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Royal Dutch Shell plc fourth quarter and full year 2018 results webcast presentation

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Royal Dutch Shell plc webcast presentation slides for the fourhd quarter and full year 2018 results.

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Royal Dutch Shell plc fourth quarter and full year 2018 results webcast presentation

  1. 1. Royal Dutch Shell January 31, 2019 Royal Dutch Shell plc January 31, 2019 Fourth quarter 2018 results Delivering a world-class investment case #makethefuture
  2. 2. Royal Dutch Shell January 31, 2019 Ben van Beurden Chief Executive Officer Royal Dutch Shell
  3. 3. Royal Dutch Shell January 31, 2019 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 non- current 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 2016-2018 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 multi- decade 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 third- party 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 www.shell.com/investor and www.sec.gov). 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, 2019. 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 1-32575, available on the SEC website www.sec.gov.
  4. 4. Royal Dutch Shell January 31, 2019 4 Summary Divestments: headline. Share buybacks: completed by January 28, 2019. CFFO from new projects: estimated 2018 contribution of key projects started up 2014-2018, with pricing assumption of $60 per barrel real terms 2016, mid-cycle Downstream. Key messages  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 $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 $30 billion divestment programme completed New projects delivering >$10 billion in cash flow from operations  Leading through the energy transition Short-term targets to reduce Net Carbon Footprint Methane emissions intensity targets Thrive in the energy transition World-class investment case Strong license to operate
  5. 5. Royal Dutch Shell January 31, 2019 5 2018 Financial Summary Earnings and ROACE on CCS basis, excluding identified items 21.4 49.6 Earnings ($ billion); EPS +34% vs. 2017 Cash flow from operations excluding working capital ($ billion) 39.4 7.6 Free cash flow ($ billion) ROACE (%) 20.3 Gearing (%)
  6. 6. Royal Dutch Shell January 31, 2019 2018 HSSE performance Injuries – TRCF (per million working hours) Goal Zero on safety Million tonnes CO2e Upstream flaring Thousand tonnes Operational spills Number of incidents Process safety  HSSE priority  Performance and transparency million working hours # Working hours (RHS)TRCF Volume of spills Number of spills (RHS) Tier 1 incidents Tier 2 incidents 6
  7. 7. Royal Dutch Shell January 31, 2019 7 2018 Leading through the energy transition Changes to executive remuneration subject to shareholder approval. Methane emissions intensity is for Shell operated oil and gas assets. Highlights Proof points Innovating to meet changing society and customer preferences  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  Thought leadership – Shell Energy Transition report and Sky Scenario publication Nigeria Decrease in flaring intensity by ~70% over the last 10 years Brent Delta platform (UK) Decommissioning >97% to be recycled Quest CCS (Canada) >3.5 million tonnes CO2 captured and stored Solar Investments in Asia and North America
  8. 8. Royal Dutch Shell January 31, 2019 Gabon onshore $0.9bln 8 Divestment programme $30 billion completed 2016-2018 Divestments: headline as per announcement.  Reshape, simplify and high-grade the portfolio  Attractive valuations  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 2019-2020 Portfolio simplification Oil Sands Oil Products Chemicals MLP Deep water Conventional Oil & Gas Shales Integrated Gas Oil Sands $7.3bln UK North Sea package up to $3.8bln Thailand Bongkot $0.8bln Showa Shell JV $1.4bln MOTIVA JV $2.2bln Woodside shares $2.6bln Downstream Argentina $1.0bln SADAF JV $0.8bln  Net debt reduction  Net liabilities (e.g. D&R) reduction  Credit rating upgrades Supporting the financial framework MLP $1.8bln Top 20 transactions: Upstream Ireland up to $1.3bln
  9. 9. Royal Dutch Shell January 31, 2019 Delivery Key projects start-ups Pricing assumption 2019E-2020E and 2018 estimate: $60 per barrel real terms 2016, mid-cycle Downstream. Brazil accumulations are subject to unitisation agreements. Key projects $ billion Cash contribution from key projects: de-risked  >$10 billion CFFO delivered in 2018  Additional projects with >150kboe/d of peak production capacity to start up in 2019 Start-up Brazil (8 FPSOs) Gulf of Mexico (Cardamom, Mars, Stones, Kaikias) Malikai Gumusut Kakap Ph1 Lula North (P-67) Appomattox Permian QCLNG Gorgon Prelude Kashagan Schiehallion redevelopment Clair Ph2     Nanhai China Chemicals Geismar AO4 Pernis SDA Scotford     Q3 2019  2017-2020   Deep water Integrated Gas Conventional Oil & Gas Shales Chemicals Oil Products   Projects started up Projects under construction 9  +$5 billion Q1 2019
