Fourth quarter 2018 results

Transcription

1 Fourth quarter 2018 results Delivering a world-class investment case Royal Dutch Shell plc January 31, 2019 #makethefuture

2 Ben van Beurden Chief Executive Officer Royal Dutch Shell

3 Definitions & cautionary note Gearing is defined as net debt as a percentage of total capital. With effect from 2018, the net debt calculation includes the fair value of derivative financial instruments used to hedge foreign exchange and interest rate risks relating to debt, and associated collateral balances. Free Cash Flow is defined as the sum of Cash flow from operating activities and Cash flow from investing activities. Cash flow from operating activities excluding working capital movements is defined as Cash flow from operating activities less the sum of the following items in the Consolidated Statement of Cash Flows: (i) (increase)/decrease in inventories, (ii) (increase)/decrease in current receivables, and (iii) increase/(decrease) in current payables. Organic free cash flow is defined as free cash flow excluding inorganic capital investment (acquisitions) and divestment proceeds. ROACE (Return on Average Capital Employed) is defined as the sum of current cost of supplies (CCS) earnings attributable to shareholders excluding identified items for the current and previous three quarters, as a percentage of the average capital employed for the same period. Capital employed consists of total equity, current debt and noncurrent debt. Capital investment comprises capital expenditure, exploration expense excluding well write-offs, new investments in joint ventures and associates, new finance leases and investments in Integrated Gas, Upstream and Downstream equity securities, all of which on an accruals basis. Divestments comprises proceeds from sale of property, plant and equipment and businesses, joint ventures and associates, and other Integrated Gas, Upstream and Downstream investments, reported in Cash flow from investing activities (CFFI), adjusted onto an accruals basis and for any share consideration received or contingent consideration recognised upon divestment, as well as proceeds from the sale of interests in entities while retaining control (for example, proceeds from sale of interest in Shell Midstream Partners, L.P.). Headline divestments is a non-gaap metric. Divestment cash proceeds in were equal to $26.7 billion (in Cash flow from investing activities) and $2.1 billion ( Change in non-controlling interest in Cash flow from financing activities, primarily related to Shell Midstream Partners, L.P.). Additionally certain contingent payments associated with these divestments are expected to be received in the future. This presentation contains the following forward-looking Non-GAAP measures: Organic Free Cash Flow, Free Cash Flow, Capital Investment, CCS Earnings less identified items, Operating Expenses, ROACE, Capital Employed and Divestments. We are unable to provide a reconciliation of the above forward-looking Non-GAAP measures to the most comparable GAAP financial measures because certain information needed to reconcile the above Non-GAAP measure to the most comparable GAAP financial measure is dependent on future events some which are outside the control of the company, such as oil and gas prices, interest rates and exchange rates. Moreover, estimating such GAAP measures with the required precision necessary to provide a meaningful reconciliation is extremely difficult and could not be accomplished without unreasonable effort. Non-GAAP measures in respect of future periods which cannot be reconciled to the most comparable GAAP financial measure are calculated in a manner which is consistent with the accounting policies applied in Royal Dutch Shell plc s financial statements. As the projects are expected to be multidecade producing the per barrel projection will not be reflected either in earnings or cash flow in the next five years. 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 (SPE) 2P + 2C definitions. The forward-looking break-even price (BEP) presented is calculated based on all forward-looking costs associated from Final Investment Decision (FID). Accordingly, this typically excludes exploration and appraisal costs, lease bonuses, exploration seismic and exploration team overhead costs. The forward-looking BEP is calculated based on our estimate of resources volumes that are currently classified as 2p and 2c under the Society of Petroleum Engineers Resource Classification System. The financial measures provided by strategic themes represent a notional allocation of ROACE, capital employed, capital investment, free cash flow, organic free cash flow and underlying operating expenses of Shell s strategic themes. Shell s segment reporting under IFRS 8 remains Integrated Gas, Upstream, Downstream and Corporate. All outlook on financial metrics and/or alternative performance measures excludes the effect of IFRS 16 implementation. Also, in this presentation we may refer to Shell s net carbon footprint, which includes Shell s carbon emissions from the production of our energy products, our suppliers carbon emissions in supplying energy for that production and our customers carbon emissions associated with their use of the energy products we sell. Shell only controls its own emissions but, to support society in achieving the Paris Agreement goals, we aim to help and influence such suppliers and consumers to likewise lower their emissions. The use of the terminology Shell s net carbon footprint is for convenience only and not intended to suggest these emissions are those of Shell or its subsidiaries. The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate legal 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 Royal Dutch Shell plc and its subsidiaries in general or to those who work for them. These terms are also used where no useful purpose is served by identifying the particular entity or entities. Subsidiaries, Shell subsidiaries and Shell companies as used in this presentation refer to entities over which Royal Dutch Shell plc either directly or indirectly has control. Entities and unincorporated arrangements over which Shell has joint control are generally referred to as joint ventures and joint operations, respectively. Entities over which Shell has significant influence but neither control nor joint control are referred to as associates. The term Shell interest is used for convenience to indicate the direct and/or indirect ownership interest held by Shell in an entity or unincorporated joint arrangement, after exclusion of all thirdparty interest. This presentation contains forward-looking statements (within the meaning of the U.S. Private Securities Litigation Reform Act of 1995) 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 aim, ambition, anticipate, believe, could, estimate, expect, goals, intend, may, objectives, outlook, plan, probably, project, risks, schedule, seek, should, target, will 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 regulatory measures addressing climate change; (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. No assurance is provided that future dividend payments will match or exceed previous dividend payments. 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 risk factors that may affect future results are contained in Royal Dutch Shell s Form 20-F for the year ended December 31, 2017 (available at and These risk factors also expressly qualify all forward-looking statements contained in this presentation and should be considered by the reader. Each forward-looking statement speaks only as of the date of this presentation, January 31, Neither Royal Dutch Shell plc nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking 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 forward-looking statements contained in this presentation. We may have used certain terms, such as resources, in this presentation that the United States Securities and Exchange Commission (SEC) strictly prohibits us from including in our 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 3

