Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Shell shares here in the US are up by about
Speaker 2: one percent after the company's Capital Markets Day at the
Speaker 2: New York Stock Exchange. One highlight plans to become the
Speaker 2: world's top LNG trader, saying it's going to expand sales
Speaker 2: by forty five percent a year until twenty thirty. The
Speaker 2: British energy giant, also vowing to increase shareholder returns and
Speaker 2: cut spending. Joining us to discuss this further is Wile
Speaker 2: Swan Shell CEO, joining us from the floor of the
Speaker 2: New York Stock Exchange. While really great to see you,
Speaker 2: Thank you so much for joining us. Congrats on getting
Speaker 2: through the day. Huge LNG targets, in particular how much
Speaker 2: it's going to make up in terms of your business
Speaker 2: twenty thirty percent larger by twenty thirty.
Speaker 3: How do you get there? Yeah? Thanks Alex. Look, we're
Speaker 3: very proud of where we are today.
Speaker 4: Today in the Capital Markets Day, we took a polls
Speaker 4: and reflected on the journey we've been on over the
Speaker 4: past couple of years, and the key message was one
Speaker 4: of trying to instill confidence. Here's a company that has
Speaker 4: delivered what it said it was going to do and
Speaker 4: actually over delivered in certain areas, and beyond that, as
Speaker 4: you rightly pointed out, we've also today laid out as
Speaker 4: a vision aut to twenty thirty five that has LNG
Speaker 4: at the heart of it. We believe LNG is going
Speaker 4: to be a critical part of the energy system and
Speaker 4: we want to be the leading player energ But our
Speaker 4: story also has lots of richness around wanting to sustain
Speaker 4: material liquids production and being the most competitive and the
Speaker 4: most focused energy marketer and energy trader in the world,
Speaker 4: And so a holistic story that I think we're very
Speaker 4: proud to be able to say is well on track.
Speaker 2: Are you worried at all about a potential looming LNG
Speaker 2: supply glut and kind of betting really big on this
Speaker 2: for the next ten years at a time where there's
Speaker 2: just too much supply coming online?
Speaker 4: Okay, my job, I have to look at twenty years
Speaker 4: and what I see when I do that is up
Speaker 4: to twenty forty, we see a potential sixty percent increase
Speaker 4: in overall LNG demand. We have a diversified port for you,
Speaker 4: both of production sources as well as demand options, and
Speaker 4: we are very much looking to leverage that global diversity
Speaker 4: of production and customer contracts to be able to create value.
Speaker 3: Importantly, our LNG port.
Speaker 4: For you is heavily linked to long term contracts that
Speaker 4: are tied to brand, which means we have a lot
Speaker 4: of resilience and so we can ride at the inevitable
Speaker 4: cycles in this business while making sure that the underlying
Speaker 4: cash flow continues to come from this business.
Speaker 1: So what should investors look for in terms of the
Speaker 1: capacity increase on your energy output?
Speaker 4: Very much what we outline today, which is four to
Speaker 4: five percent per year, So indeed the twenty to thirty
Speaker 4: percent by twenty thirty, and that's just to twenty thirty.
Speaker 4: We see more running room beyond that, we have projects
Speaker 4: that we can evolve over and above that. But what's
Speaker 4: unique around our LNG business is not just the production piece.
Speaker 4: We are actually also selling roughly the equivalent amount not
Speaker 4: just of what we produce, but also another equivalent amount
Speaker 4: to that because we're also one of the largest optimizers
Speaker 4: of LERG in the market, and so in any year
Speaker 4: we're selling around sixty million tons of LNG, which is significant,
Speaker 4: and so we are trying to continue to build up
Speaker 4: our portfolio to really have that diversity and to be
Speaker 4: able to make sure that we can continue to essentially
Speaker 4: stay in the fifteen to twenty percent of the overall
Speaker 4: LG market is what we represent.
Speaker 1: So once you get to twenty thirty while what actually
Speaker 1: happens to the oil side of this business.
Speaker 4: So we have a very clear pathway to sustain our
Speaker 4: liquids production to the tune of around one point four
Speaker 4: million baros per day between now and twenty thirty, and
Speaker 4: we have plans to extend that plateau well into the future.
Speaker 4: So we already have plans in place for that. And
Speaker 4: so the key areas where we see growth at the
Speaker 4: moment are our integrated gas business, as we've talked about LNG,
Speaker 4: but also I would say our marketing business, our mobility business,
Speaker 4: which is the leading franchise in the world, our lubricants business,
Speaker 4: which is another core part of our overall value proposition.
Speaker 4: So those will be growth trajectories and are sustained liquid
Speaker 4: production will allow us to have the fundamental underpinning that
Speaker 4: continues to keep us as a scale company.
Speaker 2: Overall sustained liquids doesn't sound like growing oil production. And
Speaker 2: you know, this is my way of asking about you
Speaker 2: guys don't have Permian assets.
Speaker 4: So what we have is a very diverse portfolio. We
Speaker 4: have the largest position in the Gulf of America, we
Speaker 4: have the largest position in Brazil, which are the two
Speaker 4: premier deep water basins in the world. It requires a
Speaker 4: lot of running just to stay flat. So these portfolios
Speaker 4: are declining anywhere between four to six percent per year,
Speaker 4: so one has to stay running fast just to stay flat.
