BALANCING GROWTH & RETURNS MANAGEMENT DAY MARCH 2014 ROYAL DUTCH SHELL PLC

Transcription

1 BALANCING GROWTH & RETURNS MANAGEMENT DAY MARCH 2014 ROYAL DUTCH SHELL PLC 1

2 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 (for example, through our 23% shareholding in Woodside Petroleum Ltd.) 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, 13 March, 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

3 BEN VAN BEURDEN CHIEF EXECUTIVE OFFICER ROYAL DUTCH SHELL PLC 3

4 EXECUTING A CONSISTENT, LONG-TERM STRATEGY Unrelenting focus on HSSE Technology, integration and scale Disciplined capital investment by strategic theme Growth in cash flow through-cycle Competitive shareholder returns Shearwater platform North Sea, UK 4

5 FOCUS ON SAFETY 2013 UPDATE Goal Zero on safety Injuries TRCF/million working hours million working hours Spills - operational Volume in thousand tonnes TRCF Working hours (RHS) Energy intensity - refineries Energy Intensity Index (EEITM) Process safety trend Number of incidents HSSE priority Performance + transparency Tier 1 incidents Tier 2 incidents 5

6 PORTFOLIO MANAGEMENT RESILIENCE Risk, performance & STRATEGIC INTENT uncertainty ATTRACTIVENESS ASPIRED PORTFOLIO RESULTS & PAY-OUT Growth & returns Opportunity scale Balancing risk and reward Strict investment hurdles and price screens drive returns 6

7 INVESTMENT PRIORITIES + STRATEGIC INTENT Engines Free cash flow businesses Maintain competitiveness Asset integrity + selective growth UPSTREAM DOWNSTREAM Growth Priority Global leadership established High-grading our rich opportunity set INTEGRATED GAS DEEP-WATER Longer Term Major potential; managing non-technical risks Slower pace + capital allocation RESOURCES PLAYS FUTURE 1 OPPORTUNITIES Credible, competitive, affordable Investment choices driven on a global thematic basis 1 Iraq, Nigeria onshore (SPDC), Kazakhstan, heavy oil, Arctic 7

8 FINANCIAL PERFORMANCE TRACK RECORD Earnings $ billion CCS Cash flow from operations $ billion Upstream Downstream Corporate Identified items Total capital investment Payout $ billion $ billion Organic capital investment Acquisitions Dividend declared Buyback 8

9 FINANCIAL PERFORMANCE COMPETITIVE POSITION Earnings per share growth 3 years % growth Cash flow per share growth 3 years % growth Shell Competitors Total shareholder return 3 years % growth ROACE EPS on reported CCS basis ROACE: earnings on reported local GAAP basis 9

10 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 Changing emphasis in

11 IMPROVE FINANCIAL PERFORMANCE: RESPONDING TO NEW MARKET DYNAMICS North America resources plays Oil Products Groundbirch, Canada Geelong refinery, Australia ~$80 billion capital employed Financial performance not acceptable Multi-year turn-around Priorities: Portfolio restructuring + potential write-downs Cost reduction + margin improvement Invest for financial resilience + selective growth 11

12 IMPROVE FINANCIAL PERFORMANCE IN UPSTREAM ENGINE PDO Oman kboe/day, Shell share UK North Sea kboe per day, Shell share 2012:117kboe/d 2013: 91kboe/d Actual production assumed production with continued decline Production decline halted focus on up-time reservoir development sub-surface dynamics impacted by high levels of maintenance 2013 maintenance downtime 50 kboe per day (vs. 35 kboe per day downtime in 2012) Address late life assets: fix or divest Innovative EOR schemes 12

13 IMPROVE FINANCIAL PERFORMANCE DRIVE TO FURTHER ENHANCE INTEGRATED GAS PROFITABILITY Increasing Shell s managed sales Total LNG volumes in mtpa Shell s LNG portfolio 2013 >25 mtpa 2014 >30 mtpa Cove Point Elba Baja Altamira Atlantic LNG LNG Peru LNG supply Under construction Regasification Spain Nigeria QG-4 Oman Hazira Gorgon Sakhalin Malaysia Brunei Prelude NWS Pluto Trading flows Integrated Gas financial performance 2017 ~40 mtpa $ billion North West Shelf Sakhalin Earnings ~400% QG4 Pearl GTL Pluto LNG North Rankin Repsol LNG Elba Gorgon T1-3 Prelude FLNG Shell directly managed JV marketed Earnings CFFO ROACE (RHS) Includes LNG + GTL; earnings excluding identified items 13

