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BP should take a close look at Shell

There are two main differences between Royal Dutch Shell and BP.

By , Head of Business 11:17PM GMT 02 Feb 2012

Shell’s results on Thursday showed it was capable of mistakes, like any company. Hiccups in its production business and continued over capacity in refining meant it undershot market expectations and the share price ended 1.2pc down.

But the company’s dividend remains strong (in 2011 it was Europe’s biggest dividend payer, before special distributions, and probably the world’s biggest as a result) and it plans to start raising the payout on the back of continued investment.

However, it’s not infallible, as we know is the case with BP. But two things separate the companies. One is £56bn, which is the gap between their market values. The other is management credibility.

Carl-Henric Svanberg and Bob Dudley, BP’s chairman and chief executive, don’t have the track record of Jorma Ollila and Peter Voser. Neither do they have the same level of trust and credibility with shareholders.

A credibility discount may not account for the entire £56bn, but it’s certainly contributing a fair chunk.

BP has results next week and the company, after another mistake-riddled year in 2011, needs a new story to tell – a clear and precise strategy for growth and investment based on a clear and precise corporate structure that’s communicated on Tuesday and delivered over the next 12 months.


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