Shell to quit London stock exchange listing?

Unloved - in some quarters ...

Shell seems to be putting it about that it might leave the LSE for a New York listing.  Well, it's already listed in NY and has been for many years.  Obviously, quitting London will save on costs to some extent, but why will the share price be liberated?  If US investors value Shell that much more highly, why doesn't this make itself felt via its NY listing price?  There'd be plenty of folk eager to exploit any arbitrage opportunity if a differential opened up.

I think we can guess the answer.  As the DTel says: "a growing focus on environmental, social and governance (ESG) measures among investors has begun to threaten [London's] status, with major [mining and energy] companies starting to defect to the US."  By "investors" they presumably mean the London-based institutional type.  

The DTel goes on:  "It comes as Shell looks to shift its business away from oil and gas towards greener sources of energy. But its hybrid approach has risked alienating traditional investors focused on profits, while failing to appease more activist investors concerned about climate change."

I have a slightly different way of describing what's going on.  For some while now it's been apparent to me that the oil majors - both IOCs and NOCs - have done the sums, and concluded that renewables etc simply aren't going to sweep them aside [the green reductio mentioned in the quote below], & that demand for the traditional oil & gas business and its products is secure for many decades to come.  The only question is: which players are going to conduct this business?

Obviously, the NOCs aren't bowing out: in fact, starting with the most recent COP, they are becoming confidently strident on the subject.  Several years ago, when Shell, BP et al were very definitely promoting their reorientation towards 'green', I discerned Exxon wondering whether it really needed to change at all:  "You can see them thinking: the world will still need oil ... maybe there's a niche for just one unreconstructed old dinosaur ...":  and in 2021 I wrote: 

Some people are making a Great Deal of Money from this - right now. And the scope for a great deal more to be made in the coming years is huge ... Even just the continued supply of simple gas to western consumers (whether the green-woke like it or not) has a lot of mileage still in it ... But the 'traditional players' seem to feel themselves unable to make the usual response to an economic reductio ad absurdum, in terms of investment (long term) and arbitrage (short term) to take advantage of the mispriced assets etc ... So: is it all simply about greenwashing? Maybe you just need the right "communications" firm in tow.  I think Shell [as well as Exxon] was hoping they could pull this one off, too. 

Traditional business

Three years on, personally I don't think there's much doubt left.  Exxon goes (or stays) without saying.  Shell, BP, Chevron, even Equinor! - are looking to pull off the balancing act.  If you're only listed in NY, you don't need to make so many of those pesky ESG declarations about how woke you are in your Annual Report**.  The company that interests me is Total: they've gone for a fairly comprehensive woke/green rebranding, and are certainly putting themselves about in the renewables space.  But it's clear they haven't remotely given up on the hard stuff, either - not least in Africa, where they seen to have been singled out by the Semtex wing of the green movement (as we noted here).

My characterisation of the current situation is that it's to be an awkward but determined balancing act for all except the utterly unreconstructed NOCs + Exxon.  The rest are going to try to have it both ways, as best they can.  The depth and reality of the green reductio is such, there's just too much money lost if they give up on the trad stuff they are so good at.  Switching SE listings will be just one of the many games they'll be contemplating.

ND 

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**Though, interestingly, you do need to make much more rigorous risk disclosures, US shareholders being highly litigious in these matters.  Several years ago Germany's mighty E.on (before it split) withdrew from its NY listing - my confident explanation is and was that they didn't like the extensive - and quantified - risk disclosures they needed to make in their US reporting about their dependence on vast and very disadvantageous Russian gas purchases.   Shell will be needing to mull that over, too.  Oh how complicated it all is! 

AEP on 'Green Boom': not quite the full picture

As oft-noted here, Evans-Pritchard is often amusingly contrarian with an interesting point to make; and equally often just plain bonkers.  His latest DTel offering - fresh from his triumphant insistence that Labour should stick to its £28 billion pledge, hoho - straddles both characterisations. 

This is the year the world’s green juggernaut becomes unstoppable - the greatest economic growth story since the industrial revolution has crossed a critical threshold

Well, we read what he writes and we know what he means: but caveats need to be entered.

1.  2024 isn't the year: it was 2018-19, as explained here several times.  This was the window in time through which shone the dazzling light of expenditure on adaptation / resilience to climate change being classified by the UN as "green", & therefore qualifying for government subsidy / underwriting etc.  At this point, every traditional steel-n-concrete industry and their bankers realised this Green thing really had something in it for them - road repairs, sea defences, flood protection measures, reservoirs etc etc.  At which point - and that's 5 years ago now, Ambrose - the switch was thrown.

(Not all Greens are big fans of this development.  For one thing, dosh for adaptation diverts funds away from what they'd prefer to be spending money on; and for another, it can be portrayed as having given up on outright prevention of climate change, which many of them still cling to.)  

2.  There's a renewal in oil & gas, too.  More than one thing can be true at once, in this complicated world of ours.  The big O&G companies - and not just the Aramcos, ADNOCs & Petronas's of this world; it's Exxon, Shell, Total, BP and Equinor, too - have tracked the spending on renewables, modelled its impact, and noticed that the green trajectory lauded by AEP isn't going to eliminate the need for oil & gas for a very long time yet to come - the tobacco industry phenomenon I've written about before.  It might have been just the NOCs, the Chinese, and the piratical energy traders who benefitted: but now the IOCs have started to reorient.  

So, quietly at first (except Total**: their buccaneering CEO is made of stronger stuff), they've started on strategies that will allow them to carry on with their traditional businesses, while maintaining at least some kind of green front.  An ostentatious readiness to get stuck into the 'S' bit of CCS is one such wheeze; a bit of renewable investment of their own is also in the mix (except for Exxon, which started thinking that maybe it didn't need to change after all, a couple of years ahead of the others).

I'm not sure how the stock markets will handle this, or the pension funds.  But be in no doubt, however the spoils are shared and the shares are held, there's a long-term viable business still there.

ND

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** This may have awkward consequences for Total, because it has been identified as #1 Bad Guy by the greens who are willing to go violent, and they plan to target it.