Carrie Tait, Financial Post Published: Friday, March 19, 2010

Courtesy of Royal Dutch Shell Royal Dutch Shell PLC, under pressure from a small group of shareholders, has responded to critics’ concerns with a report detailing its activity in Alberta’s oil sands.

Royal Dutch Shell PLC, under pressure from a small group of shareholders, has responded to critics’ concerns with a report detailing its activity in Alberta’s oil sands.

Shell said it published the 17-page report because it shares many of the same environmental and economic worries expressed by the shareholders who are demanding the oil and gas giant provide greater transparency with respect to its operations in northern Alberta.

“All aspects of oil price outlook, oil demand, regulatory framework, cost of CO2 and industry cost structure” are “taken into account when … investment decisions are considered,” Shell said in the easy-to-read document.

“When we assess the economic attractiveness of our major projects we include an expected future price for green house gas emissions (‘carbon price’) over the full life of the project,” Shell said. “Shell includes the expected carbon price in its economic assessments, which is higher than the current carbon price [of $15 per tonne for every tonne emitted above a certain reduction target] in Alberta, anticipating that potential future greenhouse gas regulation could lead to a higher carbon price.”

Shell expects to pay between US$2-million and US$3-million in Alberta for its carbon emissions in 2009, but did not provide further financial details regarding its carbon price predictions.

The company also talked about reclamation, the process of rebuilding the hills, forests, wetlands, and fens that are torn up as companies mine for bitumen. Shell takes a provision on its balance sheet for this process, booked as land is disturbed and reflecting the discounted value of the expected future costs.

Shell expects to spend between 3% and 5% of operating costs on reclamation, which it considers before starting a project, the report said.

Other financial, environmental, and social concerns were addressed in the online report. Shell’s oil sands operations churned out 78,000 barrels of oil per day in 2009 and it expects that to hit 150,000, or 4% of its total production, in the next few years. Mining is its primarily extraction method.

FairPensions, a British lobby group, rustled up enough shareholder support to get a resolution on the ballot at Shell’s upcoming annual meeting demanding more disclosure. It is almost certain that the resolution will fail.

But despite the resolution’s long odds, FairPensions attracted considerable media attention on both sides of the Atlantic, to the point where a British MP has tabled a resolution in the House of Commons asking the MPs’ pension fund to side with FairPensions.

Shell explicitly said its report is in response to the resolution.

“We’re quite cheered that Shell has taken a look at the resolution and decided it has some merit,” Duncan Exley, a spokesperson for FairPensions, said. “We need to look through [the report]…with our partners” before deciding whether it meets their disclosure demands.

BP PLC is facing the same shareholder resolution.

ctait@nationalpost.com

SOURCE ARTICLE

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The Motley Fool

By David Lee Smith
March 18, 2010

In the hierarchy of Big Oil, I don’t have to work up a sweat to place ExxonMobil (NYSE: XOM) overall in first place — both qualitatively and quantitatively — while for several years now, Royal Dutch Shell (NYSE: RDS-A) has brought up the rear.

BP leads the way
That’s not to say, however, that the companies can’t change positions, much like NASCAR participants, passing one another when things are going especially well, or falling behind when bad luck hinders them. Take BP (NYSE: BP) for instance. It wasn’t long ago that the company was simultaneously trying to fend off the ramifications of a lethal explosion at a Texas refinery that killed 15 and injured scores of others, all while dealing with leaks in its Alaska pipelines. At about the same time its Indiana refinery was shut down by a fire, and an abrupt top management change all seemed to leave the company even further behind the eight-ball.

But in just the past couple of years, CEO Tony Hayward and the team he’s assembled have BP roaring back. In fact, the company is as clear-cut a demonstration as I can conjure up of the real value of quality management to corporate success. And now it appears that Shell, which until recently couldn’t find oil in a Jiffy Lube, may be following in the footsteps of its European rival.

And here comes Shell
If, as this week’s version of the company’s annual strategy session appeared to indicate, Shell is shedding its ineptitude, still new CEO Peter Voser will have performed a miraculous feat. After all, this is the same company that in 2004 admitted to overstating its reserves by 20%, or about 3.9 billion barrels. The result for the company was a fine of more than $350 million, plus administrative costs and other charges, along with the termination of several top executives.

