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Royal Dutch Shell plc July 28, 2016
Second quarter 2016 results Re-shaping Shell, to create a world-class investment case
“Let’s make the future”
Royal Dutch Shell July 28, 2016
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. Resources and potential: Our use of the term “resources and potential” 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. 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. There can be no assurance 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, 2015 (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 release, July 28, 2016. 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.
Definitions & cautionary note
3
Royal Dutch Shell July 28, 2016 4
Strategy “Let’s make the future”
Leader: value + influence
Reducing our carbon intensity
Shared value with society
World-class investment case
STRATEGIC
Focus portfolio on resilient positions
Invest in advantaged projects
Value chain integration
FCF/share + ROCE growth
Conservative financial
management
OPERATIONAL
Reset cost and capital spending
First class execution projects +
operations
Unrelenting focus on HSSE and
licence to operate
Royal Dutch Shell July 28, 2016
Re-shape Shell Driving strategy in multiple time horizons
Relentless portfolio high-grading
Strong free cash flow and returns
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+
CONVENTIONAL OIL + GAS
CHEMICALS
OIL PRODUCTS
DEEP WATER INTEGRATED GAS
OIL SANDS MINING
SHALES NEW ENERGIES
5
Royal Dutch Shell July 28, 2016
Thousand boe/d Thousand boe/d Unit costs $/boe
6
Operating costs exclude identified items; deep water excludes idle rig costs
Re-shape Shell H1 2016 delivery
Reducing costs + improving uptime Delivering growth projects HSSE priority
Cash engines: today Growth priorities: 2016+ Future opportunities: 2020+
Conventional oil and gas Deep water Shales Unit costs $/boe Unit costs $/boe
Unit operating costs Production (RHS)
Thousand boe/d
Royal Dutch Shell July 28, 2016
Competitive financial data as published. Free cash flow: cash flow from operations less cash used in investing activities. $/ADR for European companies.
ROACE underlying: European companies: CCS basis excluding identified items. US companies: reported earnings excluding special non-operating items. Capital employed on gross debt
basis.
Financial dashboard
%
Gearing
%
ROACE
$/share
Free cash flow per share
%
Total shareholder return
Shell Peer group
3 years to Q2 2016 12 months to Q2 2016
Royal Dutch Shell July 28, 2016 9
Earnings and ROACE on CCS basis, excluding identified items
$ billion
Earnings Q2 2015 to Q2 2016
Q2 2016 Financial highlights $ billion Q2 2015 Q2 2016
Upstream (0.5) (1.3)
Integrated Gas 1.4 0.9
Downstream (CCS) 3.0 1.8
Corporate & minorities (0.1) (0.3)
CCS net earnings 3.8 1.0
CCS earnings, $ per share 0.60 0.13
Cash flow from operations 6.1 2.3
ROACE (%) 7.6 2.5
Dividends 3.0 3.7
Dividend, $ per share 0.47 0.47
Royal Dutch Shell July 28, 2016 10
Earnings on CCS basis, excluding identified items
$ billion
Earnings Q2 2015 to Q2 2016
Q2 2016 Financial highlights
Environment Choice
Royal Dutch Shell July 28, 2016 11
Cash investment: Cash flow from investing activities
Cash performance + payout
$ billion
Cash flow
$ billion
Dividend, buyback + gearing
$ billion, 2016 Q2 4Q rolling
Cash generation
Priorities for cash: Debt reduction Dividends Buybacks + capital investment
CFFO Cash investment Free cash flow (RHS)
Cash investment
BG acquisition – cash element Dividend and buyback
Downstream + Corporate
Dividend declared Buyback
End period gearing (RHS)
$ billion
%
Integrated Gas Upstream
~20
43
Gearing range
CFFO CFFI
Royal Dutch Shell July 28, 2016 12
Integration with BG BG performance
Thousand boe per day
Queensland LNG
Thousand boe per day
Brazil pre-salt
$ billion
Synergies: BG
Production Number of cargoes delivered in the quarter (RHS)
1st LNG Train 1 Dec 2014
T2 start up Nov 2015 #
Cidade Itaguaí Q3 2015
FPSO Cidade de Maricá Q1 2016
Actions taken for ~50% of synergies capture: Staff + contractors Offices Exploration Procurement + others
2.5
4 4.5
Exploration Costs
Royal Dutch Shell July 28, 2016 13
* $60 oil price scenario 2018 (2016 RT Brent)
Manage down-cycle Pulling levers to manage financial framework
2016-18 levers
Divestments Reduce capital
investment
Reduce operating
costs
Deliver new projects
Reducing our cash break-even
Further options available
+/- $10 Brent = ~5 billion CFFO
$ billion 2015 baseline:
Shell + BG 2016 2017-2018 potential
Operating costs 46 Trend to 40 (underlying) Multi-billion p.a.
