BALANCING GROWTH & RETURNS NEW YORK INVESTOR DAY 5 SEPTEMBER 2014 ROYAL DUTCH SHELL PLC

Transcription

1 BALANCING GROWTH & RETURNS NEW YORK INVESTOR DAY 5 SEPTEMBER 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 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, 5 September, 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 AGENDA Ben van Beurden Chief Executive Officer Marvin Odum Upstream Americas Director John Abbott Downstream Director Simon Henry Chief Financial Officer Question & answer session Panel break-outs Downstream Upstream Americas: deep-water Upstream Americas: resources plays 4

5 EXECUTING A CONSISTENT, LONG-TERM STRATEGY Energy demand outlook million boe per day Unrelenting focus on HSSE Technology, integration and scale Disciplined capital investment by strategic theme Growth in cash flow through-cycle Competitive shareholder returns Shell activities Oil Gas Biomass Wind Coal Nuclear Other renewables Solar source: Shell estimates 5

6 FOCUS ON SAFETY UPDATE Goal Zero on safety Volume in thousand tonnes million working hours Spills - operational Number of incidents TRCF Working hours (RHS) 4Q rolling 4Q rolling Energy intensity refineries Energy Intensity Index (EEITM) Process safety trend HSSE priority Performance + transparency Injuries TRCF/million working hours Tier 1 incidents Tier 2 incidents 6

7 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 7

8 IMPROVE FINANCIAL PERFORMANCE H OUTCOME Earnings + ROACE $ billion Cash flow $ billion $ billion Upstream Downstream Corporate/Other ROACE (RHS) CFFO CFFI Free cash flow (RHS) Dividend + buy-back $ billion Balancing returns + growth Competitive shareholder returns Expecting > $30 billion distributions to shareholders Dividend declared Buy-back CCS earnings + ROACE excluding identified items 8

9 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

10 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 10

11 IMPROVE FINANCIAL PERFORMANCE PORTFOLIO RESTRUCTURING North America resources plays Oil Products Gas supply for LNG Canada LRS exploration: Permian + W.Canada Appalachia Utica gas exploration Asset sales + cost focus Downstream 10-12% ROACE + $10 billion p.a. CFFO potential MLP proposal Asset sales + cost focus 11

12 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 ~$10 billion completed year-to-date 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 non-core LRS Italy Downstream ADCO license expiry Woodside market sell down Australia / Denmark / Norway Downstream Nigeria onshore Mature UKCS + GOM assets Pinedale + Haynesville dry gas others 340,000 boed upstream 180,000 b/d refining 300,000 b/d marketing completed 12

13 DELIVER NEW PROJECTS UPSTREAM TRACK RECORD Consistent delivery of new projects Growth from key start-ups kboe per day $ billion Last 12 months CFFO from start-ups $11 billion Repsol LNG Mars-B Key project start-ups: Gumusut-Kakap Production Cash flow from operations (RHS) Perdido North America: tight gas Gbaran-Ubie Gjoa AOSP-1 West Qurna Schoonebeek North America: tight gas Qatargas 4 LNG Pearl GTL Qarn Alam Harweel Caesar Tonga ph1 Gumusut-Kakap (early production) Pluto LNG North America: tight gas Eagle Ford Majnoon FCP BC-10 ph2 Basrah gas company North Rankin Amal steam AOSP debottlenecking others Repsol LNG acquisition Mars B Petai Bonga North West Cardamom Gumusut-Kakap others completed 13

14 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 Heartland Near field exploration < Near field High value Balancing exploration risk Prospect size: potential 14

15 EXPLORATION SUCCESS ADDING RESOURCES IN HEARTLANDS Gulf of Mexico cumulative resources added in million boe Malaysia cumulative resources added in million boe Stones West Boreas Appomattox Vito Cardamom South Deimos Rydberg Vicksburg Kaikias Vito Appraisal Appomattox appraisal Tukau Timur West NFE Success Limbayong-2 NFE success Rosmari Marjoram Pegaga Appraisal Tukau Timur Deep Appomattox area Deep-water Malaysia Appomattox 20 km Planned Appomattox host Rydberg Vicksburg Gettysburg Shell leasehold discovery drilling Sirih Sintok Pegaga Bakong Larak Legundi Limbayong-2 Marjoram Rosmari Gorek Teja 50 km Shell licence 2011 Shell licence 2014 discovery 15

