Shell’s fall from grace
In May 2013, when Voser’s retirement was announced, he was described by Reuters as having been Shell’s “renaissance CEO”. Fast-forward eight months and Voser’s successor stunned the market with a profits warning. It was a remarkably quick fall from grace for both the former chief and the company… …the company’s misstatement of its proven reserves early in the century landed it with a multi-million dollar fine from stock market regulators and forced the departure of its chairman as well as shocking investors. Shell has had its own environmental problems in Nigeria. Now it is being severely criticised for overspending.
By John Kemp
Feb 4 (Reuters) – “All political lives, unless they are cut off in midstream at a happy juncture, end in failure,” wrote Enoch Powell, a former member of Britain’s parliament who held controversial views on immigration and national identity.
Much the same could be said of business careers, as Shell’s former chief executive Peter Voser has learned the hard way. His strategy of continuing to invest in complex megaprojects through the oil industry cycle is now blamed for the company’s recent profit warning and underperformance.
In May 2013, when Voser’s retirement was announced, he was described by Reuters as having been Shell’s “renaissance CEO”. According to my colleague Andy Callus, “his exit from a role he is seen to have excelled in surprised investors, analysts and people inside Europe’s biggest oil company” .
Fast-forward eight months and Voser’s successor stunned the market with a profits warning. “Our 2013 performance was not what I expect from Shell,” Chief Executive Ben van Beurden told investors and promised a more disciplined approach to investment as well as better operational performance and project delivery.
It was a remarkably quick fall from grace for both the former chief and the company, though no swifter than many other chief executives and businesses have endured.
FROM HERO TO FAILURE
Speaking to Reuters in May 2013, Voser warned: “You spend capex through the cycle. Don’t try to read it, don’t slow down. It will cost you more when you want to grow afterwards.
“I know a lot of investors and analysts. They all think they can read the market … but one thing in our industry is very clear; it takes you five to seven years to recover (from) a strategic slowdown,” Voser explained.
“The market changes its views in three to six months, and you can’t change that fast in our industry.”
Just a few weeks after Voser stepped down, Shell has finally succumbed to cyclical pressure. Van Beurden insists the company’s overall strategy is sound, but has promised to cut investment and enhance returns by making hard choices about new projects.
Shell’s abrupt turnaround has prompted questions about whether the company’s strategy was mistaken, poorly executed, or if the company was the victim of changed circumstances beyond its control.
It has also prompted unflattering comparisons with BP , which emphasised spending discipline much earlier, and is now the darling of analysts and investors.
SIBLING RIVALRY
Contrasting the strategy, leadership, culture and performance of the two London-listed oil majors is a favourite pastime of writers about both companies.
In the standard caricature, Shell is more conservative, bureaucratic, technology-driven and controlled by engineers. BP is reputedly more entrepreneurial, innovative, risk-taking and controlled by financially focused managers.
The two have regularly swapped places as the favourite of the media and investors over the last two decades depending on which set of characteristics is in fashion.
Legendary Chief Executive John Browne, who played a leading role consolidating the oil industry, pushing into post-communist Russia and building up a formidable oil trading division, made BP the favourite in the late 1990s.
But in the wake of accidents like the Texas City refinery explosion and Macondo well blowout in the Gulf of Mexico, BP’s alleged lack ofengineering expertise, reliance on external contractors, obsession with short-term financial results, and criticism of its safety procedures, drew adverse comparisons with Shell’s boring but predictably safe operations.
BP suffered a near-death experience following the 2010 Gulf oil spill, and is still paying out tens of billions of dollars in fines and compensation.
But Shell too has had its ups and downs. The company’s Pearl gas-to-liquids project in Qatar has proved to be enormously profitable. Shell’s advanced engineering is admired across the industry. And Shell was the first of the major oil companies to exploit the shift from oil to gas.
But the company’s misstatement of its proven reserves early in the century landed it with a multi-million dollar fine from stock market regulators and forced the departure of its chairman as well as shocking investors. Shell has had its own environmental problems in Nigeria. Now it is being severely criticised for overspending.
