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Shell fires back at investor attack branding Dan Loeb’s break-up calls “symbolism”

·4-min read
Shell’s new target will see its own emissions cut in half by 2030 (Andrew Matthews/PA) (PA Wire)
Shell’s new target will see its own emissions cut in half by 2030 (Andrew Matthews/PA) (PA Wire)

SHELL boss Ben Van Beurden today mounted a forthright defence against calls to split up his company, saying profits from its oil and gas operations will be vital in funding the transition to a low-carbon future.

The FTSE100 giant’s fightback against an ambush by activist investor Josh Loeb’s Third Point was, however, dented by a big miss in third-quarter profits, despite record cash flow from soaring gas and oil prices.

Shell’s share price fell by more than 3% as it posted adjusted net profit from July-to-September of $4.1billion against consensus forecasts of $5.4 billion.

That was down from $5.5 billion in the previous quarter and came despite a record $17.5 billion cash flow from operations.

The unexpected intervention by the US hedge-fund also overshadowed Shell’s banner announcement to slash greenhouse gas emissions from its own operations by 50% from 2019 levels - equivalent to 40 million tons of carbon - by 2030.

September fuel crisis failed to lift earnings (PA Wire)
September fuel crisis failed to lift earnings (PA Wire)

Shell said it only learned of Third Point’s call to break up the £140 billion group into “multiple standalone companies” via a newsletter sent to Loeb’s investors.

It has held “very preliminary discussions” with the fund which has built up a 0.4% stake worth around $750 million over the past six months and was behind activist raids at Yahoo!, Sony and Sothebys.

Third Point accused Shell of trying to be “all things to all people” and said a demerger would all allow it to wind down its legacy oil and gas operations while attracting a new generation of investors into a growing renewables business.

Beurden launched an uncharacteristically robust defence, describing the demand as “symbolism” and expressing disappointment at the loss of long-term investors.

He defended Shell’s integrated model, saying profit generated by the oil business is needed to finance investment into renewables: “Replacing long term, thoughtful investors by hedge funds is not necessarily beneficial for the transition. It’s all about symbolism, it doesn’t really make a contribution.

“The reality is that without companies like us who are significant providers of energy.. without our skills, our scope and scale to convert the energy system the energy transition will be a whole lot more difficult and may not even happen at the pace needed.

Ben van Beurden (Shell)
Ben van Beurden (Shell)

“It’s disappointing that long-term investors run away from a company leading in its field and trying to do the best for society, but we understand the symbolism.”

He also said the company would be appealing against a Dutch court ruling ordering it to include emissions from customers burning their fuel - which account for 90% of Shell’s total - in its 2030 target, saying this “not an effective way to tackle climate change.”

His critique was backed up by CFO Jessica Uhl, who added: “We are an energy company that has been providing energy to the world for the last 120 years.

“We have built up assets, networks, systems and capabilities that will be needed in terms of the transition to low or no carbon energy systems of the future.

“Given the scale of change and the pace there’s few companies on this planet who can make the solutions come to life.

“If you were to split that into its component pieces, that could sound compelling from a financial perspective, but in terms of a real solution our ability to integrate and bring pieces of the puzzle together will be how we make a difference.

“If we are not actively involved in doing these things the transition is not as possible.”

Shell says oil cash key to clean energy drive (PA Archive)
Shell says oil cash key to clean energy drive (PA Archive)

The company said it had not profited from soaring natural gas and oil prices - which have risen from $65 to $86 per barrel this quarter - as the majority of its contracts are longer term and do not benefit from a higher spot price.

It sold its Permian shale oil business in Texas for $9.5billion last month, and has pledged to return $7billion of that to shareholders through buybacks.

Analysts were downbeat on the results and the response.

Citi said it was a “relatively uninspiring set of results and guidance”, Cowen said a separation could result in “lost integration value that big energy companies see as key to successfully competing.”

Stuart Lamont at Brewin Dolphin said: “As ever, the tricky balance Shell needs to strike is remaining an attractive investment prospect as it makes the transition towards net zero, which it is currently managing well with a progressive dividend and share buyback programme.

“However, any detrimental change to the oil price could be a significant challenge in that regard.”

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