second quarter 2017 results - shell · second quarter 2017 results re-shaping shell, to create a...

Royal Dutch Shell July 27, 2017

Royal Dutch Shell plcJuly 27, 2017

Second quarter 2017 resultsRe-shaping Shell, to create a world-class investment case

#makethefuture


Ben van BeurdenChief Executive OfficerRoyal Dutch Shell

Royal Dutch Shell July 27, 2017 3

Definitions & cautionary note

Underlying operating expenses are defined as operating expenses 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 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 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 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’’, ‘‘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, 2016 (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, July 27, 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 presentation. This presentation may contain references to Shell’s website. These references are for the readers’ convenience only. Shell is not incorporating by reference any information posted on www.shell.com. We may have used certain terms, such as resources, in this presentation 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.


Summary Q2 2017 - cash momentum

Underlying CCS earnings $3.6 billion

CFFO $11.3 billion

Q217 dividend $0.47 per share

Re-shaping Shell - on track

Divestments: >$25 billion completed, announced or advanced progress

Projects delivery for 2018 on track

Capital investment – discipline, efficiency and flexibility

Operational excellence and driving down costs

4Q rolling – oil at less than $50 per barrel

$38 billion CFFO

Cash dividend covered and net debt reduced

Balance sheet strengthened: 25.3% gearing

Leader: value + influence

Reducing our carbon

intensity

Shared value with

society

World-class investment case

FCF/share + ROCE growth

Conservative financial

management


Q2 2017

Portfolio updates

Schiehallion redevelopment – start of production V-Power now in >60 markets – differentiated fuels

Prelude – sail away Brazil – first replicant FPSO


Divestments progress

6

Divestments progress: >$25 billion Vivo Energy

April 26, 2017

Motiva

May 1, 2017

Australia Aviation

May 31, 2017

Oil Sands

May 31, 2017

Corrib

July 12, 2017

Up to $1.23 billion

Divestments Reduce capital investment

Reduce operating costs

Deliver new projects

Completed in Q2’17

Announced since Q1’17

Divestment programme on track

Completed in 2016 & 2017 $15 billion

Announced $7 billion

Advanced progress >$4 billion

$30 billion 2016-18

$9.6 billion divestment in Q2’17 ($6.7 billion in cash)

Portfolio impact included in 2020 FCF outlook


Capital discipline and efficiency

Excludes BG acquisition in 2016

Historical BG Capital investment is based on BG’s published 2014 Annual Report

$ billion

Capital investment

-$20 billion

Shell BG

30

25

2018-20: $25 billion “soft floor’’

$25 billion p.a. consistent with the free cash flow growth to 2020




Appomattox

Gannet C

Geismar

20% saving compared to investment promise

>20% cost saved compared to investment promise

17% saved with respect to original proposal

Shell interest 79%175 kboe/d peak

425,000 tonnes additional capacity

50% equity in the Gannet field


Reduce operating costs: more than 20% down since 2014

$ billion $ billion

Underlying operating expenses

Shell

BG

Underlying operating expenses – 4 quarters rolling (RHS)




Underlying operating expenses measures Shell’s total operating expenses performance excluding identified items

# FTE in SBOs (thousands) Shell Business Operations (SBOs)

7 Shell operated centres

Standard processes, increasing capability

Scope: functions + business

# of FTE (thousands)

Curlew, UK: Maintenance in-sourcing

Using a marine approach to maintenance applied on the FPSO

Reducing reliance on vendors offshore by 50%, reducing costs by 35%

FTE movements

Reduction of 6,500 FTEs in 2016

Reduction of 6,500 FTEs completed by mid-2017

“Lower forever” mindset Q2’17 4 quarters rolling

underlying opex: $38 billion Underlying costs trending

down

Shell BG


Deliver new projects:~$10 billion CFFOby 2018




Delivery de-risked

On-stream projects ramping up

BG organic growth from January1, 2016; LNG volume includes offtake; pricing assumes $50 Brent in 2017E + $60 real terms 2016 in 2018

Thousand boe per day / mtpa

Shell project start-ups 2014 through 2018

/ 15

/ 10

/ 5

$ billion p.a.

