The British-Dutch oil company is under a lot of pressure.
(Photo: AP)
Daimler is doing it, RWE has already done it and Siemens has done it several times: The spin-off of individual business divisions is not uncommon in the corporate world. That’s why star investor Dan Loeb’s demand to split oil giant Shell into two parts is actually not such a daring idea.
The good ones in the pot, the bad ones in the croup – in other words: the fossil fuel business on one side, the future-oriented alternative energies on the other. More and more activist shareholders want this not only from Shell, but also from Exxon Mobil and RWE. You suspect a massive undervaluation of the former profit machines on the stock market, resulting in poorer results and in the end losses for the shareholders, i.e. yourself.
Of course, Shell could spin off its new businesses in order to achieve a higher valuation over the long term and to pacify activist shareholders. But what then happens to the main business of oil and gas production, which is still multi-billion euros? That would come under even greater pressure in view of climate targets, CO2 prices and medium-term stagnating oil demand.
Even today, oil and gas are almost single-handedly responsible for the company’s income. In comparison, the business with renewables has significantly lower margins. So a spin-off would only shift the problem.
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A problem that Shell has admittedly gotten itself into. Of the European oil companies, the British-Dutch company clearly has the lowest ambitions with regard to the climate and the environment. It’s not just about when and how much CO2 can be saved. After all, Shell did not upgrade until Thursday.
Trench warfare in the group
It’s much more about which direction the group is going in the long term. And while BP is clearly turning in the direction of alternative energies and gas, Shell does not yet want to be pushed in one or the other direction.
No wonder, as there was real trench warfare inside and outside the group while the new strategy was being drawn up. Some managers left the house because the climate specifications were too weak for them, while others demanded a clear commitment to oil and gas. Shell tried to do justice to both sides and in the end couldn’t please either side.
Either way: Now the group has to make a decision. Quieting both sides will not work in the long run. Shell can now determine the direction itself. At some point, however, really activist investors will take care of it.
More: Why split-up plans are putting oil giant Shell under even more pressure