16 SHELL IN NORTH AMERICA LNG Canada Western Canada gas Carmon Creek AOSP Production Refining capacity North America Rest of the world Leading industry positions Growth potential Upstream + Downstream Integration + opportunities LRS Puget Sound Upstream positions Scotford Martinez AERA heavy oil Permian Gas monetization options Refinery/ chemical plant Refinery with LTO capability Proposed midstream positions/capacity Midstream positions/capacity Permian Express Proposed Energy East Pipeline Sarnia Mobile Ho-Ho Motiva Deer Park refineries Appalachia Gas to chemicals Elba LNG Gulf of Mexico Production and refining capacity as at end

17 MARVIN ODUM UPSTREAM AMERICAS DIRECTOR ROYAL DUTCH SHELL PLC 17

18 UPSTREAM AMERICAS Deep-water Heavy oil Resources plays Integrated Gas Arctic Industry leadership Mining and in-situ Portfolio repositioning Monetizing gas Long-term potential Mars B start-up Appomattox FEED Cardamom commissioning Carmon Creek under construction On-going restructuring LNG Canada FEED Evaluating options Profitable + competitive today Potential Deliver our deep-water and heavy oil growth projects Establish resources plays and integrated gas profitability Drive sharper cost focus and capital efficiency across our operations 18

19 UPSTREAM AMERICAS PORTFOLIO Resources 10.9 billion boe Western Canada dry gas + LRS LNG Canada AOSP + in-situ Resources plays Deep-water Heavy oil Gas monetization options Integration potential Major undeveloped resources Resources plays Deep-water Heavy oil AERA heavy oil Appalachia dry gas Eastern Canada Gas-to-chemicals Colombia Permian LRS Elba LNG Argentina Brazil Resources 1/1/2014 updated for 2014 announced divestments and acquisitions Gulf of Mexico Production million boe per day Capital investment $ billion -20% +5% Resources plays Deep-water Heavy oil Completed divestments Resources plays Heavy oil Pre-FID/other Deep-water Completed divestments 19

20 IMPROVE FINANCIAL PERFORMANCE: UPSTREAM AMERICAS - FINANCIAL DRIVERS Earnings 2013 H H1 Balance sheet Q214 $ billion Long term growth $ billion GAS LRS $3.2 billion clean DD+A 2014 H1 4Q rolling 2013 H H1 On stream Under construction Non productive leases Resources plays Deep-water Heavy oil/arctic Strong recovery in results 2014 H1 ~$6 billion CFFO 12 months rolling Continued drive to improve profitability Earnings and CFFO excluding identified items 20

21 NORTH AMERICA RESOURCES PLAYS RESTRUCTURING SHELL PORTFOLIO Portfolio ~10 billion boe resources + potential Maintain/Grow: Western Canada gas + integration plays Appalachia Western Canada LRS Permian LRS Dry gas: Canada LNG supply Appalachia appraisal Liquids rich: Permian + W. Canada appraisal Profitability focus Attractiveness Exit: Eagle Ford Mississippi Lime Hold or Divest LRS plays Resources + potential = discovered + prospective resources as at 1/1/2014 updated for 2014 announced divestments and acquisitions North Americas capital investment $ billion Rockies LRS Deep Basin (North) -50% Foothills (Burnt Timber) Appalachia (Slippery Rock) -20% Pinedale Haynesville completed Resilience LRS Dry gas Divestments Acquisitions 21