SIMILAR RETURNS
In practice, the long-term performance of the two companies has been remarkably similar. The attached chart shows the share price performances of Shell and BP since 1994 ().
At times, BP has outperformed its more staid rival, but its shares have also been much more volatile, and the two companies’ performance over the whole period has ended up remarkably similar.
If reinvested dividends are taken into account, the total return on Shell’s shares has averaged 8.64 percent per year since 1994, only marginally less than the 8.96 percent return on BP shares. Which company comes out ahead is sensitive to the period chosen for analysis, suggesting underlying performance is basically indistinguishable.
That is not really surprising. Both companies face the same fundamental forces – including exploration and development costs, political risks, price risks, and technology challenges.
The fact the two companies’ financial performances have been similar over the long term suggests the fundamentals they have in common are more important than the cultural, strategic and leadership factors that differentiate them.
Journalists, financial analysts and investors tend to focus on human factors like strategy, leadership and culture because they make for a more interesting story. But the fundamental factors the two rivals have in common are probably more important in explaining medium and long-term performance.
FICKLE FASHIONS
Voser was right to observe that in a capital-intensive industry like oil and gas it makes no sense to keep changing spending and investment plans in response to short-term demands from investors and analysts. But he was most definitely wrong to think the market would reward Shell for taking a rational long-term view.
Nearly all political, business and financial careers end in failure and recriminations because as they mature leaders become more rigid, less adaptable, and less open to new thinking, and they must live with the consequences of past decisions when circumstances change.
The only leaders to escape with their heroism intact tend to be those who leave early before the external environment shifts. Voser retired early but he was unlucky to do so just as the industry’s investment climate was turning.
Shell’s strategy was not wrong, and it certainly was not worse than BP’s, however it was not well aligned to the prevailing phase of the cycle, and the company did not adapt quickly enough to keep investors and commentators happy.
But the cycle will keep on turning. In a few years BP will be out of favour again, and everyone will be writing about how Shell is a much more solid and reliable performer, with a good long-term investment portfolio, and crediting its lucky CEO.
BP versus Shell
In the wake of this month’s profits warning from Royal Dutch Shell and its problems in Nigeria, its upstream and downstream problems and the failure of its massive capital expenditure program to yield any meaningful benefits in the short term, investors appear to be asking themselves whether a move back to BP might be in order. Shell’s new CEO Ben van Beurden in his new role as CEO appears to be clearing the decks for some form of company reorganisation as the company struggles with falling revenues and lower oil prices.
Royal Dutch Shell and Mad Dog Gaddafi
The compilation of articles accessible below provide the answer to why Tony Blair and Royal Dutch Shell executive director Malcolm Brinded (above left), sucked up to the Libyan dictator Muammar al-Gaddafi, the monster ultimately responsible for the Pan-Am 103 bombing and other terrorist atrocities. They include the murder of a British police constable Yvonne Fletcher shot outside the Libyan Embassy in London while policing an anti-Gaddafi demonstration.
By John Donovan
Last night a remarkable 90 minute documentary was aired on BBC FOUR TV under the title: Mad Dog: Gaddafi’s Secret World
Part of the documentary covered the bombing of Pan Am 103 and the subsequent release of the convicted bomber Abdelbaset al-Megrahi in a deal involving oil.
Shell is the only oil company named in the documentary. It claims to operate under strict business principles, but in fact has no scruples at all.
The following are extracts from a related Daily Mail article published under the headline: Shell wrote letter Tony Blair used in £325m Libyan oil deal
Tony Blair used a letter written by Shell to lobby Colonel Gaddafi on its behalf to clinch an oil deal, documents reveal.
A letter he wrote to the Libyan leader bears a remarkable similarity to a briefing note Royal Dutch Shell sent him weeks earlier promoting a £325million deal.
The correspondence, obtained under a Freedom of Information request, reveals just how much Mr Blair was influenced by the oil company when he was Prime Minister.
It also puts into question the Government’s motives for releasing Lockerbie bomber Abdul Baset Ali al-Megrahi.
