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Shell's (RDS.A) Seismic Test is Stopped by South African Court

Zacks Equity Research
·4-min read

Royal Dutch Shell plc’s (RDS.A) seismic testing for oil and gas along South Africa's eastern coastline has been suspended, pending a final judgement by a South African court.

Environmentalists applauded this move, which they believe will protect marine life from the loud blasting.

Seismic surveys are used to map what is under the ocean's surface. Shockwaves launched from an air pistol — similar to a large speaker — are shot down to the seafloor. The sound echoed tells if there is oil trapped beneath the rock.

Per the High Court Judge Gerald Bloem, permission to explore the seas around the Wild Coast was granted to RDS.A on the basis of a significantly faulty consultation procedure.

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The natural beauty and marine life of the 250-kilometer (155-mile) long coastline in the Eastern Cape province is world-famous.

Many marine species, including whales, dolphins and seals will be harmed by the seismic testing, according to campaigners.

Also, local communities represented in the lawsuit claimed that their customary rights to land and fishing had not been honored.

Shell began scanning the 6,000-square-kilometer region in early December 2021 after a previous court ruling allowed it to proceed with its activity. At that time, the court had ruled that those opposed to the survey had failed to offer a sufficient proof of environmental damages.

The Anglo-Dutch supermajor claims that the seismic testing is being applied for decades in search of oil and gas. Respecting the court's order, RDS.A suspended its exploration process. In view of the verdict, management asserted that if feasible resources were discovered offshore, it could considerably improve the country's energy security.

There is no specific deadline for determining whether authorization is necessary under the National Environmental Management Act. Shell stated that it already has the required clearance to carry out the survey.

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.

PDC Energy PDCE is an independent upstream operator dealing in 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, PDCE'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%.

Canadian Natural Resources Limited CNQ is one of Canada’s largest independent energy companies. CNQ has a broad portfolio of low-risk exploration and development projects, with a strong international exposure that yields long-term volume growth at above-average rates. As of 2020 end, CNQ had 12.106 billion oil-equivalent barrels (BOE) in its total proved reserves.

Canadian Natural Resources’ earnings for 2021 are expected to surge 1,085.4% from the year-ago reported figure. CNQ currently has a Zacks Style Score of B for Growth. CNQ raised its dividend 25% in November, reflecting strength in its cash flows. CNQ is counted as a ‘Canadian Dividend Aristocrat’ with an attractive yield. The energy player has a solid track record of dividend hikes over 22 consecutive years.

Sunoco LP SUN is a master limited partnership that distributes motor fuel to roughly 10,000 customers, including independent dealers, commercial customers, convenience stores and distributors. In the United States, Sunoco is among the largest motor fuel distributors in the wholesale market by volume. In 2020, the partnership sold 7.1 billion gallons of motor fuel.

SUN's earnings for 2021 are expected to surge 743.4% from the year-ago reported figure. Sunoco currently has a Zacks Style Score of A for both Value and Growth. For 2021, SUN expects fuel volumes of 7.25-7.75 billion gallons, indicating a rise from the 2020 reported level of 7.09 billion gallons.


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Royal Dutch Shell PLC (RDS.A) : Free Stock Analysis Report
 
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