22 NORTH AMERICA RESOURCES PLAYS PROGRESS ON COSTS Drilling time reduction % improvement Pinedale Groundbirch Appalachia Eagle Ford Permian Kaybob Haynesville Staff reduction -40% Unit operating expense $/mcfe -10% program years Portfolio: learning curve Top quartile in 60% of wells ~$155 million year over year reduction Right-sizing the organization ~$130 million in savings from overhead reductions ~$40 million year over year reduction in direct lease and field costs 2014 >$500 million in capital and operating cost reductions 22

23 NORTH AMERICA RESOURCES PLAYS APPRAISING NEW POTENTIAL Appalachia Utica Permian Western Canada Loving Co Winkler Co Fox Creek Kaybob area Tioga Ward Co Pecos Tioga County 0 25km Pembina area 18km 18km 54km Rocky Mountain House New Utica sweetspot in Tioga County mmscf/day IP rates ~275k net acres + ~1500 well locations Additional ~155k net acres once Pinedale swap complete Multiple stacked pays ~70% liquids Wolfcamp exploration potential ~300k net acres + ~5700 well locations 50/50 JV with Anadarko Premier position in Duvernay play Oil + gas condensate window ~365k net acres + ~2400 well locations Integration potential with heavy oil 23

24 NORTH AMERICA LNG PROGRESSING TO FID LNG Canada Elba LNG 2 x ~6 mtpa first phase 25-year export license for 24 mtpa in place Joint venture agreement signed FEED contract awarded Joint venture: Shell (50%), Kogas, Mitsubishi, PetroChina Two phased liquefaction project with up to 2.5 mtpa capacity Joint venture 49% Shell + 51% Kinder Morgan Shell will be single LNG off-taker (100%) FERC application filed in March 2014 FEED nearing completion 24

25 DEEP-WATER GULF OF MEXICO PROJECT FLOW Stones FPSO Cardamom Deep ~50 kboe/d Shell 100% (operator) Tie back to Auger 2014 start-up Vito ~100 kboe/d potential >300 million boe resources Shell 51.33% (operator) Cardamom Deep Auger Brutus Caesar Tonga Kaikias Oil discovery; further appraisal required Shell 100% (operator) Cardamom Stones Mars Mars B Ursa Appomattox/Vicksburg Ram Powell Nakika Appomattox >150 kboe/d potential >600 million boe resources Shell ~80% (operator) Rydberg ~100mmboe discovery Shell ~57% (operator) 100 km Perdido Stones ~50 kboe/d FPSO >250 million boe resources Shell 100% (operator) FPSO under construction 2016 start-up Vito Rydberg Discovery FID Start-up Growth outlook 1 : ~230 kboe/d on stream in Q Mars B continued ramp-up kboe/d to start-up in 2H 2014 and 50 kboe/d under construction On stream Execute (under construction) Select/Define 2014 exploration success >170 kboe/d new options 1 Shell share 25

26 DEEP-WATER GULF OF MEXICO DRIVING PROFITABLE GROWTH Production thousand boe/d Perdido start-up Drilling moratorium Cardamom start-up Mars B start-up Cumulative resources added million boe Stones West Boreas Appomattox Vito Cardamom South Deimos Rydberg Vicksburg Kaikias Vito Appraisal Appomattox appraisal Unit operating cost $/bbl Sustained exploration delivery Emerging from decline post-macondo 2014 project start-ups drive new growth Mars B, Cardamom, Nakika Phase 3 Maintaining cost leadership Unit cost range Shell unit cost Unit cost range source: Rystad 26

27 DEEP-WATER GULF OF MEXICO MARS B DEVELOPMENT Olympus in Kiewit shipyard Ingleside, Texas Summer 2013 Olympus on-site February 2014 Olympus platform FID September 2010 First Oil February 2014 competitors FID 2010 Mars B production ramp-up progress 000 boe/d 3 rd well to start in Q4 First oil February months ahead of schedule Averaged ~38 kboe/d Q2 14 Capacity > 100 kboe/d Shell 72% (operator) 27