Lockerbie victims have accused the Government of releasing the terrorist in order to allow British companies better access to oil and gas deals in Libya. The letters reveal that
Shell asked Mr Blair to discuss progress on weapons of mass destruction and about information on the investigation into the murder of WPC Yvonne Fletcher outside the Libyan Embassy in London in 1984.
The objective was ‘to cause the Leader to instruct the Cabinet to approve/finalise quickly’ the company’s deal, according to the Shell draft.
Shell advised the Prime Minister to congratulate Colonel Muammar Gaddafi on Revolution Day and to comment on Libya’s ‘remarkable year of progress’.
EXTRACTS END
The compilation of articles accessible below provide the answer to why Tony Blair and Royal Dutch Shell executive director Malcolm Brinded (now departed), sucked up to the Libyan dictator Muammar al-Gaddafi, the monster ultimately responsible for the Pan-Am 103 bombing and other terrorist atrocities. They include the murder of a British police constable Yvonne Fletcher shot outside the Libyan Embassy in London while policing an anti-Gaddafi demonstration.
- Shell’s Malcolm Brinded – lustful friend of Libya: 22 August 2009
- Shell has been stalking the Libyans ever since relations thawed: 22 August 2009
- Shell dealing with the devil in Libya: 23 February 2011
- Claimed uprising by Shell Libya staff: 15 June 2012
- Shell’s undignified exit from Libya: 16 June 2012
- Shell Libya Security Breach: 22 Jan 2013
Chris Finlayson’s dreadful first year as chief executive at BG
LONDON EVENING STANDARD TODAY:
Chris Finlayson’s dreadful first year as chief executive at BG Group was today capped by the news that profits slumped 37% to $4.16 billion (£2.54 billion) in 2013. The former Royal Dutch Shell executive said he shared shareholders’ “disappointment” at the oil producer’s many problems, which have included four profit warnings in little more than 12 months. Garry White, chief investment commentator at broker Charles Stanley, said: “I reckon it’s time for BG Group to be broken up.”
By John Donovan
WE REPEATEDLY WARNED BG SHAREHOLDERS AND EMPLOYEES ABOUT CHRIS FINLAYSON…
HE IS NOT THE ONLY COMMON DENOMINATOR BETWEEN ROYAL DUTCH SHELL AND BG GROUP.
BOTH COMPANIES HAVE JUST ISSUED PROFIT WARNINGS
- How Chris Finlayson bungled the Mother of all Projects: Sakhalin II: 24 December 2012
- BG Group corporate incubator for Shell strays?: 22 December 2012
- BG Group CEO Chris Finlayson and the Shell ‘Touch Fuck All’ Scandal: 20 December 2012
- CHRIS FINLAYSON AND THE ROYAL DUTCH SHELL RESERVES SCANDAL: 18 December 2012
- Contact with BG Group about its controversial new CEO Chris Finlayson: 17 December 2012
- Shareholder alarm over appointment of BG Group CEO Chris Finlayson: 16 December 2012
- Chris Finlayson: One can of worms after another: 17 Jan 2013
- Chris Finlayson saw himself as the victim of a brutal Shell regime: 21 October 2013
THE DEVASTATING ARTICLE PUBLISHED TODAY BY THE LONDON EVENING STANDARD IS SELF-EXPLANATORY
Gloom continues for new BG boss amid profits slide
The former Royal Dutch Shell executive said he shared shareholders’ “disappointment” at the oil producer’s many problems, which have included four profit warnings in little more than 12 months.
Last week Finlayson declared “force majeure” notices in Egypt, meaning the group would cancel contracts due to circumstances out of its control, which resulted in a 13.8% slump in the share price on the day.
Some analysts believe BG cannot carry on in its current form. Garry White, chief investment commentator at broker Charles Stanley, said: “I reckon it’s time for BG Group to be broken up.”
