LONDON (Reuters) – Breaking up oil major Royal Dutch Shell into separate fossil fuels and renewables companies might be financially compelling but would not work in real life, finance chief Jessica Uhl said on Thursday.
FILE PHOTO: The logo of Royal Dutch Shell is pictured during a launch event for a hydrogen electrolysis plant at Shell’s Rhineland refinery in Wesseling near Cologne, Germany, July 2, 2021. REUTERS/Thilo Schmuelgen
Activist hedge fund Third Point, which has built a large stake in Shell, on Wednesday called for the oil major to split into multiple companies to increase its performance and market value.
“If you were to split that into component pieces, I think that can sound really interesting from a financial perspective,” Uhl told reporters.
“But in terms of real solutions, I think that breaks down and our ability to integrate and bring these different pieces of the puzzle together will be how we uniquely make a difference in the energy transition.”
Shell Chief Executive Ben van Beurden told reporters that Shell’s strategy is coherent and well understood by a majority of its shareholders.
Bernstein analyst Oswald Clint, who has an outperform rating on Shell, said in a note that a minority listing of Shell’s marketing business might make financial sense, but that a full split of the company would hamper future earnings.
Deepening a divide with European rivals on the outlook for renewables, top U.S. oil firms are doubling down on drilling and winning support from big investors who do not expect them to invest in wind and solar.
Shell reported third-quarter profit of $4.13 billion on Thursday, below an analysts forecast provided by the company of $5.31 billion. It also set itself a tougher emissions-cutting targets for its direct emissions, aiming to halve them by 2030 in absolute terms.
Previously, it only had intensity-based emissions cut targets for that time frame. Shell’s direct emissions are dwarfed by the emissions caused by the combustion of its products through its customers, known as Scope 3.
The company has pledged to become a net-zero emissions company by 2050, but is under pressure to make faster progress, with a Dutch court ordering it in May to cut all of its emissions – including Scope 3 – by 45% by 2030.
Shell is appealing the court ruling.
(GRAPHIC: Royal Dutch Shell’s profits – )
LNG TO GROW IN Q4
Gas and power prices surged this autumn as tight gas supplies have collided with strong demand in economies recovering from the COVID-19 pandemic.
This helped Shell’s cashflow from operations in the quarter to rise by around 54% on the year to $16 billion, which in turn helped it to reduce net debt to $57.5 billion, compared with $65.7 billion in the previous quarter.
The company guided for its liquefied natural gas (LNG) production to rise to 8-8.6 million tonnes in the fourth quarter.
Reporting by Shadia Nasralla; Editing by Jason Neely, Mark Potter, Barbara Lewis and Christina Fincher