28 DEEP-WATER BRAZIL PROJECT DELIVERY AND NEW POTENTIAL BC-10 Bijupira Salema Libra Update picture Phase 2 water injection complete Injection above target plan Phase 3 wells completed Q2/14 ~60 kboe/d Shell 50% (operator) Redevelopment complete First oil February 2014 Production up 20% from Q1 due to well management efforts Q2/14 ~26 kboe/d Shell 80% (operator) First well spudded in August 2014 Joint project team established Extended well test planned to begin December 2016 Shell 20% 28

29 UPSTREAM AMERICAS Deep-water Heavy oil Resources plays Integrated Gas Arctic Industry leadership Mining and in-situ Portfolio repositioning Monetizing gas Long-term potential Mars B start-up Appomattox FEED Cardamom commissioning Carmon Creek under construction On-going restructuring LNG Canada FEED Evaluating options Profitable + competitive today Potential Deliver our deep-water and heavy oil growth projects Establish resources plays and integrated gas profitability Drive sharper cost focus and capital efficiency across our operations 29

30 JOHN ABBOTT DOWNSTREAM DIRECTOR ROYAL DUTCH SHELL PLC 30

31 DOWNSTREAM STRATEGY Developing and sustaining competitive advantage through Advantaged Improving our Differentiated Leveraging the feedstock + footprint Products + Brand supply Customer Offer Priority to improve our financial performance Renewed focus on upgrading our portfolio Returns + free cash flow improvement 31

32 DOWNSTREAM OPERATIONAL EXCELLENCE CONTINUOUS IMPROVEMENT Focus on HSSE continues Injuries TRCF/million working hours million working hours Working hours Operating performance % unplanned downtime TRCF 4Q rolling Pernis refinery, The Netherlands Positive overall safety trends Controlling unplanned downtime Refining Chemicals Port Arthur expansion included from

33 DOWNSTREAM COMPETITIVE LANDSCAPE Downstream ROACE $ billion Cash flow performance $ billion $ billion Earnings on local GAAP basis adjusted for inventory valuation differences and excluding identified items; Peer group: Chevron, Total, BP, XOM, RDS Chemicals ROACE % Shell Downstream Peer group range CFFO excl. WC movements Working capital movements Q2 4Q rolling Cash flow from investments Free cash flow (RHS) Shell Chemicals Peer group range Q2 rolling Priority to improve financial performance Targeting: 10-12% ROACE >$10 billion p.a. CFFO Earnings excluding identified items; peer group: XOM, LBI, DOW, BP, RDS 33

34 UPGRADING OUR PORTFOLIO Portfolio change Selective Growth: Chemicals China LNG for transport Premium fuels + lubes Refinery crude flexibility others Downstream asset sales $ billion Announced divestments 2014 ytd: 180,000 b/d refining 300,000 b/d marketing Fix: Attractiveness Motiva Singapore fuels Pernis + Rheinland others Asset sales proceeds Exit: Italy Norway Australia Denmark others completed Resilience Optimise footprint Integrated value capture Selective investment in growth markets Capital discipline and project delivery 2014 YTD is end August

35 IMPROVE FINANCIAL PERFORMANCE: NORTH AMERICA DOWNSTREAM Share of Shell portfolio Global refining capacity 3.2 million boed total Global branded retail stations 43,000 stations total 1.2 million b/d refinery capacity 15,400 retail stations 6,000 kilometers pipelines North America North America Rest of world Rest of world Scotford Motiva Rest of North America Puget Sound Martinez Sarnia Geismar ~35% of Shell worldwide refining capacity No. 1 North America fuels retail + lubes market share Refinery 50,000 boed capacity 1 Drive to improve financial performance Shell Chemical facility Deer Park Mobile Norco Motiva refineries 1 1 Shell share crude distillation capacity 35

36 MLP PROPOSAL SHELL MIDSTREAM ASSETS Colonial system SEC S-1 filing 18th June, 2014 Targeting $750 million initial fund raising Drop-down potential Initial MLP drop-down %: Zydeco (Ho-Ho) 43% Mars 28.6% Bengal 49% Colonial 1.612% 36

