Shell CEO eyes top spot with post-BG deal refocus

Tue Jun 7, 2016 10:36am EDT
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By Ron Bousso and Karolin Schaps

LONDON (Reuters) - Royal Dutch Shell (RDSa.L: Quote) plans to increase cost savings to $4.5 billion following its $54 billion acquisition of BG Group which Chief Executive Officer Ben van Beurden said will make it the best oil company investment, ahead of Exxon Mobil (XOM.N: Quote).

In its first long-term strategy presentation since February's deal, Shell unveiled plans to limit spending and exit countries in order to focus on the most profitable operations such as liquefied natural gas (LNG), deepwater oil production and chemicals.

The company also detailed longer-term plans to grow its shale oil and gas production and green energy as it switches to cleaner resources.

The combination of BG catapulted Shell to the world's second biggest international oil company behind Exxon by market capitalisation and production. Shell became the top liquefied natural gas trader and a major deepwater oil producer by increasing its position in Australia and Brazil.

Van Beurden hopes the new strategy to generate double digit returns will boost investor confidence and lift Shell's share price which has underperformed rivals since the BG deal was announced in April last year. The deal also doubled its debt-to-equity ratio to 26 percent, leading to credit rating downgrades.

"For the first 90 years of Shell's existence... we were the industry leader in total shareholder return. But we lost the lead in the 1990s," said the 58-year-old Dutchman, who was appointed in early 2014.

"I am determined to get us back to that number one position."

Shell targets a 10 percent return in capital employed by the end of the decade, assuming an oil price of around $60 a barrel, up from around 8 percent between 2013 and 2015.   Continued...

A logo of Shell is pictured at a gas station in the western Canakkale province, Turkey April 25, 2016. REUTERS/Murad Sezer