Re-shaping Shell, to create a world-class investment case Downstream Day Societe Generale

Transcription

1 Re-shaping Shell, to create a world-class investment case Downstream Day Societe Generale John Abbott Downstream Director Royal Dutch Shell plc May 11, 2017 #makethefuture

2 John Abbott Downstream Director Royal Dutch Shell plc

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 (SPE) 2P + 2C definitions. Discovered and prospective resources: Our use of the term discovered and prospective resources are consistent with SPE 2P + 2C + 2U 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. Shales: Our use of the term shales refers to tight, shale and coal bed methane oil and gas acreage. Underlying operating cost is defined as operating cost less identified items. A reconciliation can be found in the quarterly results announcement. The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate legal entities. In this release 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 release refer to companies 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 a venture, partnership or company, after exclusion of all thirdparty interest. This release 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. Forwardlooking 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, 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 release, 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 release 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 20-F for the year ended December 31, 2016 (available at and ). These risk factors also expressly qualify all forward looking statements contained in this release and should be considered by the reader. Each forward-looking statement speaks only as of the date of this presentation, May 11, 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 release. With respect to operating costs synergies indicated, such savings and efficiencies in procurement spend include economies of scale, specification standardisation and operating efficiencies across operating, capital and raw material cost areas. We may have used certain terms, such as resources, in this release that 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 Energy challenge Growing population Global population will increase from around 7.4 billion today to nearly 10 billion by 2050, with 67% living in cities Rising demand Global energy demand will likely be almost 60% higher in 2060 than today, with 2 billion vehicles on the road (800 million today) Ongoing supply Renewable energy could triple by 2050, but we will still need large amounts of oil and gas to provide the full range of energy products we need Growing global demand for energy as population and living standards increase Mitigating climate change Net-zero emissions is a potentially achievable societal ambition Source: UN Population Fund; UN World population Prospects (2015 revision); World Urbanisation Prospects (2014 revision); IEA, Energy Technology Perspectives 2015; Shell New Lens Scenarios 4

5 Strategy Let s make the future Leader: value + influence World-class investment case FCF/share + ROCE growth Conservative financial management STRATEGIC Focus portfolio on resilient positions Invest in advantaged projects Value chain integration Reducing our carbon intensity Shared value with society OPERATIONAL Reset cost and capital spending First class execution projects and operations Unrelenting focus on HSSE and licence to operate 5

6 Driving strategy in multiple time horizons Cash engines: today Funds dividends + balance sheet Growth priorities: Cash engines Future opportunities: Material value + upside Competitive + resilient Affordable growth in advantaged positions Path to profitability Strong free cash flow and returns FCF + ROACE pathway Managed exposure CONVENTIONAL OIL + GAS INTEGRATED GAS DEEP WATER CHEMICALS SHALES NEW ENERGIES OIL SANDS MINING OIL PRODUCTS Relentless portfolio high-grading 6

7 Downstream Cash engine Growth priority Marketing Refining & Trading Chemicals Improve our financial performance Upgrading our portfolio Returns + free cash flow improvement Differentiated products Brand leverage + customer offer Selective growth Full integration with trading Improve retained assets Reducing refining capacity Feedstock plays Capacity growth Chemicals growth priority 7

8 Downstream financial performance Earnings + ROACE $ billion % Cash flow $ billion Q1 4Q rolling Cash flow excluding working capital Working capital movements Free cash flow Capital employed $55 billion as at end Q117 Refining & trading Contribute sustainable and growing cash surplus Q1 4Q rolling 0 Marketing Chemicals Deliver competitive returns Marketing Refining & Trading Chemicals ROACE (RHS) Earnings and ROACE on CCS basis, excluding identified items 8

9 Improving our Downstream footprint and performance 2016: Showa Shell Motiva split Denmark refining Malaysia refining PSPC IPO Denmark marketing MLP dropdowns (3) Vivo Energy (Africa) Australia Aviation 2017: Portfolio change Attractiveness Exit: Australia Denmark marketing Harburg Italy LPG France Norway Selected UK retail sites Tongyi lubricants China Showa Shell Malaysia refining Denmark refining SADAF petrochemicals JV Hong Kong LPG others Resilience Backbone / grow: Chemicals China LNG for transport Premium fuels + lubes Refinery crude flexibility others Fix: Singapore - manufacturing USGC restructuring post Motiva JV others completed Earnings + ROACE $ billion Q1 4Q rolling Marketing Refining & Trading Chemicals ROACE (RHS) % SADAF Hong Kong LPG Earnings and ROACE on CCS basis, excluding identified items 9