37 ACCESSING ADVANTAGED FEEDSTOCK NORTH AMERICA LIGHT TIGHT OIL + CANADIAN HEAVY North America - Advantaged crude processing Crude runs kbbl/day % of equity capacity Scotford, Edmonton Canada High margin refinery Processes 100% advantaged feedstock Integrated upstream + downstream Integration value: $4/bbl upstream + $3/bbl chemicals New debottlenecking potential Advantaged N.A. crude % of equity capacity (RHS) Incremental additional capex Logistics and blending improvements Pipeline reversal (Ho-Ho) completed Further options continuing to develop Mobile refinery, Alabama Moved from 50% advantaged crude processing in 2011 to ~90% 2014 ytd Achieved with minor capex and logistics changes 37

38 MOTIVA JOINT VENTURE Supply and distribution Port Arthur refinery ADVANTAGED CRUDE LOGISTICS CANADIAN HEAVY + BAKKEN SHALE EXPORTS JV Shell-Saudi Aramco Manufacturing: ~1.1 million b/d refining + lubes Fuels marketing: 35 terminals, ~8,300 retail sites Supply, trading, logistics recent advantaged crude logistics success Largest refinery in US Port Arthur refinery expanded to 600,000 b/d Ramp up in

39 MOTIVA JV IMPROVEMENT PLAN Aligned with partner Saudi Aramco on improvement plan, covering: Refocused delivery strategy Reliability, crude advantage, unit yields, E2E optimization Management structure + leadership team changes effective 2014 Earnings $ billion $/bbl Cash flow $ billion Free cash flow H2 12 H1 13 H2 13 H1 14 H2 12 H1 13 H2 13 H1 14 Net income before tax USGC Coking Margin (RHS) CFFO excl. working capital movements Capital expenditure Earnings and cash flow IFRS basis 39

40 NORTH AMERICA FUELS MARKETING + LUBRICANTS North American sales leader in fuels & lubricants Strategy focused on premium brands & services, through quality and innovation Recent launch of PurePlus Technology leveraging our upstream GTL base oils Retail network well positioned in major demand centres and around our refinery & supply assets Synthetic Lubricants volume growth North America Indexed Premium volume mix (2011 = 100) Premium fuels penetration (V-Power) - USA % penetration Differentiated fuels volume USA Differentiated fuels penetration Fuels volumes and penetration on 100% venture basis; 2014H1 is 12 months rolling 40

41 DOWNSTREAM STRATEGY Developing and sustaining competitive advantage through Advantaged Improving our Differentiated Leveraging the feedstock + footprint Products + Brand supply Customer Offer Priority to improve our financial performance Renewed focus on upgrading our portfolio Returns + free cash flow improvement 41

42 SIMON HENRY CHIEF FINANCIAL OFFICER ROYAL DUTCH SHELL PLC 42

43 FINANCIAL FRAMEWORK AND PRIORITIES CASH PERFORMANCE Priorities for cash $ billion 1. Debt service 2. Dividends: growth policy PAY OUT CFFO 4Q rolling INVESTMENT 3. Capital investment: disciplined through cycle growth 4. Return surplus cash: buy-backs $ billion $ billion Cash dividend 4Q rolling Buy-back CFFI 4Q rolling BALANCE SHEET $ billion % Net debt Gearing 43

44 CASH FLOW AND PAY-OUT Cash generation Dividend track record $ billion Q214 4Q rolling $ billion Last 3 years $ billion DOWN STREAM DOWN STREAM UP STREAM UP STREAM Cash flow from operations Dividend and buy back Cash flow from investments Dividends declared 4Q rolling Gearing + balance sheet $ billion Gearing range Maintaining long-term financial framework > $30 billion distributions (dividends + buybacks) to shareholders buy-back $7-8 billion Net debt Gearing (RHS) CFFO Downstream includes Corporate 44

45 INVESTMENT PRIORITIES Organic capital investment 2014 $ billion Longer term Growth priorities Engines Exploration + pre-fid Key growth projects Smaller growth projects Care + maintain 25% Preparing new options 30% Driving new Upstream growth 45% Maintaining competitive cash generation Downstream* Upstream engine Integrated gas Deep-water Resources plays Future opportunities Credible, competitive, affordable Investment choices driven on a global thematic basis * includes Corporate 45

