1 Copyright of Royal Dutch Shell plc 31 July, 2014
BALANCING GROWTH & RETURNS SECOND QUARTER 2014 RESULTS
31 JULY 2014 ROYAL DUTCH SHELL PLC
2 Copyright of Royal Dutch Shell plc 31 July, 2014
BEN VAN BEURDEN CHIEF EXECUTIVE OFFICER
ROYAL DUTCH SHELL PLC
3 Copyright of Royal Dutch Shell plc 31 July, 2014
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 20-F for the year ended 31 December, 2013 (available at www.shell.com/investor and www.sec.gov ). These factors also should be considered by the reader. Each forward-looking statement speaks only as of the date of this presentation, 31 July, 2014. Neither Royal Dutch Shell 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. 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 20-F, File No 1-32575, available on the SEC website www.sec.gov. You can also obtain this form from the SEC by calling 1-800-SEC-0330.
4 Copyright of Royal Dutch Shell plc 31 July, 2014
2014 PRIORITIES
Returns and cash flow
Competitive returns for shareholders
Take hard choices on new options
Increase asset sales
Reduce pace of growth investment
Major deep-water start-ups in 2014
Integrate 2013 acquisitions
Deliver new projects
Enhance our capital efficiency
Improve our financial performance
5 Copyright of Royal Dutch Shell plc 31 July, 2014
DRIVING PERFORMANCE IN SHELL
Policy from 1.1.2015
New shareholding requirements Performance units
Drive bottom line focus
Credible, competitive and affordable plans
Drives decisions on spending + divestment
Individual performance management
Stronger accountability for outcomes
New shareholding requirements for senior executives
7 x base pay CEO
4 x base pay CFO
Top 200 executives below Executive Committee: 1.5 x base pay
Senior Executives
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Cash flow
IMPROVE FINANCIAL PERFORMANCE H1 2014 OUTCOME
Earnings + ROACE $ billion $ billion
CCS earnings + ROACE excluding identified items
Upstream
Downstream
Corporate/Other
CFFO CFFI
%
ROACE (RHS)
$ billion
Free cash flow (RHS)
Dividend + buy-back $ billion
Dividend declared Buy-back
Balancing returns + growth
Competitive shareholder returns Expecting >$30 billion distributions to shareholders
2014-15
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IMPROVE FINANCIAL PERFORMANCE OIL PRODUCTS
ROACE: CCS earnings excluding identified items
Resilience
Attr
activ
enes
s
Addressing underperforming portfolio Downstream CFFO + ROACE $ billion %
Exit: Italy Norway Australia Denmark others
Fix: Motiva Singapore fuels Pernis + Rheinland others
Selective Growth: Chemicals China LNG for transport Premium fuels + lubes Refinery crude flexibility others
: completed
Announced divestments 2014 year to date: 180,000 b/d refinery capacity
300,000 b/d marketing
US mid-stream MLP proposal
CFFO ROACE (RHS)
8 Copyright of Royal Dutch Shell plc 31 July, 2014
IMPROVE FINANCIAL PERFORMANCE NORTH AMERICA RESOURCES PLAYS
* 2014 H1: 12 month rolling
Haynesville
Elba LNG
LNG Canada
Groundbirch Deep Basin/Kaybob
Foothills/Pembina
Pinedale Gas-to-chemicals
Appalachia
Liquids rich shales (LRS)
Gas monetization options
Permian
Dry gas Gas/LRS
Resilience
Attr
activ
enes
s
$ billion
Dry gas Acquisitions LRS Divestments
-50%
-20%
North Americas capital investment Dry gas: LNG growth options in Canada Lower 48: low holding cost production +
appraisal drilling Liquid rich shales: Major divestments completed Appraisal in Western Canada + Permian
