Shell

[monabri]

Surprise move!

"Oil giant Shell will soon begin supplying lighting and heat to British homes through a major deal to buy the biggest energy supply rival to the 'big six' utilities."

http://www.telegraph.co.uk/business/201 ... t-utility/

[idpickering]

Surprise move!

"Oil giant Shell will soon begin supplying lighting and heat to British homes through a major deal to buy the biggest energy supply rival to the 'big six' utilities."

http://www.telegraph.co.uk/business/201 ... t-utility/

Thank you monabri, for bringing this to our attention. This has got to be good news for Shell. Shell RDSB are my largest holding by some distance, which is naughty of me really, as it doesn't fit with the equal weighting mantra of the HYP sport. I'm very much of the 'never sell Shell' bent, and I haven't.

Regards,

Ian.

[nmdhqbc]

Am I right in saying BG group had a lot of gas so now they can sell it direct?

[JMN2]

My largest holding too and the largest dividend payer. I actually considered topping up earlier today in order to reach another round dividend amount threshold but restrained myself in the end.

Interesting news indeed.

[tjh290633]

Am I right in saying BG group had a lot of gas so now they can sell it direct?

They split off Centrica in 1997, which trades as British Gas. BG Group is the gas and oil production operation, which hived off Lattice in 2000 and that merged with National Grid in 2002.

I think that BG. do sell gas to large customers direct.

TJH

[monabri]

Centrica set up this;

https://www.centrica.com/news/spirit-en ... nt-venture

"Spirit Energy, the E&P joint venture which combines Centrica plc’s E&P business with Bayerngas Norge AS, has begun trading as an independent oil and gas operator. Completion of the transaction – which was announced on 17 July, 2017 – follows receipt of all the required regulatory approvals and Spirit Energy now becomes a leading independent European E&P company."


https://www.spirit-energy.com/

"Today, our team of more than 700 people is committed to the development of oil and gas reserves in Europe, overseeing production of 50million barrels of oil equivalent per year while working out how to tap into reserves and resources in the pipeline amounting to more than 600million barrels".

[monabri]

Hold on a sec (Off topic)

"An initial public offering is also understood to be a possibility in the medium term."

Don't the CNA shareholders already own 69% of this ?

https://www.energyvoice.com/oilandgas/n ... olidation/

[Gengulphus]

Hold on a sec (Off topic)

"An initial public offering is also understood to be a possibility in the medium term."

Don't the CNA shareholders already own 69% of this ?

https://www.energyvoice.com/oilandgas/n ... olidation/

Yes, but only indirectly - they own shares in Centrica, and Centrica owns 69% of the shares in Spirit Energy. Members of the public can't buy Spirit Energy shares directly, and changing that is what an initial public offering would do.

I've kept this brief because as you say, it's off-topic for this thread. There's a recent thread viewtopic.php?f=15&t=8958 which is very specifically about Spirit Energy being set up, so if you want to ask any follow-up questions about the possible IPO, I'd suggest asking them there.

Gengulphus

[alnitak1971]

Thank you monabri, for bringing this to our attention. This has got to be good news for Shell.

Regards,

Ian.

I beg to differ. The oil majors have generally retreated from the downstream/retail operations because the margins are too low. This is going against the trend. And it increases their exposure politically, given the way that our MPs love to posture with their pronouncements about the retail energy market. And it is unlikely to register on their bottom line in any significant way.

[Dod101]

I beg to differ. The oil majors have generally retreated from the downstream/retail operations because the margins are too low. This is going against the trend. And it increases their exposure politically, given the way that our MPs love to posture with their pronouncements about the retail energy market. And it is unlikely to register on their bottom line in any significant way.

Do you not think that Shell will have taken these factors into account? And according to the article this new acquisition is a 'challenger' and is likely to be well attuned to what is required of energy suppliers under the new regime. It is not as if they are buying say Centrica. This is part and parcel of their move away from oil and into the wider green energy market, and may well have no real effect on the bottom line immediately. Like all companies that have been around for a long while, like HSBC, Unilever and so on, Shell will be looking ten or fifteen years ahead, not next year.

Dod

[idpickering]

Thank you monabri, for bringing this to our attention. This has got to be good news for Shell.

Regards,

Ian.

I beg to differ. The oil majors have generally retreated from the downstream/retail operations because the margins are too low. This is going against the trend. And it increases their exposure politically, given the way that our MPs love to posture with their pronouncements about the retail energy market. And it is unlikely to register on their bottom line in any significant way.

