Shell comes under attack from Wall Street raider

Asia's Tech News Daily

Shell has come under attack from a Wall Street raider demanding a break-up of the oil and gas giant after taking a stake worth about $750m (£545m).

Shell comes under attack from Wall Street raider
© Provided by The Telegraph Shell

Dan Loeb’s Third Point said it had been “a difficult two decades” for shareholders in the FTSE 100 company, which it claimed was now torn between conflicting interests over climate change.

He believed Shell should put its oil and refining operations into a separate business focused on returning cash to shareholders. 

That would allow the company to investment more in renewables, liquified natural gas and its global network of petrol stations where it is installing electric charge points.

In a letter to Third Point shareholders, Mr Loeb said: “Some shareholders want Shell to invest aggressively in renewable energy. Other shareholders want it to prioritise return of capital and enjoy the exposure to legacy oil and gas.

“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.”

It added: “You can’t be all things to all people. 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 decarbonise.” 

The investment, which is a fraction of Shell’s $194bn market value, was first reported by the Wall Street Journal. 

Third Point is the latest activist investor to target the oil and gas sector amid the huge flux in global energy triggered by efforts to tackle climate change. 

In May, the small activist fund Engine no.1 rocked the industry when it forced two nominees on to US oil giant Exxon’s board, pushing for a tougher response to climate change. 

However, Shell is arguably less vulnerable to attack given its climate strategy won 88.74pc of shareholder backing in a vote this year.

However, support for a separate activist resolution calling for tougher action also increased, while this week the Dutch pensions giant ABP said it is divesting from all fossil fuel companies. 

Shell and other oil and gas companies are grappling with how far and fast to adapt to a lower carbon energy system without cutting off the cash flow from oil and gas. 

Some are believed to have toyed with the idea of splitting off carbon-heavy assets into a “bad bank”-style separate company, but often want to keep the company as one entity so oil profits can be invested into renewables. 

Shell, which is due to report third quarter results on Thursday, is one of the world’s largest oil and gas producers, pumping out close to 900m barrels of oil equivalent last year. It has 87,000 employees in more than 70 countries. 

Led by Ben van Beurden, the company plans to invest $2bn to $3bn a year in renewables, and cut the net carbon intensity of its products by a fifth by 2030 and 100pc by 2050. 

However, in May a Dutch court ordered it to go faster and cut absolute emissions by 45pc by 2030 following a legal challenge brought by Friends of the Earth with more than 17,000 Dutch citizens. 

FTSE 100 rival BP has pledged to build 50 gigawatts of renewable energy capacity by 2030 – more than the UK’s entire installed capacity. 

Third Point is one of Wall Street’s highest-profile activist investors. It has shaken up companies ranging from Yahoo to Sotheby’s and Sony, often starting with a florid letter penned by Mr Loeb to management. 

The 59-year-old is said to be a major art collector who was a classmate of President Obama at Columbia University and whose great aunt, Ruth Handler, is credited with inventing the Barbie doll. 

He founded Third Point in June 1995 using his own savings and funding from family. It hit a high point in 2007 when it made $1.5bn in profits before almost collapsing in the financial crisis, according to a Vanity Fair profile in 2013. 

In its letter this week, Mr Loeb said Third Point started taking a stake in Shell earlier this year. 

He said the past two years had been “especially challenging” for Shell shareholders due to the Dutch court case dividend cut in the depths of the pandemic, which has since been partially restored. However, investor returns had been low for two decades. 

“We are early in our engagement with the company but are confident that Shell’s board and management can formulate a plan to accelerate decarbonisation while simultaneously improving returns for its long-suffering shareholders,” Mr Loeb added.

Shell declined to comment. Its shares fell 0.7pc to £17.76.

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