And then there’s been the company’s geologic incompetence. As you know, one of the keys to judging an oil and gas producer involves the percentage of its production it’s able to replace each year. For instance, Exxon replaced 133% of its production in 2009, departing the year with more reserves than it started off with. From Shell’s perspective, as recently as 2007, the company replaced a shameful 17% of its production. In 2008, it replaced just 98% of its output.

Like a new company
Then came 2009 and surprise stardom for Shell. Believe it or not the company’s reserve-replacement ratio reached a whopping 288%, the highest in the industry. And while that ratio hasn’t yet manifested itself in Shell’s financials, in my opinion, Mr. Voser and his team have set the stage for some solid results going forward. For instance, next year two huge projects in Qatar — the Pearl Gas-to-Liquids project and Qatargas 4, a massive liquefied natural gas project — will come on stream. Also an expansion of the Canadian oil sands project that it shares with Chevron (NYSE: CVX) and Marathon (NYSE: MRO) will likely start up in the next couple of years. As Mr. Voser told the assembled analysts, the result could be an impressive 11% increase in barrels of oil equivalent production by 2012.

And it wasn’t just the discovery of 2.4 billion barrels of oil equivalent, its top performance of the past decade, that made 2009 the company’s turnaround story so strong. In addition, cost cutting received plenty of attention. By laying off 5,000, or 5%, of its employees, along with taking other measures, Shell was able to save $2 billion in expenses during the year. Further, it appears that the company is far from through in the fat-trimming department. Indeed, Mr. Voser stated during the session that another 2,000 Shell hands will be laid off by the end of next year.

Wanna buy a refinery?
Beyond that, there obviously will be asset sales as well. A month ago, rumors were rampant that the company was looking to dispose of about $10 billion worth of its properties, potentially including oilfields in the North Sea, three refineries in Europe, onshore acreage in Nigeria, and retail outlets in Africa. Whether or not that target number is accurate, the company made it clear on Tuesday that there will be refineries and retail facilities on the block.

Clearly this is not the ideal time to be in the refinery business, and, with margins having withered in that sector, all the integrated companies, from ExxonMobil on down, are struggling with their downstream operations. In fact, companies like France’s Total (NYSE: TOT), along with several other members of the Big Oil fraternity appear intent on cutting refinery capacity, and ConocoPhillips (NYSE: COP) may sell some small units.

So all in all, it’s not solely because spring is arriving that I recommend that Fools do some “Shelling.” There could be some money to be made in this clear-cut turnaround situation.

SOURCE ARTICLE

Ian Lyall, Daily Mail
16 March 2010, 9:52pm

He said he was ‘energised’ and up for the fight. But as he stood at the podium to deliver the company’s annual strategy review, Shell boss Peter Voser (right) looked anything but.

His audience of a hundred or so British and foreign journalists listened with an air of resignation rather than in rapt attention.

Voser isn’t a natural orator. His clipped Swiss accent and the dry delivery may work well around the boardroom table, but his style is hardly inspirational.

Which is a pity. Because his message was an uplifting one for Shell investors, and addressed the concerns of the critics who dismiss the Anglo-Dutch giant as low growth, bureaucratic and bloated.

Voser’s trick was to come up with a fairly punchy production target and spice it with a subtle change of direction and emphasis.

And it seemed to work, with the company’s London-listed A shares rising 27.5p to close the day at 2920p.

The briefing re- capped the impact Voser has made in his short tenure. Since becoming chief executive in the summer of last year, he has spearheaded an impressive $2bn cost cutting drive that has seen the loss off 5,000 jobs, mostly mid-ranking managerial posts.

An extension to that programme was unveiled yesterday. It will save another $1bn by cutting a further 1,000 roles, though the workforce still numbers more than 100,000.

But what grabbed the analysts’ attention was his plans to have Shell pumping around 3.5m barrels of oil a day by 2012.

This implies an annual growth rate of 3.5%, which is well ahead of the rather pedestrian performance of rival BP at around 1.5%.

Shell even seems to have raised its game in finding new oil and gas fields, with its reserve replacement rate running at a healthy 288%.

Voser showed he recognised the lingering misgivings of investors, though he was careful to couch the message in diplomatic terms that wouldn’t offend his colleagues and predecessor.

‘When I became chief executive in the middle of last year, I did think the organisation of the company was working against us,’ he told the meeting at a central London hotel.