Interesting alnitak1971 (makes me feel old ), I don't know the ins and outs of all this aspect of Shell's tactics, and if I may, strategic ignorance applies. I don't mean be totally unaware, but I have no control over this, and am relying on the Shell management to do the right thing.

Ian.

[Wizard]

Thank you monabri, for bringing this to our attention. This has got to be good news for Shell.

Regards,

Ian.

I beg to differ. The oil majors have generally retreated from the downstream/retail operations because the margins are too low. This is going against the trend. And it increases their exposure politically, given the way that our MPs love to posture with their pronouncements about the retail energy market. And it is unlikely to register on their bottom line in any significant way.

Interesting alnitak1971 (makes me feel old ), I don't know the ins and outs of all this aspect of Shell's tactics, and if I may, strategic ignorance applies. I don't mean be totally unaware, but I have no control over this, and am relying on the Shell management to do the right thing.

Ian.

Ian

But hang on a minute, you also own SSE. If I understand it correctly SSE has recently announced it is exiting the very market Shell is pushing in to. I also own Shell and SSE and I am now concerned that only one of these two decisions can be right. Should / can we reasonably sit back and say both sets of management are making the right decision? How can it be good for SSE to be exiting and Shell to be entering? My starting position is that as an incumbant in the domestic supply market SSE's management will have more knowledge of it than Shell's management, so I need convincing this is a good idea for Shell. I know Shell are buying their way in and therefore acquiring management, but that team as the founders have a massive incentive to convince Shell this is a great idea. So unless the deal includes a massive lock-in with a large part of the management's consideration linked to future business performance I suspect current management of First Utility are not an independent judge of what is best for Shell shareholders.

The article speaks about vehicle charging, but the First Utility website (well the UK one at least) is all about domestic supply and competing with the 'big 6', it seems they look to compete on price and service. The article also makes clear Shell is pushing forward vehicle charging any way so I not see at this stage that it is about vehicle charging.

In short I am not convinced by the deal. I am therefore interested as to why you think it has "got to be good for Shell".

Terry.

[vrdiver]

SSE sees the downstream market as sessile, customers are "houses". Shell probably think customers are mobile, being "cars". First Utility is a dynamic organisation that can bring retail expertise in electricity, whilst Shell is the behemoth that can roll out POS stations across its network of garages.

SSE looks at political risk rather differently than Shell, as SSE is competing in the "overpriced" domestic arena, whereas Shell are entering the "green and clean" market, which would be much more difficult to punish, politically.

So for me, as a holder of both SSE and Shell, I can paint a picture (in my mind) why both management teams are making the right decision about entering or leaving downstream electrical supply.

All, of course, based on my own comfort blanket and in no way backed up by research or facts!

[dspp]

They are coming from different places and going to different places.

SSE has a large position in generation, and in retail. The large retail exposure makes it very politically exposed, especially as it largely conducts its business in the UK. Its decision to fold its retail unit in with RWE's retail unit in the UK and then demerge that reduces political exposure and gains economies of scale (better to compete with Centrica in that market). SSE already has a good renewables exposure and is building that apace.

Shell is global. It sees peak oil coming, and peak carbon, and is seeking to decarbonise. It has been on that path since well before the early 90s, but manages the pace of decarbonisation carefully, adjusting course as the environment changes. It is now pushing into offshore wind and into mobile electric. But it needs scale & scope to manage the swings of mobile electric, and so needs to do a triple play of commercial electric, retail electric, and mobile electric. It is exploring this in different places in different ways. In the UK that is as a challenger-position.

I hold both SSE and RDSB, very overweight in the latter. I am relaxed about the strategy of both, actually quite positive.

regards, dspp

[idpickering]

In short I am not convinced by the deal. I am therefore interested as to why you think it has "got to be good for Shell".

Hi Wizard, For me this is an added diversification to what Shell traditionally offers, which is a good thing IMHO. I do hold Sse plc too, as you mentioned. I'm ok with the deal, and am impressed by the way the guys in the last two posts have articulated this matter.

Ian.

[Wizard]

SSE sees the downstream market as sessile, customers are "houses". Shell probably think customers are mobile, being "cars". First Utility is a dynamic organisation that can bring retail expertise in electricity, whilst Shell is the behemoth that can roll out POS stations across its network of garages.

SSE looks at political risk rather differently than Shell, as SSE is competing in the "overpriced" domestic arena, whereas Shell are entering the "green and clean" market, which would be much more difficult to punish, politically.

So for me, as a holder of both SSE and Shell, I can paint a picture (in my mind) why both management teams are making the right decision about entering or leaving downstream electrical supply.

All, of course, based on my own comfort blanket and in no way backed up by research or facts!