Q214 impairments $1.9 billion
Redefining growth + reducing cost
Exit: Eagle Ford Mississippi Lime Rockies LRS Deep Basin (North) Foothills (Burnt Timber)
Hold or Divest: Lower 48 gas
Maintain / Grow: W. Canada gas +
integration plays W. Canada LRS Permian LRS
LRS Plays completed
9 Copyright of Royal Dutch Shell plc 31 July, 2014
ENHANCE CAPITAL EFFICIENCY
Take hard choices on new options
More selectivity: FIDs > $500 million require CEO approval at FEED
Maturing new projects: LNG, deep-water
Increase asset sales
$8 billion completed H114
US midstream MLP proposal
Reduce pace of growth investment
2014 organic spending ~$35 billion
Scrip cancellation reflects improving FCF
: completed
2014+ Asset sales / license expiry
Wheatstone LNG
BC-10 dilution
North America LRS
Italy Downstream
ADCO license expiry
Woodside market sell down
Australia/Denmark/ Norway Downstream
Nigeria onshore
Late life UKCS
Others
270,000 boed upstream
180,000 b/d refining
300,000 b/d marketing
10 Copyright of Royal Dutch Shell plc 31 July, 2014
DELIVER NEW PROJECTS 2014 START-UPS
Mars B – February 2014 start-up
Mars B production ramp-up progress
Cardamom: H2 2014 start-up
Gumusut-Kakap: H2 2014 start-up
Shell 72%, 100 kboe/d
Shell 33%, 135 kboe/d Shell 100%, 50 kboe/d
kboed
11 Copyright of Royal Dutch Shell plc 31 July, 2014
Heartland
CONVENTIONAL EXPLORATION PORTFOLIO + THEMES
Prospect size: potential
Conventional Exploration spend 2014
Near field exploration Arctic/Frontier
Prospect Size
(million boe)
Time to development
(years)
15+
10+
3+
<3 5-50
50-250
>250
>500 Arctic
Frontier Under explored basins
Heartlands New plays in Shell producing basins
Near field High value
Balancing exploration risk
~ $ 4 billion
12 Copyright of Royal Dutch Shell plc 31 July, 2014
CONVENTIONAL EXPLORATION PROGRESS DELIVERY H1 2014: EXAMPLES
Rosmari gas discovery
~110 million boe
Shell 85%
4 near field gas discoveries in 2014 (100% success rate)
Adding gas to Malaysia heartland
Shell 30%
Deep-water oil discovery 16 km south of Appomattox
~100 million boe
Shell 57.2%
3rd Norphlet discovery
Malaysia, Block SK318 Malaysia, Block SK408 GOM, Rydberg Deep
Doo Sung rig Noble Globetrotter 1 Gorek-1 3D
13 Copyright of Royal Dutch Shell plc 31 July, 2014
SIMON HENRY CHIEF FINANCIAL OFFICER
ROYAL DUTCH SHELL PLC
14 Copyright of Royal Dutch Shell plc 31 July, 2014
Q2 2014 FINANCIAL HIGHLIGHTS
Earnings CCS basis, excluding identified items, ROACE excluding identified items
Earnings Q2 2013 to Q2 2014 $ billion
Earnings Q2 2013 to Q2 2014
Q2 2013
Q2 2014
$ billion UPSTREAM 3.5 4.7 DOWNSTREAM (CCS) 1.2 1.3
CORPORATE & MINORITIES -0.1 0.1
CCS NET EARNINGS 4.6 6.1
CCS EARNINGS, $ PER SHARE 0.73 0.97
CASH FROM OPERATIONS 12.4 8.6
ROACE (%) 11.8 9.4 SHARE BUY BACKS 1.9 0.3
DIVIDENDS 2.8 3.0
DIVIDEND, $ PER SHARE 0.45 0.47
Environment Choice
15 Copyright of Royal Dutch Shell plc 31 July, 2014
UPSTREAM PERFORMANCE Q2 2014
Earnings CCS basis, excluding identified items
Earnings + cash flow $ billion
Exploration expense
$ billion (pre-tax)
Oil and gas production
Million boe/day
Upstream International Upstream Americas Upstream International Upstream Americas
Gas Oil LNG Sales volumes (RHS)
Million tonnes
Cash flow from operations (RHS)
Q3 – Q3 OUTLOOK:
Production impact: Abu Dhabi license expiry ~170 kboe/d
Divestment impact ~75 kboe/d
Uplift from lower maintenance