14 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 14

15 DECONSTRUCTING OUR PORTFOLIO 2013 $ billion CCS earnings CFFO Organic capital investment Capital employed ROACE % Engines DOWNSTREAM ENGINE Mature + drives free cash flow % UPSTREAM ENGINE Growth Priorities INTEGRATED GAS % % Profitable + growing DEEP-WATER Longer Term RESOURCES PLAYS FUTURE OPPORTUNITIES 1 (4) (12)% % Returns impacted by growth spend CCS earnings excluding identified items; ROACE based on CCS earnings excluding identified items 1 Iraq, Nigeria onshore (SPDC), Kazakhstan, Arctic, heavy oil 15

16 ENHANCE CAPITAL EFFICIENCY TAKE HARD CHOICES 2014 ~$8 billion capital investment ~$27 billion capital investment Low cost options + Early high-grading Increase predictability Flawless execution of major spend Explore Feasibility study FEED FID On stream Identify & Assess Select Define Execute On stream 12 billion boe 7 billion boe 11 billion boe Hard choices on growth projects: US GTL Alaska LNG FID pause in Asia Pacific AOSP debottlenecking Wheatstone Cove others 16

17 ENHANCE CAPITAL EFFICIENCY MAKING OUR PLANS CREDIBLE, COMPETITIVE, AFFORDABLE ~150 performance units implemented Targeted growth spend Address underperforming assets Increase divestment of non-core positions Attractiveness Keep and grow Fix or divest Sharpen our focus: Asset sales Wheatstone LNG BC-10 dilution UA resources plays Nigeria onshore Norway DS Italy DS Australia DS Others $15 billion divestments Exit Resilience 17

18 ENHANCE CAPITAL EFFICIENCY CAPITAL CEILINGS + OPTION SET DRIVE HARD CHOICES Integrated Gas IDENTIFY/ASSESS SELECT DEFINE EXECUTE ON STREAM US GTL - CANCELLED Gorgon LNG T4 - PAUSE Sunrise LNG - PAUSE Arrow LNG - REDESIGN Browse LNG - REDESIGN Abadi LNG ph2 LNG Canada Sakhalin T3 Abadi LNG ph1 Gorgon LNG T1-3 Prelude FLNG Wheatstone - SOLD MMLS LNG (Elba) Atlantic LNG Brunei LNG Malaysia LNG Nigeria LNG Northwest Shelf Oman LNG Peru LNG Pluto Qatargas 4 Sakhalin LNG MTPA: 17.6 MTPA: 0.9 MTPA: 7.5 MTPA: 26.1 FID START UP Shell share equity liquefaction capacity in mtpa 18

19 RESOURCES PLAYS MAJOR REVIEW OF PORTFOLIO UNDERWAY Portfolio Staff reduction Attractiveness Exit: Eagle Ford Mississippi Lime Rockies LRS Fix or Divest: Appalachia Deep Basin Pinedale Haynesville Foothills Grow: Permian Kaybob Pembina Argentina Vaca Muerta Groundbirch Drilling cost learning curve Drilling costs 100% 80% 60% 40% Shell employees Contractor -30% E Reduction in Shell + contractor staff Field office closures Supply chain + drilling performance 20% LRS Plays Resilience 0% Groundbirch Eagle Ford Number of wells drilled Haynesville Duvernay (Kaybob) 19

20 ENHANCE CAPITAL EFFICIENCY CAPITAL SPENDING Total capital investment $ billion Strict capital ceilings More competitive returns Future opportunities Resources plays Deep-water Integrated gas Upstream engine Downstream (incl. Corporate) Upstream Europe Africa/Middle East/CIS Asia Pacific Americas Downstream (incl. Corporate) 20

21 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 21

22 PROJECT MANAGEMENT + BENCHMARKING Upstream project status Construction time elapsed % IPA project benchmark Upstream cost Downstream cost 1Q 2Q 3Q 4th Quartile Oversight and accountability Track record Construction time elapsed % IPA Independent Project Analysis by Industry Benchmarking Consortium 22

23 CONVENTIONAL EXPLORATION PORTFOLIO + THEMES Time to development (years) Prospect size (million boe) Spend including deals ($ billion) Resources/potential added 1 (billion boe) Oil & gas split (%) performance 15+ >500 ARCTIC ~2 0 Alaska drilling pause 10+ >250 FRONTIER Under explored basins ~4 0.9 (95% oil, 5% gas) Albania: Shpirag-2 Brazil: Libra access HEARTLANDS New plays in Shell producing basins ~8 2.6 (25% oil, 75% gas) GOM: Vicksburg Australia: Kentish Knock Nigeria: Zabazaba appraisal < NEAR FIELD High value ~1 0.4 (35% oil, 65% gas) 19 near field discoveries Nigeria (SPDC), Oman, Egypt, Netherlands, Brunei, Australia Increased focus in our exploration spending 1 includes acquisitions 23

