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Splitting up Shell’s oil and renewables divisions would not work as the supermajor’s strength is the integration and funding new energy solutions with the earnings from the legacy business, the company’s top executives said on Thursday, a day after an activist investor called for breaking up the major into separate companies.
Activist investor Third Point built a position in Shell in the second and third quarters, and said on Wednesday that 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.
“In our view, Shell has too many competing stakeholders pushing it in too many different directions, resulting in an incoherent, conflicting set of strategies attempting to appease multiple interests but satisfying none. Some shareholders want Shell to invest aggressively in renewable energy. Other shareholders want it to prioritize return of capital and enjoy the exposure to legacy oil and gas,” Third Point said in its Q3 Investor Letter.
Shell has tried to “do it all,” the activist investor says, noting that “In trying to do so, Shell has ended up with unhappy shareholders who have been starved of returns and an unhappy society that wants to see Shell do more to decarbonize.”
Jessica Uhl, chief financial officer at Shell, said on Thursday, commenting on the activist investor’s call:
“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.”
Chief executive Ben van Beurden defended Shell’s current structure, saying that oil and gas would pay for low carbon energy.
“A very significant part of this energy transition that we are talking about is going to be funded by the legacy business,” van Beurden said, as carried by The Wall Street Journal.
Earlier on Thursday, Shell reported lower-than-expected earnings for the third quarter. Shares in Shell (NYSE: RDS.A) down nearly 4% pre-market.
By Tom Kool for Oilprice.com
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Tom majored in International Business at Amsterdam’s Higher School of Economics, he is Oilprice.com's Head of Operations