  10. 10. Royal Dutch Shell January 31, 2019 10 Portfolio & projects Projects delivery 2018  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 Geismar alpha olefins – start-up  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 Prelude – start-up
  11. 11. Royal Dutch Shell January 31, 2019 11 Portfolio & projects Projects delivery 2019-2020 Appomattox – installation and commissioning Permian – continued growth  ~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  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
  12. 12. Royal Dutch Shell January 31, 2019 12 Portfolio & projects Projects delivery 2020+ Gulf of Mexico – Whale development United States – Pennsylvania petrochemicals  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  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
  13. 13. Royal Dutch Shell January 31, 2019 13 World-class investment case Strategic themes delivery: on track 2019-21: 2016 RT $60 per barrel, mid-cycle Downstream. Deep water and Shales categorised as per the 2019-2021 outlook. 2019-21 ~$60RT2018 ~$71 Strategic themes Organic free cash flow $ billion Organic free cash flow $ billion Organic free cash flow $ billion p.a. Integrated Gas 2.8 10.8 8-10 Deep water 0.8 5.0 6-7 Conventional Oil & Gas 6.1 6.5 5-6 Oil Products 5.3 6.3 6-7 Cash engines 15.0 28.7 25-30 Shales (1.1) (0.6) 1-2 Chemicals 1.1 0.4 0 Growth priorities (0.0) (0.2) 1-2 New Energies (0.2) (0.5) (2) - (1) Emerging opportunities (0.2) (0.5) (2) - (1) Organic free cash flow (incl. Corporate & Other) 15.1 30.8 25-30 Divestments & acquisitions 12.5 8.7 >5 Free cash flow (incl. Corporate & Other) 27.6 39.4 30-35 Price sensitivity: +/- $10 Brent = +/- ~$6 billion CFFO 2017 ~$54
  14. 14. Royal Dutch Shell January 31, 2019 Delivery in 2016-2018 14 World-class investment case Delivering on commitments Continued delivery in 2019-2020  Cancel scrip dividend  Start $25 billion buyback programme: $4.5 billion completed  Disciplined & efficient capital allocation: $25 billion capital investment Financial Framework Delivery Portfolio & projects delivery Financial Framework Delivery Portfolio & projects delivery Divestments: headline. 2020 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.  $25-30 billion organic free cash flow per year by 2020  Complete $25 billion buyback programme  Capital investment of $25-30 billion per annum  >$5 billion divestments per annum  Another $5 billion CFFO from new projects by end 2020  Deliver $30 billion divestment programme  Realise $10 billion CFFO from new projects in 2018  Reduce underlying operating expenses: $39 billion in 2018
  15. 15. Royal Dutch Shell January 31, 2019 Jessica Uhl Chief Financial Officer Royal Dutch Shell
  16. 16. Royal Dutch Shell January 31, 2019  Of which $14.3 billion organic free cash flow  Significant working capital release Disciplined cash allocation Cash generation 16 Q4 2018 Financial highlights: summary 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. Q4 2018 average Brent price: $69/bbl  $5.7 billion earnings  Continued improvement Net debt reduction Share buybacks Capital investment $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 $16.7 billion Cash flow from operations excl. working capital Free cash flow ROACE 7.6 % Returns $9.1 billion  20.3% gearing $2.5 billion $8.0 billion  2018 capital investment of $25 billion at lower end of indicated range  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
  17. 17. Royal Dutch Shell January 31, 2019  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% 17 Q3 2018 Other portfolio developments  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%  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 Q4 2018 Portfolio highlights Project delivery Portfolio Divestments
  18. 18. Royal Dutch Shell January 31, 2019 $ billion Q4 2017 Q4 2018 Integrated Gas 1.6 2.4 Upstream 1.7 1.9 Downstream (CCS) 1.4 2.1 Corporate & non-controlling interest (0.4) (0.7) CCS earnings 4.3 5.7 CCS earnings, $ per share 0.52 0.69 ROACE (%) 5.6 7.6 18 Q4 2018 Financial highlights: earnings Earnings and ROACE on CCS basis, excluding identified items. $ billion Earnings Q4 2017 to Q4 2018
  19. 19. Royal Dutch Shell January 31, 2019 $ billion Q4 2017 Q4 2018 Integrated Gas 0.8 5.8 Upstream 3.8 6.9 Downstream 2.6 8.8 Corporate 0.0 0.6 Cash flow from operations 7.3 22.0 Cash flow from operations excl. working capital 9.1 12.9 Cash flow from investing activities (0.7) (5.3) Free cash flow 6.6 16.7 Dividend (2.3) (3.9) Interest paid (0.8) (0.9) Share buybacks - (2.5) 19 Q4 2018 Financial highlights: cash flow Dividend distributed to RDS shareholders. $ billion CFFO excl. working capital Q4 2017 to Q4 2018
