International oil companies listed in the US benefit from higher multiples, greater access to capital and a friendlier investor base, according to Shell Plc’s former chief executive officer.
“It’s a major issue,” Ben van Beurden said when discussing the valuation gap between European and North American oil and gas players at the FT Commodities Global Summit in Lausanne, Switzerland.
European supermajors have historically lagged their US peers, with some investors pointing at large spending on renewables as part of the reason why shares have underperformed. Shell’s current CEO, Wael Sawan, has made it his focus to cut costs and return more money to shareholders as part of a 10-quarter sprint to shake up the company.
In an interview with Bloomberg Opinion, Sawan acknowledged that Shell’s London listing seemed to be suppressing its value.
Van Beurden, who stepped down from Shell at the end of 2022, said that deeper capital pools and higher multiples across the board on the New York Stock Exchange lifted North American valuations higher than those of Europeans. “More positive” attitudes in the US to oil and gas companies also benefited majors.
“All these factors conspire against the people listed in Europe,” he said.
While relocating listings seems an obvious solution to the problem, doing so isn’t straightforward, Van Beurden added. In the meantime, Shell has to demonstrate it has superior worth despite being “massively undervalued.”
Van Beurden acknowledged that the company considered moving its listing to the US in 2021 before Shell instead announced it would drop its dual listing and move its headquarters to London. At the time it was trying to solve issues that were related to the Netherlands and leaving Europe was “a bridge too far”.
“Of course we looked at all sorts of options,” Van Beurden said. “We thought that going to the UK was the most logical next step. Was it going to be the end game? You always have to reconsider what other options are there.”
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