10 Oil Products Optimization of footprint Showa Shell divestment Motiva JV split SADAF SADAF Petrochemicals facility, Kingdom of Saudi Arabia Sale of ~33% of Showa Shell Sekiyu KK to Idemitsu Lubricants and fuel brand licensing agreements ~$1.4 billion Completion in 2016 Integrate retained assets with Shell Brand licensing agreement Balancing payment ~$2.2 billion Completed May 1, 2017 Sale of 50% petrochemicals SADAF joint venture to SABIC ~$800 million Completion expected in

11 Chemicals Base chemicals Ethylene oxide/ glycols Higher olefins Styrene monomer Propylene oxide Solvents Phenol feedstock for packaging films carrier bags plastic buckets food containers drainpipes brake fluids plastic bottles polyester packaging antifreeze sunscreen shower gel automobile interiors wire insulation detergents polystyrene fridge insulation tyres food containers crash helmets insulation foam for bedding and car interiors engineering plastics aeroplane deicers pharmaceuticals paints mining and metalworking fluids adhesives inks plywood kitchen worktops fibreglass boats car parts circuit boards cosmetics hand sanitisers 11

12 Chemicals Increasing standards of living driving growth Innovative solutions that support a lower carbon future Cold wash laundry detergents Modern home insulation Lightweight plastics in cars Petrochemicals are the key ingredients for thousands of essential products Vital role to meet the growing population s demands Faster growth than GDP, Oil and Gas Shell produces important petrochemical building blocks Some products made from these chemicals can enable CO 2 savings over their lifetime 12

13 Growth priority Chemicals Earnings + ROACE $ billion 2 % 20 Under construction 425,000 tonnes additional Alpha Olefins capacity Geismar, USA 15 New liquids cracker and derivatives units 1 10 Nanhai, China Capacity: ~1.2 million tonnes ethylene per annum 50/50 JV CNOOC 5 Greenfield FID Q1 4Q rolling Earnings ROACE (RHS) 0 Pennsylvania, USA Capacity: ~1.5 million tonnes ethylene per annum and polyethylene derivatives 2006 Nanhai 2010 USGC go-light strategy Singapore China + USA Earnings and ROACE on CCS basis, excluding identified items 13

14 Investing in selective growth Refining and Trading Retain competitive sites Refinery capacity in thousand barrels per day (100%) Scotford (100%) Puget Sound (100%) Martinez (100%) Deer Park ( 50%) Houston 1,055,000 bpd 875,000 bpd 460,000 bpd Calgary Sarnia (100%) Convent (100%) Norco (100%) Fredericia (100%) London Pernis (100%) Rotterdam Miro (32%) Rheinland (100%) Schwedt (38%) Al Jubail (50%) Dubai Beijing Karachi (30%) Singapore Pulau Bukom (100%) Mizue (Toa) (2%) Yamaguchi (1%) Yokkaichi (3%) Tabangao (55%) Retained site Q Announced exits Exits Q1 Buenos Aires (100%) Durban (36%) Refineries (barrels per day) 0 100, , , ,000+ Announced exits Trading offices Shell capacity as at end Q

15 Investing in selective growth Shell Oil Products marketing Marketing ROACE % 30% Marketing free cash flow $ billion 6 20% 4 10% 2 0% Q1 4Q rolling Q1 4Q rolling No.1 market share in global retail + global lubricants ROACE on CCS basis, excluding identified items 15

16 Oil Products Retail

17 Oil Products Retail s 5 ambitions for % 20% LOWER CARBON EVERY CUSTOMER 100% Increase margin share from convenience retail to 50% Fuels margin from low-emission energy solutions Reduce carbon intensity of our retail outlets by at least 50% Treated like a guest on site & in the digital world Sites committed to local communities unified by a global social cause 17

18 Downstream Cash engine Growth priority Marketing Refining & Trading Chemicals Improve our financial performance Upgrading our portfolio Returns + free cash flow improvement Differentiated products Brand leverage + customer offer Selective growth Full integration with trading Improve retained assets Reducing refining capacity Feedstock plays Capacity growth Chemicals growth priority 18

19 Questions & Answers

20 Re-shaping Shell, to create a world-class investment case Downstream Day Societe Generale John Abbott Downstream Director Royal Dutch Shell plc May 11, 2017 #makethefuture

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