Shell - $SHELL.NA

What’s Shell Business Model?

Shell PLC explores and refines petroleum products. The Company produces fuels, chemicals, and lubricants. Shell serves clients worldwide.

What Shell is doing in more details?

Royal Dutch Shell (Shell) boasts worldwide proved reserves of 1.3 billion barrels of oil equivalent. Operating in over 70 countries, the British-Dutch company pumps out 3.6 million barrels of crude oil, liquefied natural gas (LNG), natural gas, synthetic crude oil, and bitumen.

Among the company’s many and varied operations, it boasts the world’s deepest oil and gas project in the Gulf of Mexico, the world’s largest offshore floating LNG production plant off the Australian coast, and the world’s largest retail fuel network at about 46,000 stations. Royal Dutch Shell also runs over 20 refineries, transports natural gas, trades gas and electricity, and develops renewable energy.

Where Shell is Operating?

Shell divides its operations into five segments: Integrated Gas, Upstream, Oil Products, Chemicals and Corporate.

Its Oil Products business is part of an integrated value chain that refines crude oil and other feedstocks into products that are moved and marketed around the world for domestic, industrial and transport use.

The products it sells include gasoline, diesel, heating oil, aviation fuel, marine fuel, low-carbon fuels, lubricants, bitumen and sulphur.

It also trade crude oil, oil products and petrochemicals. It provides access to electric vehicle charge points at home, at work and on-the-go, including at its forecourts and at a range of public locations. The Oil Products generate some 70% of total sales.

Integrated Gas comprises the company’s liquefied natural gas (LNG) operations, including exploration, extraction, and transportation.

Other activities include the marketing and trading of crude oil, natural gas, LNG, electricity, and carbon-emission rights, and the sale of LNG as a fuel for heavy-duty vehicles and vessels.

Shell’s investments in renewable and other low-carbon energy forms, its New Energies business, are housed in this segment. The Integrated Gas segment accounts for nearly 20% of total sales.

Chemicals business supplies customers with a range of base and intermediate chemicals used to make products that people use every day. It has a major manufacturing plants which are located close to refineries, and its own marketing network. Chemicals represent more than 5% of total sales.

Shell’s Upstream segment explores for and extracts crude oil, natural gas, and natural gas liquids. It also markets oil and gas and delivers them to market. The Upstream segment generates some 5% of total sales.

The Corporate segment covers the non-operating activities supporting Shell. It comprises Shell’s holdings and treasury organisation, self-insurance activities and headquarters and central functions.

Where is the geographical reach of Shell?

Listed in London but run out of The Hague in the Netherlands, Royal Dutch Shell has enormous global reach, producing oil and natural gas in more than 70 countries, including Australia, Brazil, Brunei, Canada, China, Denmark, Germany, Malaysia, the Netherlands, Nigeria, Norway, Oman, Qatar, Russia, the UK, and the US.

Shell operates about 46,000 fuel stations across 70 countries. Royal Dutch Shell’s lubricants business produces, markets, and sells products in over 160 market and has four base oil manufacturing plants, more than 30 lubricant blending plants, eight grease plants, and four gas-to-liquid base oil storage hubs.

It makes about 35% of revenue from its Asia/Oceania/Africa reporting region, roughly 30% each from Europe, and US. Other Americas (Brazil in particular) account for the remainder.

What is Shell Financial Performance?

The company’s revenue for fiscal 2020 decreased to $180.5 billion compared with $344.9 billion in the previous year.

Loss for fiscal 2020 was $21.7 billion compared to the prior year with an income of $15.8 billion.

Cash held by the company at the end of fiscal 2020 increased to $31.8 billion. Cash provided by operations was $34.1 billion, while cash used for investing and financing activities were $13.3 billion and $7.2 billion, respectively.

Main cash uses were capital expenditures, dividends paid and repurchases of shares.

What is Shell Future Strategy?

Powering Progress sets out Shell’s strategy to accelerate the transition of its business to net-zero emissions, in step with society. It is designed to deliver value for its shareholders, for its customers and for wider society.

Powering Progress serves four main goals: generating shareholder value, achieving net-zero emissions, powering lives and respecting nature. The company is transforming its company across its three business pillars of Growth, Transition and Upstream.

The company’s growth pillar includes its service stations, traditional and low-carbon fuels, integrated power, hydrogen, charging for electric vehicles, nature-based solutions, and carbon capture and storage. It focuses on working with its customers to accelerate the transition to net-zero emissions.

Shell’s Transition pillar comprises its Integrated Gas, and its Chemicals and Products businesses, and produces sustainable cash flow.

The company’s Upstream pillar delivers the cash and returns needed to fund its shareholder distributions and the transformation of its company, by providing vital supplies of oil and natural gas.

What is Shell’s History?

In 1870 Marcus Samuel inherited an interest in his father’s London trading company, which imported seashells from the Far East. He expanded the business and, after securing a contract for Russian oil, began selling kerosene in the Far East.

Standard Oil underpriced competitors to defend its Asian markets. Samuel secretly prepared his response and in 1892 unveiled the first of a fleet of tankers. Rejecting Standard’s acquisition overtures, Samuel created “Shell” Transport and Trading in 1897.

Meanwhile, a Dutchman, Aeilko Zijlker, struck oil in Sumatra and formed Royal Dutch Petroleum in 1890 to exploit the oil field. Young Henri Deterding joined the firm in 1896 and established a sales force in the Far East.

Deterding became Royal Dutch’s head in 1900 amid the battle for the Asian market. In 1903 Deterding, Samuel, and the Rothschilds (a French banking family) created Asiatic Petroleum, a marketing alliance.

