Shell plc SHEL, the British oil and gas major, has stated that it will record a financial write-down of nearly $400 million over an offshore oil discovery in Namibia. The company has found the oil discovery to be commercially infeasible for development.
Per Reuters, SHEL cannot confirm the development of this resource under the current circumstances. The oil and gas find, located in the offshore block PEL 39, was discovered by Shell and its partners, QatarEnergy and the national oil company of Namibia, in 2022.
Namibia’s Crude Oil Ambitions
The oil and gas discovery in PEL 39, along with another hydrocarbon discovery made by TotalEnergies in a nearby block, piqued substantial global interest in Namibia as a potential hub for oil and gas resources. The country currently does not produce crude. Shell’s announcement came as a setback for the southern African nation that was looking to establish itself as a crude producer.
Technical and Geological Challenges in Offshore Exploration
Shell has actively explored the offshore block PEL39. The company has drilled nine wells in the license in the past three years. However, SHEL met with significant geological and technical challenges that hindered the development of these resources. Shell’s CEO Wael Sawan mentioned in an update that the development of the acreage would be extremely challenging. The lower permeability of the rock in this region made the process of hydrocarbon extraction significantly difficult. Furthermore, the company noted that these discoveries have a high proportion of natural gas, making the extraction process even more complicated.
Shell provided a trading update before its fourth-quarter results, wherein the company mentioned that it would record a $400 million write-off. The company did not disclose any additional details. The British energy giant also mentioned another financial write-off of $300 million related to Colombian exploration licenses.
SHEL’s Zacks Rank and Key Picks
SHEL currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the energysector areTechnipFMC plc FTI, Sunoco LP SUN and Oceaneering International OII. TechnipFMC and Sunoco currently sport a Zacks Rank #1 (Strong Buy) each, while Oceaneering International carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
TechnipFMC is a leading manufacturer and supplier of products, services and fully integrated technology solutions for the energy industry. The company’s total backlog witnessed a high of $14.7 million in the third quarter of 2024, indicating an 11.1% increase from the previous year’s level. This growing backlog ensures strong revenue growth for FTI.
Sunoco LP is one of the largest distributors of motor fuel in the United States. The partnership distributes fuel to independent dealers, commercial customers, convenience stores and distributors. Its current distribution yield is greater than that of the industry's composite stocks, providing unitholders with consistent returns.
Oceaneering International delivers integrated technology solutions across all stages of the offshore oilfield lifecycle. The company is a leading offshore equipment and technology solutions provider to the energy industry. Its proven ability to deliver innovative, integrated solutions supports ongoing client retention and new business opportunities, ensuring steady revenue growth.
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