4 Summary Key messages Thrive in the energy transition Delivering strong cash flow Free cash flow of $16.7 billion in Q4, and $39.4 billion in 2018 Cash flow from operations excluding working capital of $12.9 billion in Q4 and $49.6 billion in 2018 Strengthening the financial framework World-class investment case $25 billion share buyback programme: $4.5 billion purchased so far Gearing further reduced to 20.3% Fully covered dividend, interest, and share buybacks in 2018 Reshaping the portfolio Strong license to operate $30 billion divestment programme completed New projects delivering >$10 billion in cash flow from operations Leading through the energy transition Short-term targets to reduce Net Carbon Footprint Methane emissions intensity targets Divestments: headline. Share buybacks: completed by January 28, CFFO from new projects: estimated 2018 contribution of key projects started up , with pricing assumption of $60 per barrel real terms 2016, mid-cycle Downstream. 4

5 2018 Financial Summary Earnings ($ billion); EPS +34% vs Cash flow from operations excluding working capital ($ billion) Free cash flow ($ billion) ROACE (%) 20.3 Gearing (%) Earnings and ROACE on CCS basis, excluding identified items 5

6 2018 HSSE performance Goal Zero on safety Injuries TRCF (per million working hours) Operational spills million working hours Thousand tonnes # TRCF Working hours (RHS) Volume of spills Number of spills (RHS) Upstream flaring Million tonnes CO 2 e Process safety Number of incidents HSSE priority Performance and transparency Tier 1 incidents Tier 2 incidents 6

7 2018 Leading through the energy transition Highlights Net Carbon Footprint long-term ambition operationalised with short-term targets; linked to executive remuneration Methane maintain emissions intensity below 0.2% by 2025 Task force on Climate-related Financial Disclosures (TCFD) driving effective climate change disclosures as a member of Oil & Gas Preparer Forum Proof points Nigeria Decrease in flaring intensity by ~70% over the last 10 years Brent Delta platform (UK) Decommissioning >97% to be recycled Thought leadership Shell Energy Transition Innovating to meet changing society and customer preferences report and Sky Scenario publication Quest CCS (Canada) >3.5 million tonnes CO 2 captured and stored Solar Investments in Asia and North America Changes to executive remuneration subject to shareholder approval. Methane emissions intensity is for Shell operated oil and gas assets. 7

8 Divestment programme $30 billion completed Oil Sands $7.3bln MLP $1.8bln Upstream Ireland up to $1.3bln UK North Sea package up to $3.8bln Thailand Bongkot $0.8bln Showa Shell JV $1.4bln Top 20 transactions: Oil Sands Deep water MOTIVA JV $2.2bln Integrated Gas Conventional Oil & Gas Shales Chemicals Downstream Argentina $1.0bln Gabon onshore $0.9bln SADAF JV $0.8bln Woodside shares $2.6bln Oil Products MLP Reshape, simplify and high-grade the portfolio Attractive valuations Portfolio simplification More than 50 transactions in 25 countries Business country exits in Argentina, Ireland, Gabon, Thailand, Japan and New Zealand Continue divestments of at least $5 billion average per annum in Supporting the financial framework Net debt reduction Net liabilities (e.g. D&R) reduction Credit rating upgrades Divestments: headline as per announcement. 8

