Ben van Beurden, whose departure as Shell chief executive at the end of the year was confirmed on Thursday morning, leaves at least two major legacies.
The first is the blockbuster £47bn takeover, announced in April 2015, in BG Group.
The deal was attracting no end of criticism at the time. There was much concern, at a time when oil and gas prices were low, about Shell’s ability to sustain its dividend payments, which were then calculated to be £1 in every £9 dividend paid by UK companies. The company is accused of over-paying BG.
Mr van Beurden’s argument was that, at a time when Shell’s subsidies were falling, BG wanted to significantly improve its position on that front. It also received a huge bet on oil and gas prices and a large strategic bet on liquefied natural gas (LNG).
In the event, the Dutch were forced You have split the Shell into pieces the first since the second world war in 2020, but was due to the collapse of oil and gas prices at the beginning of the pandemic.
After that, BG Group’s astute achievement proved to be the case, especially since Russia’s attack on Ukraine this year sparked a global clamor for LNG. Shell now accounts for between 15-20% of the global LNG market – a position that will serve it well for many years.
According to BG Group, Mr van Beurden is also carefully restructuring Shell’s portfolio, offloading less profitable or profitable assets. This, of course, was less glamorous or eye-catching than the BG Group comparison, but it is still vital to increasing the efficiency of the whole group.
Shell pointed out on Thursday at 80bn worth of divestments that have been made over the last decade – something that has kept concerns about the company’s debts at bay, and that would not have been possible had it not been for a higher-quality earnings stream. a great deal can be done by BG.
Mr van Beurden’s second major delegation will demonstrate that the transition has begun to kick off from fossil fuels and towards renewables.
He announced in April 2020 that Crusta will seek net zero business emissions by 2050 or sooner and, while it is still debated in the industry by whether. Shell or its rival BP was more ambitious looking for a prayer climate changeUndisputedly, both have led the way with other global energy giants.
Of course, the Shell will never be able to move fast enough to critical in green movement, especially after it has decided to attack it. Dutch royal reigning last year it called for a net carbon emissions cut of 45% by 2030.
Skeptics also point out that this year’s innovations still only account for just 5% or so of the higher demand charts – although part of that can be explained by the fact that traditional hydrocarbons have made Shells’ business that much more profitable. This year’s surge in oil and gas prices.
The company also highlighted that, over the last decade, the company has reduced its “target 1” and “target 2” emissions (those emissions caused either directly or indirectly through its operations) by a third.
While those are two great achievements that Mr van Beurden can point to, it is somewhat more ambiguous to share his legacy in pure values.
For much of the time since Mr van Beurden became chief executive, at the beginning of 2014, the share price has traded below the level of the market cap, when he took the helm (at the time of writing, about 9% before that day).
Shell will legitimately argue that this is partly down to events beyond Mr van Beurden’s control, such as the pandemic, while it can also be argued that the tight comparisons with January 2014 are also tricky because of the company’s decision last year to leave a complex two-part arrangement and to relocate tax residency from the Netherlands to the UK – in the process dropping the “Royal Dutch” from its corporate moniker.
Shell also highlighted the slide from a recent earnings presentation showing that its organic free cash flow for the first half of this year was three times that of the same period in 2013 when Brent Crude was trading at roughly a comparable price.
It also indicates that adjusted earnings in that previous period were up 65% and shareholder distributions were from $6.4bn in the first half of 2013 to $12.8bn in the first half of this year. The company can also argue that, in absolute terms, Shell’s share price performance has been better over time than global peers such as Exxon, Chevron and BP, although not Summa Energies.
In selecting Wael Sawan as Mr van Beurden’s successor, Shell has largely opted for a continuity candidate.
Mr Sawan, who was born in Beirut and is a dual Lebanese-Canadian national, was seen by investors as the front-runner to succeed Mr van Beurden when rumors swirled earlier this summer that he was preparing to retire.
Now director of Integrated Gas, Renewables and Energy Solutions, he has been at Shell for 20 years, during which time he has distinguished himself in many key areas of the business.
Shell chairman, Mr. Andrew Mackenzie said: “Wael Sawan is an exceptional leader, with all the qualities needed to drive Shell safely and profitably through the next period of transition and growth. His track record of commercial, operational and transformational success is not limited to his own. Broad, deep experience and understanding Shell and the energy sector, but also its strategic clarity.
“He combines those qualities with a passion for people, which enables him to get the best from those around him. He managed the successful board succession process as well as the appointment of an outstanding CEO and proved the strength and depth of Shell’s leadership talent.
The reason it is unlikely that a change of direction is appropriate is because it has already been set by Mr van Beurden. It can be summarized as generating sufficient capital from existing oil and gas to continue investing in energy transitions.
That sounds easier said than done, and Mr Sawan will face plenty of challenges.
Few among these satisfy the multitude of different classes which Shell has. Governments and consumers want certainty over the security of the grain industry at a time when Vladimir Putin is armed with energy, while investors want higher financial returns. Employees want a company they are proud to work for and where their safety is valued. And they all want an efficient transition to net zero – although opinions differ as to the degree to which this is achieved.
That’s why Shell is running one of the biggest businesses in the global business.
In the fullness of time, Master van Beurden will be seen to have acquitted himself well for nine years.