Third Point activist fund calls for dismantling of Shell – .

Third Point activist fund calls for dismantling of Shell – .

Royal Dutch Shell is under pressure to separate after activist hedge fund Third Point took a large stake and accused the oil supermajor of being bogged down by inconsistent strategy.

Third Point, led by Daniel Loeb, urged Shell to split into “several stand-alone companies,” including a “legacy” oil and gas-focused arm that could “slow down investment beyond what it has. already promised ”. Its participation amounts to nearly 750 million dollars, according to a source familiar with the matter.

The New York hedge fund’s decision comes less than six months after a court in The Hague ordered the Anglo-Dutch company to speed up plans to cut greenhouse gas emissions. It also follows a successful activist campaign by hedge fund Engine No 1 against Shell’s US rival ExxonMobil.

In a letter to shareholders seen by the Financial Times, Third Point said that Shell had “too many competing stakeholders pushing it in too many different directions, resulting in a set of inconsistent and contradictory strategies attempting to appease multiple interests but not ‘satisfying none’.

While Shell’s historic business could handle fossil fuels, Third Point said, a separate entity is expected to focus on cleaner energy, to “combine modest cash returns with aggressive investments in renewables and technology. reduction in carbon ”.

“Pursuing a bold strategy like this would likely lead to an acceleration in the reduction of CO2 emissions as well as a significant increase in shareholder returns, a victory for all stakeholders,” the letter reads.

Third Point is one of Wall Street’s most prolific activist investors, managing around $ 20 billion in assets. He previously targeted companies such as Intel and Disney.

The intervention in one of the world’s largest oil companies came a day before the CEOs of ExxonMobil and Chevron, as well as U.S. executives from Shell and BP, testified before Congress on whether they had misleads the public about the role played by fossil fuels in climate change.

In a landmark ruling in May, a Dutch court ordered Shell to speed up reductions in carbon dioxide emissions after the judge found the company’s plan to cut pollution was not strong enough.

On the same day, ExxonMobil shareholders elected three new directors appointed by Engine No 1, an entry-level fund manager who had run a six-month proxy campaign in which he argued that the company’s plans to continue to increase oil and gas production was an “existential risk”.

Shell said its oil production peaked in 2019. It plans to allow production to drop 1 to 2 percent per year as it shifts spending towards renewables and other low-carbon technologies. such as hydrogen. The company last month sold its Permian shale oil business in Texas for $ 9.5 billion, an area it had previously described as the heart of its oil and gas business.

Shell did not respond to a request for comment.

Andrew Mackenzie, named Shell president in May, is used to wrestling with activist investors. When he was managing director of BHP, the world’s largest miner, Elliott Management launched an aggressive campaign to push the company to divest its oil business and merge into a single listed group. Mackenzie has pushed back on Elliot’s demands although BHP is now in the process of selling off its remaining oil assets and unifying its dual-listed structure.

Mark van Baal, director of Follow This, an activist shareholder group that owns a small stake in Shell, has expressed skepticism about whether a dismantling of the company would have a significant environmental benefit.

“At first glance, I don’t see how this will contribute to the fight against climate change – and that’s because there isn’t a substantial part of renewables at Shell yet. I don’t see what needs to be divided, ”he said. “We believe it is better to generate cash flow with fossil fuels and invest in renewables. “

But others have argued that it could be a watershed moment.

“This will force Shell to answer a question that has been on the minds of investors for some time: Are legacy oil companies like Shell really adding value to the low carbon transition? said Andrew Logan, senior director of oil and gas at Ceres, who coordinates investor climate action.

“At the very least, Third Point’s decision indicates that Shell has failed to convince the investment community that it pays to keep all of these companies in-house. “

Additional reporting by Tom Wilson and Neil Hume in London


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