re-shaping shell, to create a world-class investment case · royal dutch shell may 11, 2017 royal...

Royal Dutch Shell May 11, 2017

Royal Dutch Shell plc

May 11, 2017

Re-shaping Shell, to create a world-class investment caseDownstream Day – Societe Generale

John Abbott – Downstream Director

#makethefuture


John AbbottDownstream DirectorRoyal Dutch Shell plc

Royal Dutch Shell May 11, 2017 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 third-party 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. 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’’, ‘‘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 www.shell.com/investor and www.sec.gov ). 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, 2017. 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 1-32575, available on the SEC website www.sec.gov.


Energy challenge

Source: UN Population Fund; UN World population Prospects (2015 revision); World Urbanisation Prospects (2014 revision); IEA, Energy Technology Perspectives 2015; Shell New Lens Scenarios

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

Mitigating climate change

Net-zero emissions is a potentially achievable societal ambitionGrowing global demand for energy as population and living standards increase


Strategy

“Let’s make the future” STRATEGIC

� Focus portfolio on resilient positions

� Invest in advantaged projects

� Value chain integration

OPERATIONAL

� Reset cost and capital spending

� First class execution projects

and operations

� Unrelenting focus on HSSE and

licence to operate

Leader: value + influence

Reducing our carbon intensity

Shared value with society

World-class investment case

� FCF/share + ROCE growth

� Conservative financial

management

5


Strong free cash flow and returns

Driving strategy in multiple time horizons

CONVENTIONALOIL + GAS

CHEMICALS

OIL PRODUCTS

DEEP WATERINTEGRATED GAS

OIL SANDS MINING

SHALES NEW ENERGIES

Cash engines:today

Growth priorities: 2016+

Future opportunities: 2020+

Competitive + resilient

Funds dividends + balance sheet

FCF + ROACE pathway

Affordable growth in

advantaged positions

Material value + upside

Managed exposure

Path to profitability

Cash engines 2020+

Relentless portfolio high-grading

6


Downstream Cash engine

� Improve our financial performance

� Upgrading our portfolio

� Returns + free cash flow improvement

� Chemicals growth priority

Marketing Refining & Trading Chemicals

Growth priority

� Differentiated products

� Brand leverage + customer offer

� Selective growth

� Full integration with trading

� Improve retained assets

� Reducing refining capacity

� Feedstock plays

� Capacity growth


Downstream financial performance

Earnings and ROACE on CCS basis, excluding identified items

$ billion

Earnings + ROACE Cash flow

$55 billion as at end Q117

Capital employed

� Contribute sustainable and growing cash surplus

� Deliver competitive returns

0

10

20

0

5

10

2013 2014 2015 2016 17Q14Q rolling

-10

-5

0

5

10

15

2013 2014 2015 2016 17Q14Q rolling

Working capital movements

Cash flow excluding working capital

Free cash flow

Refining & trading

Chemicals

Marketing

ROACE (RHS)Refining & Trading

ChemicalsMarketing

$ billion %


0

10

20

0

5

10

2013 2014 2015 2016 17Q14Q rolling

9

Improving our Downstream footprint and performance


Portfolio change

$ billion

Earnings + ROACE

2016:

� Showa Shell ��

� Motiva split ��

� Denmark refining

� Malaysia refining ��

� PSPC IPO ��

� Denmark marketing ��

� MLP dropdowns (3) ��

� Vivo Energy (Africa) ��

� Australia Aviation

2017:

� SADAF

� Hong Kong LPG

Resilience

Attr

act

iven

ess

Backbone / grow:� Chemicals� China� LNG for transport� Premium fuels + lubes� Refinery crude flexibility� others

