Slugcatcher report card on Shell: "can do better"

As Slugcatcher speculated in last week’s ponderings about the outlook for Royal Dutch/Shell, Jeroen van de Veer failed to inspire much confidence when detailing his chief executive's vision of the future for Shell at last week’s strategy presentations in London and New York.

Reviews, to say the least, were unflattering – both in the press and from the financial markets. Media commentary, in keeping with its dual role of informing and entertaining, had the most fun.

The Wall Street Journal queried whether higher oil prices would be enough to save Shell’s biggest problem, “turning around the under performing exploration unit.”

The Independent had fun with the fact that the first event was held in London’s Plaisterer’s Hall which has this inscription over the door “let brotherly love continue” – and then noted a distinct lack of love for Shell.

The Daily Telegraph noted how “shell-shocked” senior executives of the Anglo/Dutch oil giant did their best “to cover up the cracks with smooth-finish plaster” – but failed, partly because of a slide into management gobbledegook with meaningless phrases such as “fix and reset the business”, and “growth in markets of choice”, whatever all that means.

The media commentary, if Slugcatcher was using it to mark Shell’s report card, probably delivered a B-rating, plus a note from teacher saying “can do better”.

More intense commentary came from the financial markets where people far more learned than scribblers such as Slugcatcher gave Shell a C-rating, at best. Consider some of these words of wisdom dredged up from the boys (and girls) at some of the world’s top merchant banking houses.

Morgan Stanley welcomed Shell’s “dose of reality” but added: “unfortunately, the reality is less attractive than we had envisaged.”

Credit Suisse First Boston said that “overall, we found the strategy presentation disappointing.”

Charles Stanley said investors were looking for a turn-around in Shell’s fortunes but it looks too early.

Deutsche Bank said the company seemed to be keeping its options open on new deals.

The best, however, is saved for last. Lehman Brothers said that capital efficiency looked “inadequate”, and that the overall target of “raising the performance bar” and looking for “top quartile performance” were admirable goals.

“However, those have always been the goals for Shell and it has failed by a wide margin to deliver them in the past.

“In our view, the problem has not been that the bar was set too low, just that Shell came in below it,” Lehman Brothers said, and to which Slugcatcher adds “ouch!”

The game now for one of the oil world’s super-majors is to deliver on the gobbledegook (sorry, the promises of a better performance).

Unfortunately, that process is off to a poor start with the only possible way for Shell to avoid five years of rubbishing in the media, and under-performance on the stock market is for the oil price to stay unnaturally high, or for the company to finally, and irrevocably, overhaul its 1920s-style management structure, including a simplified board, and a single corporate entity.

loader