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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By Alexis Xydias

Feb. 19 (Bloomberg) — Royal Dutch Shell Plc shares are a “trading buy” before the company uptades investors on its strategy on March 16, analysts at Credit Suisse Group AG wrote in a report today.

“We argue that the market remains keen to call the ‘turn’ in Shell after seven years of production decline and operational struggles, and that the annual strategy update conducted by Chief Executive Officer Voser in his sophomore year in charge will, rightly or wrongly, be viewed as a catalyst in this turnaround process,” the note said.

Shell’s stock remains rated “neutral” at Credit Suisse.

To contact the editor responsible for this story: Alexis Xydias at +44-20-7073-3372 or axydias@bloomberg.net

SOURCE ARTICLE

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.

TELEGRAPH ARTICLE

REUTERS

LONDON (Reuters) – Royal Dutch Shell Plc (RDSa.L) said it was overhauling its pay practices for top management, including a pay freeze for its chief executive, Peter Voser, and a limit on bonuses, after a shareholder revolt last year.

The head of Shell’s remuneration committee said salaries for Voser and Chief Financial Officer Simon Henry, which are 20 percent lower than their predecessors’, were being frozen until 2011.

Directors will not, this year, be allowed to award management bonuses if they fail to meet pre-agreed targets.

Top management received bonuses for 2008, despite not hitting targets, prompting 60 percent of Shell investors who voted, to oppose the 2008 remuneration report.

Hans Wijers, Chairman of Shell’s Remuneration Committee told investors in a letter, a copy of which was published on Shell’s web site on Tuesday, that he wanted to “demonstrate appropriate restraint in the current economic environment”.

Investors in European corporates, who traditionally vote overwhelmingly in favor of managements’ plans, registered their dissatisfaction with companies’ handling of and contribution to the global economic crisis in unprecedented numbers in 2009.

One third of voters at mining group Xstrata’s (XTA.L) annual general meeting opposed its pay policy, and more than a third of investors opposed oil major BP’s (BP.L) executive pay.

A majority of investors in troubled bank Royal Bank of Scotland (RBS.L), housebuilder Bellway (BWY.L) and Provident Financial (PFG.L) opposed pay plans in 2009 and last week, residential landlord Grainger (GRI.L) lost a shareholder vote on executive pay.

STRUCTURE REMAINS THE SAME

Hague-based Shell’s bonus structure remains largely intact and of the same magnitude.

Nonetheless, in addition to the restrictions on directors issuing discretionary bonuses, Europe’s second-largest oil company by market capitalization has introduced measures which it says will help align management and investors’ interests.

Under the new rules, management will be forced to hold shares awarded under Shell’s long term incentive plan for two years after they are awarded.

Annual bonuses will be tied to project delivery, with delay or budget overshoots being punished.

Also, as the bonuses are based on percentages of base salaries, the pay freeze, effective July 2009 to January 2011, will restrain the total amount of the bonuses somewhat.

Shell said it had also introduced a right to claw-back incentives paid within the previous 12 months, in the case of any material misstatements.

In 2004, Shell’s shares dived after it admitted overstating its reserves.

The key metric in the bonus plan remains Shell’s performance against other supermajors — U.S. rivals Exxon Mobil (XOM.N) and Chevron (CVX.N) and London-based BP and France’s Total (TOTF.PA).

In future, Shell’s CEO will have to have a shareholding in the company equal to three times his salary, to provide “greater alignment with shareholders’ interests”.

The current shareholding guideline for executive directors, including the CEO and CFO, is two times salary, Shell said.

Jeroen van der Veer, who retired as Chief Executive in June 2009, received total compensation of $15 million for 2008, according to Shell’s annual report.

Voser, who was Chief Financial Officer until he took over in July, earned $6 million.

Shell’s London-listed “A” shares were unmoved by the news, trading up 0.8 percent at 1,740 pence, compared to a 1.0 percent rise in the DJ Stoxx European oil and gas sector index .SXEP.

(Reporting by Tom Bergin; Editing by Erica Billingham and Louise Heavens)

REUTERS ARTICLE

Heath Aston, Daily Mail
5 February 2010, 9:51am

Oil giant Royal Dutch Shell will cut jobs and refine capacity as it enters an ‘uncertain’ 2010 faced with weak gas prices and depressed refining margins for oil products.

Under pressure from better performing rivals such as BP, Shell chief executive Peter Voser conceded that the Anglo-Dutch company had become bloated during the good times of sky-high oil prices before the financial crisis.

He said: ‘We’ve had four years of record profits. You know yourself when you have a good time you eat a little too much and you get a bit fat.’

In a bid to trim the company down, Voser will axe 1,000 staff, mainly executives, and sell about 15% of Shell’s oil refineries dotted across the globe, raising up to £1.9bn.