9 Delivery Key projects start-ups Key projects Deep water Brazil (8 FPSOs) Gulf of Mexico (Cardamom, Mars, Stones, Kaikias) Malikai Gumusut Kakap Ph1 Lula North (P-67) Appomattox Start-up Q Q Cash contribution from key projects: de-risked $ billion +$5 billion Integrated Gas QCLNG Gorgon Prelude >$10 billion CFFO delivered in 2018 Additional projects with >150kboe/d of peak production capacity to start up in 2019 Conventional Oil & Gas Shales Chemicals Oil Products Kashagan Schiehallion redevelopment Clair Ph2 Permian Nanhai China Chemicals Geismar AO4 Pernis SDA Scotford Projects started up Projects under construction Pricing assumption 2019E-2020E and 2018 estimate: $60 per barrel real terms 2016, mid-cycle Downstream. Brazil accumulations are subject to unitisation agreements. 9

10 Portfolio & projects Projects delivery 2018 Geismar alpha olefins start-up Prelude start-up Fourth alpha olefins unit, with 425,000 metric tonnes per annum additional capacity, Shell interest 100% Largest alpha olefins site globally Integrated US Gulf coast position with ethylene crackers at Deer Park and Norco Floating LNG facility offshore Australia, with capacity to produce 3.6 million tonnes LNG per annum and 1.7 million tonnes natural gas liquids per annum, Shell interest 68% First gas in wells and production of condensate Preparations for first LNG cargo underway 10

11 Portfolio & projects Projects delivery Appomattox installation and commissioning Permian continued growth Gulf of Mexico hub development producing from the Appomattox and Vicksburg fields Peak production capacity of 175 thousand barrels of oil equivalent per day, Shell interest 79% 40% cost reduction since FID Offshore installation and commissioning underway ~260,000 net acres in the Delaware basin, Shell interest ~57% Shell share of production 145 thousand barrels of oil equivalent per day Strong delivery to date and continued growth Free cash flow growth well into the next decade 11

12 Portfolio & projects Projects delivery Gulf of Mexico Whale development United States Pennsylvania petrochemicals Gulf of Mexico deep-water discovery, Shell interest 60% Assessing exploration and appraisal results Progressing development options and targeting potential FID in 2020 Standardisation and replication enabling cycle time reduction Pennsylvania petrochemicals complex with production capacity of 1.6 million tonnes of polyethylene per annum, Shell interest 100%, Commercial production early next decade Supporting growth in Shell s global Chemicals business, which sells ~18 million tonnes of products per annum 12

13 World-class investment case Strategic themes delivery: on track Strategic themes 2017 ~$54 Organic free cash flow $ billion 2018 ~$71 Organic free cash flow $ billion ~$60RT Organic free cash flow $ billion p.a. Integrated Gas Deep water Conventional Oil & Gas Oil Products Cash engines Shales (1.1) (0.6) 1-2 Chemicals Growth priorities (0.0) (0.2) 1-2 New Energies (0.2) (0.5) (2) - (1) Emerging opportunities (0.2) (0.5) (2) - (1) Price sensitivity: +/- $10 Brent = +/- ~$6 billion CFFO Organic free cash flow (incl. Corporate & Other) Divestments & acquisitions >5 Free cash flow (incl. Corporate & Other) : 2016 RT $60 per barrel, mid-cycle Downstream. Deep water and Shales categorised as per the outlook. 13

14 World-class investment case Delivering on commitments Delivery in Financial Framework Delivery Cancel scrip dividend Start $25 billion buyback programme: $4.5 billion completed Disciplined & efficient capital allocation: $25 billion capital investment Portfolio & projects delivery Deliver $30 billion divestment programme Realise $10 billion CFFO from new projects in 2018 Reduce underlying operating expenses: $39 billion in 2018 Continued delivery in Financial Framework Delivery $25-30 billion organic free cash flow per year by 2020 Complete $25 billion buyback programme Capital investment of $25-30 billion per annum Portfolio & projects delivery >$5 billion divestments per annum Another $5 billion CFFO from new projects by end 2020 Divestments: headline organic free cash flow outlook at $60 per barrel real terms 2016, mid-cycle Downstream. Share buybacks: subject to further progress with debt reduction and oil price conditions. CFFO from new projects in 2018 and 2020 compared with 2014, at $60 per barrel real terms 2016, mid-cycle Downstream. 14