Speaker 4: Beyond that, we will look at opportunities and we will
Speaker 4: continue to look at those opportunities. But of course we've
Speaker 4: left the Permian and we believe that the opportunities we
Speaker 4: have in front of us in the Gulf of America,
Speaker 4: in Brazil, in many of our heartlands like Kazakhstan, Oman Malaysia,
Speaker 4: those are the places where we want to continue to
Speaker 4: strengthen our portfolio.
Speaker 2: The analyst notes about today, we're all relatively positive. RBC
Speaker 2: has had a really nice quote said today reads is
Speaker 2: more evolution than revolution, And I'm wondering if the revolution
Speaker 2: part is what investors need to see to have Shell
Speaker 2: Share start to outperform the likes of Exxon as well
Speaker 2: as chev Run, and would that evolution be buying a
Speaker 2: US gas producer doing some sort of substantial oil deal.
Speaker 4: I think there's a couple of dimensions to that question.
Speaker 4: I'm very pleased with the evolutionary nature of it, and
Speaker 4: it's important that one footnote in all that discussion is
Speaker 4: that we have brought back around twenty plus percent of
Speaker 4: our share share register over the last three years, and
Speaker 4: a big part of what we announced today is we
Speaker 4: will continue to preferentially lean towards buybacks, having indeed increased
Speaker 4: the overall distributions to forty to fifty percent of our CFFO.
Speaker 3: On this trajectory that we're on.
Speaker 4: We will have quietly bought another forty percent of the
Speaker 4: company by twenty thirty. Need to me, the revolution is
Speaker 4: not in singular actions. It's in looking at the life
Speaker 4: cycle over a period of seven eight years. If we
Speaker 4: can buy more than half of this company, that is
Speaker 4: what is truly going to be differentiated and transformational for
Speaker 4: our shareholders.
Speaker 1: So while I do want to ask you though about
Speaker 1: just the general structure, I mean a lot of in
Speaker 1: terms of the cash giving back. There has been a
Speaker 1: lot of discussion in analyst circles about this idea of
Speaker 1: why we haven't seen more balance between the dividend versus
Speaker 1: the buybacks relative to some of your competitors.
Speaker 4: Yeah, it's a great question. I think the first thing
Speaker 4: I keep getting asked is can you grow your overall
Speaker 4: share of distributions, And thankfully we've been able to move
Speaker 4: from twenty to thirty, to thirty to forty to forty
Speaker 4: to fifty, so big tick there.
Speaker 3: Then.
Speaker 4: Indeed, it's the balance of how we want to return capital.
Speaker 4: It's a point that you both made earlier, which is
Speaker 4: we still find that our fundamental valuation does not fully
Speaker 4: price the cash flows we see into the future. So
Speaker 4: what a great opportunity to be able to use remarginal
Speaker 4: dollar of distributions to be able to buy back our
Speaker 4: shares and create that life cycle value.
Speaker 3: For our shareholders.
Speaker 4: By the way, we have increased our dividend per share
Speaker 4: by twenty five percent over the last two years, and
Speaker 4: we have a four percent progressive policy around our dividends,
Speaker 4: so we are addressing the dividend. But today the right
Speaker 4: capital allocation option is to go into more buybacks, and
Speaker 4: that's what you see us doing.
Speaker 1: Investors also, while have also I guess pondered, if not asked,
Speaker 1: the question about your listing. Obviously your primary listing overseas
Speaker 1: you're standing there on the floor of the New York
Speaker 1: Stock Exchange. Has there been any sort of meaningful discussion
Speaker 1: dot consideration about making the US your primary place of listening.
Speaker 4: There has been, and indeed we made the decision a
Speaker 4: couple of years ago to move our listing or to
Speaker 4: move sorry our headquarters over.
Speaker 3: To the UK.
Speaker 4: At the heart of it, our focus is to make
Speaker 4: sure that we are driving the fundamentals up to me.
Speaker 4: That means growing the free cast of the company. Yes,
Speaker 4: listing might add different liquidity, but we're already very liquid
Speaker 4: here in the US. Over fifty percent of our shareholder
Speaker 4: base is a US shareholder base, so we are attracting
Speaker 4: many of the investors that believe in the investment thesis
Speaker 4: we have. And so while we focus today on making
Speaker 4: sure that we're pulling every lever to build consistency, to
Speaker 4: build resilience, and to build longevity, of course we keep
Speaker 4: all options open. Right now, a change of listing is
Speaker 4: not a live discussion, but it's always under review, and
Speaker 4: of course we'll look at it when the time is right.
Speaker 2: It feels like a no for now. While I'm just
Speaker 2: going to paraphrase that going back to M and A
Speaker 2: for a moment, You're going to love this question. But
Speaker 2: when it comes to say BP, I know you get
Speaker 2: a lot of questions on when, if how are you
Speaker 2: going to buy VP, But I want to approach it
Speaker 2: from another angle and talk about synergies. A big part
Speaker 2: of your outperformance in the past couple of years has
Speaker 2: been synergies and weeding out those costs. At what point
Speaker 2: does BP become so cheap you just cannot avoid looking
Speaker 2: at them for those synergies, Alex.
