European oil giants are considering moving their listings to the US

Two European energy giants, France’s TotalEnergies and Britain’s Shell, are considering moving their listings to New York as pressure mounts for them to improve their valuations, which lag those of their American counterparts.

Moving their listing to the US would be a blow to European stock exchanges, where they are among the largest listed companies.

In the past, it would have been almost unthinkable for TotalEnergies, one of France’s most important companies, to consider moving its listing from Paris. But the company’s chief executive, Patrick Pouyanné, recently discussed considering such a shift to analysts.

“There was a discussion with the board,” Mr. Pouyanné said on a recent call to discuss earnings. “We all agreed that we needed to look at this seriously.”

Shell, Europe’s largest energy company, has said it is considering a similar move. However, no postponement is currently planned, said Wael Sawan, CEO of the company, which recently relocated Headquarters from The Hague in the Netherlands to Londonwhere it is the largest listed company by market value.

Each move would reflect the almost irresistible lure of the United States as a center of energy production, innovation and investment.

The United States has become the world’s leading oil producer and exporter of liquefied natural gas. In contrast, Europe’s oil production is declining, and many European governments are skeptical of the oil and gas industry, which remains crucial to global energy supplies despite concerns about climate change. The Biden administration’s Inflation Reduction Act could also give the United States an advantage in cleaner energy technologies such as hydrogen and electric vehicles.

A key factor driving these companies’ unrest is the vast difference in valuation investors are willing to pay for the U.S.-based energy giants compared to their European counterparts.

According to a recent study by Giacomo Romeo, an analyst at the investment firm, the two largest American energy companies, Exxon Mobil and Chevron, have a valuation of share price-to-earnings ratios that is at least a third higher than that of their European rival Bank Jefferies. The New York listing debate is becoming “a key issue” among investors, he said in a note to clients.

A lower stock valuation not only weakens executives’ egos, but it also puts these companies at a disadvantage when they use their stock to participate in a wave of industry consolidation. Exxon MobilFor example, the company recently purchased Pioneer Natural Resources, a major shale oil driller, for $60 billion Chevron agreed to pay $53 billion for Hess, although legal issues regarding Guyana complicate the sale. Their European counterparts were largely left out.

European companies now see steps such as stock exchange listings in the United States as an opportunity to improve their valuation and reduce the gap to the competition. For example, Mr. Pouyanné said TotalEnergies’ number of North American shareholders was growing, but major investors faced hurdles to putting money into the French company’s shares, including time differences with European markets and fluctuating exchange rates.

But any move could face resistance. France’s Finance Minister Bruno Le Maire has already vowed to oppose any move by TotalEnergies. “I’m here to make sure that doesn’t happen,” he said.

It is difficult to overstate the importance of TotalEnergies for France. The company is a major domestic energy supplier and major foreign investor, leading France’s transition to lower-carbon energy through investments in solar and wind power and other cleaner technologies.

In some ways, a move by Shell seems more logical. It is one of the largest foreign investors in the United States, with more capital there than in any other country.

Shell has suffered a series of setbacks in Europe in recent years, including a court ruling that said it needed to speed up production Climate Change Efforts. There are also questions about whether the London Stock Exchange did this lost favor since Brexitis the right place for a large company like Shell, which has a market value of around $232 billion.

It is also questionable how effectively a move to the US would close the valuation gap. Jefferies’ Mr. Romeo said that shifting primary listings alone may not be enough to eliminate the difference, adding that companies may also need to move their headquarters to be included in U.S. index funds, which Mr. Pouyanné said they would not that he would not do this.

Mr. Sawan has said he thinks Shell shares are cheaper than they should be. Still, he is focused on efforts to strengthen stocks through better financial performance and higher returns for investors. If that effort doesn’t pay off, Shell might consider making a move.

“We have a duty of care to explore all options to bridge this valuation,” he told analysts on Thursday.

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