Analysts are forecasting a period of intensity scrutiny for Shell (LON: SHEL) as various “sin stocks” prepare to unveil their half-year results.
Investors are expected to put the oil giant “under the microscope”, says financial services firm Hargreaves Lansdown, amid questions about its broader strategy.
Rumours are circulating that Shell is looking at a partial or full spinout of its global renewable power operations.
According to reports the London-listed group has approached a number of global investors to offer a stake in the unit, though it’s thought discussions aren’t too far along.
“From a responsible investment perspective, this strategy could be a net positive for climate change depending on who comes on board,” said Hargreaves Lansdown.
© Supplied by Shell/Stuart Conway“An investor with more expertise in the area could drive the renewables business forward. Plus, given Shell’s increased focus on legacy oil and gas, a complete spin-off could attract more capital from sustainable investors.
“Without more details it’s impossible to understand the implications, so we’re hoping Shell’s management will put these rumours to bed next week.”
A fit with the wider strategy
Shell will publish its H1 2023 results on July 27, giving a useful initial marker of how the world’s supermajors are performing.
Speculation that the group is offering up its renewables business fits with the change in strategy enacted by Wael Sawan.
© BloombergThe 49-year-old, who took over as chief executive at the turn of the year, used Shell’s capital markets day in June to unveil a pivot back towards oil and gas.
The plan for the group now is to keep hydrocarbon flows steady until the end of the decade, while also being more selective over where it allocates cash.
Sawan and the board hope the approach will help to close the current valuation gap between Shell and its US rivals, like ExxonMobil (NYSE: XOM) and Chevron (NYSE: CVX).
US oil giants coasting on ESG
Investors on the other side of the pond are more on board with oil stocks, and less receptive to ESG plans, meaning European majors are currently trading at major discounts.
© BloombergHargreaves Lansdown says “carbon reduction appears to fall firmly toward the bottom of Chevron’s list of priorities”, though attitudes for investors stateside mean it’s been able to “coast” – the US giant will release its H1 2023 results the day after Shell.
Laura Hoy, ESG analyst at the financial services group, said: “Some sin stocks are set to report next week, so their ESG credentials will be on full display. Chevron’s shrugged off any climate-related concerns thanks to the blase attitude of its US investors, but Shell’s under the microscope as investors question whether it will offload all or part of its renewables division.”
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