Good theory, but that domestic arena is exactly the one First Utility operates in as far as I can see from their website, they are a 'challenger' admittedly but there is nothing on their website that suggests they are any greener than any if the 'big 6' they talk about being cheaper and providing better service. It may be that First Utility operate car charging in Germany, but I would have thought Shell is more likely to have the expertise in this anyway.

I am interested in the comment about them looking at political risk differently and would be interested on any more detailed thinking on that point.

Terry.

[Wizard]

They are coming from different places and going to different places.

SSE has a large position in generation, and in retail. The large retail exposure makes it very politically exposed, especially as it largely conducts its business in the UK. Its decision to fold its retail unit in with RWE's retail unit in the UK and then demerge that reduces political exposure and gains economies of scale (better to compete with Centrica in that market). SSE already has a good renewables exposure and is building that apace.

Shell is global. It sees peak oil coming, and peak carbon, and is seeking to decarbonise. It has been on that path since well before the early 90s, but manages the pace of decarbonisation carefully, adjusting course as the environment changes. It is now pushing into offshore wind and into mobile electric. But it needs scale & scope to manage the swings of mobile electric, and so needs to do a triple play of commercial electric, retail electric, and mobile electric. It is exploring this in different places in different ways. In the UK that is as a challenger-position.

I hold both SSE and RDSB, very overweight in the latter. I am relaxed about the strategy of both, actually quite positive.

regards, dspp

My bold.

That point in bold is very interesting dspp, is that something you picked up from something Shell has published, or press commentary? I wouldn't mind understaning what Shell is doing a little more.

I am afraid I have always struggled with the whole 'Strategic Ignorance' concept, would anyone buy a car without a test drive or a bit or research saying "I am sure the management of the business know what they are doing"?

Terry.

[dspp]

No, it is from my own analysis. Which comes from having worked in various parts of the energy sector for 25-years, including within Shell and close alongside SSE and RWE, and others.

ps. I don't do strategic ignorance blindly. see my portfolio reviews. and over on the energy board in sectors etc.

regards, dspp

[vrdiver]

SSE looks at political risk rather differently than Shell, as SSE is competing in the "overpriced" domestic arena, whereas Shell are entering the "green and clean" market, which would be much more difficult to punish, politically.

Good theory, but that domestic arena is exactly the one First Utility operates in as far as I can see from their website, they are a 'challenger' admittedly but there is nothing on their website that suggests they are any greener than any if the 'big 6' they talk about being cheaper and providing better service. It may be that First Utility operate car charging in Germany, but I would have thought Shell is more likely to have the expertise in this anyway.

I am interested in the comment about them looking at political risk differently and would be interested on any more detailed thinking on that point.

Terry.

It's a weird political situation: from SSE themselves: "SSE's continues to be the UK's leading generator of electricity from renewable sources" whereas Shell are typically associated with fossil fuels.

However, SSE could be nationalised by a UK government with almost no backlash (assuming they put it in their manifesto and got elected on that) whereas Shell is a global company with its HQ in the Netherlands, so even though incorporated in the UK, it could recorporate (is that a real thing?) to Holland at very short notice. As a major dividend payer, I would also expect a fierce defense from the City, fund managers and most company pension managers. Scotland might also want to argue about who gets to own Shell, as it was "oor oil" that Westminster was stealing when the SNP were discussing how Scotland would thrive as an independent nation!

First Utility is, as dspp referred to, part of Shell's strategy in electricity whereby:

it needs scale & scope to manage the swings of mobile electric, and so needs to do a triple play of commercial electric, retail electric, and mobile electric

If you're going to promote EV, then presumably EV drivers are going to want to charge their vehicles at home, so being the provider into the house is logical if you don't want the other electricity companies to eat your forecourt fuel sales for lunch. The political risk is still there (nationalise Utilities) but Shell would have quite a lot to say about a government taking over a car battery-charging company, if that's wrapped into the mix. Easier for the government to take over the pure-plays, set the price and encourage customers to migrate than to get into a legal battle with a multinational.

So, a fossil fuel company that can't be touched and is rebranding as "clean energy" and a renewables energy company that can be painted as "the bad guy" and needs to develop a strong defense against political threats...

All IMHO of course.

[Wizard]

No, it is from my own analysis. Which comes from having worked in various parts of the energy sector for 25-years, including within Shell and close alongside SSE and RWE, and others.

ps. I don't do strategic ignorance blindly. see my portfolio reviews. and over on the energy board in sectors etc.

regards, dspp

I'll take a look, many thanks.

Terry.