15 Jessica Uhl Chief Financial Officer Royal Dutch Shell

16 Q Financial highlights: summary Cash generation Cash flow from operations excl. working capital $12.9 billion Good cash conversion of strong underlying earnings Seasonally higher cost and tax Positive contribution from margining, driven by falling Brent oil price Free cash flow $16.7 billion Of which $14.3 billion organic free cash flow Significant working capital release Returns ROACE 7.6 % $5.7 billion earnings Continued improvement Disciplined cash allocation Net debt reduction Capital investment $9.1 billion 20.3% gearing $8.0 billion 2018 capital investment of $25 billion at lower end of indicated range Q average Brent price: $69/bbl Share buybacks $2.5 billion Second tranche completed January 28, 2019 Next tranche of up to $2.5 billion announced Intention to purchase $25 billion by the end of 2020 Earnings and ROACE on CCS basis, excluding identified items. Dividend distributed to RDS shareholders. Share buybacks: repurchases completed in Q4 2018, tranches announced do not align with quarters. Share buybacks subject to further progress with debt reduction and oil price conditions. 16

17 Q3 Q Other Portfolio portfolio developments highlights Project delivery Clair phase 2 up to 120 thousand barrels of oil per day production, Shell interest 28% Geismar Chemicals start-up of fourth Alpha Olefins unit, Shell interest 100% Prelude FLNG first gas in wells and condensate production, Shell interest 68% Portfolio Divestments Argentina Shales progressed 3 Vaca Muerta blocks into development, up to 70 thousand barrels of oil equivalent per day, Shell interest 80-90% Nigeria Assa North FID on gas development project targeting 300 million standard cubic feet of gas per day, Shell interest 30% US Offshore Wind acquisition of 310,000 acres off the coast of Massachussets and New Jersey with potential to generate 4.1 Gigawatts, Shell interest 50% Ireland Upstream completed sale of Corrib for $1.3 billion consideration Norway completed sale of Draugen and Gjøa for $0.5 billion consideration New Zealand completed country exit for $0.6 billion consideration 17

18 Q Financial highlights: earnings $ billion Q Q Integrated Gas Upstream Downstream (CCS) Earnings Q to Q $ billion Corporate & non-controlling interest (0.4) (0.7) CCS earnings CCS earnings, $ per share ROACE (%) Earnings and ROACE on CCS basis, excluding identified items. 18

19 Q Financial highlights: cash flow $ billion Q Q Integrated Gas Upstream Downstream Corporate CFFO excl. working capital Q to Q $ billion Cash flow from operations Cash flow from operations excl. working capital Cash flow from investing activities (0.7) (5.3) Free cash flow Dividend (2.3) (3.9) Interest paid (0.8) (0.9) Share buybacks - (2.5) Dividend distributed to RDS shareholders. 19

20 2018 Gulf of Mexico: Strong cash flow growth Growing production of high cash margin barrels Operational excellence Improving asset availability Reduction in unit operating costs Fill the hub strategy Maximising existing production through well reservoir facility management Subsea tiebacks Optimised waterflood performance Project delivery Coulomb phase 2 on-stream Accelerated delivery of Kaikias Cycle time improvement for new wells Gulf of Mexico production growth Thousand boe per day +50% Map shows Shell operated assets. 20

21 2018 Financial highlights: improving year on year Earnings & ROACE $ billion Cash flow Gearing % $ billion $ billion % Upstream Integrated Gas ROACE (RHS) Downstream Corporate + NCI CFFO CFFI FCF Net debt (at year end) Gearing (RHS) $21.4 billion earnings $39 billion free cash flow $26 billion of net debt reduction ROACE increased to 7.6% $31 billion organic free cash flow since end average Brent price: $71/bbl On track to deliver 10% ROACE More than $30 billion divestments completed since 2016 On track to deliver Gearing reduced from 23.1% to 20.3% in Q Improved credit rating outlook Earnings and ROACE on CCS basis, excluding identified items. Pricing assumption 2020: $60 per barrel real terms 2016, mid-cycle Downstream. Divestments: headline. 21