‘Shell had become too complicated, and slower than I’d like, and working on too many areas and options.’

The simplification of Shell, which has many moving parts, is borne out of necessity.

With the oil price hovering at, or close to, $80 a barrel, more investment is going into exploration and production.

For recession-hit refining, in the middle of the worst slump in 20 years, the pendulum has swung the other way. Capacity is set to be cut by around 15%, with plants sold or even shut down.

And the marketing operation, which owns the company’s filling stations and also sells motor oil and jet fuel, is also undergoing a shake-up. It is focusing on fewer markets to improve profitability.

Only one of the laggards seems to have been spared the Voser treatment: Shell’s gas business.

It has been hit by the downturn but is deemed to be a fundamentally sound business.

Voser trumpeted a series of exploration success stories that tell a tale of a growing conservatism, so we heard about the company’s strikes in the Gulf of Mexico, Australia and North America.

Relatively expensive regions in which to work, they do have the upside of being politically stable and incredibly easy places to do business.

Air-brushed from the literature were the likes of Nigeria and Russia.

It was only when prodded that Voser commented on the war-torn African nation, where the oil reserves are plentiful, but the region is a mess of infighting and instability: ‘In the past, as I have said many times, Shell has depended a lot on the growth of Nigeria. In today’s situation, we still have the same growth potential in Nigeria. But we have seeded plenty of projects in other parts of the world where we also can achieve growth.’

Hardly a ringing endorsement of the country’s prospects.

Some analysts, such as Collins Stewart’s Gordon Grey, see Voser’s latest strategy pronouncement as ‘an important turning point operationally’ for Shell.

The respected and experienced Richard Griffith of Evolution has been following the company for far too long to be totally convinced: ‘It’s a positive statement, but there is still plenty to be delivered.’

Bloomberg.com

Watch

Shell’s Voser Interview

March 17 (Bloomberg) — Peter Voser, chief executive officer of Royal Dutch Shell Plc, talks with Bloomberg’s Andrea Catherwood about efforts to control spending as industry costs rise. Voser also discusses the company’s growth strategy and investments in refineries and biofuel projects. They spoke yesterday in London.

Voser Says Shell Must Control Spending as Industry Costs Rise

By Will Kennedy and Andrea Catherwood

March 17 (Bloomberg) — Royal Dutch Shell Plc Chief Executive Officer Peter Voser said industry costs have started to rise and the company will use technology to control spending as it invests $100 billion to boost production.

“Costs have not come down as much as we hoped for, and some of them are now rising again,” Voser said in an interview with Bloomberg Television broadcast today. Shell’s challenge is to be “more speedy in terms of technology implementation.”

Shell, vying with BP Plc as Europe’s biggest oil company, said yesterday it’s assessing more than 35 projects to keep production rising until 2020. Australia, where the company is developing offshore and coal-seam gas reserves, may attract as much as 40 percent of Shell’s capital expenditure. It has higher wage rates than other countries where the company operates.

“In Australia, we are doing floating LNG, which is actually fabricated in Korea, so we will be less exposed to the labor costs,” Voser said in London. We need to do “things differently in the future so that you actually save costs and get things built cheaper.”

Crude prices doubled to more than $80 a barrel in the past year, prompting producers to resume projects put on hold during the recession. Oil and gas industry spending will rise 11 percent this year to $439 billion, according to Barclays Capital. Increased investment may start to reverse reductions in drilling and engineering costs caused by the global slowdown.

Raise Production

Voser, speaking to analysts at the company’s annual strategy briefing, outlined plans to raise oil and gas production 11 percent by 2012 to 3.5 million barrels a day. The company’s capital expenditure, set at $28 billion this year, will be between $25 billion and $27 billion from 2011 to 2014.

Investment in production will be focused on three main areas, Voser said in the interview. These are Australia, the Gulf of Mexico and so-called tight gas in the U.S., where recently developed drilling techniques are used to access resources trapped between rocks.

“On top of that we have other projects in areas like Kazakhstan, like Nigeria, in the Middle East we have Iraq,” he said. “We have got a vast set of opportunities. I’m very pleased with the variety we have in the portfolio, so if one doesn’t come, we’ve got others to replace those.”

Shell yesterday announced plans to cut staff by a further 1,000 people, making the overall reduction of 7,000 in the three years through 2011. Voser has said he will cut costs by $1 billion this year, after reducing them by $2 billion last year.

