Shell (RDS.A) Upholds Order to Stall Work at Prelude FLNG Plant

Royal Dutch Shell plc (RDS.A) received an order from NOPSEMA, the Australian oil and gas industry’s safety regulator, to keep the massive Prelude floating liquefied natural gas (FLNG) facility (offshore Western Australia) closed. The directive will remain enforced until RDS.A can prove to the regulator that the facility is adequately powered and its safety measures are in working order.

The order came after manufacturing at the floating plant was halted earlier this month due to a power outage and the repeated attempts to re-establish stable electricity were unsuccessful. The inability to restore adequate power seemed unending, thus jeopardizing the health and safety of the facility’s staff. Due to this shutdown, FLNG LNG capacity will most certainly be unavailable for several months.

Earlier in January, the Anglo-Dutch supermajor resumed production of liquefied natural gas at its Prelude floating liquefied natural gas facility after almost a year-long pause. The facility has remained offline since last February due to engineering glitches.

The 488-meter long Prelude, the world’s biggest floating gas-export vessel, is almost 50% bigger than the largest aircraft carrier and constructed by the Technip Samsung Consortium in South Korea. The project is a joint venture among Shell, Inpex Corporation, Korea Gas Corporation and Taiwan’s CPC Corporation with Shell being the chief operator, owning a 67.5% stake in the project.

Prelude handles production, liquefaction, storage and transfer of LNG at sea as well as manages processing, exporting and condensation of liquefied petroleum gas. The facility has a production capacity of 5.3 million tons per annum (mtpa) of liquids with LNG accounting for 3.6 mtpa or 68% of its total capacity. This $12.5-billion project is expected to generate cash flow from next year and boost Shell’s Integrated Gas business.

Being a significant project in Shell’s portfolio, Prelude FLNG is a path-breaking facility for the emergence of floating LNG. It is also the first and the most versatile endeavor planned by RDS.A. The facility is expected to unearth new offshore energy sources and supply LNG worldwide.

Zacks Rank & Key Picks

Shell currently has a Zack Rank #3 (Hold). Investors interested in the energy  sector might look at the following stocks worth considering with a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Occidental Petroleum Corporation OXY is an integrated oil and gas company with significant exploration and production exposure. OXY is also a producer of various basic chemicals, petrochemicals, polymers and specialty chemicals. As of 2020 end, OXY’s preliminary worldwide proved reserves totaled 2.91 billion BOE compared with 3.9 billion BOE at the end of 2019.

In the past year, shares of Occidental Petroleum have surged 99% compared with the industry’s growth of 96.6%. OXY’s 2021 earnings are expected to soar 151.4% from the year-ago reported figure. OXY has also witnessed eight northward estimate revisions in the past 60 days. In the third quarter, OXY achieved its divestiture target of $10 billion by inking a deal to sell off its interest in two offshore Ghana assets for $750 million.

PDC Energy PDCE is an independent upstream operator dealing in the exploration, development and production of natural gas, crude oil and natural gas liquids. PDCE, which reached its present status following the January 2020 merger with SRC Energy, is currently the second-largest producer in the Denver-Julesburg Basin. As of 2020 end, PDC Energy’s total estimated proved reserves were 731,073 thousand barrels of oil equivalent.

In the past year, shares of PDC Energy have gained 169% compared with the industry’s growth of 108.6%. PDCE’s earnings for 2021 are expected to surge 273.4% from the prior-year reported figure. In the past 60 days, the Zacks Consensus Estimate for PDC Energy’s 2021 earnings has been raised 26.8%. Earnings of PDCE beat the Zacks Consensus Estimate in all the last four quarters, the average being 51.06%.

SM Energy SM is also a leading upstream player with a strong top-tier asset footprint. SM is delivering the best-in-class well performances. Since the beginning of 2021 to the third-quarter 2021 end, SM completed 78 net wells with the projection of completing 82 more.

Over the past seven days, SM Energy has witnessed upward earnings estimate revisions for 2021. So far this year, SM has gained 373.9%, outpacing the surge of 98.7% of the composite stocks belonging to the industry.

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