Shell needs to consider Van Beurden succession

English translation of an article published today by the Dutch FT

Shell needs to consider Van Beurden succession

From our editor

CFO Jessica Uhl and CEO Ben van Beurden before the start of the Shell Shell shareholders’ meeting in Scheveningen last May. Photo: Piroschka van de Wouw / Reuters

In brief

• Investors say in the Sunday Telegraph that Shell should reflect on the position of its top man.
• The British newspaper published a story based on anonymous sources.
• Shell is struggling: last week, the dividend was cut for the first time in decades.

One of Shell’s largest shareholders has suggested that the oil and gas company should start thinking about succeeding CEO Ben van Beurden, the day after Shell reduced its dividend for the first time since World War II. That writes the Sunday Telegraph. The British newspaper has spoken to two investors from the top 20 largest shareholders, one of which says it is time for a ‘changing of the guard’.

The shareholders spoke on the basis of anonymity. The investors did understand that Shell cut sharply in the profit distribution. That went from $ 0.47 per share to $ 0.16 per share, the company announced last quarter in its first quarter figures. The shareholders said in the Sunday Telegraph that the company is entering a new era. There should be more visibility into the future of management, according to anonymous Shell investors.

‘Difficult day’

Van Beurden has been CEO since January 2014. “No chairman of the board wants this on his track record, but it is wise to do it,” he said, when Shell cut the profit distribution last week. He spoke of ‘a difficult day for the company’.

Due to the corona crisis and because Russia and Saudi Arabia initially failed to agree on a restriction on production, the oil price has plummeted over the past month. In the US, one forward contract even turned negative: traders were willing to pay for it, so as not to get oil delivered. That has never been seen before.

-43%

As a result, the revenues of large oil companies are being hit hard. In order to arm themselves against this, they have to make major cutbacks: scrapping or postponing investments, firing people. By reducing the dividend, Shell will save $ 10 billion annually.

Nevertheless, the company is one of the biggest fallers of the AEX. Price this year: -43%. This is unprecedented for a company the size of Shell. Tens of billions in stock market value have evaporated. When Shell reported to cut the dividend on Thursday, the price fell by more than 10%.

Green profile

Shell is also increasingly under pressure to do something about the company’s so-called green profile. Five years ago, Shell bought the British BG Group for more than € 50 billion. This made the share of gas more important within Shell.

Although gas is a fossil fuel, compared to other fuels, gas contains little CO2. Van Beurden wants Shell to be seen again as a company that makes a positive contribution to society, a “force for good”, he said in an interview with this newspaper at the time.

Investments

That is also what Shell hears from the outside world. The green ambitions are definitely there. Shell invests up to $ 4 billion a year in new forms of energy, including electricity from the sun and wind. On the other hand, the company constantly insists that the world still needs oil and gas. So Shell invests tens of billions in this every year.

“While the oil and gas industry is going through a challenging period, investors will wonder if the oil industry will continue to play an important role in the future,” Nick Stansbury, chief commodity research officer at Legal & General Investment Management, told the Sunday Telegraph . “Or does cutting the dividends reflect a more structural change?”

And the dividend is a reason for shareholders to invest in Shell and the other oil majors. The dividend is a source of income that has been stable for decades.

SOURCE

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