Wishful Green/Renewable Disaster VS Real life real assets OIl & Gas: Shell Shares Hit Lowest Point Since 1995

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Shell Shares Hit Lowest Point Since 1995


Bloomberg) -- Royal Dutch Shell Plc dropped to the lowest in 25 years a day after announcing a companywide overhaul, demonstrating the scale of the challenge the biggest oil companies face convincing investors about their green ambitions.

Along with its European peers, Shell is embarking on a transformation to become a cleaner, greener company with much fewer assets in oil by the middle of the century. While many investors have welcomed the new direction, others question a pivot into less-profitable renewables

Shell’s B shares closed at 907.3 pence on Thursday, the lowest level since November 1995. It’s London-based competitor BP Plc also fell to a 25-year low for a second week running, closing at 218.2 pence.

The Anglo-Dutch major announced Wednesday as many as 9,000 job losses by the end of 2022, which it predicts will result in cost savings of as much as $2.5 billion dollars. The redundancies are part of a wider restructuring of the company as it seeks to slash its greenhouse gas emissions and move into cleaner energy.

Shell and its peers have been battling with the impact the coronavirus pandemic has had on global demand and oil prices. The major slashed its dividend for the first time since the Second World War, as well as capital spending earlier this year, in a bid to reduce costs.

The stock has declined 59% year-to-date, compared to 22% for the FTSE 100 Index. Shell’s competitors BP Plc are down 54% this year, while Total has fallen by 42%.

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BP Hits 25-Year Low



Bloomberg) -- Just a week after revealing its plan to turn itself into a clean-energy giant, BP Plc watched its share price drop to a 25-year low.

Chief Executive Officer Bernard Looney and his new management team gave more than 10 hours of presentations over three days last week, in a bid to show the world that the oil and gas giant could adapt to a low-carbon future without sacrificing returns.

The company’s shares closed in London on Thursday at 232.4 pence, the lowest level since October 1995. While falling crude prices and fears of the second wave of the coronavirus haven’t helped BP, the slide suggests shareholders weren’t convinced by Looney’s pitch.

“Investors remain skeptical,” said Mirza Baig, Global Head of Governance at Aviva Investors. “Particularly as this move is being forced on the company by climate change.”

Looney took over as CEO in February, but the so-called “BP Week” this month was his big moment, designed to put flesh on the bones of a bold plan to become a “net-zero” energy company by 2050. It was also an opportunity to persuade shareholders to stick with BP after the company slashed its dividend by half in August.

“What investors are looking for with companies, when they announce big strategic changes of direction of any sort, is compelling answers to three questions: The what, the why and the how?” said Nick Stansbury, a fund manager at Legal & General Group Plc.

BP’s European peers are also trying to answer the same questions, with varying degrees of success. Royal Dutch Shell Plc, which also made a deep cut to its dividend this year, is barely trading above the post-pandemic share price low reached in March. Total SA has so far done a better job of maintaining investor confidence in its energy-transition plan.

At the heart of BP’s reinvention is a reduction in oil and gas production and simultaneous growth in its renewables business. Looney promised investors he could do this while delivering returns of 8% to 10%. That’s not as high as the double-digit returns oil developments can sometimes bring in, but greater than many clean-energy projects.

Looney said BP will take advantage of its experience, integration, low borrowing costs and trading prowess, but the market is likely to remain skeptical until such returns can be demonstrated in practice, analysts at Redburn wrote in a research note.

“BP’s challenge lies in the building up of its skill set in renewable energy solutions and a competitive advantage in its chosen areas that allows investors to believe they can deliver attractive financial returns from the capital allocated,” said Aviva’s Baig, who strongly supported the company’s net-zero ambition.

Doubts about Big Oil’s ability to maintain returns as the world shifts away from fossil fuels are reflected in companies’ dividend yields. The measures have been climbing steadily for both BP and Shell, suggesting shareholders aren’t confident the payouts can be maintained even after they were cut sharply earlier this year.

Investors don’t appear to be any more confident that sticking to oil and gas is a safe bet. Exxon Mobil Corp., the U.S. giant that shows little intention of transitioning to renewable energy and is still pumping huge amounts of money into hydrocarbon projects, has the highest dividend yield of all.

