LONDON — Oil giant Royal Dutch Shell on Thursday reported weaker-than-expected third-quarter earnings as New York-based hedge fund Third Point called on the energy major to break up.
Shell also announced it had set itself a bigger carbon reduction target.
The Anglo-Dutch company posted adjusted earnings of $4.1 billion for the three months through to the end of September. That compared with $955 million over the same period a year earlier and $5.5 billion for the second quarter of 2021.
Analysts had expected third-quarter adjusted earnings to come in at almost $6 billion, according to Refinitiv.
Shell issued a note to investors earlier this month warning that Hurricane Ida in the Gulf of Mexico likely had an aggregate adverse impact of roughly $400 million on adjusted earnings.
The company on Thursday said lower contributions from trading and optimization when compared to the second quarter had also impacted third-quarter results. This was only partly offset by a global energy supply crunch that has sent oil and gas prices soaring.
“This quarter we’ve generated record cash flow, maintained capital discipline and announced our intention to distribute $7 billion to our shareholders from the sale of our Permian assets,” Ben van Beurden, CEO of Shell, said in a statement.
Billionaire activist investor Dan Loeb on Wednesday called on Shell to break up into multiple companies to strengthen its performance and market value.
His comments came shortly after it emerged that Loeb’s Third Point had built a stake of roughly $750 million in Shell, according to various media reports that couldn’t be independently verified by CNBC.
Shell acknowledged Loeb’s letter to clients calling for the company to split.
The company added that it “regularly reviews and evaluates the Company’s strategy with a focus on generating shareholder value. As part of this ongoing process, Shell welcomes open dialogue with all shareholders, including Third Point.”
Dividends declared to Shell shareholders for the quarter amounted to 24 cents per share, unchanged from the previous quarter.
Net debt came in at $57.5 billion, reflecting a decrease from $67 billion at the end of the second quarter. Shell said this was mainly driven by free cash flow generation.
COP26 in focus
Shell said it planned to cut absolute emissions from its operations and the electricity it uses — sometimes referred to as Scope 1 and 2 emissions — by half by the end of the decade, when compared to 2016 levels.
It has pledged to become a net-zero carbon emissions company by 2050.
In a landmark ruling earlier this year, a Dutch court ordered Shell to take much more aggressive action to drive down its carbon emissions. It ruled in May that the energy major is responsible for its own carbon emissions and those of its suppliers, known as Scope 3 emissions, and must reduce its emissions by 45% by 2030.
