As Royal Dutch Shell announced its quarterly earnings on Thursday, including a jump in profit that failed to meet investor expectations, company executives were dealing with an activist fund’s proposal that the oil giant be broken up.
Third Point, a New York-based activist fund management firm, has taken a stake in Shell and called for it to be broken up into “multiple stand-alone companies” that could address competing shareholder interests.
These companies could include a unit encompassing Shell’s legacy oil- and gas-extraction businesses and another with its renewable-energy and liquefied-natural-gas activities, said Third Point’s chief executive, Daniel S. Loeb, in a letter to investors.
Mr. Loeb called Shell “one of the cheapest large-cap stocks in the world.” He also said that by most metrics Shell was trading at a 35 percent discount to its rivals Exxon Mobil and Chevron, despite what he called “higher quality and more sustainable” business lines.
He blamed the company’s “attempting to appease multiple interests but satisfying none” for the lack of investor interest in Shell.
Shell said that it had “preliminary conversations with Third Point and we will engage with them, as we do with all our shareholders.”
Third Point’s move recalled the successful battle waged this spring by another activist hedge fund, Engine No. 1, to install three directors on the board of Exxon Mobil with the goal of pushing it to reduce its carbon footprint.
News of the Third Point’s interest came as Shell, Europe’s largest oil company, reported $4.1 billion in adjusted earnings for the third quarter of this year, a substantial increase over the $955 million reported in the period a year earlier, thanks mainly to higher oil and gas prices. The earnings came in below analysts’ expectations.
Shell shares were down 3 percent.