BALANCING GROWTH & RETURNS SECOND QUARTER 2014 RESULTS 31 JULY 2014 ROYAL DUTCH SHELL PLC

Transcription

1 BALANCING GROWTH & RETURNS SECOND QUARTER 2014 RESULTS 31 JULY 2014 ROYAL DUTCH SHELL PLC 1

2 BEN VAN BEURDEN CHIEF EXECUTIVE OFFICER ROYAL DUTCH SHELL PLC 2

3 DEFINITIONS & CAUTIONARY NOTE Reserves: Our use of the term reserves in this presentation means SEC proved oil and gas reserves. Resources: Our use of the term resources in this presentation includes quantities of oil and gas not yet classified as SEC proved oil and gas reserves. Resources are consistent with the Society of Petroleum Engineers 2P and 2C definitions. Organic: Our use of the term Organic includes SEC proved oil and gas reserves excluding changes resulting from acquisitions, divestments and year-average pricing impact. Resources plays: our use of the term resources plays refers to tight, shale and coal bed methane oil and gas acreage. The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate entities. In this presentation Shell, Shell group and Royal Dutch Shell are sometimes used for convenience where references are made to Royal Dutch Shell plc and its subsidiaries in general. Likewise, the words we, us and our are also used to refer to subsidiaries in general or to those who work for them. These expressions are also used where no useful purpose is served by identifying the particular company or companies. Subsidiaries, Shell subsidiaries and Shell companies as used in this presentation refer to companies in which Royal Dutch Shell either directly or indirectly has control, by having either a majority of the voting rights or the right to exercise a controlling influence. The companies in which Shell has significant influence but not control are referred to as associated companies or associates and companies in which Shell has joint control are referred to as jointly controlled entities. In this presentation, associates and jointly controlled entities are also referred to as equity-accounted investments. The term Shell interest is used for convenience to indicate the direct and/or indirect ownership interest held by Shell in a venture, partnership or company, after exclusion of all third-party interest. This presentation contains forward-looking statements concerning the financial condition, results of operations and businesses of Royal Dutch Shell. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of Royal Dutch Shell to market risks and statements expressing management s expectations, beliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of terms and phrases such as anticipate, believe, could, estimate, expect, intend, may, plan, objectives, outlook, probably, project, will, seek, target, risks, goals, should and similar terms and phrases. There are a number of factors that could affect the future operations of Royal Dutch Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this presentation, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for Shell s products; (c) currency fluctuations; (d) drilling and production results; (e) reserves estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and regulatory developments including potential litigation and regulatory measures as a result of climate changes; (k) economic and financial market conditions in various countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; and (m) changes in trading conditions. All forward-looking statements contained in this presentation are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Additional factors that may affect future results are contained in Royal Dutch Shell s 20-F for the year ended 31 December, 2013 (available at and ). These factors also should be considered by the reader. Each forward-looking statement speaks only as of the date of this presentation, 31 July, Neither Royal Dutch Shell nor any of its subsidiaries undertake any obligation to publicly update or revise any forwardlooking statement as a result of new information, future events or other information. In light of these risks, results could differ materially from those stated, implied or inferred from the forwardlooking statements contained in this presentation. There can be no assurance that dividend payments will match or exceed those set out in this presentation in the future, or that they will be made at all. We use certain terms in this presentation, such as discovery potential, that the United States Securities and Exchange Commission (SEC) guidelines strictly prohibit us from including in filings with the SEC. U.S. Investors are urged to consider closely the disclosure in our Form 20-F, File No , available on the SEC website You can also obtain this form from the SEC by calling SEC

4 2014 PRIORITIES Improve our financial performance Returns and cash flow Competitive returns for shareholders Enhance our capital efficiency Take hard choices on new options Increase asset sales Reduce pace of growth investment Deliver new projects Major deep-water start-ups in 2014 Integrate 2013 acquisitions 4

5 DRIVING PERFORMANCE IN SHELL Performance units New shareholding requirements Drive bottom line focus Credible, competitive and affordable plans Drives decisions on spending + divestment CEO 7 x base pay Individual performance management Stronger accountability for outcomes New shareholding requirements for senior executives CFO Senior Executives 4 x base pay Top 200 executives below Executive Committee: 1.5 x base pay Policy from

