Shell fights back against US activist
...but profit flop piles pressure on oil major as hedge fund demands break-up
SHELL was under growing pressure last night as the fightback against an activist investor was dented by disappointing results.
Shares in the oil giant fell 3.5pc after it posted third quarter profits of £3bn – four times higher than the same period last year but a long way short of the £3.9bn expected in the City.
The figures came as Shell bosses launched a forthright defence of the company following an attack by New York hedge fund Third Point, which has built up a £545m stake.
The activist investor, led by financier Daniel Loeb, this week claimed Shell was trying to be ‘all things to all people’ by attempting to turn into a renewable energy group.
Third Point called for the group to be broken up into ‘multiple standalone companies’, separating its legacy oil and gas operations and renewable energy arms.
But Shell boss Ben van Beurden hit back. He has always maintained that the only way to fund the company’s switch to green energy is to continue its oil and gas operations.
Shell already has a big presence in the wind and solar industries – and bosses argue that the vast amounts of money they make from fossil fuels mean it will be able to capitalise on this expertise.
Van Beurden said: ‘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.’
Echoing her boss, Shell finance chief Jessica Uhl also said splitting Shell into multiple companies would not work in practice. Uhl said: ‘We are an energy company that has been providing energy to the world for the last 120 years.
‘If you were to split that into component pieces, I think that can sound really interesting from a financial perspective.
‘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 has been under fire from investors and campaigners for years and was recently forced by a Dutch court to commit to clearer and more ambitious green goals. The company has been pushed to speed up its switch to renewables at the same time as it has had to navigate the pandemic, which pummelled profits in 2020 and led to a dramatic twothirds cut to its dividend in the first hack to its payout since the Second World War. Alongside its third-quarter results yesterday, Shell announced it planned to slash two types of emissions in the next decade in a new 2030 climate target. It will ensure all emissions the company itself generates through its operations – extracting oil, for example – will be net zero carbon. But this leaves out the vast majority – or around 90pc – of its pollution, which comes from customers burning its products.
Shell produced around 3.1m barrels of oil a day in the third quarter. This is the equivalent of 3pc of global daily demand in 2019, before Covid struck.
Analysts had hoped that soaring oil and gas prices would boost Shell’s profits – but it also knocked a number of financial instruments called commodities derivatives contracts.
Shell took a hit of around £3.6bn as a result. The profit miss made investors nervous.
Shell was one of the biggest fallers on the Footsie last night, with shares closing down 3.5pc, or 61.4p, to 1706.6p. Rival BP – which releases its own results next week – fell 1.6pc, or 5.55p, to 352.05p.