Posts under ‘Daily Telegraph’

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.

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A stream of analyst comments and silence on the offer from the Australian coal-seam gas group has fuelled expectations that Arrow will reject the bid and the two parties will have to come in with a higher – and hostile – offer. Last week, Shell and PetroChina offered A$4.45 in cash for each Arrow share, plus a share in a new, international Arrow entity.

Shell’s oil facilities in the Niger Delta have suffered from a number of criminal and militant attacks, leading Peter Voser, chief executive officer, to declare that the country is no longer a key area for growth.

Daily Telegraph

Last updated: March 11th, 2010

An area near Fort McMurray, Alberta, Canada, where oil sands are believed to lie

The group of investors vociferously trying to persuade BP and Shell to re-evaluate their potential investments in the Canada tar sands has now enlisted a group of MPs in Britain to propose an early day motion questioning the project’s financial viability.

The move is part of a pretty well-coordinated campaign mobilised by FairPensions (members: ActionAid, WWF and a number of trade unions). This year, the rebels have managed to get enough shareholder support to submit motions to the oil companies’ annual meetings against the Alberta prospects, which environmentalists argue will be responsible for high levels of carbon dioxide emissions.

Shareholders obviously have a perfect right to kick up a fuss about investments they’re not keen on. Around 25pc of the FTSE-100’s dividends are paid out each year by BP and Shell, so the importance of these two companies’ decisions to UK pensions cannot be under-estimated.

However, it does seem slightly disingenuous that FairPensions is trying to claim that a big reason for their concern is the economics of the projects. They question the margins that will be made by the oil companies and warn of possible high legal fees from environmental challenges, plus the rising costs of climate change legislation.

But if they were so concerned about the right economic decisions being made by companies like BP, they would be having a look at its portfolio of renewables and “other” unit, which made a stonking $2.3bn loss in 2009. Yet there seems to be no issue with wind, solar and biofuels: all eco-friendly, low-carbon projects that are undertaken to improve the company’s green image and prepare for a future of heavier regulation of emissions/higher financial penalties, rather than turn an immediate profit.

What’s more, if you look at an investment like BP’s Project Sunrise, it represents a low proportion of the company’s overall capital expenditure. It is currently planning to spend $1.25bn on the venture over the next few years out of a total $20bn yearly budget on exploration and new projects. If given the go-ahead, BP’s oil sands will only be pumping out 60,000 barrels out of 4m barrels per day by 2014 – around 1.5pc of overall output.

I’m not taking sides on the environmental controversy of this debate. BP claims the extra carbon dioxide emissions of Project Sunrise – from well to wheel – will only be an additional 5-15pc. The campaigners put this figure at a much higher 12-40pc.

It’s just that all the talk about the oil sands’ profitability seems to obscure this real purpose of this argument – do the tar sands pose an unacceptable environmental risk and how much do we care about it? Obviously the economics of the project are borderline unless oil stays in the $80-100 per barrel range, confirmed by the fact that Shell’s Peter Voser has decided to slow the pace of investment at the moment to concentrate on conventional reserves.

But it is highly unlikely that BP and Shell would have been examining these prospects if there were not a probability that they could make some money and they will be subject to the same financial feasibility tests as every other investment – there would be little point in them wasting all this time and money just to spite the environmentalists. And I somehow doubt that the campaigners would be putting all this effort into an anti-tar sand campaign if the projects were the cleanest form of crude extraction in the world.

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Daily Telegraph

Royal Dutch Shell is reportedly selling assets including its liquid petroleum gas business and North Sea fields to meet the cost of its $28bn (£18bn) capital spending programme.

Published: 12:12AM GMT 01 Mar 2010

The oil and gas giant predicts that it will raise $2bn to $3bn from selling assets that are not central to its growth plans, particularly downstream assets such as refining and marketing operations in mature markets such as Europe, for example.

