Could European majors relocate to the United States? If so, would this move have any advantages for them?
These were the questions Rigzone posed to several analysts in exclusive interviews, in an effort to better understand the likelihood of such a scenario, as well the benefits.
“It is a widely shared perception these days that there’s no better place to be a listed oil and gas company than America, owing largely to its relatively fossil fuel friendly investors,” Patrick Rutty, the Director of Global Intelligence at Enverus, told Rigzone, in response to the questions.
“From a vantage point in the States, that might seem a surprise, but if you think Wall Street and Washington have turned against the industry, you’ll need stronger language to describe the antipathy in places like London, Paris, or Amsterdam, where P/E [price-earning] ratios of supermajors are said to be about 25 percent lower than their peers in New York,” he added.
“Already this year, French supermajor TotalEnergies and the UK’s Shell and BP have all publicly addressed re-listing in New York, although BP has been the coolest on the idea, stating its focus is on quarterly deliveries,” Rutty went on to state.
The Enverus director highlighted to Rigzone that, back in 2021, Royal Dutch Shell “shucked its first and middle names” and changed tax residence from the Netherlands to the UK, “following a Dutch court ruling that the company’s carbon emissions plans weren’t ambitious enough”.
Rutty added, however, that the company’s new home in London “may have also become problematic, as the repercussions of Brexit continue to ripple through British capital markets and investor groups”.
“Though often mooted as another reason to move, Westminster’s 2022 Energy Profits Levy – essentially a windfall profits tax – applies only to companies’ UK-sourced oil and gas production,” Rutty told Rigzone.
“Thus, it has a modest impact on Shell, the majority of whose assets are scattered around the globe,” he added.
In the interview, Rutty also pointed out that the supermajors “aren’t the only ones eyeing the advantages of listing on the New York exchange”, noting that Australia’s Tamboran Resources announced its intention to redomicile to the U.S. last October.
“Citing access to a broader U.S. investor pool more familiar with shale developments, potentially leading to a better reflection of valuation; improved liquidity; and improved access to the lower-cost, larger, and more diverse U.S. debt and equity capital markets, Tamboran hopes to fund future growth at a lower cost and with less dilution to existing shareholders,” Rutty told Rigzone.
No Panacea
Frederick J. Lawrence, the ex-Independent Petroleum Association of America (IPAA) Chief Economist, told Rigzone that European majors could initially consider relocation to the U.S. due to advantages in higher valuations, “given that European majors face a 30-45 percent discount to U.S. majors based on projected cash flow multiples”.
Lawrence warned, however, that, “for a variety of reasons, the relocation option would likely be no panacea and would involve many complications”.
“These European based companies experience very different political, investor, and activist expectations that will always give them a unique profile compared to the U.S. supermajors such as ExxonMobil and Chevron,” he said.
“For European companies, these alternate norms include a greater corporate strategic focus on energy transition investment compared to the U.S. companies who are more geared towards traditional energy sources such as oil, natural gas, and NGLs,” Lawrence added.
“In addition, many of the European companies have signed climate pledges which could restrict future fossil fuel production growth, while the U.S. companies will be more opportunistic in their upstream oil and gas investments based on current global energy market demand, geopolitics, and shale/LNG operations,” he went on to state.
Lawrence told Rigzone that, recently, “we have witnessed a more reduced profile for ESG investing in the U.S. considering a market that shows higher demand for oil and natural gas within the portfolio”.
“Given the rate of return advantages for oil and gas compared to clean energy, the U.S. companies have been able to generate higher profits and distribute more cash flow back to investors through buybacks and dividends,” he said, adding that their higher stock price multiple also gives them more firepower for stock-based mergers and acquisitions.
While the European companies may continue to grow their shareholder base in the U.S., any relocation would likely be challenging to do and limited by the different transatlantic political and corporate cultures, Lawrence warned.
“There may be some advantages for the relocating companies including a slightly more fossil-friendly set of norms and more support for traditional upstream production,” Lawrence told Rigzone.
“However, they would likely also encounter some regulatory challenges regarding change of domicile, headquarters, and their respective portion of U.S. assets,” he added.
“The companies would continue to be influenced by their European investors and significantly different energy political economy so any large strategic shift would likely be tough to achieve (unless the company was acquired outright by a U.S. supermajor),” he continued.
Lawrence told Rigzone that greater participation in U.S. market exchanges may be a more viable option.
“It will be interesting to see what type of corporate support is received by Citadel and Black Rock’s recently announced efforts to set up a new national stock exchange in Texas,” he highlighted.
“The companies noted that the exchange would be more CEO-friendly about regulations and compliance costs. Energy companies could be some of the early entrants to the exchange given their headquarters in the southeastern quadrant focus,” he added.