The company plans to sell filling stations and oil refineries to free up capital for production spending. Shell is negotiating with India’s Essar Oil Ltd. to sell three European plants after the recession cut fuel-processing profits.

“You need bigger refineries, more complex refineries, because they can withstand recessions better than smaller refineries,” Voser said.

To contact the reporters on this story: Will Kennedy in London at wkennedy3@bloomberg.net; Andrea Catherwood in London at acatherwood@bloomberg.net.

Last Updated: March 17, 2010 05:09 EDT

BLOOMBERG ARTICLE

Daily Telegraph: Royal Dutch Shell has unveiled the most dramatic overhaul of its business in recent memory, outlining plans to exit more than a third of its 90 retail markets, slash refining capacity and return to growth after seven years of falling output.

By Garry White
Published: 10:10PM GMT 16 Mar 2010

Peter Voser, chief executive, unveiled a further 1,000 jobs cuts in addition to the 6,000 already announced as he vowed to “sharpen up” Shell in the next three years by boosting output by 11pc.

“Shell has been disadvantaged recently, due to our higher exposure to refining and natural gas, where margins are hard-wired to the economy,” Mr Voser said.

“The priorities are for a more competitive performance, for growth, and for sharper delivery of strategy. We have more to do to drive out cost and improve the operating performance in the company.”

Shell plans to exit 35pc of its petrol station markets and reduce refining capacity by 15pc to help it make cost saving of $1bn (£658m) this year. It also said it would sell non-core assets worth $1bn-$3bn a year, including its refineries in Gothenburg, Los Angeles and New Zealand.

Monday is the deadline for bids for the company’s liquified petroleum gas distribution arm, which could raise £1.1bn. Those understood to be tabling offers include Brazilian chemicals group Ultrapar, Centrica spin-off DCC and French listed Rubis, as well as a number of private equity groups.

“Upstream, we have built up strong foundations in activities like gas-to-liquids, oil sands and liquefied natural gas,” Mr Voser said. “Looking out to 2020, I expect Shell’s exploration to underpin new upstream growth, especially in North America and Australia, with additional barrels from development-led projects.”

The news came on the day that Shell released its annual report, which showed that Mr Voser earned less than Tony Hayward, chief executive of rival BP, in 2009. Mr Voser earned a total salary and bonus of £2.8m compared with Mr Hayward’s £4m.

Shell has said it would freeze management salaries until 2011 after shareholders objected last year when executives were awarded bonuses even after performance targets were missed.

Linda Cook, who resigned as head of Shell’s gas and power business in May last year, was paid a salary and bonus of £2.1m as well as a severance payment of almost €5.5m (£5m). She leaves with a total pension pot of just under $25m. Mr Voser’s predecessor, Jeroen van der Veer, left with a pension pot worth $34.2m.

Shell predicts oil will trade between $50 and $90 a barrel over the next few years and is targeting output of 3.5m barrels of oil equivalent per day in 2012. This compares to 3.15m in 2009, the equivalent to an annual growth rate of 3.5pc, or 11pc in total over three years

Mr Voser said the company should be in a surplus cash flow position in 2012, after capital investment and dividend payments – assuming $60 oil prices and a more normal environment for natural gas prices and downstream. In order to achieve this it will have to invest between $25bn and $27 a year in its operations.

The Anglo Dutch group also said that it replaced 288pc of its oil and gas output with new discoveries in 2009, or 3.42bn barrels of oil equivalent.

SOURCE ARTICLE

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Boston Common is one of more than 140 institutional investors supporting a shareowner resolution asking Shell to report on the strategic risks of Canadian oil sands investments in the face of “future carbon prices, oil price volatility, demand for oil, anticipated regulation of greenhouse gas emissions and legal and reputational risks arising from local environmental damage and impairment of traditional livelihoods.”

Co-op backs oil sands awareness campaign

By Ed Crooks, Energy Editor

Published: March 15 2010 22:32

The Co-op is backing Dirty Oil, a new documentary that had its premiere in London on Monday night.

The film alleges pollution from oil sands production is contributing to high rates of cancer among local communities; a claim that is rejected by the industry.

The Co-op has put £100,000 towards marketing and distribution of the documentary in Britain. Its asset management arm is part of a campaign against oil sands investment by Royal Dutch Shell and BP.

