The Energy Report - Key Buy in the Sector

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Key Buy in the Sector

MARK FLETCHER, CITI (05/28/2010)
"Shell has announced a material increase in its U.S. shale gas position—Shell has added around 1.3 million acres of North American tight gas acreage in 2010 and added >2.7 billion boe of resources, materially increasing its previous 3.7 billion boe position. East Resources is a major low cost addition—Shell announced today that it is paying $4.7 billion to acquire East resources, a private company with a resource base of around 14tcf. This equates to a price of around $4,500/acre for the overall position or $7,200/acre for the Marcellus acreage ignoring the value of any other properties. In terms of resources Shell is paying around $0.34/mcf which looks attractive against recent transactions. . .Shell remains a key buy in the sector. Our thesis on Shell remains that the group is now past the peak in its recent investment cycle and that as capital comes into service annual free cashflow should increase by around $26 billion 2013 on 2009."

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