Shell CEO seen focusing on LNG as key part of growth strategy
(Bloomberg) – Shell Plc will update its strategy on Tuesday, just a month after rival bp Plc unveiled a fundamental “reset.”
Shell CEO Wael Sawan is in the final stages of a two-year effort to shake up Shell by cutting costs, improving reliability and shedding under-performing units. Analysts and investors will be looking for plans for growth at the company’s crucial liquefied natural gas business and reassurance on oil reserves.
Here’s what they want to hear:
Gas growth
Shell’s profit growth has been largely centered on LNG, a priority that analysts expect to remain amid burgeoning global demand for the fuel.
“LNG and gas are perceived to have a longer runway than oil in a transitioning world,” HSBC analyst Kim Fustier said in a note. LNG has remained a core area for Shell “even during the ‘peak’ ESG years of 2020 and 2021.”
Shell is world’s biggest LNG trader, and last month raised its consumption outlook for the fuel, forecasting a 60% surge into 2040. Analysts will be looking for the latest on major export project LNG Canada, which is due to starting shipping soon, and any expansion plans for the coming years.
Oil reserves
Analysts have questions over Shell’s long-term oil resources, particularly how little output growth the company has locked in beyond 2030.
“In the upstream, the key question mark is the liquids portfolio,” RBC Europe Ltd.’s Biraj Borkhataria said in a note. “While Shell has some near-term growth, we think visibility beyond this is weak and will need to be supplemented with M&A.”
The company in recent months spun off its UK North Sea business, sold its onshore Nigeria exploration and production arm and suffered drilling setbacks off Namibia. As rivals like Chevron Corp. and Exxon Mobil Corp. drive growth from prolific fields in the Americas, analysts want to see what new prospects Shell has to offer.
“They don’t really have a lot of growth levers, particularly outside of LNG,” Morningstar analyst Allen Good said.
Whatever Shell announces, the stakes are far less dramatic than for its closest rival.
As bp has ridden the rollercoaster of unexpected CEO resignations, interventions from activist investors and radical strategy shifts, Sawan has trodden a consistent path and been rewarded by shareholders.
Shell is up almost 20% in the past two years, compared with a decline of more than 10% for bp.
In an interesting footnote — London-based Shell is holding its investor day in New York, a location that’s seen as more friendly to the oil industry than climate-conscious Europe. TotalEnergies SE has toyed with the idea of listing there, and Sawan has also spoken about its appeal.
His presentation in the city is set to focus on fossil fuels, cementing Shell’s retreat from clean energy after a push into renewables earlier this decade. For bp, too, green businesses are taking a back seat following calls from investors for better returns.