6 IMPROVE FINANCIAL PERFORMANCE H OUTCOME Earnings + ROACE Cash flow % Upstream Corporate/Other Downstream ROACE (RHS) CFFO CFFI Free cash flow (RHS) Dividend + buy-back Balancing returns + growth Competitive shareholder returns Expecting >$30 billion distributions to shareholders Dividend declared Buy-back CCS earnings + ROACE excluding identified items 6

7 Attractiveness IMPROVE FINANCIAL PERFORMANCE OIL PRODUCTS Addressing underperforming portfolio Selective Growth: Chemicals China LNG for transport Premium fuels + lubes Refinery crude flexibility others Downstream CFFO + ROACE % Fix: Motiva Singapore fuels Pernis + Rheinland others CFFO ROACE (RHS) Exit: Italy Norway Australia Denmark others : completed Announced divestments 2014 year to date: 180,000 b/d refinery capacity 300,000 b/d marketing US mid-stream MLP proposal Resilience ROACE: CCS earnings excluding identified items 7

8 Attractiveness IMPROVE FINANCIAL PERFORMANCE NORTH AMERICA RESOURCES PLAYS LNG Canada Groundbirch Deep Basin/Kaybob Foothills/Pembina Liquids rich shales (LRS) Dry gas Gas/LRS Gas monetization options Redefining growth + reducing cost Maintain / Grow: W. Canada gas + integration plays W. Canada LRS Permian LRS Permian Pinedale Appalachia Gas-to-chemicals Elba LNG Haynesville Exit: Eagle Ford Mississippi Lime Rockies LRS Deep Basin (North) Foothills (Burnt Timber) Hold or Divest: Lower 48 gas completed LRS Plays Resilience North Americas capital investment -50% LRS Dry gas Divestments * 2014 H1: 12 month rolling -20% Acquisitions Dry gas: LNG growth options in Canada Lower 48: low holding cost production + appraisal drilling Liquid rich shales: Major divestments completed Appraisal in Western Canada + Permian Q214 impairments $1.9 billion 8

9 ENHANCE CAPITAL EFFICIENCY Take hard choices on new options More selectivity: FIDs > $500 million require CEO approval at FEED Maturing new projects: LNG, deep-water Increase asset sales $8 billion completed H114 US midstream MLP proposal Reduce pace of growth investment 2014 organic spending ~$35 billion Scrip cancellation reflects improving FCF Asset sales / license expiry Wheatstone LNG BC-10 dilution North America LRS Italy Downstream ADCO license expiry Woodside market sell down Australia/Denmark/ Norway Downstream Nigeria onshore Late life UKCS Others 270,000 boed upstream 180,000 b/d refining 300,000 b/d marketing : completed 9

10 DELIVER NEW PROJECTS 2014 START-UPS Mars B February 2014 start-up Mars B production ramp-up progress kboed Shell 72%, 100 kboe/d Cardamom: H start-up Gumusut-Kakap: H start-up Shell 100%, 50 kboe/d Shell 33%, 135 kboe/d 10

11 CONVENTIONAL EXPLORATION PORTFOLIO + THEMES Conventional Exploration spend 2014 ~ $ 4 billion Time to development (years) Prospect Size (million boe) 15+ >500 Arctic 10+ >250 Frontier Under explored basins Heartlands New plays in Shell producing basins Arctic/Frontier Near field exploration Heartland < Near field High value Balancing exploration risk Prospect size: potential 11

12 CONVENTIONAL EXPLORATION PROGRESS DELIVERY H1 2014: EXAMPLES Malaysia, Block SK318 Malaysia, Block SK408 GOM, Rydberg Deep Doo Sung rig Gorek-1 3D Noble Globetrotter 1 Rosmari gas discovery ~110 million boe Shell 85% 4 near field gas discoveries in 2014 (100% success rate) Adding gas to Malaysia heartland Shell 30% Deep-water oil discovery 16 km south of Appomattox ~100 million boe Shell 57.2% 3rd Norphlet discovery 12

