Activist Investor Sets Sights On Breaking Up Shell

The trend is clear: activist shareholders in the energy industry are making waves. This time, the target is Royal Dutch Shell.

Activist investor Dan Loeb, through Third Point LLC, holds a $750 million stake in Shell, according to Bloomberg sources. Third Point, in a letter last Thursday, said that Shell would benefit from splitting off certain divisions.

According to the investor, it would be beneficial for Shell to split off its LNG and renewables divisions, leaving Shell’s upstream, refining, and chemicals operations to be separated from the greener divisions.

Shell (NYSE: RDS.A), with a market cap of $193 billion, is a global force in the energy industry and produces roughly 2 million barrels of oil per day.

But in February, the oil titan said that its oil production would decline by as much as 18% by 2030, and 45% by 2050 as the world moves towards greener energy sources.

But even in 2050, this decline would see Shell continue to produce more than a million barrels of oil daily, and Shell still plans on sinking $8 billion into oil exploration and pumping, with only $2 -$3 billion set aside for renewables and hydrogen. Another $8-$9 billion is earmarked for integrated gas and chemicals.

The sizable investments in oil exploration and smaller investments into renewables and hydrogen has drawn the ire of activists who feel this is not going far enough.

Shell is set to announce earnings on Thursday. Analysts have estimated that Shell will report earnings per share of $1.50 and revenue of $63.4 billion.

Shell recently sold its Permian Basin assets to ConocoPhillips for $9.5 billion and its Western Desert assets in Egypt to Cairn Energy. Those moves follow a rather difficult period in Shell’s history that have seen the energy company slash its dividend and a rather unfavorable court ruling that will require the Dutch major to meet even more strict emissions standards.

Loeb has criticized Shell for having too many irons in the fire. “You can’t be all things to all people,” Loeb said in the letter.

A breakup of an energy company the size of Shell would reverberate throughout the energy industry.

Shell was up 2.13% on Wednesday afternoon at $49.92.

By Julianne Geiger for Oilprice.com

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