London Evening Standard: The oil giants' scorecard: "How they add up: BP 66, Shell 49": “Shell: Desperately needs to find more oil after the reserves debacle”: “Bonuses for the executive team for 2003 were scrapped in the light of the reserves scandal”
Steve Hawkes,
23 July 2004
Posted 25 July 04
HOW the two big players compare – check the scores on a range of indicators from assets to the environment.
Strategy
BP: Lord Browne has thrown BP's exploration focus on to five new profit centres, Caspian Sea, Trinidad, Angola, Gulf of Mexico and Asian gas, as a new foundation for growth. Plans to sell off half its underperforming petrochemicals arm. Has lucrative petrol station ventures in China.
Score: 8
Shell: Desperately needs to find more oil after the reserves debacle and is now pinning its hopes on far-flung frontiers such as deepwater Brazil while staying loyal to its heartlands, such as the North Sea. The biggest private provider of liquefied natural gas in the world.
Score: 4
Assets:
BP: More than 18bn barrels of oil and gas reserves and nearly 28,000 service stations spread around the world. Huge interest in deepwater Gulf of Mexico, Greater Plutonio field in Angola due to come on stream in 2007. Getting 900,000 barrels a day of production from Russian venture.
Score: 8
Shell: Just over 14bn barrels of reserves, but its 55,000 service stations give the group more retail outlets than McDonald's. Key player in Sakhalin II project to construct Russia's first liquefied natural gas plant and invested $4bn in Athabasca oil sands project in Canada.
Score: 8
Executive pay
BP: Lord Browne's pay package increased to £3.2m last year, but City analysts believe that he is solely responsible for contributing 5% to BP's stock market valuation of £108bn. Three of the five members of the group's remuneration committee are not independent.
Score: 6
Shell: A controversial £1m pay-off for former chairman Sir Philip Watts led to a 17% protest vote by shareholders against Shell's remuneration report this year. Bonuses for the executive team for 2003 were scrapped in the light of the reserves scandal.
Score: 5
Management
BP: Lord Browne is the undisputed King of Oil and BP's trump card. He is due to retire in four years but already has an eye on succession, the joint favourites being Tony Hayward, current head of exploration and production, and John Manzoni, head of refining and marketing.
Score: 9
Shell: A lot is expected of Malcolm Brinded, who was pushed over to head up Shell's exploration team after this year's scandals. New chairman Jeroen van der Veer is charged with restoring Shell's pride, stripping out bureaucracy and creating one board.
Score: 5
Communications
BP: Analysts claim that BP bends over backwards to help them with guidance on forecasts and queries on financial matters. Slick on public relations and recently switched to publishing its financial results at 7am, in line with the rest of the City.
Score: 8
Shell: Complaints about Shell's communications with the City are legendary - from the surprise over a huge exceptional hit contained in last year's third-quarter results, to Watts' no-show when the reserves scandal broke. Improving significantly under Van der Veer.
Score: 5
Brand
BP: Splashing out vast amounts on a redesign seems to have paid off for BP. Its BP Connect petrol stations have earned plaudits from design gurus and the group is judged to be 'moving ahead of the times'. Hugo Brooks, chief executive of Brand Works, labels the brand 'dynamic and impactful'.
Score: 7
Shell: Sticking to its roots has given it more of a connection with the customer, its Shell image linking the group to its heritage. Brand Works' Hugo Brooks says the group seems warmer than the sleek BP and that there is huge potential: 'There is an enormous latent value to be unlocked.'
Score: 5
Shares
BP: Claims a total shareholder return of 342% over the past 10 years, against 187% for the wider UK market. Investors stand to pocket more than $33bn (£18bn) over the next three years in buybacks and dividends* under plans announced by Browne earlier this year to return surplus cash.
Score: 6
Shell: Van der Veer finally delivered some good news for the stock market in April, alongside encouraging first-quarter results, with proposals to renew share buybacks, starting with a £2.3bn return. The share price plunged as low as 348 3/4p after the reserves scandal, a 16% drop in two months.
Score: 4
Financials
BP: Sky-high energy prices should push net* income at BP to as high as $15.6bn this year. Production is likely to surge next year and into 2006 to around 4.5m barrels a day as more projects come on line. Sale of the underperforming petrochemicals arm will boost cashflow.
Score: 8
Shell: Should match BP all the way with net income this year but, looking ahead, oil and gas production is only likely to break the 4m barrels a day mark in 2007. Still to restructure US downstream business but selling down Swedish, Iberian and Peruvian operations.
Score: 7
Environment
BP: Browne branded BP the green-energy company with its Beyond Petroleum campaign, but the group has been hit by controversy over its huge pipeline project running through Turkey, Georgia and Azerbaijan.
Score: 6
Shell: Suffered major problems in Nigeria, where local conflict has severely disrupted production over the past year. Held talks with minority groups from countries as far apart as the US and Africa at its annual general meeting last year.
Score: 6
How they add up:
BP 66, Shell 49
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