It is also believed to be selling some mature oil and gas fields in the North Sea and Nigeria.

Shell has invited indicative bids, which are expected to go up to approximately €1bn (£900m) for its French-based European LPG arm. This sells bottled gas to rural homes.

Axa Private Equity, Bain Capital and PAI are said to be in the running for the business, which saw earnings before interest, tax, depreciation and amortisation of about €120m last year.

CVC Capital Partners and the Carlyle Group are also said to be interested.

All private equity groups declined to comment.

Shell has also reportedly put up for sale North Sea fields connected to the Anasuria floating production, storage and offloading vessel off the coast of Aberdeen, and fields in the Southern gas basin.

These assets could be worth several hundred million pounds.

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Daily Telegraph

Royal Dutch Shell has frozen the pay of its top executive directors and imposed new rules on bonuses, as it tries to appease investor anger over excessive remuneration.

By Rowena Mason, City Reporter (Energy)
Published: 9:11AM GMT 16 Feb 2010

Last year, Shell’s board suffered an embarrassing shareholder revolt over their pay packages, which awarded bonuses to executives who had failed to hit their targets.

Since then, the company has been consulting with major shareholders about more appropriate remuneration policies.

In a letter to investors , Hans Wijers, chairman of the remuneration committee, said the move would “better align remuneration policy with shareholder interests and long-term strategy”.

Peter Voser, who took over as chief executive of Shell last year, has already accepted a pay package 20pc below that of his predecessor, in line with other new employees.

He, along with Simon Henry, finance director, and Malcolm Brinded, director of upstream, will not be eligible for a rise until at least January 2011.

A greater proportion of bonus payments will now be in shares, to be vested over a longer period of time, which will tie the money made by directors to performance.

Mr Voser will also have a personal say in how successful his executive directors have been at hitting targets each year. The remuneration committee has also agreed not to award bonuses where directors fail to meet their targets.

It is understood major shareholders are happy with the concessions, which will be presented at the group’s annual meeting in May.

The shareholder revolt last year was one of the largest in UK corporate history, with 59.42pc of shareholders voting against Shell’s pay deal during at fiery meeting at the Hague.

Peter Job, the former chairman of Royal Dutch Shell’s remuneration committee, stepped down in September, five months after the rebellion. He angered investors by recommending that directors take up half their share awards even though Shell missed its target of finishing third in terms of performance against a peer group of five rivals.

Jeroen van der Veer, Shell’s former chief executive, received a package worth £9.1m, up 58pc on 2007.

At the time, several investors spoke out. Errol Keyner, from Dutch shareholder association VEB, called the system “sick and in need of fixing”. Guy Jubb, of Standard Life, told the board he was “dismayed” over Mr van der Veer remuneration package.

The rebellion was seen as an indication of increasing activism among institutional shareholders and a sign that anger at bonuses paid to management in the banks had spilled over into other sectors.

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The Movement for the Emancipation of the Niger Delta (Mend) called off its ceasefire just hours before an attack on three fuel pumping stations operated by Royal Dutch Shell. The company confirmed on Monday it was forced to partially shut down production following the sabotage assault on the facilities, in the south-eastern Bayelsa state.

Peter Voser, Shell’s chief executive, has pledged to concentrate on developing biofuels and clean coal, as part of the company’s attempt to reduce its carbon dioxide emissions.

Sunday Telegraph

BP expected to exend gap with Shell in the battle of oil giants

The British oil major, now the biggest in Europe, is currently winning the race against its Anglo-Dutch rival

By Rowena Mason
Published: 8:12PM GMT 30 Jan 2010

Royal Dutch Shell is likely to endure more humiliation at the hands of BP this week, when it posts profits an estimated $1.7bn lower than its rival.

BP, which recently stole Shell’s crown as Europe’s largest oil company by market value, is likely to report profits of $4.6bn (£2.9bn). This 80pc up from $2.6bn in the last quarter of 2008 on a “replacement cost basis – a measure used by oil companies to strip out the effect of changing inventories.