22 Preliminary results SEC proved reserves position 2018 Reserves performance 2018 RRR 53% 2018 RRR (excl. A&D) 66% 2018 RRR (excl. Groningen) 98% 3-year average RRR 96% Reserves/Production at end 2018 ~8.3 years Reserves performance Billion boe billion boe Production SEC proved reserves Reserves/ Production (years) ~9.5 ~8.8 ~8.3 RRR 208% 27% 53% 2016 and 3-year average RRR includes BG acquisition. 22

23 Financial framework Cash allocation Surplus CFFO Buybacks Intention to purchase $25 billion by the end of 2020 Subject to further progress with debt reduction and oil price conditions Capital investment $25-30 billion per annum, organic & inorganic 2018: $25 billion 2019: within the $25-30 billion range CFFO Dividend $15.7 billion in 2018 Interest $3.6 billion in 2018 Divestment proceeds Net debt reduction to 20% gearing 20.3% as of Q Dividend distributed to RDS shareholders. 20% gearing as a proxy for AA equivalent credit metrics. 23

24 Financial framework Free cash flow performance and payout Distributions from free cash flow $ billion $99/bbl $54/bbl $71/bbl $60/bbl Available for share buybacks and debt reduction : ample capacity for debt reduction and share buybacks average Divestment proceeds less acquisitions Scrip dividend Interest paid Organic free cash flow Cash dividend Share buybacks outlook: 2016 RT $60 per barrel, mid-cycle Downstream. Dividend distributed to RDS shareholders cash dividend includes scrip issuance of $2.4 billion offset by share buybacks share buybacks of $3.3 billion presented net of $2.4 billion offsetting scrip issuance. 24

25 Competitive performance World-class investment case ROACE % Free cash flow 4 quarters rolling $ billion Thrive in the energy transition World-class investment case Gearing % Total shareholder return % Since Jan 2016 Since Jan 2017 Since Jan 2018 Strong license to operate Shell Peer group Shell Peer group Competitive financial data as published. ROACE: European companies: CCS basis excluding identified items, US companies: reported earnings excluding special non-operating items; Capital employed on gross debt basis. Free cash flow: cash flow from operations less cash used in investing activities, corrected for interest paid for RDS. Gearing: gross debt less cash and cash equivalents as a percentage of total capital. TSR: in USD, 90-day averages until January 25,

26 Ben van Beurden Chief Executive Officer Royal Dutch Shell

27 Summary Key messages Thrive in the energy transition Delivering strong cash flow Free cash flow of $16.7 billion in Q4, and $39.4 billion in 2018 Cash flow from operations excluding working capital of $12.9 billion in Q4 and $49.6 billion in 2018 Strengthening the financial framework World-class investment case $25 billion share buyback programme: $4.5 billion purchased so far Gearing further reduced to 20.3% Fully covered dividend, interest, and share buybacks in 2018 Reshaping the portfolio Strong license to operate $30 billion divestment programme completed New projects delivering >$10 billion in cash flow from operations Leading through the energy transition Short-term targets to reduce Net Carbon Footprint Methane emissions intensity targets Divestments: headline. Share buybacks: completed by January 28, CFFO from new projects: estimated 2018 contribution of key projects started up , with pricing assumption of $60 per barrel real terms 2016, mid-cycle Downstream. 27

28 Questions & Answers Ben van Beurden Chief Executive Officer Jessica Uhl Chief Financial Officer Maarten Wetselaar Integrated Gas and New Energies Director 28

29

30 Outlook Q Outlook Q Q OUTLOOK: Year-ago baseline reflects Shell s earnings seasonality Integrated gas Production volumes: thousand boe/d lower, mainly due to divestments, the transfer of some activities into the Upstream segment as of 2019 and higher maintenance activities LNG liquefaction volumes: million tonnes lower, mainly as a result of divestments and higher maintenance activities Upstream Production volumes: thousand boe/d lower, mainly due to divestments and field decline, partly offset by ramp-ups of existing fields. This includes the impact of additional activities reported in the Integrated Gas segment in 2018 Downstream Refinery availability to decrease, as a result of higher maintenance activity Chemicals availability expected to be at a similar level Oil products sales volumes: thousand boe/d lower, mainly as a result of the divestment of the Downstream business in Argentina 2019 OUTLOOK: Corporate segment: net charge of $ million in Q1, and $ billion for the full year 2019, excluding the impact of currency exchange rate effects and the impact of IFRS 16 Leases IFRS 16: updates will be communicated during a webcast on March 28, The quantitative impact at transition date (January 1, 2019) will be disclosed in the 2018 Annual Report and Form 20-F As of 2019, Salym (Russia) is reported within the Upstream segment production: 62 kboe/d Shell share (97% liquids); 2018 net income: $0.1 billion. 30

