Shell Petroleum Company Limited (SPCo), a global energy giant, has revealed plans to divest its majority share in Shell Pakistan Limited (PSX: SHEL). This decision was disclosed to the Pakistan Stock Exchange on Wednesday, June 14, 2023, through a stock filing.
The Board of Directors at SPL was officially informed during a meeting on June 14, 2023, about SPCo’s intent to offload its 77% ownership in the Pakistani operations. The announcement confirmed that any prospective sale would follow a targeted sales process, subject to successful execution of binding documentation and obtaining necessary regulatory clearances.
In a statement, the company assured that this development would not impact SPL’s current business operations, which will proceed as usual. SPL reiterated its commitment to ensure safe and dependable operations for its clients and partners.
A spokesperson from Shell addressed the media, asserting, “Shell is witnessing robust interest from international buyers. SPL remains dedicated to providing safe, reliable operations.”
Emphasizing Shell’s strategy behind the move, the spokesperson stated, “Shell Petroleum Company Limited, a subsidiary of Shell plc (Shell), has publicized its plan to sell its stake in Shell Pakistan Limited (SPL), thereby simplifying Shell’s portfolio. Having operated in the country for 75 years, Shell Pakistan has a significant retail footprint and a thriving lubricants business.”
Earlier this year, Shell considered exiting its home energy retail operations in the United Kingdom, the Netherlands, and Germany, spurred by challenging market conditions due to EU measures to shield consumers from escalating energy costs. This likely prompted Shell to reduce costs in other areas, with Pakistan among several locations the company plans to exit.
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The UK-based firm now plans to continue oil production until 2030 while expanding its natural gas business, aiming to retain its position as the leading player in the global liquefied natural gas (LNG) market. Concurrently, it may streamline operations in various countries to retain its strategic competitiveness in the sector.
The company’s broader strategy involves an enhanced focus on performance, discipline, and simplification, as well as increased shareholder distributions to 30-40% of cash flow from operations (CFFO) through the business cycle. Shell also plans to reduce capital spending to $22-25 billion per year for 2024 and 2025, while aiming to decrease annual operating costs by $2-3 billion by the end of 2025. Shell reaffirmed its commitment to achieving net-zero emissions by 2050.
SPL reported significant losses for Q1 2023, reflecting the ongoing economic crisis in the country. A shift from a post-tax profit of Rs. 2 billion to a loss of Rs. 4.6 billion from the previous year was observed. The economic downturn, fueled by the steep depreciation of the rupee and macroeconomic uncertainty, was identified as the main cause of this downfall. As of the latest reports, SHEL’s scrip at the bourse stands at Rs. 89.17, marking a 7.5 percent increase.
