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Chief executives often claim they hate direct comparisons with rivals. Yet for Shell boss Wael Sawan, comparisons with London-listed competitor BP only serve to flatter.
Since Sawan took the helm in January 2023, Shell’s share price has significantly outperformed both US and European rivals, gaining almost 20 per cent. By comparison, BP’s shares have lost 6 per cent over the same time.
When BP chief executive Murray Auchincloss delivered a strategy reset a month ago, it left pressing questions over whether this was a company that could turn itself round. By contrast, Shell’s latest strategy day on Tuesday should be enough to satisfy investors over its immediate future.
Sawan has the luxury of not needing to reinvent the wheel. He has a formula investors like: cutting costs, being disciplined with capital expenditure, reducing net debt and sending cash back to shareholders. Crucially, he also reassessed early in his tenure which cleaner energy technologies Shell should back.
Sawan on Tuesday upped cost savings and lowered spending to $20bn-22bn a year between 2025 and 2028, from $22bn-$25bn previously. Shell’s shareholder payout percentage will also move to between 40 and 50 per cent of cash flow from operations, from between 30 and 40 per cent previously. If the share price stayed close to current levels, it reckons it could repurchase up to a further 40 per cent of its stock by 2030, having already bought more than a fifth in the past three years.
In a world where investors can only pick between BP and Shell, Sawan is in a good spot. Sadly, the reality is different. While Shell has outperformed its large rivals, the company’s valuation dramatically lags US peers on several measures. Valued as a multiple of its forecast 2025 free cash flow, Shell trades at roughly a 40 per cent discount to Chevron and ExxonMobil.
Sawan knows that slashing costs and spending can only get him so far. He was keen to stress on Tuesday that combined oil and gas production, shrinking since 2019, is expected to grow again by 1 per cent a year to 2030. This growth will come from gas. Shell is making a big bet on liquefied natural gas and its role in the energy transition. By contrast, it is planning to keep production of oil and other liquids more or less flat for the rest of this decade.
Can Shell ever close the gap with its US peers? In the past, the group has looked at bold moves such as shifting its listing to New York. Some analysts have suggested asset sales, or even acquiring another energy major to secure growth beyond 2030. For now, though, Sawan has at least done enough to ensure Shell is still spoken of in flattering tones. Beating BP is not a bad consolation prize.
nathalie.thomas@ft.com