  20. 20. Royal Dutch Shell January 31, 2019 20 2018 Gulf of Mexico: Strong cash flow growth Map shows Shell operated assets. 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 Thousand boe per day Gulf of Mexico production growth Growing production of high cash margin barrels +50%
  21. 21. Royal Dutch Shell January 31, 2019 21 Earnings and ROACE on CCS basis, excluding identified items. Pricing assumption 2020: $60 per barrel real terms 2016, mid-cycle Downstream. Divestments: headline. $ billion Earnings & ROACE $ billion Cash flow $ billion Gearing  $21.4 billion earnings  ROACE increased to 7.6%  On track to deliver 10% ROACE  $39 billion free cash flow  $31 billion organic free cash flow  More than $30 billion divestments completed since 2016  On track to deliver 2019-2021 outlook  $26 billion of net debt reduction since end 2016  Gearing reduced from 23.1% to 20.3% in Q4 2018  Improved credit rating 2018 average Brent price: $71/bbl % % Upstream ROACE (RHS) Downstream Integrated Gas Corporate + NCI CFFO CFFI FCF Net debt (at year end) Gearing (RHS) 2018 Financial highlights: improving year on year
  22. 22. Royal Dutch Shell January 31, 2019 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 22 Preliminary results SEC proved reserves position 2016 and 3-year average RRR includes BG acquisition. Billion boe Reserves performance billion boe 2016 2017 2018 Production 1.4 1.4 1.4 SEC proved reserves 13.2 12.2 11.6 Reserves/ Production (years) ~9.5 ~8.8 ~8.3 RRR 208% 27% 53%
  23. 23. Royal Dutch Shell January 31, 2019 Capital investment Buybacks Divestment proceeds CFFO Surplus CFFO 23 Financial framework Cash allocation Dividend distributed to RDS shareholders. 20% gearing as a proxy for AA equivalent credit metrics.  Intention to purchase $25 billion by the end of 2020  Subject to further progress with debt reduction and oil price conditions  $25-30 billion per annum, organic & inorganic  2018: $25 billion  2019: within the $25-30 billion range  $3.6 billion in 2018  20.3% as of Q4 2018  $15.7 billion in 2018Dividend Interest Net debt reduction to 20% gearing
  24. 24. Royal Dutch Shell January 31, 2019 24 Financial framework Free cash flow performance and payout 2019-2021 outlook: 2016 RT $60 per barrel, mid-cycle Downstream. Dividend distributed to RDS shareholders. 2014 cash dividend includes scrip issuance of $2.4 billion offset by share buybacks. 2014 share buybacks of $3.3 billion presented net of $2.4 billion offsetting scrip issuance. $ billion Distributions from free cash flow Organic free cash flow Divestment proceeds less acquisitions Cash dividend Scrip dividend Interest paid $99/bbl 2019-2021: ample capacity for debt reduction and share buybacks Share buybacks 2014 2017 2019-2021 average Available for share buybacks and debt reduction $54/bbl $71/bbl $60/bbl 2018
  25. 25. Royal Dutch Shell January 31, 2019 Competitive performance World-class investment case 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, 2019. % ROACE % Gearing $ billion Free cash flow – 4 quarters rolling Total shareholder return Shell Peer group 25 % Since Jan 2016 Since Jan 2017 Since Jan 2018 Shell Peer group Thrive in the energy transition World-class investment case Strong license to operate
  26. 26. Royal Dutch Shell January 31, 2019 Ben van Beurden Chief Executive Officer Royal Dutch Shell
  27. 27. Royal Dutch Shell January 31, 2019 27 Summary Divestments: headline. Share buybacks: completed by January 28, 2019. CFFO from new projects: estimated 2018 contribution of key projects started up 2014-2018, with pricing assumption of $60 per barrel real terms 2016, mid-cycle Downstream. Key messages  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 $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 $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 Thrive in the energy transition World-class investment case Strong license to operate
  28. 28. Royal Dutch Shell January 31, 2019 28 Questions & Answers Ben van Beurden Chief Executive Officer Jessica Uhl Chief Financial Officer Royal Dutch Shell January 31, 2019 Maarten Wetselaar Integrated Gas and New Energies Director
  29. 29. Royal Dutch Shell January 31, 2019
  30. 30. Royal Dutch Shell January 31, 2019 Outlook Q1 2019 Outlook As of 2019, Salym (Russia) is reported within the Upstream segment. 2018 production: 62 kboe/d Shell share (97% liquids); 2018 net income: $0.1 billion. Q1 2018 – Q1 2019 OUTLOOK: Year-ago baseline reflects Shell’s earnings seasonality  Integrated gas  Production volumes: 140-170 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: 0.4-0.7 million tonnes lower, mainly as a result of divestments and higher maintenance activities  Upstream  Production volumes: 10-50 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: 40-70 thousand boe/d lower, mainly as a result of the divestment of the Downstream business in Argentina 2019 OUTLOOK:  Corporate segment: net charge of $400-450 million in Q1, and $1.7-1.9 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, 2019. The quantitative impact at transition date (January 1, 2019) will be disclosed in the 2018 Annual Report and Form 20-F 30