The deeper cuts come after Shell got rid of 5,000 staff last year and reduced its refining capacity, especially in established western markets where fuel consumption has dwindled since the recession. Last week the company closed a refinery in Montreal, Canada.

The need to strip back and kickstart Shell’s operating performance was illustrated by earnings figures showing annual profits in 2009 at $9.8bn were just a third of the $31bn bagged in 2008.

By comparison, BP’s annual profits halved.

n what one analyst described as a ‘truly awful set of figures’, Shell’s fourth quarter earnings on a current cost of supplies basis wilted to $1.2bn from $4.8bn in the same quarter of 2008.

Excluding one-off items – mainly the $900m cost of redundancies – earnings fell to $2.8bn from $3.9bn, below what the City had anticipated.

Oriel Securities analyst Andrew Whittock described the result as ‘disappointing’.

Voser warned there could be no quick fix, with refining capacity in the market outweighing demand and refining margins at their lowest point in 15 years.

Shell’s move to increase its exposure to the lower carbon natural gas market has backfired in the short term, with prices falling much harder than oil since their peaks.

Echoing statements from BP, Voser said the rebound in the global economy would take longer than many people expected.

He said: ‘On the outlook, I wouldn’t call it a rosy one. I would be quite cautious.’

Voser said Shell’s $28bn capital expenditure programme would be directed more at expanding Asian markets although building new refineries was not on the agenda after India and China opened refineries that have added two million barrels a day of oil supply in that region.

Royal Dutch Shell’s A shares ended the day in the doldrums and down 43p at 1732p.

DAILY MAIL ARTICLE

Oil firm will sell 15% of refinery operations and slow down tar sands projects as fourth-quarter profits fall by 75%

AFP: LONDON — Energy giant Royal Dutch Shell said on Thursday that fourth-quarter adjusted net profit slumped 75 percent due to weak demand in the downturn, adding it would axe 1,000 jobs amid an uncertain outlook.

Earnings tumbled to $1.18 billion (851 million euros) in the three months to December, compared with $4.8 billion in the same period of 2008, Shell said in a results statement.

For 2009 as a whole, adjusted net profit plunged 69 percent to $9.8 billion.

The London-listed energy major said it will axe another 1,000 jobs this year after cutting 5,000 positions over 2009 as it sought to ramp up efficiency.

Shell said it has targeted at least $1 billion of cost reductions for 2010, largely from downstream and corporate functions.

“Our fourth quarter 2009 results were impacted by the weak global economy,” Royal Dutch Shell Chief Executive Officer Peter Voser said in the statement.

“Oil prices have increased compared to a year ago but gas prices and refining margins have declined sharply because of weaker demand and high industry inventory levels.

“We are not assuming that there will be a quick recovery and the outlook for 2010 is uncertain,” he said.

Production slid two percent during the fourth quarter to 3.331 million barrels of oil equivalent per day.

Voser said the group was positioning itself for “significant growth” in the years ahead.

“We are taking steps to improve our performance, to bridge the company, and our shareholders, into a period of significant growth in the coming years.”

The group added that it sold around $1.3 billion of non-core downstream assets in 2009.

Asset sales would continue this year, with 15 percent of its refining capacity placed under review, it added.

Copyright © 2010 AFP. All rights reserved.

Bloomberg February 04, 2010, 03:40 AM EST

By Fred Pals

Feb. 4 (Bloomberg) — Royal Dutch Shell Plc, which vies with BP Plc as Europe’s biggest oil company, laid out plans for 1,000 extra job cuts and savings of $1 billion this year because of a “challenging” outlook for refining.

Earnings excluding one-time items and gains or losses from inventories fell 28 percent in the fourth quarter to $2.8 billion from the year-earlier period. They matched the $2.88 billion median estimate of 14 analysts surveyed by Bloomberg.

Chief Executive Officer Peter Voser, who has placed 15 percent of Shell’s refining capacity up for review, said he isn’t betting on a “quick” recovery and the outlook for 2010 is “uncertain.” Oil prices had their biggest annual gain since 1999 last year, keeping refining margins under pressure as the recession weighed on fuel demand.

“Refining is struggling a lot and it is worse than we had expected,” Gudmund Halle Isfeldt, an Oslo-based analyst at DnB Nor Markets, said in a telephone interview.

Net income of $1.96 billion in the fourth quarter compared with a loss of $2.81 billion a year ago, The Hague-based Shell said in a statement today.

BP, which warned earlier this week that the recovery will be “slow and gradual,” posted net income of $4.3 billion in the final quarter of 2009. Exxon Mobil Corp., the largest U.S. company, posted a fifth straight drop in quarterly profit earlier this week to $6.05 billion.

‘Significant Overhang’

Shell cut 5,000 jobs last year and reduced costs by $2 billion, of which $1 billion came from in the last quarter. There is a “significant overhang” of industry refining capacity and about 560,000 barrels a day of capacity is under review, the company said.