46 FINANCIAL FRAMEWORK KEY DRIVERS Organic free cash flow drives dividend $ billion (cash basis) A+D supports portfolio growth $ billion 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: shares outstanding at end of period x dividend/share ($) 46

47 FINANCIAL FRAMEWORK TRACK RECORD Balancing financial framework over time $ billion 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 47

48 BALANCING GROWTH + RETURNS CFFO in billion $ Q214 4Q rolling ROACE Strong + diverse portfolio Priority to restructure NA resources plays + Oil Products ROACE (%) Bubble size represents Q214 capital employed Downstream engine Integrated gas Upstream engine Deep-water Resources plays Future opportunities 2015/16 potential* 2014 Q2 4Q rolling ROACE CCS earnings excluding identified items * 2015/16 outlook as per March 2014 Management day 48

49 COMPETITIVE PERFORMANCE: BALANCING GROWTH AND RETURNS 4Q ROLLING Cash flow from operations $ billion Free cash flow $ billion Shell Peer group ROACE underlying % Driving competitive performance 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. 49

50 BEN VAN BEURDEN CHIEF EXECUTIVE OFFICER ROYAL DUTCH SHELL PLC 50

51 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 51

52 QUESTIONS & ANSWERS NEW YORK INVESTOR DAY 52

53 NORTH AMERICA LIQUIDS RICH SHALES EXPLORATION FOCUSSING ON WESTERN CANADA + PERMIAN BASIN Frontier exploration program since 2010 Exit from non-material acreage following early well results ($1 billion ) Positive results in Western Canada (Duvernay + Wet Montney) and Permian (Wolfcamp) ~60% of wells >1000 boe/d potential Appraisal continues Assessing development options Acreage Groundbirch Kaybob Pembina Permian Groundbirch drilling LRS production thousand boe/day Drilling focus in sweet spots Cumulative # of exploration wells >1000 boe/d potential H1 Liquids Associated gas Permian W. Canada Completed divestments Completed divestments W. Canada Permian 53

54 NORTH AMERICA ONSHORE DRY GAS FOCUSSING ON WESTERN CANADA + APPALACHIA Addressing underperforming assets Acquisition cost overhang Scale & cost reduction Exit non-material acreage ($2.5 billion 13-14) Growth opportunity Canada LNG integration options New exploration success in Appalachia Utica Acreage LNG Canada Groundbirch Deep Basin Foothills Pinedale Announced divestments Partial divestment Gas Appalachia Haynesville Gas production thousand boe/day Rig count # of rigs H1 H1 H1 Gas Associated liquids W. Canada Haynesville Completed divestments Appalachia Pinedale Completed divestments 54

55 APPALACHIA UTICA LARGE DRY GAS OPPORTUNITY SHELL UTICA FOCUS AREA Neal Gee Tioga 430 k acres (Shell Net) Including new acreage from Ultra deal Production update: Gee peak rate: ~11 mmscf/d Discovery well in the Utica play in N.E. Pennsylvania 3,100 lateral with 13 frac stages Neal peak rate: ~26 mmscf/d Follow up to Gee well 4,200 lateral with 16 frac stages Expect 4-8 wells flowing by year end ~430,000 net acres in Tioga County focus area pay thickness >1500 potential wells 55

56 PERMIAN LIQUIDS GROWTH BASIN Low cost, early Wolfcamp entry Gas Condensate Volatile Oil Loving Co Avalon appraisal and development NEW MEXICO TEXAS Production growth and profitability Thousand boe per day Winkler Co Ward Co Horizontal Wolfcamp play outline Wolfcamp prospective throughout leasehold Oil/ Liquids Associated gas Jeff Davis Co Shell acreage ~300,000 net acres focus area >3500 stacked pay thickness with large resource potential in Wolfcamp >5700 potential wells mostly Wolfcamp 70% liquids 56