Speaker 4: You'll forgive me if I don't directly answer that question,
Speaker 4: but what I will say is our focus over the
Speaker 4: last few years has been to build fitness and strength
Speaker 4: for Shell that today people are asking the question because
Speaker 4: they see a fitter, stronger, more dynamic company. Anatomy is great.
Speaker 4: We want to be able to build flexibility. We've been
Speaker 4: able to bring our net debt down to essentially the
Speaker 4: lowest it has been excluding lises for over a decade.
Speaker 4: We've been able to outperform our peers in the sector
Speaker 4: on both TSR as well as just pure shareholder purer
Speaker 4: share performance, and we are generating free cash flow in
Speaker 4: a very robust and solid way. And so today we
Speaker 4: have options. At the same time, when we think about
Speaker 4: those options, the priority is to deliver that ten percent
Speaker 4: free cash flow per annum growth within our business that's
Speaker 4: immediately within our control, and of course we will keep
Speaker 4: an eye out for opportunities. But I have to say
Speaker 4: the bar is high, because if you're going to go
Speaker 4: for a big acquisition, one has to recognize that that
Speaker 4: can potentially describe.
Speaker 3: And therefore we're very focused.
Speaker 4: On making sure if we do something in the inorganic space,
Speaker 4: that the bar is high and that we go in
Speaker 4: ready to do that.
Speaker 2: And that also kind of felt like a no. I'm
Speaker 2: just saying from where I sit.
Speaker 4: Yeah, I would qualify Alex as it's finding the right
Speaker 4: time to make the moves and what is the long
Speaker 4: journey first?
Speaker 2: Okay, but is BP like on the road to the
Speaker 2: moves or is BP like on the highway somewhere that
Speaker 2: you're not passing.
Speaker 4: What I would say is we are always looking at companies,
Speaker 4: both in Europe and beyond, and every company will have
Speaker 4: its time and at that point we will make a decision.
Speaker 1: All right, Well, I'll get you off the hook here
Speaker 1: and give Alex a break for a second. I do
Speaker 1: want to get your thoughts so on just a broader
Speaker 1: economic condition globally. And I have to ask you, of
Speaker 1: course about what's going on here in the US politically.
Speaker 1: And I know you don't have a lot of exposure
Speaker 1: to assets here, but obviously what we do here has
Speaker 1: ripple effects across the world. Have you actually had a
Speaker 1: chance to actually meet with anyone from the administration, including
Speaker 1: the President?
Speaker 3: So firstly, just.
Speaker 4: A correction, So, our biggest capital employed globally is here
Speaker 4: in the US. We are the largest producer and operator
Speaker 4: in the Gulf of America. We are the largest off
Speaker 4: taker of US LNG of any company, so we have
Speaker 4: a very material presence, not to mention thirteen thousand staff
Speaker 4: that are very.
Speaker 3: Much the core of our company here.
Speaker 4: I have had the opportunity over recent weeks to indeed
Speaker 4: meet many in the administration, including the privilege to meet
Speaker 4: the President. And what I would say is we are
Speaker 4: very encouraged and welcome the strong support for the energy sector,
Speaker 4: not something that has always been there in the US
Speaker 4: or beyond, and I do think the energy sector is
Speaker 4: a critical underpinning of any successful economy.
Speaker 3: Beyond that, what I would say is what is key
Speaker 3: for our sector.
Speaker 4: For companies like ours is predictability in the investment climate
Speaker 4: and stability of the investment climate because many of our
Speaker 4: investments have payback periods usually above seven eight years, and
Speaker 4: so that is a critical part of being able to
Speaker 4: have the peace of mind to make the material investments
Speaker 4: that we need to be making.
Speaker 3: Well before we let you go.
Speaker 2: If there is a piece deal between Ukraine and Russia,
Speaker 2: are you anticipating Russian gas flows to Europe and how
Speaker 2: are you seeing them?
Speaker 3: Global flows here difficult to call where that ends up playing.
Speaker 4: I mean, what you find, of course is Russian gas
Speaker 4: to Europe has gone down from roughly forty percent of
Speaker 4: Europe's demand to just under ten percent, so potentially some.
Speaker 3: Flows will occur.
Speaker 4: What we are focused on is making sure that through
Speaker 4: our world leading trading capability that we have, that we
Speaker 4: are managing all these potential discontinuities that we are seeing
Speaker 4: in trade flows, and so we want to make sure
Speaker 4: that we.
Speaker 3: Can deliver to our customers.
Speaker 4: How the situation in Russia evolves is anyone's guests, but
Speaker 4: we are preparing for multiple different scenarios so that we
Speaker 4: can honor those straight flows that need to be met.
Speaker 1: Well, we really appreciate you taking time for us. I
Speaker 1: know it's been a long and busy day. While Swan there,
Speaker 1: he's the CEO of Shell. Down there in downtown Manhattan,
Speaker 1: on the floor of the New York Stock Exchange.