Production

LNG volume CFFO (RHS)

Mars B Brazil FPSO 7-10Brazil FPSO 11-13StonesMalikai

Permian + Fox Creek

GorgonQCLNGPrelude

KashaganSchiehallion redevelopmentClair Ph2

StartedUnder construction

9

Select key projects


Safety and operational excellence

Availability: Gulf of Mexico, USA Availability: Gumusut, Malaysia

Proactive integrated surveillance

System + leadership

Unplanned production losses reduced from >5% to 2.7% over the period ‘15 -‘17

Focus on availability improvement across portfolio

Using safety practices and culture to improve availability

Use an appropriate

picture

Use an appropriate

pictureUse an appropriate

picture

Availability improved by 6% over the period ‘12-’17 compared to ‘08-’11 through relentless focus on reliability

Goal-zero mindset across operations from safety to reliability

Strong process safety record

98% availability in 2017

Availability: Pernis, the Netherlands

2017 data based on year-to-date performance

GoM: Unplanned production losses on surface facility equipment excluding weather, pipeline and subsurface outages


Jessica UhlChief Financial OfficerRoyal Dutch Shell


Q2 2017

Financial highlights

Earnings and ROACE on CCS basis, excluding identified items

NCI: Non Controlling Interest

Dividend: Dividend distributed

$ billion

Earnings Q2 2016 to Q2 2017CCS earnings $ billion Q2 2016 Q2 2017

Upstream (1.3) 0.3

Integrated Gas 0.9 1.2

Downstream (CCS) 1.8 2.5

Corporate & non-controlling interest (0.3) (0.4)

CCS net earnings 1.0 3.6

CCS earnings, $ per share 0.13 0.44

Cash flow from operations 2.3 11.3

Free cash flow (3.2) 12.2

Dividend 3.7 3.9

ROACE (%) 2.5 4.2

Q2’17 vs. Q2’16: Earnings: + $2.6 billion CFFO: +$9.0 billion Free cash flow: +15.4 billion


Q2 2017

Cash momentum

Earnings on CCS basis, excluding identified items

Cash flow from operations excluding working capitalCash flow from operations excluding working capital – 4 quarters rolling (RHS)

Strong cash flow momentum continued from 2016 into 2017

$38bln CFFO (4 quarters rolling) at <$50/bbl

Average Brent oil price - 4 quarters rolling ($/bbl)

Clean earnings

$ billion $ billion

$99/bbl $43/bbl $50/bbl


Downstream financial performance

Earnings and ROACE on CCS basis, excluding identified items

$ billion

Earnings + ROACE

Capital employed$52.5 billion at end Q2’17

Cash flow

Working Capital movementCFFO excluding working capital

Refining & Trading ChemicalsMarketing

ROACE (RHS)Refining & Trading

ChemicalsMarketing

$ billion %

Strong cash generation

Competitive returns


The world’s largest fuel retailer

*Source: Brand Finance Global 500

Most valuable oil and gas brand in the world*


Q2 2017

Synergies

*Exchange rates assumed for synergies calculation purposes at the time of BG combination for 2017, 2018

FTE: Full time equivalent

FTE reductions

$3.5 billion synergies by 2018 as per BG prospectus exceeded

$4.5 billion expected by the end of 2017at planned exchange rates*

Exploration synergiesCosts and corporate synergies Synergies target as per BG

prospectus More synergies, delivered

faster than expected

Synergies included in operating costs and capital investment guidance

2016 2017E 2018E

$ billion

Synergies update

Additionalsynergies

# of FTE (thousands)

Contracting and Procurement savings$ billion

16

Shell BG


Q2 2017

Cash performance and distributions

$ billion

Dividend + gearing

UPSTREAM

IG

DOWNSTREAM/CORPORATE

4 quarters rolling:

Cash dividend covered at oil price below $50/bbl

Gearing reduced to 25.3%

$ billion

Sources and uses of cash – 4 quarters rolling

Dividend Buy-backs

Gearing (RHS)

%

26.4

Interest paid Debt repayments & other financing


Cash flow priorities 2016-18

Priorities for cash Debt reduction Dividends Buy-backs

& capital investment

1 2 3





Q3 2017Outlook

Q3 – Q3 OUTLOOK: Year-ago baseline reflects Shell’s earnings seasonality

Integrated gas Gorgon start-up partly offset by higher maintenance: positive impact of ~60 kboe/d

Upstream Divestment impact: reduction of ~190 kboe/d

Production in the Netherlands (NAM): reduction of ~40 kboe/d

Maintenance: negative impact of ~30 kboe/d

Restored production in Nigeria: positive impact of ~90 kboe/d

Downstream Refinery availability to increase

Chemicals availability to increase

Divestment impacts: reduction of ~240 thousand b/d in oil products sales volumes

2017 OUTLOOK:

Corporate segment: net charge of $350 – 450 million in Q3; $1.4 – 1.6 billion in 2017, excluding the impact of currency exchange rate effects and interest rate movements

Shell earnings sensitivity:

Brent: $10/bbl Brent +/- ~$5 billion earnings per annum, of which:Upstream +/- ~$3 billion; Integrated Gas +/- ~$2 billion (4-6 month LNG price lag versus Brent)

Henry Hub: $1/mmbtu +/- ~$250 million earnings per annum

19


Ben van BeurdenChief Executive OfficerRoyal Dutch Shell


World-class investment case

Transformation

ROACE on CCS basis, excluding identified items

Organic free cash flow as CFFO minus CFFI excluding divestment proceeds

2019-2021 Brent price as 2016 RT

Strategy is working

Implementation is on track

Q2’174Q rolling

2013-2015average

Brent

ROACE

~$50

4.2%

~$90

8%

Organic free cash flow $16.6 billion$5 billion p.a.

2019-2021average

~$60

~10%

$20-25 billion p.a.


Questions & Answers

Ben van BeurdenChief Executive Officer

Jessica UhlChief Financial Officer



Royal Dutch Shell plcJuly 27, 2017

Second quarter 2017 resultsRe-shaping Shell, to create a world-class investment case

#makethefuture


Q2 2017

Prices & margins $/barrel

Shell oil & gas realisations

$/barrel

Industry refining margins

$/tonne

Industry chemicals margins

US ethaneWestern Europe naphthaNE/SE Asia naphtha

US West CoastUS Gulf Coast cokingRotterdam complexSingapore

OilGas (RHS)

24

$/mscf


Q2 2017

Upstream results$ billion

Earnings Q2 2016 to Q2 2017

Environment Choice


Q2 2017

Integrated Gas results

$ billion


Environment Choice


Q2 2017

Downstream results

Earnings on CCS basis, excluding identified items.

$ billion


$ billion

Earnings mix

MarketingRefining & Trading

Chemicals


Q2 2017

Oil and gas production

Million boe per day

Upstream + Integrated Gas – oil & gas

Million tonnes

LNG liquefaction volumes

Choice


Projects under construction

29

Start up Project Country Shell share (direct &

indirect) %

Peak Production

100% kboe/d

LNG 100% Capacity mtpa

Products Legend Theme Shell Operated

2017-18 Baronia / Tukau Timur Malaysia 40 65 Conventional oil + gasBerbigão** Brazil 25 150 Deep water

Clair Ph2 United Kingdom 28 100 Conventional oil + gas

Coulomb United States 100 20 Deep water P

Fox Creek* Canada various 26 Shales P

Forcados Yokri Integrated Project (FYIP) Nigeria 30 50 Conventional oil + gas P

Gbaran-Ubie Ph2 Nigeria 30 150 Conventional oil + gas P

Geismar AO4 United States 100 425 ktpa AO Chemicals P

Lula Extreme South** Brazil 25 150 Deep waterLula North** Brazil 25 150 Deep water

