CS VAIL ENERGY CONFERENCE BALANCING GROWTH & RETURNS 24 FEBRUARY 2015 ROYAL DUTCH SHELL PLC

Transcription

1 CS VAIL ENERGY CONFERENCE BALANCING GROWTH & RETURNS 24 FEBRUARY 215 ROYAL DUTCH SHELL PLC 1

2 MARVIN ODUM UPSTREAM AMERICAS DIRECTOR ROYAL DUTCH SHELL PLC 2

3 DEFINITIONS & CAUTIONARY NOTE Reserves: Our use of the term reserves in this presentation means SEC proved oil and gas reserves. Resources: Our use of the term resources in this presentation includes quantities of oil and gas not yet classified as SEC proved oil and gas reserves. Resources are consistent with the Society of Petroleum Engineers 2P and 2C definitions. Organic: Our use of the term Organic includes SEC proved oil and gas reserves excluding changes resulting from acquisitions, divestments and year-average pricing impact. Resources plays: our use of the term resources plays refers to tight, shale and coal bed methane oil and gas acreage. The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate entities. In this presentation Shell, Shell group and Royal Dutch Shell are sometimes used for convenience where references are made to Royal Dutch Shell plc and its subsidiaries in general. Likewise, the words we, us and our are also used to refer to subsidiaries in general or to those who work for them. These expressions are also used where no useful purpose is served by identifying the particular company or companies. Subsidiaries, Shell subsidiaries and Shell companies as used in this presentation refer to companies in which Royal Dutch Shell either directly or indirectly has control, by having either a majority of the voting rights or the right to exercise a controlling influence. The companies in which Shell has significant influence but not control are referred to as associated companies or associates and companies in which Shell has joint control are referred to as jointly controlled entities. In this presentation, associates and jointly controlled entities are also referred to as equity-accounted investments. The term Shell interest is used for convenience to indicate the direct and/or indirect ownership interest held by Shell in a venture, partnership or company, after exclusion of all third-party interest. This presentation contains forward-looking statements concerning the financial condition, results of operations and businesses of Royal Dutch Shell. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of Royal Dutch Shell to market risks and statements expressing management s expectations, beliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of terms and phrases such as anticipate, believe, could, estimate, expect, intend, may, plan, objectives, outlook, probably, project, will, seek, target, risks, goals, should and similar terms and phrases. There are a number of factors that could affect the future operations of Royal Dutch Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this presentation, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for Shell s products; (c) currency fluctuations; (d) drilling and production results; (e) reserves estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and regulatory developments including potential litigation and regulatory measures as a result of climate changes; (k) economic and financial market conditions in various countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; and (m) changes in trading conditions. All forward-looking statements contained in this presentation are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Additional factors that may affect future results are contained in Royal Dutch Shell s 2-F for the year ended 31 December, 213 (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, 24 February, 215. 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 2-F, File No , available on the SEC website You can also obtain this form from the SEC by calling 1-8-SEC-33. 3

4 FOCUS ON HSSE 214 UPDATE Goal Zero on safety Injuries TRCF/million working hours 4 million working hours 8 Spills - operational Volume in thousand tonnes '4 '6 '8 '1 '12 '14 4 '4 '6 '8 '1 '12 '14E TRCF Working hours (RHS) Energy intensity refineries Energy Intensity Index (EEITM) 14 Process safety Number of incidents '4 '6 '8 '1 '12 ' HSSE priority Performance + transparency Injuries TRCF/million working hours Tier 1 incidents Tier 2 incidents 4

5 EXECUTING A CONSISTENT, LONG-TERM STRATEGY Unrelenting focus on HSSE Total shareholder returns growth 1 years Index 1/1/25 =1 Technology, integration and scale 2 Disciplined capital investment by strategic theme Growth in cash flow through cycle 15 Competitive shareholder returns drive to rebalance growth and returns 5 1/1/ Shell S&P5 FTSE1 5

6 ENERGY TRANSITIONS Long-term energy supply mix Million boe per day 4 +5% 25 outlook Population increases from 7 to 9 billion Enabled by cheap and reliable energy % Realities Requirement to mitigate climate change Oil supply -7% by 23 without new investment Key role of gas & CCS Shell activities Gas Oil Biomass Wind Coal Nuclear Other renewables Solar Energy transitions underway 6

7 OIL MARKET + SHELL RESPONSE Oil supply Million barrels of oil per day Oil market downturn Entering 215 with low oil prices Requirement for $5 billion industry investment in upstream oil during Under-spending amplifies price spike risks 4 2 Shell response Long-term $7 - $9 - $11 Brent oil price screens unchanged 214 decline growth 22 Planning for low prices 215+; uncertain recovery timing Hard choices on our growth pipeline + options Opportunity to reduce costs Source: IEA estimates 7

8 FINANCIAL PERFORMANCE 214 DELIVERY Earnings + ROACE $ billion Dividend, buyback + gearing $ billion 2 1 Upstream Downstream Corporate/Other ROACE (RHS) Gearing range % % Cash flow $ billion CFFO CFFI Free cash flow (RHS) Well-positioned into oil market downturn Asset sales delivered ahead of oil price decline Enhanced free cash flow + lower gearing $ billion Dividend announced Gearing (RHS) Buyback CCS earnings + ROACE excluding identified items 8