Capital investment 36 ~29 25-30
Divestments 6 + 5 6-8 in progress
30 over 2016-18
Projects start-up post-2014 (CFFO) n/a ~$2 billion ~10 billion
by 2018*
Royal Dutch Shell July 28, 2016 14
Manage down-cycle Divestments
Integrated gas split out from Upstream from 2011 onwards
$ billion
Divestment program
$30 billion 2016-18 Progressing $6-8 billion 2016 5-10 countries; ~10% of production
Downstream/Corporate High grading ‘tail’ Infrastructure + mature positions Refocus portfolio
Upstream Integrated Gas
2016-2018 completed + announced $ billion
Completed – MLP 0.8
– Denmark marketing 0.3
– N.Z.: Maui pipeline 0.2
– MGL IPO 0.1
– Others 0.1
Total completed 1.5
Announced – Showa Shell ~1.4
– Malaysia refining
~0.2 – Anasuria cluster
– Maclure
Total announced ~1.6
TOTAL ~3.1
In progress – Motiva JV end
– N.Z.: upstream strategic review – Thailand strategic review – Selective North Sea strategic review
Divestments Reduce capital investment
Reduce operating costs
Deliver new projects
Royal Dutch Shell July 28, 2016
25-30
15
2016 excludes BG purchase price
$ billion
Capital investment
Manage down-cycle Lower & more predictable capital investment
Planning for $25-$30 billion range
$30 billion/year ceiling
Trending lower in range today
Options to further reduce below $25 billion if warranted
Shell BG
-25%
Divestments Reduce capital investment
Reduce operating costs
Deliver new projects
Shell + BG C.I. on a cash basis
58
47 41
36
53
43 37
33 31 ~29 29 ~26
Royal Dutch Shell July 28, 2016 16
Manage down-cycle Reduce operating cost
Excluding identified items
$ billion
Operating cost
Shell BG
Divestments Reduce capital investment
Reduce operating costs
Deliver new projects
Substantial reductions delivered
“Lower for ever” mindset + BG synergies
Staff, supply chain + contractors
Divestments, growth, FX impacts
-$4 bn
~40
49 46
44 42
Royal Dutch Shell July 28, 2016
BC-10 Ph3 Shell 50%
Gorgon start-up 15.6 mtpa LNG Shell 25%
17
Deliver new projects 2016 investment decisions and planned start-ups
Divestments Reduce capital investment
Reduce operating costs
Deliver new projects
Kashagan 300 kboe/d Shell 17%
Stones 50 kboe/d Shell 100%
Pennsylvania FID 1.6 mtpa polyethylene plant Shell 100%
Nanhai 2nd cracker FID 1.2 mtpa ethylene plant Shell 50%
7th FPSO 1st oil – ‘Maricá’ 150 kboe/d Shell 25%
8th FPSO – ‘Saquarema’ 150 kboe/d Shell 25%
LNG Canada delay of FID 13 mtpa LNG Shell 50%
9th FPSO – ‘Caraguatauba’ 100 kboe/d Shell 30%
ML South start-up 35 kboe/d Shell 35%
FID
Lake Charles delay of FID ~15 mtpa LNG Shell capacity interest 100%
2016 start-ups: >250 kboe/d ; 3.9 mtpa LNG
New chemicals investment
LNG FIDs postponed
Start-up
Royal Dutch Shell July 28, 2016 18
Deliver new projects Conventional exploration: progress H1 2016
Million boe
Fort Sumter discovery
GoM: cumulative resources added (2010-2016)
Added ~1.3 billion boe in GoM 2010+ Heartland + near field focus; vicinity to infrastructure; deep geological basin knowledge
