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Against a nervy market, Shell sheds oil sands stakes

Oil stocks sold off this week as US data shows a frantic ramp up in production
March 9, 2017

Royal Dutch Shell (RDSB) has taken another significant step towards hitting its $30bn (£24.7bn) asset disposal target, after selling holdings in the Athabasca and Peace River oil sands projects, and a number of undeveloped leases in Canada.

IC TIP: Buy at 2163p

The sale – for which Shell will be paid $8.5bn in cash and shares – is being made to oil sands specialist Canadian Natural Resources, in conjunction with whom Shell has also agreed to acquire Marathon Oil’s Canadian subsidiary for $1.25bn. In selling out of its Canadian oil sands interests, Shell will incur a post-tax write-down of up to $1.5bn, and see its reserves base reduce by 2 billion barrels.

Judging by the 3 per cent sell off which greeted the news, Shell investors might well have assumed that the oil major had flogged the fields on the cheap. The more likely cause of the stock decline was a US Energy Information Administration report which detailed an 8.2 million barrel build-up in domestic crude inventories, a 56,000 barrel-a-day increase in domestic production and a surge in crude imports. This sparked a fall in Brent and WTI prices, and knocked oil stocks around the world amid fears that too much oil is chasing global demand, once again.