57 WESTERN CANADA KAYBOB + PEMBINA INDUSTRY LEADING POSITION IN DUVERNAY PLAY Duvernay play thermal maturity map Drilling focus in sweet spots Cumulative # of exploration wells >1000 boe/d potential Kaybob Pembina 34 wells online through Q ~ 365,000 net acres in 2 core areas 100 thick TOC-rich shale ~ 2400 potential wells ~ 60 wells online by year end (1/3 of all wells in play) >1000 boe/d IP for most wells on-line to date 57

58 ARGENTINA VACA MUERTA LIQUIDS RICH POTENTIAL Vaca Muerta thermal maturity map Comparative shale thickness section La Escalonada Non-operated Aguila Mora Rincon de la Ceniza Cruz de Lorena Shell operated Haynesville Utica Ohio Karnes Trough Eagle Ford Vaca Muerta Sierras Blancas Vaca Muerta Águila Mora ~200 m Sierras Blancas ~155,000 net acres in 5 blocks ~ thick shale Early E&A stage 6 wells drilled 58

59 DEEP-WATER GULF OF MEXICO APPOMATTOX HUB Norphlet play Development concept Appomattox 80% Shell 20% Nexen Vicksburg 75% Shell 25% Nexen Planned Appomattox Host Gettysburg 80% Shell 20% Nexen Shell Leasehold Discovery Prospect/Lead Infrastructure Rydberg 57.2% Shell 28.5% Ecopetrol 14.3% Nexen 3 mi Leadership in Norphlet play Hub strategy delivering value >700 million boe discovered in 3 fields Presently drilling at Gettysburg >150 kboe/d peak production potential Semi-submersible development concept Moved into FEED in February 2014 Shell 80% (operator) Includes Vicksburg tie-back (75% Shell) 59

60 LNG PRICING CONSIDERATIONS LNG price dynamics US exports $/mmbtu Regional gas prices $/mmbtu Tokyo Bay UK Liquefaction + transport costs HH outlook Landed cost 60

61 LNG SUPPLY AND DEMAND DYNAMICS LNG demand LNG supply* N.A. LNG export development million tonnes per annum million boe/d million tonnes per annum million boe/d million tonnes per annum Japan/Korea/Taiwan SE Asia Asia North America Total NA applications Europe China Qatar S. & Latin America Sanctioned projects India Other Australia Middle East Africa Others * Risked view of all LNG supply projects 61

62 SHELL ARCTIC & NEAR ARCTIC SAKHALIN Alaska, Chukchi NIGLINTGAK UNITED STATES BEAUFORT CHUKCHI Russia, Sakhalin CANADA NORTH POLE RUSSIA SALYM BAFFIN BAY Greenland, Baffin Bay GREENLAND KANUMAS KAZAKHSTAN Russia, Salym NORWAY BARENTS ORMEN LANGE NORWAY KASHAGAN Norway, Ormen Lange Kazakhstan, Kashagan 62

63 DOWNSTREAM PORTFOLIO SEGMENTATION + PERFORMANCE Downstream businesses 2013 CFFO ($ billion) -20% Integrated refining Chemicals >40% + marketing value chain Fuels marketing -5% Merchant 10% refining Biofuels Lubricants 2013 ROACE (%) Bubble size = capital employed Segmentation into performance units Action plans to improve returns + CFFO or exit Focus on cost efficiency Targeted investment ROACE based on CCS earnings excluding identified earnings 63

64 IMPROVING PERFORMANCE OF KEY ASSETS Bukom performance turnaround Refinery unplanned downtime in % Scotford building on sustained performance Unplanned downtime Over-supplied fuels market Improving efficiency; advantaged liquids feedstock; energy costs Cogeneration + cracker debottlenecking projects 2015 High margin refinery Integrated upstream + downstream Integration value: $4/bbl upstream + $3/bbl chemicals New debottlenecking potential 64

65 BALANCING GROWTH & RETURNS NEW YORK INVESTOR DAY 5 SEPTEMBER 2014 ROYAL DUTCH SHELL PLC 65