“Downstream is facing some tough times,” Voser said in the statement. “Cost-focus is now embedded in our-day-to-day operations.”

Voser is seeking to revive production growth with new projects in Qatar, Malaysia and Brazil after output fell for a seventh year in 2009.

Shell’s class-A shares fell 1.9 percent in London trading to 1,741 pence as of 8:20 a.m. local time. The stock is up 0.6 percent in the past year, compared with a 15 percent advance for London-based BP.

Swiss-born Voser, who inherited the industry’s biggest spending program last year after taking over from Jeroen van der Veer as CEO, is no longer pinning his hopes on Nigeria, where Shell’s operations were plagued by militant attacks in recent years. Shell halted some flow stations in Nigeria earlier this week after sabotage caused a pipeline leak.

Lower Production

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. Fourth-quarter production fell 2.5 percent to 3.331 million barrels of oil equivalent a day.

Voser expects natural gas to make up more than half of Shell’s production by 2012. Gas must get “much more on the agenda as its potential role is underestimated,” Voser said in Davos last week.

Shell in December produced its first million barrels of oil from the Parque das Conchas project off the coast in Brazil. It also exceeded targets for the shipments of liquefied natural gas and crude oil from its Sakhalin-2 venture in Russia’s Far East.

Shell on Feb. 1 announced an ethanol venture with Cosan SA Industria & Comercio in Brazil. Shell will contribute assets including 2,740 service stations and as much as $1.93 billion to the 50-50 venture.

–With assistance by Eduard Gismatullin and Brian Swint in London. Editors: Stephen Cunningham, Will Kennedy.

To contact the reporter on this story: Fred Pals in Amsterdam at +31-20-589-8563 or fpals@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at +44-20-7073-3603 or wkennedy3@bloomberg.net.

SOURCE ARTICLE

LONDON (Reuters) – Royal Dutch Shell Plc posted a 75 percent fall in fourth-quarter profits to $1.18 billion, as the oil major was punished for falling output and its strong position in the depressed refining and natural gas businesses.

Oil prices recovered in the quarter but gas prices were much lower than in the same period a year earlier, while refining margins collapsed to their lowest level in almost 15 years.

Europe’s second largest oil company by market value said it made a $1.76 billion loss in its refining unit and Chief Executive Peter Voser said he was mulling the sale or closure of 15 percent of Shell’s refining portfolio, even after saying it planned to close its Montreal facility last month. “These results confirmed the very negative trends affecting the downstream business,” Colin Smith, oil analyst at ICAP, said.

Excluding one-off items, which amounted to a charge of $1.6 billion, the result was $2.77 billion, short of an average forecast of $2.87 billion from a Reuters poll of 10 analysts.

Oil and gas production fell 2.4 percent to 3.3 million barrels of oil equivalent per day in the quarter compared to the same period last year. Full year output was down 3 percent.

Shell’s results compare with a 23 percent drop in fourth-quarter net income at the largest western oil company by market value, Exxon Mobil, and a 37 percent drop at the second-largest U.S. oil company, Chevron.

However, UK rival BP managed to report a 33 percent rise in profits in the quarter thanks to its low reliance on refining and natural gas.

Finnish refiner Neste Oil lagged consensus with Q4 sales of 2.5 billion euros compared with 2.66 billion in a Reuters poll while Europe’s largest independent refiner Petroplus beat forecasts but swung to a clean net loss of $150 million in the fourth quarter.

(Reporting by Tom Bergin; Editing by Victoria Bryan, Mike Nesbit)

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FROM A SHELL INSIDER

Shell now growing in biofuels? A few years ago Shell was going to corner the solar cell business. That has been closed down. Then Shell was growing the hot air of the windmill business. They also withdrew from a huge UK project. Shell needed reserves so expanded in the tarsand business. The (negative) environmental impact is beyond belief. So that project is scaling down as well for some obscure reason. Of late oilshale is becoming popular again, Shell even recruited a corrupt US official for it so they must be serious. But I predict this will also soon fizzle out. And now strong growth in the biofuel. This will destroy Brazilian rainforests, pressure from environmentalists will be mounting and before too long this will also be scaled down. Billions of capital destruction and no consequences for the people at the top. They resemble exactly like modern day politicians, only good at surviving and reaping personal benefits while it lasts.

Why doesn’t Shell learn from Exxon: remain focused on producing oil and gas and do it profitable. Every year a bit better than the year before. Steady and relentless. But I fear the internal know-how has been replaced by woolly language, political correctness and dependence on contractors who will steal Shell blind because if you cannot do it yourself anymore, you also cannot manage it. There has been no coherent policy for future business for years.

About time Voser wraps it up and sells off Shell in large parcels and get it over and done with.