Shell Considered Relocating To The U.S. In Pursuit Of Higher Value

• Two years ago, Shell’s executive leadership discussed relocating to the U.S. in order to boost the company’s valuation.

• There is a stark difference in valuation between European and U.S. oil majors, a difference that analysts believes is related to ESG factors and energy transition plans.

• BP recently backtracked on some of its energy transition promises, resulting in its stock price climbing 10%.

Shell’s executive leadership discussed leaving Europe and relocating to the United States, the Financial Times has reported, citing unnamed sources familiar with the discussion.

According to the FT’s sources, the supermajor’s new chief executive, Wael Sawan, was part of a team of top executives that two years ago considered moving Shell’s headquarters to the U.S. and listing the company there, too.

The relocation idea was ultimately dropped but the FT notes that Shell’s chief executive remains worried about the difference in valuation between Shell and its U.S. peers.

Indeed, there has been a stark difference in the valuations of European and U.S. Big Oil majors. According to analysts, there are two primary reasons for this: the first is the greater clout that ESG investing has in Europe and the other is that neither ESG-focused nor traditional investors seem to be particularly convinced of European Big Oil’s transition plans.

Meanwhile, at least one European Big Oil major has indicated it will not stick to its transition plans unwaveringly. BP said at the release of its latest financial results that it had revised its emission-reduction plans and now eyes a smaller oil and gas production cut as a means of reducing emissions.

“We’re grossly undervalued,” BP’s Bernard Looney said at around the same time his company announced plans to actually boost oil and gas production over the medium term.

Barron’s reported earlier this month that BP, Shell, and TotalEnergies are trading at around five to seven times their expected profits for this year—after the record profits they booked for 2022.

Meanwhile, Exxon and Chevron are trading at 11 times their expected 2023 earnings, Barron’s noted. The FT, for its part, reported that Shell’s Sawan and other company executives had been “stunned” by BP’s production plan announcement and the fact its stock gained 10 percent following that announcement.

By Irina Slav for Oilprice.com