Royal Dutch Shell reports first quarter 2016 unaudited results.
- Following completion of the acquisition on February 15, 2016, BG Group plc (“BG”) has been consolidated within Royal Dutch Shell’s (NYSE:RDS.A)(NYSE:RDS.B) results. For practical purposes, this includes February and March 2016, as the impact for the first half of February is deemed immaterial.
- Royal Dutch Shell’s first quarter 2016 CCS earnings attributable to shareholders (see Note [3]) were $0.8 billion compared with $4.8 billion for the same quarter a year ago.
- First quarter 2016 CCS earnings attributable to shareholders excluding identified items (see page 6) were $1.6 billion compared with $3.7 billion for the first quarter 2015, a decrease of 58%.
- Compared with the first quarter 2015, CCS earnings attributable to shareholders excluding identified items were impacted by the decline in oil, gas and LNG prices and weaker refining industry conditions. Earnings benefited from lower operating expenses, as steps taken by Shell to reduce costs more than offset the increase in operating expenses associated with BG.
- First quarter 2016 basic CCS earnings per share excluding identified items decreased by 63% versus the first quarter 2015.
- Cash flow from operating activities for the first quarter 2016 was $0.7 billion, which included negative working capital movements of $3.9 billion.
- Total dividends distributed to shareholders in the quarter were $3.7 billion, of which $1.5 billionwere settled by issuing 65.7 million A shares under the Scrip Dividend Programme.
- Gearing at the end of the first quarter 2016 was 26.1% versus 12.4% at the end of the first quarter 2015. This increase mainly reflects the impact of the acquisition of BG.
- A first quarter 2016 dividend has been announced of $0.47 per ordinary share and $0.94 per American Depositary Share (“ADS”).
Read the transcript from Shell's conference call here. SUMMARY OF UNAUDITED RESULTS $ million Quarters Q1 2016 Q4 2015 Q1 2015 %[1] Income attributable to shareholders 484 939 4,430 -89 Current cost of supplies (CCS) adjustment for Downstream[2] 330 901 331 CCS earnings attributable to shareholders 814 1,840 4,761 -83 Identified items[2],[3] (739) 268 1,023 CCS earnings attributable to shareholders excluding identified items 1,553 1,572 3,738 -58 Of which: Integrated Gas 994 1,245 1,491 Upstream (1,437) (1,009) (195) Downstream 2,010 1,524 2,646 Corporate and Non-controlling interest (14) (188) (204) Cash flow from operating activities 661 5,423 7,106 -91 Basic CCS earnings per share ($) 0.11 0.29 0.76 -86 Basic CCS earnings per ADS ($) 0.22 0.58 1.52 Basic CCS earnings per share excl. identified items[3] ($) 0.22 0.25 0.59 -63 Basic CCS earnings per ADS excl. identified items[3] ($) 0.44 0.50 1.18 Dividend per share ($) 0.47 0.47 0.47 - Dividend per ADS ($) 0.94 0.94 0.94 - 1. Q1 on Q1 change 2. Attributable to shareholders 3. See page 6. Comparative information has been restated.
Royal Dutch Shell Chief Executive Officer Ben van Beurden commented:
“Shell’s integrated activities differentiate us, with our Downstream and Integrated Gas businesses delivering strong results and underpinning our financial performance despite continued low oil and gas prices.
We continue to reduce our spending levels, to capture cost opportunities and manage the financial framework in today’s lower oil price environment. The combination with BG is off to a strong start, as a result of detailed forward planning before the completion of the transaction. This will likely result in accelerated delivery of the synergies from the acquisition, and at a lower cost than we originally set out.
Putting all of this together, capital investment in 2016 is clearly trending toward $30 billion, compared to previous guidance of $33 billion, and some 36% lower than combined Shell and BG investment in 2014.
Annual operating expenses excluding identified items are trending towards a run rate of $40 billion compared with 2014 combined spend of around $53 billion.
In practice, we expect to absorb BG’s capital investment and operating expenses during 2016, with no net increase overall, compared with Shell stand alone in 2015.