Q214 LNG dividend phasing to Q314
16 Copyright of Royal Dutch Shell plc 31 July, 2014
DOWNSTREAM PERFORMANCE Q2 2014
Earnings CCS basis, excluding identified items
Earnings $ billion
Cash flow
Sales volume
Oil Products Chemicals
Refinery availability Chemicals availability Oil products (million bbls/d) (RHS)
Chemicals (million tonnes) (RHS)
Availability and sales volumes %
$ billion
CFFO excl w/c movements Working capital movements
CFFO
Q3 – Q3 OUTLOOK:
Similar refinery availability
Lower chemicals availability
Refining margin outlook remains bearish
17 Copyright of Royal Dutch Shell plc 31 July, 2014
UP STREAM
DOWN STREAM
CASH FLOW AND PAY-OUT
Cash generation $ billion, Q214 4Q rolling
Gearing + balance sheet $ billion
Cash flow from operations Net cash used in investing activities
Dividend and buy back
Gearing range
Net debt Gearing (RHS) 12 months
rolling
Dividends declared 12 months rolling
Dividend track record $ billion
Scrip dividend cancelled from Q2 2014
Buy back $7-8 billion 2014-15 combined
~$1.6 billion H1 2014
18 Copyright of Royal Dutch Shell plc 31 July, 2014
FINANCIAL FRAMEWORK – KEY DRIVERS
Organic free cash flow : cash flow from operations less cash used in investing activities adjusted for major acquisitions and divestments Dividend declared: weighted average outstanding shares x dividend per share ($)
A+D supports portfolio growth $ billion (cash basis)
Organic free cash flow drives dividend
$ billion (cash basis)
Divestments
Acquisitions
Cumulative cash surplus (deficit) of divestments over acquisitions
Organic free cash flow
Dividend declared
Cumulative organic FCF surplus (deficit) over dividend declared
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FINANCIAL FRAMEWORK – TRACK RECORD
Free cash flow: cash flow from operations less cash used in investing activities
Balancing financial framework over time
$ billion
Free cash flow
Cash dividend and buybacks
Cumulative surplus (deficit) of free cash flow over dividend and buybacks
20 Copyright of Royal Dutch Shell plc 31 July, 2014
COMPETITIVE PERFORMANCE: BALANCING GROWTH AND RETURNS 4Q ROLLING Q2 2014
Free cash flow: cash flow from operations less cash used in investing activities; ROACE underlying: European companies: CCS basis excluding identified items. US companies: reported earnings excluding special non-operating items.
Cash flow from operations $ billion
Free cash flow $ billion
ROACE – underlying %
Shell Peer group
Tracking Shell’s competitive performance
Q2
2014
2014
2014
21 Copyright of Royal Dutch Shell plc 31 July, 2014
BEN VAN BEURDEN CHIEF EXECUTIVE OFFICER
ROYAL DUTCH SHELL PLC
22 Copyright of Royal Dutch Shell plc 31 July, 2014
2014 PRIORITIES Q2 2014 DELIVERY
Earnings excluding identified items
Deliver new projects
Enhance our capital efficiency
Improve our financial performance
Q214 CCS earnings $6.1 billion; CFFO 8.6 billion
Restructuring in Oil Products + North America resources plays
Expecting > $30 billion distributions to shareholders 2014-15
More selectivity on new projects
$8 billion asset sales delivered
US mid-stream MLP proposal
Continued Mars B growth
Gumusut-Kakap + Cardamom deep-water start-up H214
Exploration
23 Copyright of Royal Dutch Shell plc 31 July, 2014
QUESTIONS & ANSWERS SECOND QUARTER 2014 RESULTS
24 Copyright of Royal Dutch Shell plc 31 July, 2014
BALANCING GROWTH & RETURNS SECOND QUARTER 2014 RESULTS
31 JULY 2014 ROYAL DUTCH SHELL PLC