Shell (SHEL) to Cut Offshore Wind Jobs & Renew Focus on Oil & Gas

Shell plc SHEL, the British oil and gas giant, has disclosed its plans to cut jobs in the offshore wind division. The decision, which came after Shell’s CEO Wael Sawan took over, is aimed at focusing on the company’s most profitable ventures (which include fossil fuels) and moving away from the costly renewable sector. The layoffs in the offshore wind division are expected to begin in the next few months and will mostly affect the staff in Europe.

A Shell representative has stated that the company is poised to concentrate on value over volume, indicating that it will lay emphasis on delivering value to shareholders and customers rather than expanding its business. Due to a shift in its strategy, Shell is likely to focus only on those markets and segments that will maximize value for both its investors and customers. However, Shell has mentioned that it will keep an eye out for offshore wind projects in priority markets, thereby retaining its emphasis on performance, discipline and simplification.

Under new management, Shell’s business divisions have been under pressure to improve profitability. In fact, in June 2023, management outlined a plan to decrease structural costs by nearly $3 billion by the end of 2025. The decision to move away from renewables can be primarily attributed to the high cost and the capital-intensive nature of the sector. Shell had invested heavily in the offshore wind business to leverage its prowess in oil and gas extraction at sea. However, rising costs and a renewed focus on driving shareholder returns have led to its retreat from renewables.

Under the new leadership, Shell has undergone several changes, including the elimination of certain positions, such as the global head of renewables. The company has backed out of its offshore wind projects in Ireland and France and continues to explore the potential sale of its stakes in its renewable ventures. CEO Wael Sawan has also mentioned that the company may altogether quit the London stock exchange and shift to New York.

The layoffs in the offshore wind division follow the job cuts in Shell’s low-carbon solutions unit, where at least 15% of the workforce will be laid off. This comes down to nearly 200 jobs being slashed alongside 130 more under review.

On another note, Shell has also backed out of its promise to reduce oil production. The company has, instead, emphasized its commitment to provide energy security to its customers while transitioning to a net zero emission business over time.

Zacks Rank and Key Picks

Currently, SHEL carries a Zacks Rank #3 (Hold).

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Some better-ranked stocks in the energy sector are Archrock Inc. AROC, Hess Midstream Partners LP HESM and Sunoco LP SUN.Archrock presently sports a Zacks Rank #1 (Strong Buy), while Hess Midstream and Sunoco carry a Zacks Rank of #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

Archrock is an energy infrastructure company based in the United States, with a focus on midstream natural gas compression. It provides natural gas contract compression services and generates stable fee-based revenues.

Hess Midstream LP owns, operates, develops and acquires a wide range of midstream assets, providing services to Hess Corporation and other third-party customers. The partnership has a stable fee-based revenue model secured via long-term commercial contracts. Since Hess Midstream operates through 100% fee-based contracts, it is exposed to minimal commodity price risks.

Sunoco LP is one of the largest distributors of motor fuel in the United States. The partnership distributes fuel to independent dealers, commercial customers, convenience stores as well as distributors. Its current distribution yield is greater than that of the composite stocks in the industry, providing unitholders with consistent returns.

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