We will continue to manage spend, through dynamic decision-making across the organisation, taking advantage of opportunities from both the deflating market and the two companies coming together.
The completion of the BG deal has reinforced our strategy and strength against the backdrop of hugely challenging times for our industry. For Shell and our shareholders, this is a unique opportunity to reshape and simplify the company.”
SUMMARY OF CCS EARNINGS EXCLUDING IDENTIFIED ITEMS
$ million Quarters
Q1 2016 Q4 2015 Q1 2015 %[1]
CCS earnings attributable to
shareholders 814 1,840 4,761 -83
Of which:
Integrated Gas 905 1,125 1,139 -21
Upstream (1,350) (1,458) 1,400 -196
Downstream 1,700 2,502 2,514 -32
Oil Products 1,294 2,324 2,114 -39
Chemicals 406 178 400 +2
Corporate and Non-controlling
interest (441) (329) (292) -51
Identified items[2] (739) 268 1,023
Of which:
Integrated Gas (89) (120) (352)
Upstream 87 (449) 1,595
Downstream (310) 978 (132)
Oil Products (339) 982 (123)
Chemicals 29 (4) (9)
Corporate and Non-controlling
interest (427) (141) (88)
CCS earnings attributable to
shareholders excluding identified
items 1,553 1,572 3,738 -58
Of which:
Integrated Gas 994 1,245 1,491 -33
Upstream (1,437) (1,009) (195) -637
Downstream 2,010 1,524 2,646 -24
Oil Products 1,633 1,342 2,237 -27
Chemicals 377 182 409 -8
Corporate and Non-controlling
interest (14) (188) (204) +93
1. Q1 on Q1 change
2. See page 6. Comparative information has been restated.
FIRST QUARTER 2016 PORTFOLIO DEVELOPMENTS
During the quarter, Shell completed the acquisition of BG for a purchase consideration of $54,034 million. This includes cash of$19,036 million, and the fair value ($34,050 million) of 1,523.8 million shares issued in exchange for all BG shares. Following completion of the acquisition on February 15, 2016, BG was consolidated within Shell’s results. For practical purposes, this includes February and March 2016, as the impact for the first half of February is deemed immaterial.
The consolidation of BG resulted in an increase to first quarter 2016 cash flow from operating activities of $0.8 billion and an increase to CCS earnings attributable to shareholders excluding identified items of $0.2 billion.
Goodwill of $9,024 million was recognised on the acquisition, being the excess of the purchase consideration over the fair value of net assets acquired (see Note [2]).
Shell completed the United Kingdom office footprint review announced during the final stages of the BG combination. The outcomes of the review are subject to appropriate engagement with employees and employee representatives. The review recommended a consolidation of all Shell’s London and South East based operations into Central London with the intention to close the Thames Valley Park office in Reading by the end of 2016. The review also recommended that all Aberdeen-based onshore operations move to the Shell Aberdeen Tullos office, with BG’s offices at Albyn Place closing by 2016 and the closure of Shell’s Brabazon House office in Manchester by the end of 2017.
Integrated Gas
During the quarter, first LNG production was achieved at the non-operated Gorgon project (Shell interest 25%) on Barrow Island, offshore Australia. Subsequent to first LNG cargo delivery, LNG production was temporarily halted due to mechanical issues with the propane refrigerant compressor on Train 1.
In Australia, the Browse Joint Venture participants (Shell interest 27%) decided not to progress with the development concept being studied for the resource as it did not meet commercial requirements for a positive final investment decision (“FID”), considering the current economic and market environment.
In Indonesia, INPEX as operator of the Abadi field (Shell interest 35%) received a notification from the Indonesian government authorities instructing to re-propose a plan of development based on onshore LNG for the Abadi LNG project. Shell and INPEX remain committed to work together with the Government of Indonesia to ensure that the Abadi project moves forward to optimally develop the Abadi gas reserves in a manner that benefits all.
Upstream
In Brazil, Shell announced the start of oil production from the third phase of the deep-water Parque das Conchas BC-10 development (Shell interest 50%) in the Campos basin.