With Shell’s non-Asian business eroding, Deterding engineered a merger between Royal Dutch and Shell in 1907. Royal Dutch shareholders got 60% control; “Shell” Transport and Trading, 40%.

After the 1911 Standard Oil breakup, Deterding entered the US, building refineries and buying producers. Shell products were available in every state by 1929. Royal Dutch/Shell joined the 1928 “As Is” cartel that fixed prices for most of two decades.

The post-WWII Royal Dutch/Shell profited from worldwide growth in oil consumption. It acquired 100% of Shell Oil, its US arm, in 1985, but shareholders sued, maintaining Shell Oil’s assets had been undervalued in the deal. They were awarded $110 million in 1990.

Management’s slow response to two 1995 controversies — environmentalists’ outrage over the planned sinking of an oil platform and human rights activists’ criticism of Royal Dutch/Shell’s role in Nigeria — spurred a major shakeup.

It began moving away from its decentralized structure and adopted a new policy of corporate openness.

In 1996 Royal Dutch/Shell and Exxon (now Exxon Mobil) formed a worldwide petroleum additives venture. Shell Oil joined Texaco (now part of Chevron) in 1998 to form Equilon Enterprises, combining US refining and marketing operations in the West and Midwest.

Similarly, Shell Oil, Texaco, and Saudi Arabia’s Aramco combined downstream operations on the US’s East and Gulf coasts as Motiva Enterprises.

In 1999 Royal Dutch/Shell and the UK’s BG plc acquired a controlling stake in Comgas, a unit of Companhia EnergÉtica de SÃo Paulo and the largest natural gas distributor in Brazil, for about $1 billion.

In 2000 the company sold its coal business to UK-based mining giant Anglo American for more than $850 million. To gain a foothold in the US power marketing scene, Royal Dutch/Shell formed a joint venture with construction giant Bechtel (called InterGen).

The next year the company agreed to combine its German refining and marketing operations with those of RWE-DEA. Royal Dutch/Shell tried to expand its US natural gas reserves in 2001 by making a $2 billion hostile bid for Barrett Resources,.

But the effort was withdrawn after Barrett agreed to be acquired by Williams for $2.5 billion.

In 2002, in connection with Chevron’s acquisition of Texaco, Royal Dutch/Shell acquired ChevronTexaco’s (now Chevron) stakes in the underperforming US marketing joint ventures Equilon and Motiva. That year the company, through its US Shell Oil unit, acquired Pennzoil-Quaker State for $1.8 billion.

Also that year Royal Dutch/Shell acquired Enterprise Oil for $5 billion, plus debt. In addition, it purchased RWE’s 50% stake in German refining and marketing joint venture Shell & DEA Oil (for $1.35 billion).

In 2004 the group signed a $200 million exploration deal with Libya, signaling its return to that country after a more than decade-long absence. Also that year the company reported that it had overestimated its reserves by 24%. The bad news resulted in the ouster of the chairman and CFO.

The Anglo-Dutch entity restructured to stay competitive. Revelations of overestimated oil reserves in 2004 prompted a push for greater transparency in the company’s organizational structure.

This led to the 2005 merger of former publicly traded owners Royal Dutch Petroleum and The “Shell” Transport and Trading Company into Royal Dutch Shell.

Searching for new oil assets, in 2006 the company acquired a large swath of oil sands acreage in Alberta, Canada. Further boosting its oil sands business, in 2007 the company acquired the 22% of Shell Canada that it did not already own.

The company also began investing some $12 billion (in addition to the $2.6 billion already spent) in offshore projects near Dubai. In 2008 Royal Dutch Shell expanded its exploration assets in Alaska by acquiring 275 lease blocks in the Chukchi Sea, for $2.1 billion.

In 2009 the company made significant oil discoveries in the deepwater eastern Gulf of Mexico at West Boreas, Vito and the Cardamom Deep, and in 2010 at the Appomattox prospect in the Mississippi Canyon block. The finds expanded Shell Oil’s long-term development plans in the area.

Further expanding its unconventional natural gas resources, in 2010 the company spent $4.7 billion to acquire East Resources, which holds 1 million acres of Marcellus Shale, one of the fastest-growing shale plays in the US.

On the conventional side of the oil business, the Gulf of Mexico produces 370,000 barrels of oil per day, or about 15% of Royal Dutch Shell’s worldwide production. In 2010 the company claimed an industry record, starting production at the deepest floating drilling and production platform in the world.

The Perdido Development operates in 8,000 ft. of water in the Gulf of Mexico. In response to the BP oil rig disaster in the Gulf of Mexico, the company joined forces with Exxon Mobil, Chevron, and ConocoPhillips to form a $1 billion rapid-response joint venture that will be able to better manage and contain future deepwater spills.

With an eye toward raising cash and focusing on its majority holdings and joint ventures, rather than on minority held businesses, in 2010 Royal Dutch Shell sold 10% of its 34% in Australian oil and gas enterprise Woodside Petroleum for $3.3 billion.

Royal Dutch Shell also announced that it would seek to sell the rest of its stake in Woodside Petroleum over time. (Earlier in the year the company formed a $3.5 billion joint venture with PetroChina, which acquired Arrow Energy, a company with major natural gas assets in Northern Australia).

As part of its strategy of selling noncore downstream assets to raise cash, in 2010 Royal Dutch Shell sold its Finnish and Swedish operations (including a refinery in Gothenburg and 565 gas stations) to Finland-based St1 for $640 million. In 2011 it sold its UK-based Stanlow refinery to India’s Essar Group for $350 million.

In 2010 the company formed a $12 billion joint venture with Brazil’s Cosan to ramp up ethanol production.

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