2. Shell plc (NYSE:SHEL)
Trailing 12 months Net Income: $42.31 billion
Shell plc (NYSE:SHEL) is a UK-based integrated energy company with a headcount of 80,000 employees and a presence in over 70 countries. The company has been increasing its investments in renewable energy with a heavy emphasis on wind and solar power.
Shell plc (NYSE:SHEL) has set a target of cutting its greenhouse gas emissions in half by 2030 and achieving a net-zero emissions target by 2050. It is actively investing in low-carbon technologies such as hydrogen, biofuels, and electric vehicle charging infrastructure. In 2022, Shell plc (NYSE:SHEL) completed the acquisition of India-based Sprng renewables for $1.55 billion. The takeover aided the company in increasing its installed capacity by 10 GW, following which the company got ahead of its competitor BP p.l.c. (NYSE:BP) in terms of installed capacity.
Here’s what Third Point Management said about Shell plc (NYSE:SHEL) in its Q1 2022 investor letter:
“We have continued to add to our position in Shell, as it trades at the same deeply discounted multiple today that it did last year due to a move up in commodity prices. We are engaged in discussions with management, board members, and other shareholders, as well as informal talks with financial advisors. We have discussed various alternatives with the aim of both increasing shareholder value and allowing Shell to effectively manage the energy transition. We have reiterated our view that Shell’s portfolio of disparate businesses ranging from deep water oil to wind farms to gas stations to chemical plants is confusing and unmanageable. Most investors we have discussed this with agree that the company would be more successful over the long term with a different corporate structure. Discussions among the parties have been constructive and will be ongoing since stakeholders clearly see these corporate changes as instrumental, particularly if Shell wishes to become a leader in the energy transition rather than be left behind as a tarnished legacy brand.
Beyond our discussions around corporate structure, there have been two important developments since our last update. First, Shell announced a plan to redomicile its headquarters to the UK and create a single shareholder class. This move allows greater flexibility to modify its portfolio (either through asset sales or spin-offs) and allows for a more efficient return of capital, specifically via share repurchases. Second, fundamental and geopolitical events have highlighted the strategic importance of reliable energy supplies, especially in Europe. Shell’s LNG business, the largest in the world outside of Qatar, will play a critical role in ensuring energy security for Europe. In our view, the value of this business has increased dramatically since our original investment.
While Shell continues to trade at a large discount to its intrinsic value, with proper management, we believe the company can simultaneously deliver shareholder returns, reliable energy, and decarbonization of the global economy. We look forward to continued engagement with management and other shareholders and to more strategic clarity from the Company.”