BP Fourth-Quarter Profit Drops
February 04, 2014
BP follows Royal Dutch Shell Plc (RDSA) and Exxon Mobil Corp., the two biggest oil companies by market value, in reporting lower earnings as the cost of drilling rises, refining profits slump and oil prices stagnate.
Shell and BG Group Plc (BG/) both issued profit warnings for the fourth quarter. BG today reported the first loss since 2000 on output disruptions from Egypt and higher exploration costs. Shell said last week it will accelerate asset sales to offset investment after capital spending reached a record in 2013.
BP share price: Oil giant’s earnings in focus after rivals’ gloomy results
by Alice Young, Feb 3 2014, 15:58 GMTBP’s results follow that of European peer Shell, which last week posted a drop in its fourth-quarter and full-year earnings matching a shock profit warning issued earlier in January.
Broker round-up: Shell
February 03 2014, 1:00pm
Royal Dutch Shell (LON:RDSB) has been downgraded by HSBC, despite the broker welcoming the actions taken by new chief executive Ben van Beurden.Shell’s new boss is right to focus on improving the Anglo-Dutch giant’s financial performance and its capital efficiency, says the broker, including a reduction in growth capex and the clear guidance on increased disposals. According to HSBC, however, the market has anticipated many of his changes already…
Worlds leading source of information about Royal Dutch Shell
Free access to over 36,000 articles, comment, historical information and news archive relating to corporate tax dodgersRoyal Dutch Shell, the worlds largest company by revenue. A TVdocumentary feature about our co-founder John Donovan, has aired in many countries (link to related presseurop article published in 10 languages). This non-profit website isendorsed by Shell. Site “viewed traffic” AWstats for Jan 2014:7,065,548 hits and 1,144,700 page views.
For nearly a decade, we have operated under the Royal Dutch Shell Plc top level domain name, dealing on Shell’s reluctant behalf with job applications, business proposals, Shell pension enquiries, shareholder enquiries, complaints, invitations to speak at conferences, contact from the Dutch Defence Ministry and even terrorist threats. All meant for Shell. A humiliation that Shell continues to endure. We provide a global platform, on a responsible basis, for Shell whistleblowers to put confidential information, including insider information and leaked documents, into the public domain e.g. Sakhalin2.
Shell starts production from second Mars platform in deep water Gulf of Mexico
News and Media Releases
Shell starts production from second Mars platform in deep water Gulf of Mexico
Shell today announces it has begun production from the Mars B development through Olympus – the company’s seventh, and largest, floating deep-water platform in the Gulf of Mexico. It is the first deep-water project in the Gulf to expand an existing oil and gas field with significant new infrastructure, which should extend the life of the greater Mars basin to 2050 or beyond. Combined future production from Olympus and the original Mars platform is expected to deliver an estimated resource base of 1 billion barrels of oil equivalent (boe).
“With two large platforms now producing from the deep-water Mars field, this project demonstrates our deep-water project delivery and leadership,” said John Hollowell, Executive Vice President for Deep Water, Shell Upstream Americas. “We safely completed construction and installation of the Olympus platform more than six months ahead of schedule, allowing us to begin production early from the development’s first well. Olympus is the latest, successful start-up of our strong portfolio of deep-water projects, which we expect to generate substantial value in the coming years. Deep water will continue to be a core growth opportunity for Shell.”
Australian union accuses Shell, Caltex of lax tanker safety rules
Joanna Mather: Tuesday 4 February 2014
The Transport Workers’ Union has announced a national dispute in the oil, fuel and gas industry, claiming up to 45 per cent of petrol tankers have poor break maintenance.
The union is seeking to have the Road Safety Remuneration Tribunal issue orders requiring that companies including Shell and Caltex enforce maintenance rules for fuel tankers.
There are an estimated 1500 tankers on Australian roads.
Argentina Accuses Shell of Conspiracy After Price Increase
Royal Dutch Shell Plc’s Argentine unit was accused of conspiring against the country’s interests by Cabinet Chief Jorge Capitanich after the oil producer increased fuel prices following a devaluation of the peso. “Shell’s attitude and the one from its highest executive is conspiratorial and against the interests of the country,” Capitanich told reporters this morning in Buenos Aires. “The only explanation for this behavior is greediness.”
