The Guardian: Shell ready for acquisition trail

The Guardian: Shell ready for acquisition trail

Thursday June 23, 2005

By Terry Macalister

Shell chief executive Jeroen van der Veer yesterday raised expectations of a big acquisition to put the Anglo-Dutch oil group back on equal terms with BP and ExxonMobil.

Speaking at a press briefing about the advantages of now being able to launch a rights issue, he insisted “we have no specific target in mind” but pointed out that the last 100 years in the oil industry was a story of consolidation.

His remarks came as the prospect of a bidding war loomed last night for US oil group Unocal. China’s state-run oil firm CNOOC is preparing a counter-bid for the firm, upsetting an agreed offer of $18.2bn (£10bn) from America’s ChevronTexaco, sources close to the process told Reuters. A move would be the latest in a series of ambitious acquisitions by Chinese companies in the US and is bound to be closely scrutinised by American regulators.

Shell said that under the company’s dual structure the procedure for raising cash from shareholders had been extremely difficult and slow, but this structure would change next week at the annual meeting.

Shareholders will vote on the new single company structure, board and chief executive, being introduced following a year of woe for Shell. The vote is expected to be overwhelmingly positive.

“The last time we issued equity was in the 1950s,” said Mr van der Veer, whose remarks were seized on by analysts as proof the company was scanning the industry for a company-building move.

Fadel Gheit, oil analyst at Oppenheimer in New York, said: “The company is in absolutely desperate need of a large acquisition that would give it critical mass in an area such as US natural gas.”

Shell was short of the skills it had seen BP gain with the takeover of Amoco and Exxon with Mobil, he believed, and Shell could not afford to miss out on the next round of consolidation. The Anglo-Dutch group could be expected to make a move on a target as big as the $80bn (£44bn) ConocoPhilips, Mr Gheit believed. It is known to have considered Texaco, before Texaco merged with Chevron.

A takeover would help Shell to reach its goal of raising output from 3.5m barrels a day to 5m – much of it gas. Increased output would also come from a series of multi-billion-dollar projects such as Sakhalin in Russia, alongside unconventional fossil fuels such as tar sands and gas-to-liquids, Mr van der Veer said yesterday.

Some of these schemes require higher than average oil prices, but Mr van der Veer said they would all be viable at $25 a barrel. Oil yesterday was around $58 a barrel. Short-term prices were difficult to predict, he said, but “long-term you will see prices are higher than over the last decade.”

Shell is to appoint a “Mr or Mrs CO2” within the business and expects a big increase in carbon trading, but it remains sceptical that renewables will be viable much before 2050.

“The world will need much more energy, and most will come from fossil fuels for the foreseeable future … A lot of people think oil and gas is a sunset industry. This is absolutely wrong.”

Mr van der Veer was laying out his vision for the future after the worst year in Shell’s long history. Its image in the City was badly hurt by the oil reserves scandal which led to the exit of its chairman Sir Philip Watts and a blizzard of inquiries and lawsuits.

http://www.guardian.co.uk/business/story/0,,1512431,00.html

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