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Back to Basics or Backwards? Shell and BP Hug Their Oil Barrels Tighter Than Ever, Shareholders Gleefully Applaud

Posted by John Donovan 10 May 2024

In a thrilling turn of events that absolutely no one saw coming, Shell and BP have decided that their true calling is not in saving the planet, but in stacking cash to the ceiling. In their latest “screw the environment, we’re going back to oil” conference, these darlings of the FTSE 100 dazzled investors by basically promising to print money and give it all to them. Boring? Maybe. Profitable? Absolutely.

“Shell and BP had a simple message for investors at their latest results: boring is back. After delighting the world with their flings into green energy, it seems our oil magnates got cold feet. Why court solar and wind when you can make a cushy living drilling good ol’ fossil fuels?

Murray Auchincloss, the fresh king of BP land after Bernard Looney got booted for naughtiness, put it ever so eloquently: “We’re return-driven,” he declared in BP’s earnings love letter. He stressed, “We’re really, really driven by returns.” Could they be… return-driven, perhaps? And over at Shell, Wael Sawan, one year into his reign, echoed this newfound adoration for returns, as if the word itself would magically boost stock prices.

“We want to focus on cash flow,” Shell and BP chorused across 58 earnings calls. For those late to the party, that’s code for “let’s keep drilling until the cash runs out.”

While Irene Himona, analyst at Bernstein, waxed poetic about “cash generation and free cash generation,” a veteran energy banker spilled the tea: “Investors do not trust Shell and BP to do deals, they want to see consistent returns.” Talk about trust issues!

Profit-wise, Shell wowed the crowd, pulling a $7.7 billion rabbit out of its hat, which was, hilariously enough, way more than the market’s fortune-tellers predicted. BP, on the other hand, stumbled a bit with a “mere” $2.7 billion after coughing up more for finance and taxes than expected. Oops.

But it’s not all champagne and caviar. Shell and BP’s flirtation with green energy seems to be cooling off faster than you can say “carbon footprint.” Shell is slashing its green spend like last season’s fashions, trimming down to 19% of its capital by 2030, from a whole 23% last year. Meanwhile, BP’s Auchincloss hinted at snagging bargains in the low carbon aisle while sticking to a lofty (read: “aspirational”) goal of splurging 50% of their capital on green projects by 2030. Borkhataria, an analyst from RBC Capital Markets, quipped, “That capital is not being put to work.”

As for net-zero by 2050, both companies muttered something about “balance” and “focus,” but specifics were as scarce as a unicorn in an oil field. “The issue is trying to do it all,” sighed Shu Ling Liauw of Accela Research, highlighting the “very real trade-offs” between pleasing shareholders today and maybe saving the planet tomorrow.

So, as Shell and BP proudly march into the past, clinging to their oily roots, one has to wonder: when the oil wells run dry, what’s the backup plan? Or maybe we’ll just figure that out later—there’s cash to count now!

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