Feb 3, 2014 7:08 PM GMT
Royal Dutch Shell Plc (RDSA)’s Argentine unit was accused of conspiring against the country’s interests by Cabinet Chief Jorge Capitanich after the oil producer increased fuel prices following a devaluation of the peso.
Shell boosted prices an average 12 percent at its service stations, which represent 18 percent of the Argentine market, the company said in an e-mailed statement published by local newspapers today. The company’s previous price increase of 6.8 percent was on Jan. 2, beforeArgentina moved to weaken the peso 15 percent from Jan. 22 to Jan. 23, the largest drop since 2002.
“Shell’s attitude and the one from its highest executive is conspiratorial and against the interests of the country,” Capitanich told reporters this morning in Buenos Aires. “The only explanation for this behavior is greediness.”
The sudden fall in the peso, which is the worst performing currency in the world after tumbling 19 percent this year, prompted Shell to increase prices again, the company said in the statement. The increase was the first by a fuel distributor in the Buenos Aires area since the devaluation and occurred 10 days after the government said Shell Argentina’s Chief Executive Officer Juan Jose Aranguren attempted to interfere in the currency exchange market by buying dollars at a higher rate than the market was selling.
‘Categorically Untrue’
“Suggestions that there was any other reason behind our decision are categorically untrue,” Kayla Macke, a spokeswoman for Shell based in Houston, said in an e-mailed response to questions. “As we explained to customers and the government in Argentina, this move is purely due to the relative increase in the cost of crude oil to our operation in the country, which has occurred as a direct result of the falling value of the peso.”
Aranguren said the price increase still trails the company’s costs.
“It is not a good thing to wake up after being accused of being a conspirator,” Aranguren said today in an interview aired by Radio Mitre. “If our costs increase 23 percent and we increase our prices by 12 percent, could that be considered greediness?”
YPF SA (YPF), Argentina’s biggest energy company, declined to comment on a potential fuel price increase in an e-mailed response to questions. YPF owns 1,500 service stations in Argentina, or 58 percent of the market.
Shell Boycott
Argentina, which was censured by the International Monetary Fundin February 2013 for underreporting inflation, has moved to contain consumer price increases in the wake of the devaluation by threatening to fine or close businesses and capping costs on goods from food to electronics.
Consumer prices rose 28.4 percent in 2013, according to opposition lawmakers who compile private economist estimates. Prices rose 10.9 percent last year, according to the government.’
This isn’t the first time Shell’s CEO is accused of conspiracy against the country. Aranguren, 59, was appointed president of Shell’s Argentine unit, or Shell Compania Argentina de Petroleo SA, in 2003, the same year Nestor Kirchner was elected president. Kirchner asked consumers in 2005 to boycott Shell after it raised fuel prices.
Former Argentina Trade Secretary Guillermo Moreno imposed 83 fines against the company and took Aranguren to court. All cases were dismissed. Moreno was ousted Nov. 19 after eight years of using strong-arm tactics that earned him a reputation as a bully.
The firing of Moreno “is a signal that they can’t continue running the country the way they were running it,” Aranguren said in an interview on Dec. 9.
To contact the reporter on this story: Pablo Gonzalez in Buenos Aires at pgonzalez49@bloomberg.net
To contact the editor responsible for this story: James Attwood atjattwood3@bloomberg.net
Campaigners cheer a bad week for Shell
Campaigners in Canada protesting proposed drilling in the Arctic. Tavis Ford under a Creative Commons Licence
By Kevin Smith
It’s been a bad week for Shell. On the international stage, a lawsuit from indigenous communities and environmental groups has scuppered their chances of drilling for oil in the Alaskan Arctic, while in London, it was announced that Shell was no longer going to be the sponsor for the 14/15 Classic Series at the Southbank Centre. Two events of a very different scale to each other, and on different sides of the world, but connected through the concept of the ‘social licence to operate’.
The TRUTH will set you FREE.
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