24 GLOBAL RESOURCES PLAYS BUILDING CAPABILITIES IN LONG TERM OPPORTUNITY Total resources plays capital investment $ billion Western Canada Lower 48 USA Germany Tunisia Ukraine Turkey Russia Oman Changbei Changbei 2 Sichuan Americas International Colombia Resources + potential 14.4 billion boe On stream Execute (under construction) Argentina Neuquen Arrow Gas Liquids Rich On stream E&A 2013 exploration and appraisal success Select/Define Future potential 2013 production 0.3 mboe/d Future potential = discovered + prospective resources 2014 exploration spend $3 billion ACCESS Tunisia Liquids rich shales (underlined) EXPLORATION Pembina Colombia Sichuan Ukraine Turkey Russia Germany APPRAISAL/PILOT Argentina Kaybob Permian Appalachia Changbei 2 Oman DEVELOPMENT Early Groundbirch Mature Pinedale Haynesville Foothills Deep Basin Changbei 24

25 SIMON HENRY CHIEF FINANCIAL OFFICER ROYAL DUTCH SHELL PLC 25

26 FINANCIAL FRAMEWORK AND PRIORITIES Priorities for cash CASH PERFORMANCE CFFO drives investment + payout 1. Debt service 2. Dividends: growth policy PAY-OUT Dividend linked to business results INVESTMENT Affordability, profitability, portfolio 3. Capital investment: disciplined through cycle growth 4. Return surplus cash: buy-backs BALANCE SHEET 0 30% gearing through cycle Conservative balance sheet underpins financial framework 26

27 CASH FLOW AND PAY-OUT Cash generation $ billion $ billion Dividend track record $ billion DOWN STREAM DOWN STREAM UP STREAM UP STREAM Cash flow from operations Asset sales Dividend and buy back Capex + equity acc. investments Acquisitions Dividends declared 12 months rolling Strong balance sheet $ billion Gearing range Strong balance sheet Generating surplus cash Dividend track record Net debt Gearing (RHS) 27

28 CASH FLOW + RETURNS Cash flow from operations $ billion, 4Q rolling ROACE %, 4Q rolling Shell peer group Shell peer group ROACE: earnings on reported local GAAP basis 28

29 SEC PROVED RESERVES POSITION 2013 Reserves performance 2013 RRR 131% RRR 91% Reserves life at end 2013 ~11.5 years Reserves additions Reserves average performance Organic 1 additions ~1.4 billion boe Production ~1.2 billion boe Organic reserves replacement 112% Major reserves additions Reserves Replacement SEC proved reserves Organic 112% 123% Organic incl. price effects 95% 127% Net Reserves 2 91% 131% (billion boe) Organic reserves additions Production Net Reserves Excludes acquisitions, divestments and price impacts 2 Reserves attributable to Royal Dutch Shell shareholders 29

30 NEW START-UPS Start-up 2013 start-up DOWNSTREAM ENGINE UPSTREAM ENGINE INTEGRATED GAS Bukom ECC debottleneck Bukom cogeneration Jack St.Malo pipeline Singapore LOBP Westward-Ho pipeline Amal Steam Corrib Clair ph2 Schiehallion Redevelopment Tempa Rossa Rabab Harweel integrated project North Rankin 2 Gorgon LNG T1-3 Prelude FLNG MMLS LNG (Elba) Bonga North West DEEP-WATER BC-10 ph2 Mars-B Cardamom Gumusut Kakap Sabah Gas KBB Bonga North West Petai BC-10 ph3 Malikai Stones Erha North ph2 Gumusut-Kakap RESOURCES PLAYS FUTURE OPPORTUNITIES Peak production (kboe/d) AOSP debottlenecking Kashagan ph1 Majnoon FCP Basrah Gas Company North America tight gas + liquids rich shales Southern Swamp AG Gbaran-Ubie ph2 Trans Niger loopline Carmon Creek ph1+2 Forcados Yokri major projects Strong project flow Shell operated $80 Brent scenario; Shell share at peak 30

31 RESOURCES UPDATE Converting resources to production billion boe 2013 resources by theme Longer-term upside Vito BMS-54 Zabazaba Appomattox Permian Carmon Creek ph1&2 Rabab Harweel Erha North ph2 BC-10 ph3 Stones Groundbirch NWS Gas NR2 BC-10 ph2 Amal Steam Majnoon FCP Rebuilding on stream resources Upstream engine Integrated gas Deep-water Resources plays Future opportunities On stream Execute (under construction) Select/Define Production 31

32 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 32

33 BEN VAN BEURDEN CHIEF EXECUTIVE OFFICER ROYAL DUTCH SHELL PLC 33

34 QUESTIONS & ANSWERS MANAGEMENT DAY 34

35 BALANCING GROWTH & RETURNS MANAGEMENT DAY MARCH 2014 ROYAL DUTCH SHELL PLC 35