Shell’s (LON: SHEL) chief executive has all but ruled out the chances of the supermajor completing a big takeover deal for the foreseeable.
Wael Sawan says mergers and acquisitions (M&A) are “definitely not on my priority list” for the next few years as the group strives for financial discipline.
He’s keeping the door open on “smaller, bolt-on opportunities”, but was clear that any deals need to chime with Shell’s capex guidance.
As part of his bid to close the valuation gap with the US majors, Mr Sawan outlined a blueprint for winning back investor confidence during a presentation in New York on Thursday.
In addition to handing billions of dollars to shareholders, Shell is scaling back its capital spend to between $22 billion and $25bn per year, for 2024 and 2025.
“Every single part of our business needs to help us deliver more shareholder value, while lowering emissions,” Mr Sawan told investors.
© BloombergAnd speaking to journalists later in the day, he said M&A would be a distraction in the pursuit of that objective.
He said: “What I can be clear on is that we are not looking to do big M&A in the next couple of years – that is not where our priority is.
“Our focus right now is on making sure that we unlock the full potential of the current businesses, and big M&A will distract, not to mention it tends to be challenged to be able to deliver value.
“We need to really have conviction that we need it, that we want it, and that we get the right target at the right price. So it is definitely not on my priority list for the next few years to think about big M&A opportunities.
Keeping an open mind on smaller openings
“Smaller, bolt-on opportunities? Of course. We will always look at that, but also make sure that we keep that within the confines of the $24bn to $25 billion of capex that we guided for.
“There is space to do that that within the budget, and that will be more adjacencies, for example an equity interest in a field next to ours where we can synergise.”
Last year Shell completed the purchase of Corallian Energy, holder of the West of Shetland Victory prospect, from Reabold Resources.
It is believed the London-listed company is looking to streamline its UK operations though, with reports that a sale of Southern North Sea assets in ongoing.
North Sea M&A back in vogue
A rebound in oil and gas prices from the lows of 2020 has, in turn, heralded a return to North Sea M&A deals.
Serica Energy recently completed its takeover of Tailwind Energy, while rumours are circling of an impending deal for Neptune Energy from Eni.
Harbour Energy, one of the most ardent critics of the UK’s current tax regime, is also trying to broaden its horizons, and a merger with Talos Energy is understood to be in the pipeline.
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