Shell hits back at investor attack that calls brand break ‘symbolism’

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HELL boss Ben Van Beurden today mounted an outspoken defense against calls for his company to be split up, saying profits from its oil and gas operations will be key to funding the transition to a low carbon future carbon.

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

Shell’s share price fell more than 3% as it posted July-September adjusted net profit of $4.1 billion versus consensus guidance of $5.4 billion.

That figure was down from $5.5 billion in the prior quarter and came despite record operating cash flow of $17.5 billion.

The unexpected US hedge fund intervention also overshadowed Shell’s flagship announcement to cut greenhouse gas emissions from its own operations by 50% below 2019 levels – the equivalent of 40 million tonnes of carbon – by 2030.

September’s fuel crisis didn’t boost profits

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

He had “very preliminary discussions” with the fund which has racked 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 ‘everything for everyone’ and said a spin-off would allow it to wind down its legacy oil and gas operations while attracting a new generation of investors to a growing company. full growth of renewable energies.

Beurden launched an unusually robust defense, calling the request “symbolic” and expressing disappointment at the loss of long-term investors.

He defended Shell’s integrated model, saying that the profits generated by the oil business are needed to finance investments in renewable energy: “Replacing thoughtful long-term investors with hedge funds is not necessarily good for the transition. It’s a question of symbolism, it doesn’t really contribute.

“The reality is that without companies like us who are major energy providers… without our skills, reach and scale to convert the energy system, the energy transition will be much more difficult and may not even happen. produce at the necessary rate.

Ben van Beurden

/ Shell

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

He also said the company would appeal a Dutch court order ordering it to include emissions from customers burning their fuel – which make up 90% of Shell’s total – in its 2030 target, saying it was “not not an effective way to fight climate change”. ”

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

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

“Given the scale and pace of change, few companies on this planet can bring the solutions to life.

“If you were to break this down into its component parts, it might sound compelling from a financial perspective, but in terms of the actual solution, our ability to integrate and bring the pieces of the puzzle together will be how we make the difference.

“If we’re not actively involved in these things, the transition isn’t as possible.”

Shell says oil money is key to promoting clean energy

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The company said it did not benefit from the surge in natural gas and oil prices – which rose from $65 to $86 a barrel this quarter – because the majority of its contracts are longer term and do not not benefit from a higher cash price.

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

Analysts were disappointed with the results and the response.

Citi said it was a “relatively uninspiring set of results and directions,” Cowen said a separation could lead to “a loss of integration value that big energy companies view as the key to successful competition”.

Stuart Lamont of Brewin Dolphin said: “As always, the delicate balance that Shell must strike remains an attractive investment prospect as it transitions to net zero, which it is currently managing well with a progressive dividend and a share buyback program.

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

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