Shell plc’sSHEL deal to sell its onshore Nigerian subsidiary, Shell Petroleum Development Company Ltd ("SPDC"), for $1.3 billion has suffered a setback, with the Nigerian Upstream Petroleum Regulatory Commission ("NUPRC") stating that the future buyer lacked the required qualifications to manage the assets.

Overview of SHEL’s Divestment Deal

SHEL announced its divestment strategy in January 2024, according to which the company had cracked a deal to sell its 15 oil mining leases for onshore and three shallow-water operations, which was held via its Nigerian subsidiary SPDC. The decision to exit was aimed to refocus on more profitable ventures like deep-water offshore fields.

However, the deal completion was subject to approvals by the regulatory authorities and certain other conditions, which were recently rejected, citing the Renaissance Group’s inability to manage the assets as the reason.

The sale agreement stated that there would be a change of ownership only. However, the operating capabilities would be retained by SPDC, extending full support to the management of SPDC JV facilities to supply feed gas.

Future Projections for Shell

With the rejection of the Shell’s divestment plan, the company faces a setback and is doubtful about its onshore assets in Nigeria. However, the company is in conversation with the regulatory authorities, providing them with all the necessary information and documents to complete the sale process.

SHEL’s Zacks Rank and Key Picks

London-based Shell is one of the primary oil super majors — a group of U.S. and Europe-based big energy multinationals with operations that span almost every corner of the globe. Currently, SHEL has a Zacks Rank #3 (Hold). The company remains a major investor in the West African country of Nigeria even after divesting its onshore business.

Investors interested in the energy sector might look at some better-ranked stocks like PEDEVCO Corp. PED, Nine Energy Service, Inc. NINE and MPLX LP MPLX. While Pedevco currently sports a Zacks Rank #1 (Strong Buy), Nine Energy and MPLX each carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Headquartered in Houston, TX, PEDEVCO Corp. is an oil and gas company, engaged in the acquisition and development of energy projects in the United States and Pacific Rim countries. Over the past 60 days, the Zacks Consensus Estimate for PED's 2024 earnings has improved by 33.33%.

Nine Energy Service, Inc. provides onshore completion and production services for unconventional oil and gas resource development. NINE’s expected EPS (earnings per share) growth rate for the current quarter is 23.08%, which compares favorably with the industry's growth rate of 6.14%.