“Energy will remain an important political discussion in the U.S. and the November election will play a role in the near-term pace of the American energy transition,” Lawrence pointed out.
More Welcoming, Lagging Valuations
Alex Stevens, the Manager of Policy and Communications at the Institute for Energy Research (IER) told Rigzone that European majors like Shell and TotalEnergies are considering moving their primary stock listings from London and Paris to New York.
“With Europe’s focus on promoting renewable energy and the growth of heavy regulations across Europe, these companies see the American market as potentially more welcoming,” he said.
“The potential change in administration is also likely to play a major role in their decision, as a Trump presidency would roll back many of the actions that have made it more difficult to develop oil and natural gas here in the United States,” he added.
“However, I wouldn’t be surprised if governments intervened to keep these major companies on the continent due to their importance to local stock exchanges. I don’t know exactly what that would look like but given the amount of regulatory power they have some combination of carrots and sticks will likely be used to try to stop them from leaving,” Stevens warned.
The IER manager told Rigzone that moving to the NYSE offers companies immediate access to a larger pool of liquidity than any other stock exchange.
“With 2,400 listed companies from nearly 50 countries and a history spanning over 200 years, the NYSE provides unmatched stability,” he said.
“An advantage of the NYSE is the option to be listed in multiple indices, a unique feature that fosters a more stable shareholder base. Additionally, even with our growing problems, compared to Europe, the regulatory environment in the U.S. remains more welcoming to financial markets,” he added.
Ellen R. Wald, the President of Transversal Consulting, told Rigzone that her understanding is that Shell and Total are considering moving their stock listings to the NYSE because they see this as a way to improve their valuations.
“Shell and Total’s valuations have been lagging behind comparable American oil majors,” Wald noted.
“The main issue seems to be that European investors are not willing to pay as much for oil companies as American investors are and the companies are feeling pressure,” Wald added.
Moving listings is not unheard of, Wald told Rigzone, highlighting Shell’s recent move to London.
“The benefits for both companies would be easier access to investment from American investors, who are more keen than Europeans to invest in oil and gas companies,” Wald said.
“Time differences and exchange rates make it challenging for Americans to buy shares in these companies,” Wald added.
The President of Transversal Consulting told Rigzone that, for Total, leaving Paris would be a major shift as the company is seen as an integral part of France.
“It is possible that Total’s CEO is not serious about moving the company to the U.S., but is looking to secure more favorable treatment from the French government to remain in Paris,” Wald said.
“The CEO of Total has said that he does not intend to move the company’s headquarters to the U.S., which would be necessary to include Total in U.S. index funds, a large source of investment in the United States,” Wald added.
“A move to the United States would make sense for Shell – Shell has more money invested in the U.S. than in any other country and is one of the largest foreign investors in the United States,” Wald highlighted.
What Do The Companies Say?
Rigzone asked Shell, TotalEnergies, BP, ENI, and Equinor if they will relocate to the U.S. and for comment on the statements of Rutty, Lawrence, Stevens, and Wald.
Responding to Rigzone, a Shell representative said, “the CEO has answered this question many, many times – it’s all out there on the public record”.
When Rigzone asked to be pointed to some comment from Shell on the topic, the spokesperson directed Rigzone to a Reuters article published on May 2, which reported that Shell CEO Wael Sawan said “Shell is not actively looking at relisting in New York at the moment and is focused on share repurchases”.
Also responding to Rigzone, a TotalEnergies spokesperson directed Rigzone to read an exclusive interview the company’s CEO, Patrick Pouyanné, gave to the French business newspaper Le Figaro on May 23. Originally in French, the spokesperson sent Rigzone a translation of the interview.
“There is no ‘France issue’ at TotalEnergies,” Pouyanné said in the translated copy of the interview.
“There’s no question of leaving France. I never said that TotalEnergies would leave France, or even the Paris stock exchange,” he added.
“We are already listed in the United States in the form of an ADR, subject to SEC (Securities and Exchange Commission) regulations as a foreign issuer. In New York, this instrument, which is less liquid and less attractive than a real share, accounts for eight percent of transactions, whereas its listing guides our share price in Paris,” he continued.
“Every day at 3pm, when the American stock market opens, we see that our share price in Paris adjusts to that of the ADR in New York. What we’re looking to do is just to be able to offer TotalEnergies shares on the European and American markets at the same time, to increase liquidity. On reflection, I’d say it’s more a question of cross-listing,” he went on to state.
An ENI spokesperson told Rigzone that Eni is not considering a relocation in the U.S. at the moment. The spokesperson also declined to comment on the analyst’s statements.
At the time of writing, BP and Equinor have not yet responded to Rigzone’s request.