Getting BP into a position where it can deliver profits from large-scale renewable energy projects will require lots of upfront spending. The company made a $1.1 billion splash in offshore wind earlier this month, buying a stake in developments owned by fellow oil giant Equinor ASA. The near-term milestones laid out last week suggests that more deals will follow.

“For BP to meet its low-carbon target of 50 gigawatts of renewable generation capacity by 2030, considerable growth is required over the coming years,” said Stuart Lamont, an investment manager at Brewin Dolphin Holdings Plc. “This will require discipline from the company, ensuring a delicate balance between working toward decarbonization targets while achieving attractive returns for shareholders.

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ExxonMobil focused on core oil and gas as renewable returns too weak: official



Wind, solar returns at 'utility rates'

Questions over shift to renewables by European majors

Committed to Brazil upstream investment



London — ExxonMobil remains focused on growing its core oil and gas business as alternative renewable energies are mostly unable to offer attractive rates of return compared to hydrocarbons, a top official at the US oil giant said Sept. 30.



Asked why ExxonMobil is still planning to grow its future oil production while European oil majors are pivoting towards renewable and low-carbon energy, ExxonMobil's head in Brazil Carla Lacerda said the company is prioritizing its "core competencies" of oil and gas.

"Our fundamental belief is that if we were to invest in solar or wind, for example, we don't have an engineering background business background of that type of business so we would have to joint venture or acquire a company to do so," Lacerda told the FT Commodities Global Summit.

"We believe in the fundamentals of the oil and gas business," she said. "We believe societies and economies will continue to need oil and gas. In the upcoming years, the alternatives really can only fulfill a small amount, or a relatively modest amount, of the overall demand that exists."

Despite sharp declines in the cost of solar and wind power in recent years, returns from renewable investment remain below average rates achieved from oil and gas, Lacerda said.

"As we look at it now in terms of business, many of these projects are really providing utility rates of return, so it doesn't seem like the value generation is exactly in that," she said.


Shift to renewables


Lacerda's comments come just days after Rosneft's first vice president Didier Casimiro told the conference that recent moves by European oil majors to shift away from oil and gas to renewables present an "existential threat" for future oil supply and price volatility.

He also said other producers "will need to step in" and "take that responsibility" as some oil majors move away from their core oil business.

BP surprised investors in August with plans to shrink its oil and gas production by at least 1 million b/d of oil equivalent, or 40%, over the next decade, in a radical transformation.

Also speaking at the FT event Sept. 30, Professor Paul Stevens, a Distinguished Fellow for Energy, Environment at the UK's Chatham House said oil majors are facing major hurdles in retooling for a lower-carbon future due to "extremely competitive" power and renewable energy markets.

"Oil companies, despite their best efforts, are going to struggle to maintain shareholder loyalty, and I think that's going to be a big problem," Stevens said.


Committed to Brazil


In Brazil, Lacerda said ExxonMobil's exploration-led upstream projects remained on track despite the recent company-wide spending cuts in response to the pandemic-triggered oil price collapse earlier this year.

"We have 28 blocks of which most of them are exploration," she said, "Although the company has gone through a capex reduction of 30% for 2020 ...the Brazilian projects remain on track largely because of the world-class play, because these are assets that we feel will perform well, pending discoveries, in the pricing environment that we're in."

Asked how Brazil's deepwater oil plays can compete with rival upstream resources in other parts of the world as producers seek out lower-cost, lower-carbon projects, Lacerda said: "We see the need for production coming from Brazil and the next really in the next decade two decades."

Lacerda also cautioned over the potential for an oil supply crunch as the current round of upstream spending cuts lower the future supply outlook.

"There's going to be a place where production has come down because of the capex curtailments but demand is coming back up. And so there's going to be a shortfall at that point... So we do believe Brazil has a very significant and important role in future production



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Thanks again for actually posting about oil companies on an oil website forum. 👍👍😁

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On 10/1/2020 at 10:41 PM, Ward Smith said:

Thanks again for actually posting about oil companies on an oil website forum. 👍👍😁

I look forward to and always upvote posts from @ceo_energemsier. Would that everyone were so concise and informative.

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