FULL FT ARTICLE

March 16, 2010

David Wighton: Business Editor’s commentary

He arrived with a bang and within weeks had axed 5,000 jobs. But eight months after taking over the helm at Royal Dutch Shell, is Peter Voser making progress turning around the supertanker?

Long derided as the most sluggish of the top oil companies, Shell will today try to persuade investors at its annual strategy briefing that it is back on course. There certainly are some encouraging signs. For six years, oil production has been drifting lower at an average of 3.5 per cent a year. But with a series of big projects due to give the figures a boost this year, production is expected to stabilise at about 3.2 million barrels a day in 2010. In 2011 it could start growing for the first time in almost a decade.

Mr Voser can claim only limited credit for this trend, which reflects years of investment. But his own changes are starting to have an impact, in particular a sweeping reordering of the company that has reduced costs and improved focus.

For years, Shell was plagued by delays and budget overruns on big projects. So far, his creation of a separate division, Projects and Technology, responsible for masterminding large-scale operations, seems to be working well. Compared with peers such as Exxon and BP, Shell has been slow to make such changes, but that means the potential for improvements is greater.

Mr Voser has promised at least another $1 billion in cost cuts this year and will provide further details today.

He is still grappling with huge challenges — not least Shell’s sprawling refining and marketing operation, which is struggling in the face of the industry’s most severe downturn in 20 years. The group’s poor record at finding new supplies of oil and gas also remains a profound problem which Voser must address.

Still, his decision to sell some of Shell’s onshore Nigerian assets and bid for Arrow Energy, an Australian producer of coal-seam gas, show that he is willing to give the portfolio a good shaking. It will be years before Mr Voser’s performance can be judged properly — but so far so good.

david.wighton@thetimes.co.uk

TIMES ARTICLE

By Fred Pals

March 15 (Bloomberg) — Royal Dutch Shell Plc, vying with BP Plc to be Europe’s largest oil and gas ompany, will outline a plan tomorrow to increase output every year until 2020, a person familiar with the company’s strategy said.

Chief Executive Officer Peter Voser, due to brief investors at an annual strategy update in London, will say Shell has a pipeline of more than 20 projects with the potential to sustain low single-digit average annual production growth in the second half of the decade, the person said, asking not to be indentified because the presentation hasn’t yet been made.

Shell is seeking to revive oil and gas output with projects in Qatar, Malaysia and Brazil after production fell for a seventh consecutive year in 2009. The company, based in The Hague, hasn’t previously given annual targets beyond 2012, saying only its reserves will allow it to increase production in the second half of the decade.

Voser has targeted $1 billion in cost savings this year and will cut 1,000 more jobs in an effort to weather the economic slowdown, which has reduced fuel demand in the U.S. and Europe. The Swiss CEO, who succeeded Jeroen van der Veer in July, will reiterate the need to cut costs and indicate capital spending plans beyond 2012, the person familiar with his strategy said.

A spokesman at Shell’s press office declined to comment on the briefing when contacted by phone today.

Voser will say Shell expects gas-to-liquids and liquefied natural gas projects in Qatar, the BC-10 project in Brazil and Perdido in the Gulf of Mexico to be on schedule, the person said.

Production Drop

Shell’s production fell 3 percent to 3.152 million barrels of oil equivalent a day in 2009 from 3.248 million barrels a day in 2008. The company’s London-traded shares have gained 17 percent in the last year, trailing a 35 percent gain for its closest rival BP Plc.

BP on March 2 announced plans to increase pretax profitability by $3 billion over the next two to three years by boosting production and making the refining and marketing business more efficient. BP intends to raise average annual oil and gas output by 1 to 2 percent through 2015.

Shell has earmarked net capital spending of $28 billion this year, about $8 billion more than BP.

–Editors: Will Kennedy, Stephen Cunningham.

To contact the reporter on this story: Fred Pals in Amsterdam at fpals@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

SOURCE ARTICLE

This is Money

City Diary: Week ahead in the markets

Press Association
12 March 2010, 4:43pm

Attempts by Royal Dutch Shell to address its production difficulties will be in the spotlight next week…

Royal Dutch Shell chief executive Peter Voser faces a tough challenge on Tuesday when he presents the oil major’s strategy update to a sceptical City.