Voser’s vision leaves Shell in better health

One thing is indisputable about Peter Voser’s four-year stint in the Royal Dutch Shell hot seat: investors are a lot surer of Shell than they were in 2009. As chief financial officer and then as chief executive, Mr Voser helped transform a group that was rocked to its foundations by a reserves accounting scandal and was seen as the sick man of the oil industry.

He leaves it a lot healthier, with a portfolio of massively cash-generative projects that have reaffirmed Shell’s reputation for technical excellence and financial acumen. Shell’s cash flow has more than doubled since Mr Voser took over as chief executive, up from $21.5bn in 2009 to $46bn last year.

But in recent months, some old doubts about Shell have been creeping back. The company has underperformed the European oil sector for the past few months, eclipsed by new investor darling Total. Its shares are down 9 per cent since August 1 when it revealed a 20 per cent slump in second-quarter profits, losses in its North American business and a big writedown of its US unconventional oil assets.

Mr Voser is unperturbed. “Our investment horizons are different,” he says in an interview.

A key reason for investor disenchantment with Shell is its reputation as one of the biggest spenders in the industry. The company has a $130bn capital investment programme for 2012 to 2015, 20 per cent bigger than the previous four years.

Yet investors had thought, wrongly, that Shell was finally coming out of a cycle of heavy spending on new projects. They hoped its capital expenditure, or capex, would start to level off or even fall, and that it would spend more of its free cash flow on share buybacks or higher dividends. Capex has instead crept up.

Contrast that with Total, the French major, which delighted investors by announcing in July that capital spending would peak this year. In the three months since then, it has outperformed its European peers by about 15 per cent.

Some investors say Shell should do the same. “The main criticism is: have they got their capital allocation right?” says Jason Gammel, an analyst at Macquarie Research. “Is it better to keep investing at a very high level in a high-cost environment or focus more on returning cash to shareholders?”

Mr Voser insists Shell has got the balance right. Announcing a peak in capex is, he says, “the wrong message”. What is more important is capital discipline: making sure the projects that get sanctioned have the right returns.

It is clear that Mr Voser is still haunted by what happened to Shell in the 1990s. With oil prices languishing at around $20 a barrel, the company stopped investing, and outsourced many of its key skills to service companies in an attempt to cut costs. The result was that it ceased to grow, setting the scene for the 2004 accounting scandal, when it was caught overstating the size of its reserves.

Mr Voser, who became chief financial officer that same year, was part of the executive team that turned things around. Shell, led by then chief executive Jeroen van der Veer, started investing heavily again to raise production, bringing skills back in-house and putting a stronger focus on financial performance.

The company splurged on three major projects: a $19bn gas-to-liquids plant in Qatar called Pearl, a huge liquefied natural gas plant, also in Qatar, and a big expansion of its Canadian oil sands operation.

The spree earned brickbats from some analysts. “[They said] it was too high capex, too much technical risk etc,” Mr Voser recalls. Yet the projects turned out to be hugely lucrative – “the biggest cash machines that we have in the group”, he says.

For that reason, Mr Voser tends to dismiss the current round of market warnings about Shell’s capex levels. The company, he says, has learnt from its past mistakes and now invests “throughout the cycle”. It is “my job and the board’s job to take a 10-year view here,” he says.

The result is that Shell now has a new wave of projects that are ready to roll – a total of 17 starting up this year and next. “So it shows – it takes you 10 years to correct the strategic mishaps of the past decade,” he says.

Analysts say Mr Voser has left Shell in good stead for years to come. But there are also hopes that his successor, Ben van Beurden, may take a more disciplined approach. “We’re heading for a different environment, where oil prices are stable,” said one analyst. “The age of growth at all costs is over.”

Life after an oil major

Once he leaves Royal Dutch Shell next March, he plans some private travel with his wife Daniela – a tour of Alaska and Antarctica, Australia and New Zealand, and parts of Africa – and a trip to Brazil for the 2014 World Cup. He will also have more time to indulge his passions – skiing, hiking and diving.

It was in May that Mr Voser announced his surprise decision to step down as Shell CEO after only four years in the job, saying he felt it was time for a lifestyle change. His wife lives in his native Switzerland and friends say he had tired of endlessly commuting between the family home and Shell’s headquarters in The Hague.

However, he expects to keep busy. Already a director of Roche, and chairman of Catalyst, a non-profit organisation that promotes the advancement of women in business, he expects to pick up two more non-executive directorships, and probably one other chairman role. His deft stewardship of Shell means he is unlikely to lack offers.

Mr Voser is also interested in a “coaching/monitoring role for young CEOs”, and in becoming a part-time adviser to a think tank “on conceptual, structural solutions for things like youth unemployment”.

“There could be more energy themes there as well,” he says. “I’m extremely interested in the stress nexus between water, energy and food.”

Fonte: ft.com