Divestments Reduce capital investment
Reduce operating costs
Deliver new projects
Appomattox Vito
Cardamom South Deimos
Vicksburg Vito appraisal
Appomattox appraisal
Rydberg Kaikias
Powernap
Kaikias appraisal Powernap appraisal
Kepler North Fort Sumter
Oil discovery in Gulf of Mexico heartland; Norphlet play
>125 million boe resources added, with follow-up wells in 2016 and 2017
Shell 100 %
Shell lease Discovery
Fort Sumter
Rydberg
Vicksburg Appomattox
future Appo TLP
Mississippi canyon Desoto canyon
TLP
Royal Dutch Shell July 28, 2016 20
Transformation
CREATE A WORLD CLASS INVESTMENT CASE
Improved capital efficiency: reduced investment/FCF ratio
Energy transition: CO2 footprint & new energies strategy
Simpler company: Exit ~10% production; 5-10 countries
Less cost + fewer people with BG than Shell stand-alone: 12,500 fewer staff
Capital efficiency: 2013 spending halved & $45 billion mitigated
Improving our metrics: FCF/share; ROCE; net debt
$30bn divestments: Innovative deals like Motiva, Showa and MLP
Portfolio growth: 1 mboe/d adds $10 bln cash flow
2019-2021 average
2013-2015 average
Brent
ROACE
~$60
~10%
~$90
8%
Organic free cash flow $20-25 billion p.a. $5 billion p.a.
$60 oil price scenario (2016 RT Brent)
Royal Dutch Shell July 28, 2016
Q3 2016 Outlook Q3 – Q3 OUTLOOK: Year-ago baseline reflects Shell’s earnings seasonality
Upstream
Nigeria SPDC security impact: ~-35 kboe/d
Integrated gas
Maintenance: ~-15 kboe/d
Downstream
Refinery availability marginally increase
Chemicals availability increase
Divestment impact Marketing volumes: ~-200 kboe/d
PPA - depreciation charge: up to $0.3 billion
Shell + BG earnings sensitivity (2016):
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
22
Royal Dutch Shell July 28, 2016 23
Earnings on CCS basis, excluding identified items
$ billion
Earnings Q2 2015 to Q2 2016
Q2 2016 Upstream results
Environment Choice
Royal Dutch Shell July 28, 2016 24
Earnings on CCS basis, excluding identified items
$ billion
Earnings Q2 2015 to Q2 2016
Q2 2016 Integrated gas results
Environment Choice
Royal Dutch Shell July 28, 2016
Choice: +30%
25
Q2 2016 Oil and gas production
Million boe per day
Upstream + Integrated Gas – oil & gas
Million tonnes
LNG liquefaction volumes
3.00
3.25
3.50
3.75
2.75
2.50
Royal Dutch Shell July 28, 2016 26
Earnings on CCS basis, excluding identified items
Q2 2016 Downstream results
$ billion
Earnings Q2 2015 to Q2 2016
$ billion
Earnings mix
Marketing Refining & Trading Chemicals
Royal Dutch Shell July 28, 2016
$/barrel
Shell oil & gas realisations
$/barrel
Industry refining margins
$/tonne
Industry chemicals margins
Q2 2016 Prices & margins
$/mmbtu
US ethane Western Europe naphtha NE/SE Asia naphtha
US West Coast US Gulf Coast coking Rotterdam complex Singapore
Oil Gas (RHS)
27
Royal Dutch Shell plc July 28, 2016
Second quarter 2016 results Re-shaping Shell, to create a world-class investment case
“Let’s make the future”