Also in Brazil, the seventh non-operated FPSO, Cidade de Marciá, (Shell interest 25%) reached first oil in the BM-S-11 block of the Santos Basin, offshore Brazil. The FPSO has a production capacity of 150 thousand barrels per day.
Shell announced that it has decided to exit the joint development of the Bab sour gas reservoirs (Shell interest 40%) with ADNOC in the emirate of Abu Dhabi, United Arab Emirates, and to stop further joint work on the project. This reflects the economic climate prevailing in the energy industry.
In the United Kingdom, Shell has agreed to sell its 7.59% interest in the Maclure oil and gas field in the North Sea for a purchase consideration of some $24 million. Completion is subject to necessary approvals.
Shell had continued success in its exploration programme with 10 discoveries and appraisals in Brunei, Egypt, Malaysia, Nigeria,Oman, and the United States. This included a notable oil discovery in the United States with the non-operated Kepler North well (Shell interest 50%) in the Gulf of Mexico, and a notable gas discovery with the non-operated Jerun-1 well (Shell interest 30%) inMalaysia.
Upstream divestments totalled some $38 million for the first quarter 2016 and reflected, among others, the first tranche of the sale proceeds of the Anasuria development in the North Sea.
Downstream
During the quarter, Shell announced a conditional agreement for the sale of its 51% shareholding in the Shell Refining Company inMalaysia for $66 million. The transaction is expected to complete in 2016, subject to regulatory approval.
In the United States, Shell announced that it has signed a non-binding Letter of Intent to divide the assets of Motiva Enterprises LLC. The Motiva joint venture was formed in 1998 and has operated as a 50/50 refining and marketing joint venture between Saudi Arabian Oil Company and Shell since 2002. In the proposed division of assets, Shell will assume sole ownership of the Norco, Louisiana refinery (where Shell operates a chemicals plant), the Convent, Louisiana refinery, nine distribution terminals, and Shell branded markets in Florida, Louisiana, and the Northeastern region. Saudi Refining Inc. will retain the Motiva name, assume sole ownership of the Port Arthur refinery in Texas, retain 26 distribution terminals, and have an exclusive license to use the Shell brand for gasoline and diesel sales in Texas, and in the majority of the Mississippi Valley, the Southeast and Mid-Atlantic markets.
Also in the United States, Shell completed the sale of an additional 4.66% interest in Shell Midstream Partners, L.P. to public investors via the issuance of an additional 13,400,000 LP units for net proceeds of $421 million.
Shell announced FID on a project to expand China National Offshore Oil Corporation (“CNOOC”) and Shell Petrochemical Company’s (“CSPC”) existing 50/50 joint venture in Huizhou, Guangdong Province, China. Subject to regulatory approvals, Shell and CNOOC have agreed that CSPC will take over CNOOC’s ongoing project to build additional chemical facilities next to CSPC’s petrochemical complex. The project includes the ongoing construction of a new ethylene cracker and ethylene derivatives units, which will increase ethylene capacity by more than 1 million tonnes per year, about double the current capacity. It will also include a styrene monomer and propylene oxide plant.
In May, Shell announced that it completed the sale of Dansk Fuels in Denmark for a consideration of $0.3 billion. Dansk Fuels comprises retail, commercial fuels, commercial fleet and aviation businesses, and products trading and supply activities associated with those businesses.
KEY FEATURES OF THE FIRST QUARTER 2016
- First quarter 2016 CCS earnings attributable to shareholders (see Note [3]) were $814 million, 83% lower than for the same quarter a year ago.
- First quarter 2016 CCS earnings attributable to shareholders excluding identified items (see page 6) were $1,553 million compared with$3,738 million for the first quarter 2015, a decrease of 58%.
- Basic CCS earnings per share for the first quarter 2016 decreased by 86% versus the same quarter a year ago.
- Basic CCS earnings per share excluding identified items for the first quarter 2016 decreased by 63% versus the same quarter a year ago.
- Cash flow from operating activities for the first quarter 2016 was $0.7 billion, compared with $7.1 billion for the same quarter last year.
