An Activist Hedge Fund Wants to Break Up Shell Oil

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The oil industry has a spill, and the leaky commodity is drama.

Less than six months after an activist hedge fund planted itself on Exxon’s board with plans to overhaul the company’s climate agenda, New York-based Third Point revealed on Wednesday its plans to slice up Royal Dutch Shell by carving off its renewables businesses.

What the Shuck?

Third Point, helmed by skilled spinoff veteran Daniel Loeb, has taken a $500 million stake in Shell, making it one of the Dutch-British energy giant’s biggest investors.

The hedge fund’s first order of business, relayed in a letter obtained by The Wall Street Journal, proposed splitting Shell into two companies: one containing its profitable-but-toxic oil and gas businesses, and the other consisting of its money-losing but environmentally friendly renewables businesses. The move adds to the immense pressure on the gas company:

  • Shell, which has a $200 billion market cap, has appealed a May ruling by a Dutch court demanding it cut emissions 45% by 2030.
  • Even after the company announced plans to shift to low-carbon energy, reduce oil production, and invest in biofuels and electric-vehicle charging stations — and sold its Southwest US assets to ConocoPhillips last month for $9.5 billion — investors have shown very little excitement.

Dry Well: Global oil and gas investment, which has been falling for years, will tumble 26% from pre-pandemic levels to $356 billion this year, according to the International Energy Agency. Meanwhile, renewable energy investments rose 1.8% to a record $174 billion in the first half of 2021, according to BloombergNEF.

Drilling Times: Engine No. 1, the activist hedge fund that won three seats on Exxon’s board in May and is now pushing it to dump major oil developments, invested just $12.5 million, and then built allies with major institutional investors like BlackRock. Third Point is starting with way more clout and its plans aren’t unheard of — Italy’s Eni and Spain’s Repsol are considering breaking off their renewables divisions.

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