BP is reaping the harvest of an aggressive $4bn cost-cutting drive that began before the recession and doubled in pace last year.

Meanwhile, analysts have been downgrading the forecasts for Shell’s profits over concern that its refining business has been performing below expectations.

According to consensus estimates, it is likely to report that profits have fallen to $2.9bn from $4.8bn in same quarter of the 2008, when it reports on Thursday.

Shell started cutting costs much later than its rival, resulting in 5,000 job losses during the downturn.

Its chief executive Peter Voser warned last week at the Davos economic summit that there were likely to be more redundancies this year.

“It’s normal in any business that you have to go further and you have to operate your operating expenditure in a very tough way,” he said, sounding a cautious note on global recovery. “As part of that, it may also mean that some more people have to go.”

Both the companies’ profits are expected be down sharply for the year – in the case of BP, 40pc lower at $15bn, and more than 60pc down at $11.4bn for Shell.

The first US oil company to report, Chevron, showed on Friday the difficulty of maintaining healthy profits when refining margins remain low, with hefty losses in that division.

The corporation posted a 37pc fall in quarterly profits, as the cost of producing petrol and diesel prices failed to keep up with a big rise in the cost of crude oil.

The second-largest oil company in the US made a net profit of $3bn between October and December, down 37pc from in 2008.

Data from BP shows that companies are now making just $1.49 per barrel of petrol product, compared with $5.19 a year ago.

Downstream divisions – responsible for refining, marketing and selling petrol-based products – are expected to suffer at all the majors, owing to lower demand in the recession. Many oil companies are frantically trying to offload their refineries, concerned about overcapacity in the industry.

Shell is in the process of selling its UK-based Stanlow refinery in Cheshire to Indian company Essar and three others in Europe.

A higher oil price of $76.13 in the fourth quarter – almost a third above last year – will have supported profits in the exploration and production arms.

But BG Group, the oil and gas producer, is still likely to report pre-tax profit of £1.05bn on Friday – down 10pc from £1.16bn a year earlier, with annual profits 23pc below last year’s £4.1bn.

Analysts often see discrepancies between BP and Shell’s performance as merely part of the cycle of rivalry between the two companies.

BP rose by 19pc on the stock market this year and boosted production to 3.9m barrels, while Shell fell by 3pc and saw its output drop below 3m barrels.

“Shell began restructuring last year, so is lagging BP, and furthermore its massive capex expenditure in recent years does not see new volumes start to kick in until 2011-2012,” said Richard Griffith, an analyst for Evolution Securities. “On balance, earnings won’t look great when they’re announced but we see more scope for positive surprises at BP and less dividend risk.”

Most industry experts are more concerned with the expected dash for new production assets in the aftermath of the recession than any temporary drop in profitability.

Citi analyst Mark Bloomfield said: “We expect the focus to shift from a defensive cost-saving mode towards pursuit of opportunities for expansion.”

This shift in emphasis towards new projects has led some City investors to favour Shell over BP.

Mr Voser has promised that Shell would commit to record capital expenditure. It is forecast to see a boost in output from European gas and Nigeria this year and, looking to 2013 and beyond, it will see new prospects at its Qatar gas-to-liquids project, and the Canadian oil sands come on stream. The company has staked its future on a number of technically difficult fields, including unconventional reserves in Canada and deepwater projects in the Gulf of Mexico and Brazil.

BP will also increase production over the next couple of years and is exploring deep drill sites in the Gulf of Mexico and under the Arctic ice.

However, it lacks its competitor’s big flagship projects to lift future output.

Sunday Telegraph Article

If successful, Mrs al Musawi’s case could set a legal precedent that would invalidate all the agreements that Iraq secured last year – with BP, CNPC, ExxonMobil, Petronas, Royal Dutch Shell, Eni, Gazprom and Lukoil.