- Capital investment (see Definition [B]) for the first quarter 2016 was $59.0 billion, this included $52.9 billion related to the acquisition of BG. Organic capital investment for the full year 2016 is trending towards $30 billion, compared with combined capital investment of $47 billion in 2014, and a further reduction of $3 billion from earlier guidance in 2016.
- Divestments (see Definition [C]) for the first quarter 2016 were $0.5 billion.
- Operating expenses (see Definition [F]) for the first quarter 2016 increased by $0.3 billion versus the same quarter a year ago. Compared with the first quarter 2015, operating expenses excluding identified items reduced by $0.7 billion, before the increase of $0.6 billion due to the consolidation of BG. Operating expenses for the full year 2016 are trending towards a run rate of $40 billion, compared with 2014 combined spending of $53 billion.
- Total dividends distributed to shareholders in the first quarter 2016 were $3.7 billion, of which $1.5 billion were settled by issuing 65.7 million A shares under the Scrip Dividend Programme.
- Return on average capital employed on a reported income basis (see Definition [D]) was negative 0.4% at the end of the first quarter 2016 compared with 7.1% at the end of the first quarter 2015. Return on average capital employed on a CCS basis excluding identified items was 3.8% at the end of the first quarter 2016 compared with 8.9% at the end of the first quarter 2015.
- Gearing (see Definition [E]) was 26.1% at the end of the first quarter 2016 versus 12.4% at the end of the first quarter 2015. This increase mainly reflects the impact of the BG acquisition including 1.6% related to the recognition of associated finance leases.
- Oil and gas production for the first quarter 2016 was 3,661 thousand boe/d, an increase of 16% compared with the first quarter 2015. The impact of BG on the first quarter 2016 production was an increase of 522 thousand boe/d. This reflects Shell’s ownership of BG since acquisition date averaged over the full quarter. Excluding the impact of divestments, curtailment and underground storage utilisation at NAM in the Netherlands, a Malaysia PSC expiry, PSC price effects, and security impacts in Nigeria, first quarter 2016 production increased by 19% compared with the same period last year. BG assets produced some 796 thousand boe/d in the first quarter 2016, an increase of around 25% compared with the first quarter 2015 and around 31% compared with the full year 2014.
- LNG liquefaction volumes of 7.04 million tonnes for the first quarter 2016 were 14% higher than for the same quarter a year ago, of which BG contributed some 1.58 million tonnes.
- LNG sales volumes of 12.29 million tonnes for the first quarter 2016 were 25% higher than for the same quarter a year ago, mainly reflecting the impact of the acquisition of BG.
- Oil products sales volumes for the first quarter 2016 were 1% lower than for the first quarter 2015.
- Chemicals sales volumes for the first quarter 2016 decreased by 3% compared with the same quarter a year ago.
- Supplementary financial and operational disclosure for the first quarter 2015 is available at http://www.shell.com/investor.
SUMMARY OF IDENTIFIED ITEMS
With effect from 2016, identified items include the impact of exchange rate movements on certain deferred tax balances, as set out in Definition [A]. The comparative information in this Report has been restated following this change.
CCS earnings attributable to shareholders for the first quarter 2016 reflected the following items, which in aggregate amounted to a net charge of $739 million (compared with a net gain of $1,023 million for the first quarter 2015), as summarised below:
- Integrated Gas earnings included a net charge of $89 million, primarily reflecting a gain of some $400 million related to the impact of the strengthening Australian dollar on a deferred tax position, offset by a net charge on fair value accounting of certain commodity derivatives and gas contracts of some $170 million, asset impairments of some $130 million, and other items including a litigation provision. Integrated Gas earnings for the first quarter 2015 included a net charge of $352 million.
- Upstream earnings included a net gain of $87 million, primarily reflecting a gain of some $360 million related to the impact of the strengthening Brazilian real on a deferred tax position, partly offset by asset impairments of some $300 million. Upstream earnings for the first quarter 2015 included a net gain of $1,595 million.
- Downstream earnings included a net charge of $310 million, primarily reflecting the net impact of fair value accounting of commodity derivatives of some $240 million and impairments of some $190 million, partly offset by gains on divestments of some $130 million. Downstream earnings for the first quarter 2015 included a net charge of $132 million.