13 SIMON HENRY CHIEF FINANCIAL OFFICER ROYAL DUTCH SHELL PLC 13

14 Q FINANCIAL HIGHLIGHTS Earnings Q to Q Q Q UPSTREAM DOWNSTREAM (CCS) CORPORATE & MINORITIES CCS NET EARNINGS CCS EARNINGS, $ PER SHARE Earnings Q to Q Environment Choice CASH FROM OPERATIONS ROACE (%) SHARE BUY BACKS DIVIDENDS DIVIDEND, $ PER SHARE Earnings CCS basis, excluding identified items, ROACE excluding identified items 14

15 UPSTREAM PERFORMANCE Q Earnings + cash flow Exploration expense (pre-tax) Upstream International Upstream Americas Upstream International Upstream Americas Cash flow from operations (RHS) Oil and gas production Million boe/day Million tonnes Q3 Q3 OUTLOOK: Production impact: Abu Dhabi license expiry ~170 kboe/d Divestment impact ~75 kboe/d Uplift from lower maintenance Q214 LNG dividend phasing to Q314 Gas Oil LNG Sales volumes (RHS) Earnings CCS basis, excluding identified items 15

16 DOWNSTREAM PERFORMANCE Q Earnings Cash flow Oil Products Chemicals CFFO excl w/c movements Working capital movements CFFO Availability and sales volumes % Sales volume Q3 Q3 OUTLOOK: Similar refinery availability Lower chemicals availability Refining margin outlook remains bearish Refinery availability Chemicals availability Chemicals (million tonnes) (RHS) Oil products (million bbls/d) (RHS) Earnings CCS basis, excluding identified items 16

17 CASH FLOW AND PAY-OUT Cash generation, Q214 4Q rolling Dividend track record DOWN STREAM UP STREAM Cash flow from operations Dividend and buy back Net cash used in investing activities Dividends declared 12 months rolling Gearing + balance sheet Gearing range Scrip dividend cancelled from Q Buy back $7-8 billion combined ~$1.6 billion H Net debt Gearing (RHS) 12 months rolling 17

18 FINANCIAL FRAMEWORK KEY DRIVERS Organic free cash flow drives dividend (cash basis) A+D supports portfolio growth (cash basis) Organic free cash flow Dividend declared Cumulative organic FCF surplus (deficit) over dividend declared Divestments Acquisitions Cumulative cash surplus (deficit) of divestments over acquisitions Organic free cash flow : cash flow from operations less cash used in investing activities adjusted for major acquisitions and divestments Dividend declared: weighted average outstanding shares x dividend per share ($) 18

19 FINANCIAL FRAMEWORK TRACK RECORD Balancing financial framework over time Free cash flow Cash dividend and buybacks Cumulative surplus (deficit) of free cash flow over dividend and buybacks Free cash flow: cash flow from operations less cash used in investing activities 19

20 COMPETITIVE PERFORMANCE: BALANCING GROWTH AND RETURNS 4Q ROLLING Q Cash flow from operations Free cash flow Q Shell Peer group ROACE underlying % Tracking Shell s competitive performance 2014 Free cash flow: cash flow from operations less cash used in investing activities; ROACE underlying: European companies: CCS basis excluding identified items. US companies: reported earnings excluding special non-operating items. 20

21 BEN VAN BEURDEN CHIEF EXECUTIVE OFFICER ROYAL DUTCH SHELL PLC 21

22 2014 PRIORITIES Q DELIVERY Improve our financial performance Q214 CCS earnings $6.1 billion; CFFO 8.6 billion Restructuring in Oil Products + North America resources plays Expecting > $30 billion distributions to shareholders Enhance our capital efficiency More selectivity on new projects $8 billion asset sales delivered US mid-stream MLP proposal Deliver new projects Continued Mars B growth Gumusut-Kakap + Cardamom deep-water start-up H214 Exploration Earnings excluding identified items 22

23 QUESTIONS & ANSWERS SECOND QUARTER 2014 RESULTS 23

24 BALANCING GROWTH & RETURNS SECOND QUARTER 2014 RESULTS 31 JULY 2014 ROYAL DUTCH SHELL PLC 24