Permian* United States various 54 Shales P

Pernis Solvent Deasphalting Netherlands 100 50 kbpd Oil Products P

Prelude FLNG Australia 68 131 3.6 1.7 mtpa NGLs Integrated Gas P

Tempa Rossa Italy 25 50 Conventional oil + gas2019+ Appomattox United States 79 175 Deep water P

Atapu 1** Brazil 25 150 Deep water

Atapu 2** Brazil 25 150 Deep water

Bokor Malaysia 40 12 Conventional oil + gas

Kaikias Ph1 United States 80 40 Deep water P

Nanhai China Chemicals China 50 1.2 mtpa C2 Chemicals

Pennsylvania cracker United States 100 1.5 mtpa C2 Chemicals P

Rabab Harweel Integrated Project Oman 34 40 Conventional oil + gas

Southern Swamp AG Nigeria 30 30 Conventional oil + gas P

* Permian and Fox Creek production represents Shell entitlement share of production. 2017-18: production growth expected between 2016 peak to 2018 peak production. 2019+: production

growth expected between 2018 peak to 2020.

** The Lula, Berbigão, Atapu accumulations are subject to unitisation agreements; production shown is FPSO oil capacity as per operator

2017-18 ~430 kboe/d 2.5 mtpa LNG 50 kbpd refined products 0.4 mtpa AO

2019+ ~270 kboe/d 2.1 mtpa ethylene


Pre-FID options

* Production shown is FPSO oil capacity as per operator

30

Phase Project Country Shell share (direct &

indirect) %

Peak Production

100% kboe/d

LNG 100% Capacity mtpa

Products Legend Theme Shell Operated

Select Bonga Main Integrated Redevelopment Nigeria 55 112 Deep water P

KGK Expansion Project (KEP 1A) Kazakhstan 29 TBD Conventional oil + gas

Libra 2* Brazil 20 180 Deep water

LNG Canada T3-4 Canada 50 14 Integrated Gas

Sakhalin T3 Russia 28 69 ~5 Integrated Gas

Define Bonga South West Nigeria 43 154 Deep water P

Changbei II China 50 57 Integrated Gas P

Lake Charles LNG United States TBD 16 Integrated GasLibra pilot FPSO* Brazil 20 180 Deep water

LNG Canada T1-2 Canada 50 14 Integrated Gas

Penguins Redevelopment United Kingdom 50 40 Conventional oil + gas P

Val d'Agri Ph2 Italy 39 60 Conventional oil + gas

Vito United States 63 100 Deep water P

>350 kboe/d

>15 mtpa LNG


Divestments progress: >$25 billion

Completed in 2016 & 2017: $15 billion

Announced: $7 billion

In progress: >$4 billion

Divestments progress




$30 billion 2016-18

$9.6 billion divestment proceeds in Q2’17 ($6.7 billion in cash)

Portfolio impact included in 2020 FCF outlook

Picture

Vivo Energy Australia Aviation

Oil Sands Motiva

Completed in Q2’17

Divestments impact

UK North Sea assets: announced January 2017 1

Oil sands mining + in-situ: completed May 2017 1, 2

Motiva JV exit: completed May 2017 3

Production -162 kboe/d

CFFO -$0.5 billion

Operating expenses -$1.4 billion

Capital investment -$0.2 billion

Production -116 kboe/d

CFFO -$1.2 billion

Operating expenses -$0.5 billion

Capital investment -$0.4 billion

Announced since Q1’17

Corrib – up to $1.23 billion1 Full-year basis, based on 2016 actuals2 Represents 60% of AOSP3 2017 estimates, shown on full-year basis, excluding consolidation effects.

Refining capacity -57 kboe/d

Oil product sales -221 kboe/d

Operating expenses +$1.0 billion

Capital investment +$0.5 billion

Depreciation +$0.4 billion

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