London Evening Standard: Shell's battle plan fails to win City: “But the overhaul promised by the Dutchman left the City distinctly unimpressed after he failed to commit to increasing share buybacks and admitted that it may be 2009 before oil and gas output grows.” (ShellNews.net)
Steve Hawkes
22 September 2004
SHELL has put the For Sale sign up over huge swathes of its business as chairman Jeroen van der Veer today detailed plans to transform the oil giant and bounce back from the worst crisis in its history.
But the overhaul promised by the Dutchman left the City distinctly unimpressed after he failed to commit to increasing share buybacks and admitted that it may be 2009 before oil and gas output grows.
The shares fell 10 3/4p to 421 1/2p. 'Frankly, I'm disappointed,' one analyst said.
Van der Veer hopes to raise between $10bn (£5.6bn) and $12bn over the next three years by chopping deadwood in its global empire. The cash will be used for finding new oil and gas reserves.
The decision means Shell is finally calling time on dozens of underperforming assets in its upstream and downstream divisions in a long overdue move to reposition itself.
Van der Veer said the unprecedented disposals programme was just part of 'urgent' action needed to restore the group to its former glory following the reserves scandal that erupted earlier this year.
Shell slashed 4.4bn barrels from its bank of proved reserves in a stunning admission that it overstated its portfolio for years. The fiasco led to a boardroom cull and the ousting of chairman Sir Philip Watts.
Van der Veer said: 'I wish we had not had to go through the past six months - crisis is not the best way to operate - but we are where we are and we will use this setback as an opportunity to show what we can do.
'We must sharpen our resolve - this will make us a stronger competitor and a different company.'
Annual spending across the group will now rise to $15bn, up nearly 5%, over the next three years with the vast majority going on new 'Big Cat' exploration and bringing new oil and gas projects on line.
Van der Veer added that the group would also overhaul its downstream division - which covers everything from refining to petrol stations - to improve profitability.
Its global liquefied petroleum gas (LPG) business may be first to go after Shell revealed it had received an approach. The group added that it would be fully integrating its oil products and chemicals arms.
Analysts had widely expected Shell to announce a disposals programme, given the desperate need for investment in new growth areas. But many wanted the Anglo-Dutch group to put far more assets on the block and make a firm commitment to return more to investors.
Van der Veer said buybacks would be made only when Shell had 'the space', explaining that dividends*, a strong balance sheet and potential acquisitions were a greater priority.
Crucially, Shell is basing its new financial plans around a $25-a-barrel oil price, $5 more than fierce rival BP. Van der Veer said it was clear higher energy prices would remain for the mid-term.
No fireworks from new boss
THERE were no fireworks, no rabbits out of hats. In fact, it felt like business as usual at Shell today, writes Magnus Grimond.
Jeroen van der Veer looked more like the man from the ministry than the new dynamic boss charged with breathing life into the holed Shell supertanker.
He brushed aside suggestions that his new big idea - an 'enterprise first' culture - was mere management gobbledegook.
In somewhat stilted English, the Dutchman explained: 'Culture is something you can talk very long about. But if you talk shortly about it, it is very difficult to specify.'
It boiled down to 'actions and urgency', he claimed, while admitting cultural change would take time.
There was no visible response from the other three members of Shell's top team who were van der Veer's companions today - head of gas and power Linda Cook, oil products and chemicals chief Rob Routs and head of exploration and production Malcolm Brinded.
Much of the firm's future now rests on Brinded. Over the next four years, Shell will replace 100% of its production, well below rival BP, and Brinded must come up with new finds to put a smile back on the faces of the firm's shareholders.
Brinded seemed sure of his abilities to do so, dismissing suggestions that Shell had erred in its virtual giveaway of Indian reserves to upstart Cairn.
He and van der Veer are now bound in trying to re-energise Shell. Perhaps they should take their cue from the motto of the Worshipful Company of Plaisterers, which hosted today's event: 'Let brotherly love continue'.
http://www.thisismoney.com/20040922/nm82758.html