  31. 31. Royal Dutch Shell January 31, 2019 31 Outlook Impact of IFRS16 Leases Gearing Free cash flow Capital investment Operating expenses Segment earnings ~4%-5% increase  Operating lease liabilities on balance sheet  Increase in net debt and gearing ~$4 billion increase  Lease payments will be reported under CFFF, instead of under CFFO and CFFI as previously ~$1-2 billion increase  Capital investment will include all leases, instead of only finance leases ~$2-3 billion decrease  Costs of operating leases will be reported as depreciation and interest expense ~$1 billion impact  Lease interest expenses will be treated as financing expenses and will be reported in Corporate, with corresponding offsets in business segments 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. Key metrics change, no business and value impact
  32. 32. Royal Dutch Shell January 31, 2019 $ billion Q3 2018 Q4 2018 Integrated Gas 3.3 5.8 Upstream 6.7 6.9 Downstream 1.0 8.8 Corporate 1.1 0.6 Cash flow from operations 12.1 22.0 Cash flow from operations excl. working capital 14.7 12.9 Cash flow from investing activities (4.1) (5.3) Free cash flow 8.0 16.7 Dividend (3.9) (3.9) Interest paid (0.9) (0.9) Share buybacks (1.4) (2.5) 32 Q4 2018 Financial highlights: cash flow Dividend distributed to RDS shareholders. $ billion CFFO excl. working capital Q3 2018 to Q4 2018
  33. 33. Royal Dutch Shell January 31, 2019 33 2018 Working capital & IG Brent hedging $ billion  Working capital movements consistent with Brent oil price movements  Q4 2018 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 Working capital $ billion Integrated Gas – Brent hedging cash impact  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 Q4 2017 resulting in swings in margining requirements  The cash impact is timing only Movement in working capital Average Brent price for the quarter (RHS) IG Brent hedging cash impact Brent price at the end of the quarter (RHS) $/bbl $/bbl Cumulative movement in working capital IG Brent hedging cash impact (cumulative)
  34. 34. Royal Dutch Shell January 31, 2019 34 Outlook Organic free cash flow 2019-2021 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 2019-2021 outlook is indicative, calculated using rule-of-thumb. $ billion Organic free cash flow 2018 to 2019-2021 outlook  On track to deliver 2019-2021 outlook of $25-30 billion organic free cash flow  Normalised organic free cash flow excludes effects of margining and working capital movements  New projects provide free cash flow growth 25-30>5 (4) ~31 ~23 Organic free cash flow Working capital movement and IG margining
  35. 35. Royal Dutch Shell January 31, 2019 35 Digitalisation in Shell  AI & machine learning powering decision making  Strategic partnerships for cloud- based solutions and infrastructure  Improved energy consumption in operations  Machine learning prevented loss of production at Shearwater; approach being replicated across other assets  Residential & commercial customer convenience  Applications for energy management and smart charging  Flexible, pay as you go energy service  1 million Shell app users; first cashless payment system  Asset safeguarding & leak detection  Automated materials, people and equipment management  Reduced people exposure  Drones have capability to cover up to 7,000 square kilometers in a single mission Operational Effectiveness Customer Experience Asset Management Aim to be a leading player, enabling value uplift over the coming years Shell Cashless AppShearwater UK QGC Australia
  36. 36. Royal Dutch Shell January 31, 2019 Q4 2018 Prices & margins $/barrel Shell oil & gas realisations $/barrel Industry refining margins $/tonne Industry chemicals margins US ethane Western Europe naphtha NE/SE Asia naphtha US West Coast US Gulf Coast coking Rotterdam complex Singapore Oil Gas (RHS) 36 $/mscf
  37. 37. Royal Dutch Shell January 31, 2019 37 Q4 2018 Upstream results $ billion Earnings Q4 2017 to Q4 2018 Environment Choice Earnings on CCS basis, excluding identified items
  38. 38. Royal Dutch Shell January 31, 2019 38 Q4 2018 Integrated Gas results $ billion Earnings Q4 2017 to Q4 2018 Environment Choice Earnings on CCS basis, excluding identified items
  39. 39. Royal Dutch Shell January 31, 2019 39 Q4 2018 Downstream results Earnings on CCS basis, excluding identified items $ billion Earnings Q4 2017 to Q4 2018 $ billion Earnings mix Marketing Refining & Trading Chemicals
  40. 40. Royal Dutch Shell January 31, 2019

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