Royal Dutch Shell Plc Chief Executive Officer Ben Van Beurden spelled out his main goal last week — surpass Exxon Mobil Corp. to become the best-performing oil major.
“I am determined to get us to that number one place,” he said after outlining the company’s long-term strategy in London. “I want to create a world class investment case for Shell and our shareholders.”
There are signs Van Beurden is winning over some investors following his record $54 billion acquisition of BG Group Plc. Shell has closed the gap on Exxon for total shareholder returns, which accounts for share prices, dividend payouts and buybacks, after lagging behind for five years. Still, the Anglo-Dutch explorer trails its U.S. rival on a range of other metrics from return on capital and assets to cash flow.
To meet his target, Shell will focus on increasing free cash flow per share, improving its returns and running its finances in a “conservative way,” according to Van Beurden, who is resetting the company to perform with lower oil prices.
To achieve this, Shell will cap annual capital investment at $30 billion until the end of the decade even if crude prices rise, Europe’s biggest oil company said June 7. If prices remain at the current level of about $50 a barrel, or drop, Shell can cut spending below the lower end of its target range of $25 billion.
Shell plans to slow new investments in its liquefied natural gas business as it seeks to increase cash flows. The BG deal gave it LNG assets from Australia to North America and consolidated its top position with liquefaction capacity more than double that of its nearest rival Exxon.
“I want Shell to be a more relevant, a more valuable company, which means a large market capitalization; and a more valued company, which means that we are listened to and respected for what we do and we say,” Van Beurden said.
For the first 90 years of its existence, Shell led the industry in total shareholder returns, Van Beurden said last week. It lost that position in the late 1990s as its rivals including Exxon, Total SA and BP Plc went on a deal-making spree, while Shell was the only one of the oil majors that wasn’t involved in a large acquisition. Van Beurden now wants to return the company to the top and he’s banking on the purchase of BG to help him.
Shell’s purchase of BG has boosted its total debt to about $81 billion while Exxon has about $43 billion, giving the U.S. company more flexibility to borrow to grow.