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Shell Plays Green Dress-Up for Shareholders While Profits Take a Dive

Let’s make money while pretending we care about the planet.

Posted by John Donovan: 31 Jan 24

Ladies and gentlemen, gather ’round for the latest episode of “Shell’s Green Masquerade.” While Shell has been playing the quiet game, BP’s former finance boss-turned-chief executive, Murray Auchincloss, has been hogging the spotlight. But fear not, Shell hasn’t been napping. They’ve been laser-focused on the most important thing in the universe: shareholder returns.

In a heartwarming message to analysts last June, Shell reassured everyone, “We need to continue to create profitable business models that can be scaled at pace to truly impact the de-carbonisation of the global energy system.” Translation: Let’s make money while pretending we care about the planet.

So, what’s the big news for Shell this Thursday? Spoiler alert: profits might be crashing back to Earth. We’re talking a projected nosedive from 40% to a measly 30%. With oil prices slumping to $82 per barrel from last year’s $100, Shell’s returns are looking a bit under the weather.

The forecast? A rather gloomy £21bn for the year, with a 40% drop in Q4. But wait, there’s a twist! Shell’s got a mixed bag of tricks, including a non-cash impairment charge of $2.4-2.5bn and a chemicals unit that’s been dragging its feet. On the bright side, gas production is set to skyrocket, thanks to “seasonality and opportunities” (whatever that means).

Now, onto the green scene. Thursday’s sustainability chat might reveal Shell’s not too different from BP after all. Shareholders might be thrilled with no dip in oil and gas production, but they’ll be peeking over Shell’s shoulder, wondering where that 2024 cash is going. Is it into the renewable piggy bank, or are we sticking to the fossil fuels comfort zone?

Remember Shell’s big “net zero by 2050” pledge? Well, in a plot twist last July, they dumped a key green promise like a hot potato. Bye-bye, plan to reduce oil production by 1-2% annually until 2030! Why? Because selling their stake in the Permian Basin oilfield in Texas was apparently enough. Who needs gradual change when you can just sell off a chunk and call it a day?

The big question is whether Shell can keep up the cash bonanza under Wael Sawan’s rule. With concerns about maintaining their lavish $3.5bn buybacks, it seems the green transition might be more of a slow crawl than a sprint.

“We are not trying to imitate others,” Sawan said to the Financial Times, ruling out big acquisition hunts. But if the green pressure cooker keeps whistling, Shell might need to take a leaf out of BP’s book. Stay tuned to see if Shell’s green costume convinces anyone, or if it’s just another episode of “Big Oil’s Great Pretenders.”

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