Fix:� Singapore - manufacturing� USGC restructuring post Motiva JV� others

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

�� completedROACE (RHS)Refining & Trading

ChemicalsMarketing

%


Oil Products

Optimization of footprint

Showa Shell divestment Motiva JV split SADAF

� 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 2017

SADAF Petrochemicals facility, Kingdom of Saudi Arabia


Chemicals Ethylene oxide/ glycols

Higher olefins

Styrene monomer

Base chemicals

Solvents PhenolPropylene oxide

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 de-icers

cosmetics

pharmaceuticals

paints

mining and metalworking fluids

adhesives

inks

hand sanitisers

plywood

kitchen worktops

fibreglass boats

car parts

circuit boards


Chemicals

� Petrochemicals are the key ingredients for thousands of essential products

� Faster growth than GDP, Oil and Gas

� Shell produces important petrochemical building blocks

� Some products made from these chemicals can enable CO2 savings over their lifetime

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

Vital role to meet the growing population’s demands

12


Growth priority

Chemicals


$ billion

Earnings + ROACE Under construction

Geismar, USA

Nanhai, China

Pennsylvania, USA

� 425,000 tonnes additional Alpha Olefins capacity

� New liquids cracker and derivatives units

� Capacity: ~1.2 million tonnesethylene per annum

� 50/50 JV CNOOC

� Greenfield FID 2016

� Capacity: ~1.5 million tonnes ethylene per annum and polyethylene derivatives

132006Nanhai

2010 USGC go-light strategy

2010 Singapore

2016+ China + USA

13

0

5

10

15

20

0

1

2

2013 2014 2015 2016 17Q14Q rolling

%

Earnings ROACE (RHS)


1,055,000 bpd 875,000 bpd 460,000 bpd

Deer Park ( 50%)

Buenos Aires (100%)

Miro (32%)Rheinland (100%)

Schwedt (38%)

Pernis (100%)

Pulau Bukom(100%)

Tabangao (55%)

Fredericia (100%)

Puget Sound(100%)

Martinez (100%)

Scotford (100%)

Sarnia (100%)

Durban (36%)

Mizue (Toa) (2%) Yamaguchi (1%)Yokkaichi (3%)

Karachi (30%)

Al Jubail (50%)

14

Investing in selective growth

Refining and Trading

Shell capacity as at end Q1 2017

Refinery capacity in thousand barrels per day (100%)

Retain competitive sites

0

100

200

300

400

500

600

Exits 2005–17Q1Announced exits

Retained site Q1 2017

Refineries (barrels per day)

Announced exits

London Rotterdam

Singapore

Dubai

Houston

Convent (100%)Norco (100%)

Trading offices

0 – 100,000

101,000 – 200,000

201,000+

Calgary

Beijing


Investing in selective growth

Shell Oil Products – marketing

ROACE on CCS basis, excluding identified items

%

Marketing – ROACE

$ billion

Marketing – free cash flow

No.1 market share in global retail + global lubricants

0%

10%

20%

30%

2013 2014 2015 2016 17Q1 4Qrolling

0

2

4

6

2013 2014 2015 2016 17Q1 4Qrolling


Oil Products

Retail - 2016


Oil Products

Retail’s 5 ambitions for 2025

17

50%

Increase margin share from

convenience retail to 50%

20%

Fuels margin from low-emission

energy solutions

LOWER CARBON

Reduce carbon intensity of our

retail outlets by at least 50%

EVERY CUSTOMER

Treated like a guest on site & in the digital world

100%

Sites committed to local communities

unified by a global social

cause

11 22 33 44 55


Downstream Cash engine

� Improve our financial performance

� Upgrading our portfolio

� Returns + free cash flow improvement

� Chemicals growth priority

Marketing Refining & Trading Chemicals

Growth priority

� Differentiated products

� Brand leverage + customer offer

� Selective growth

� Full integration with trading

� Improve retained assets

� Reducing refining capacity

� Feedstock plays

� Capacity growth


Questions & Answers


Royal Dutch Shell plc

May 11, 2017

Re-shaping Shell, to create a world-class investment caseDownstream Day – Societe Generale

John Abbott – Downstream Director

#makethefuture

re-shaping shell, to create a world-class investment case · royal dutch shell may 11, 2017 royal...

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