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Shell’s CFO Pick Leaves Most Analysts Asking Simply ‘Who?’

by Rakteem Katakey: 15 December 2016, 16:47 GMT

Royal Dutch Shell Plc’s appointment of Jessica Uhl as finance chief on Thursday posed one simple question for many of the analysts who follow Europe’s largest oil company: “Who?”

The 48-year-old U.S. citizen, currently head of finance for Shell’s Integrated Gas unit — a key cash cow since this year’s acquisition of BG Group Plc — will take over from Simon Henry in March. Having been at the oil major for 12 years, exclusively in finance, she has “in-depth knowledge” to execute its cash-generation plans, according to Shell.

“She is an unknown to most people,” said Iain Armstrong, a London-based analyst at Brewin Dolphin Ltd., which owns shares in the Anglo-Dutch company. “You could say she’s an internal candidate and so a safe pair of hands.”

Uhl will inherit a balance sheet weakened by a two-year slump in oil and by record debt following the $54 billion BG purchase. Not content to chip away at borrowings while weathering the downturn, the world’s No. 2 energy company has ambitions to surpass Exxon Mobil Corp. as the best-performing oil major by freeing up cash, boosting returns and keeping a tight lid on spending.

“Jessica combines an external perspective with broad Shell experience,” The Hague-based Shell said by e-mail. She has “a track record of delivering key business objectives from cost leadership in complex operations to M&A.”

Shell’s B shares, the most widely traded, were little changed for most of Thursday following news of the appointment.

Citibank, Enron

Uhl has held leadership roles in various Shell businesses including oil and gas production, and refining and chemicals. She previously worked at Citibank, now part of Citigroup Inc., then moved to Enron Corp. where she was involved in the acquisition of energy infrastructure including pipelines and power assets, according to the website of Rice University, where she was an adviser at the graduate business school.

While men have traditionally dominated the oil industry’s top jobs, Uhl will be Shell’s second female chief financial officer, after Judith Boynton held the role for two years in the early 2000s. U.S. oil giant Chevron Corp. also has had a female CFO, Pat Yarrington, since 2009.

Shell’s new finance chief will have to tackle the huge borrowings that were taken on both to fund the BG deal and to safeguard dividend payouts, resulting in credit-rating downgrades.

In a strategy announced in June, Chief Executive Officer Ben Van Beurden pledged to boost the return on capital employed to 10 percent by 2020 at an oil price of $60 a barrel, compared with an 8 percent return at $90 oil from 2013 to 2015. Shell aims to generate $20 billion to $25 billion of free cash flow from operations by the end of the decade, up from an average $12 billion.

“Shell is at the beginning of a long journey to deliver higher and, hopefully, more predictable returns,” Lydia Rainforth, an analyst at Barclays Plc, said in a note. “We would expect no change to the priorities” following Uhl’s appointment, she said.

To achieve higher returns and stave off more rating downgrades, Uhl will also have to fulfill the company’s promise to sell $30 billion of assets by 2018. Oil’s collapse has made this task difficult, prompting rating companies to warn that Shell’s debt won’t start shrinking soon enough.

Shell’s gearing — a measure of indebtedness — was 29 percent at the end of the third quarter, compared with 12 percent in early 2015. Outgoing CFO Henry told investors earlier this year that gearing could surpass 30 percent, a level that in the past has worried the rating companies.

“The new CFO is not known to me, but I do not think that this change will lead to any negative rating pressure on Shell,” said Maxim Edelson, a Moscow-based senior director at Fitch Ratings Ltd.

Analysts from BMO Capital Markets, Canaccord Genuity Ltd. and Jefferies Group LLC also said they don’t expect Shell to alter its direction following the change in CFO.

“While this news is a little surprising, it is not a complete shock to us as Shell continues to evolve post-BG,” Jefferies analysts said in a note. “We would not expect this news to result in a material deviation from Shell’s existing financial framework and strategic goals.”


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