9 214 DELIVERY BALANCING GROWTH AND RETURNS Improve our financial performance CCS earnings $22.6 billion; CFFO $45. billion Dividend growth + buyback Restructuring in Oil Products + North America resources plays Enhance our capital efficiency Moderated spending + growth Improved free cash flow; reduced gearing Early completion of divestment plan Deliver new projects 4 operated deep-water start-ups Repsol LNG integration: >$1 billion CFFO impact New options in FEED; improved exploration CCS earnings excluding identified items 9

10 PRIORITIES 215+ Competitive financial performance Capital efficiency Project delivery Returns and cash flow Competitive returns for shareholders Restructuring underperforming businesses Cost reduction programmes Choices on new options Supply chain management Managing affordability + financial flexibility Preserving our competitive growth pipeline in downturn Continued ramp-up of 214 start-ups 215 transition year into 216/17+ growth 1

11 INVESTMENT PRIORITIES + PERFORMANCE Engines (Downstream, Upstream engine) Free cash flow businesses Maintain competitiveness Asset integrity + selective growth Growth priority (Integrated Gas, deep water) Global leadership established High-grading our rich opportunity set Longer term (resources plays, future opportunities 1 ) Major potential; managing non-technical risks Slower pace + capital allocation CFFO in billion $ 15 Downstream engine Resources plays 1 5 ROACE (%) -2% % 2% 4% -5 Deep water Future opportunities Integrated gas Upstream engine Bubble size represents year-end capital employed 214 (Brent $99/bbl) 213 (Brent $19/bbl) Investment choices driven on a global thematic basis Assets tested for attractiveness + resilience 1 Iraq, Nigeria onshore (SPDC), Kazakhstan, Arctic, heavy oil 11

12 UPSTREAM AMERICAS PORTFOLIO Resources 8.8 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 Gulf of Mexico Production million boe per day % Capital investment $ billion % Resources plays Deep-water Heavy oil Completed divestments Resources plays Heavy oil Pre-FID/other Deep-water Completed divestments 12

13 COMPETITIVE FINANCIAL PERFORMANCE RESTRUCTURING RESOURCES PLAYS PORTFOLIO W. Canada gas W. Canada LRS Appalachia Germany ` Algeria Tunisia Russia Ukraine Turkey Oman Changbei Changbei 2 Sichuan Colombia Permian Arrow CBM Argentina Neuquen On-stream E&A Gas Liquids Rich 214: North America portfolio restructured ($3.3 billion asset sales / 11 kboe/d) 215+: International portfolio reduction + possible write-downs Potential to further reduce spending Production kboe per day Liquids Gas Capital investment $ billion 6-3% E Americas International Production excludes volumes from divestments 13

14 DEEP-WATER GULF OF MEXICO PROJECT FLOW Stones FPSO 1 km Perdido Vito ~1 kboe/d potential >3 million boe resources Shell 51.33% (operator) Cardamom Auger Brutus Caesar Tonga Stones ~5 kboe/d FPSO >25 million boe resources Shell 1% (operator) FPSO under construction 216 start-up Kaikias Oil discovery; appraisal well spudded Shell 1% (operator) Mars Mars B Ursa Powernap Oil discovery plus down-dip sidetrack oil discovery, evaluating results Shell 5% (operator) Nakika Appomattox >15 kboe/d potential >7 million boe resources Shell ~8% (operator) Ram Powell Rydberg ~1mmboe discovery Shell ~57% (operator) Gettysburg Oil discovery, evaluating results Shell 8% (operator) Growth outlook 1 : 228 kboe/d on stream in kboe/d under construction On stream Execute (under construction) Select/Define 214/15 exploration success >17 kboe/d new options 1 Shell share 14

15 NORTH AMERICA LNG PROGRESSING TO FID LNG Canada Elba LNG 2 x 6.5 mtpa first phase 25-year export license for 24 mtpa in place Joint venture agreement signed FEED contract awarded Joint venture: Shell (5%), 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 (1%) FERC application filed in March 214 FEED completed 15

16 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 16

17 CAPITAL EFFICIENCY INVESTMENT PRIORITIES Investment themes Organic capital investment 1% Longer term: 25% 1% Conventional exploration Pre-FID large project options 1% 5% Growth priorities: 4% 5% Post-FID large projects 5% Short-cycle projects 1 Engines: 35% Base 4% % 215 organic capital investment CFFO impact of 215 investment % 215 organic capital investment Growth priorities unchanged Driving competitive cash flow 1 Resources plays, Majnoon, infill drilling 17

18 CASH PERFORMANCE + PAY-OUT Cash flow $ billion Dividend track record $ billion Cash flow from operations Cash flow from investments 1 Pay-out Dividends announced 1 Includes MLP proceeds Gearing and pay-out $ billion % 3% 2% 1% 214 dividend and buyback $15 billion 215 dividend ~$12 billion Buybacks in 215 subject to oil prices Gearing likely to increase in Dividend Free cash flow Buybacks Gearing (RHS) % -1% Dividend is dividend announced 18

19 PRIORITIES 215+ Competitive financial performance Capital efficiency Project delivery Returns and cash flow Competitive returns for shareholders Restructuring underperforming businesses Cost reduction programmes Choices on new options Supply chain management Managing affordability + financial flexibility Preserving our competitive growth pipeline in downturn Continued ramp-up of 214 start-ups 215 transition year into 216/17+ growth 19

20 QUESTIONS & ANSWERS 2