31 Outlook Impact of IFRS16 Leases Gearing ~4%-5% increase Operating lease liabilities on balance sheet Increase in net debt and gearing Free cash flow ~$4 billion increase Lease payments will be reported under CFFF, instead of under CFFO and CFFI as previously Capital investment ~$1-2 billion increase Capital investment will include all leases, instead of only finance leases Operating expenses ~$2-3 billion decrease Costs of operating leases will be reported as depreciation and interest expense Segment earnings ~$1 billion impact Lease interest expenses will be treated as financing expenses and will be reported in Corporate, with corresponding offsets in business segments Key metrics change, no business and value impact Unaudited and provisional. All figures quoted on a full-year basis. For 2019, we will provide estimates for key indicators on a pre-ifrs16 basis for comparability with actuals. 31

32 Q Financial highlights: cash flow $ billion Q Q Integrated Gas Upstream Downstream Corporate CFFO excl. working capital Q to Q $ billion Cash flow from operations Cash flow from operations excl. working capital Cash flow from investing activities (4.1) (5.3) Free cash flow Dividend (3.9) (3.9) Interest paid (0.9) (0.9) Share buybacks (1.4) (2.5) Dividend distributed to RDS shareholders. 32

33 2018 Working capital & IG Brent hedging Working capital $ billion $/bbl Integrated Gas Brent hedging cash impact $ billion $/bbl Movement in working capital IG Brent hedging cash impact Average Brent price for the quarter (RHS) Brent price at the end of the quarter (RHS) Cumulative movement in working capital IG Brent hedging cash impact (cumulative) Working capital movements consistent with Brent oil price movements Q movement of $9.1 billion: inventory price effect of $5.3 billion, inventory volume effect of $2.4 billion (reduction of ~40 million boe), lower AP/AR of $1.4 billion Full year 2018 movement of $3.4 billion: inventory price effect of $1.9 billion, inventory volume effect of $0.9 billion, lower AP/AR of $0.6 billion Hedging programme based on Brent and Henry Hub to manage cross commodity exposure tool for managing and optimising the portfolio for value Volume and exposures vary over time Material volatility in Brent forward curve since Q resulting in swings in margining requirements The cash impact is timing only 33

34 Outlook Organic free cash flow Organic free cash flow 2018 to outlook $ billion ~31 > On track to deliver outlook of $25-30 billion organic free cash flow (4) ~23 Normalised organic free cash flow excludes effects of margining and working capital movements New projects provide free cash flow growth Organic free cash flow Working capital movement and IG margining outlook at $60 per barrel real terms 2016, mid-cycle Downstream. Organic free cash flow normalised to stable $60 per barrel real terms 2016 oil price environment in 2020, assuming no working capital or margining movements. Price effect between current Brent price and outlook is indicative, calculated using rule-of-thumb. 34

35 Digitalisation in Shell Operational Effectiveness Customer Experience Asset Management Shearwater UK Shell Cashless App QGC Australia Aim to be a leading player, enabling value uplift over the coming years AI & machine learning powering Residential & commercial customer Asset safeguarding & leak detection decision making convenience Automated materials, people and Strategic partnerships for cloudbased solutions and infrastructure and smart charging Reduced people exposure Applications for energy management equipment management Improved energy consumption in Flexible, pay as you go energy Drones have capability to cover up to operations service 7,000 square kilometers in a single Machine learning prevented loss of 1 million Shell app users; first mission production at Shearwater; approach cashless payment system being replicated across other assets 35

36 Q Prices & margins Shell oil & gas realisations $/barrel $/mscf Industry refining margins $/barrel Industry chemicals margins $/tonne Oil Gas (RHS) US West Coast US Gulf Coast coking Rotterdam complex Singapore US ethane Western Europe naphtha NE/SE Asia naphtha 36

37 Q Upstream results Earnings Q to Q $ billion Environment Choice Earnings on CCS basis, excluding identified items 37

38 Q Integrated Gas results Earnings Q to Q $ billion Environment Choice Earnings on CCS basis, excluding identified items 38

39 Q Downstream results Earnings Q to Q $ billion Earnings mix $ billion Earnings on CCS basis, excluding identified items Marketing Refining & Trading Chemicals 39

40