- Corporate results and Non-controlling interest included a net charge of $427 million, mainly reflecting a charge of $266 million related to the payment of stamp duty in the United Kingdom for the acquisition of BG, and a charge of some $190 million related to the impact of the strengthening Brazilian real on deferred tax positions related to financing of the Upstream business, partly offset by $100 million for the non-controlling interest share of an impairment of a Downstream asset. Earnings for the first quarter 2015 included a net charge of $88 million.
EARNINGS BY SEGMENT
INTEGRATED GAS
$ million Quarters
Q1 2016 Q4 2015 Q1 2015 %[1]
Integrated Gas earnings excluding
identified items 994 1,245 1,491 -33
Integrated Gas earnings 905 1,125 1,139 -21
Integrated Gas cash flow from
operating activities 2,657 1,929 2,534 +5
Integrated Gas capital investment
excluding BG acquisition impact 1,051 1,357 1,301 -19
Integrated Gas BG-related capital
investment 21,773 - -
Liquids production available for
sale (thousand b/d) 224 201 201 +11
Natural gas production available
for sale (million scf/d) 3,532 2,486 2,447 +44
Total production available for sale
(thousand boe/d) 833 633 622 +34
LNG liquefaction volumes (million
tonnes) 7.04 5.68 6.17 +14
LNG sales volumes (million tonnes) 12.29 10.14 9.81 +25
1. Q1 on Q1 change
First quarter Integrated Gas earnings excluding identified items were $994 million compared with $1,491 million a year ago. Identified items were a net charge of $89 million, compared with a net charge of $352 million for the first quarter 2015 (see page 6).
Compared with the first quarter 2015, earnings excluding identified items were impacted by the decline in oil and gas prices, and LNG price, and the Malaysia LNG Dua JVA expiry. This was partly offset by the contribution from BG, increased contributions from trading and lower well write-offs.
Integrated Gas cash flow from operating activities was $2,657 million, which included positive working capital movements of $1,628 million. The working capital movement mainly reflects an inter-segment allocation which had a nil impact on a consolidated basis.
First quarter 2016 production was 833 thousand boe/d compared with 622 thousand boe/d a year ago. Liquids production was 11% higher in than the same period a year ago and natural gas production increased by 44% compared with the first quarter 2015.
LNG liquefaction volumes of 7.04 million tonnes increased by 14% compared with the same quarter a year ago, mainly reflecting the impact of the acquisition of BG, including an increase associated with the ramp-up of Queensland Curtis LNG in Australia, partly offset by the expiry of the Malaysia LNG Dua JVA.
LNG sales volumes of 12.29 million tonnes increased by 25% compared with the same quarter a year ago, mainly reflecting the impact of the acquisition of BG.
UPSTREAM
$ million Quarters
Q1 2016 Q4 2015 Q1 2015 %[1]
Upstream earnings excluding
identified items (1,437) (1,009) (195) -637
Upstream earnings (1,350) (1,458) 1,400 -196
Upstream cash flow from operating
activities 448 987 1,595 -72
Upstream capital investment
excluding BG acquisition impact 3,907 4,463 4,642 -16
Upstream BG-related capital
investment 31,131 - -
Liquids production available for
sale (thousand b/d) 1,557 1,331 1,341 +16
Natural gas production available
for sale (million scf/d) 7,373 6,255 6,974 +6
Total production available for sale
(thousand boe/d) 2,828 2,406 2,544 +11
1. Q1 on Q1 change
First quarter Upstream earnings excluding identified items were a loss of $1,437 million compared with a loss of $195 million a year ago. Identified items were a net gain of $87 million compared with a net gain of $1,595 million for the first quarter 2015 (see page 6).
Compared with the first quarter 2015, earnings excluding identified items were impacted by the decline in oil and gas prices and increased depreciation. This was partly offset by lower operating expenses, as steps taken by the company to reduce costs more than offset the increase in operating expenses due to the consolidation of BG. Earnings also benefited from lower exploration expense and increased liquids production volumes from improved operating performance.
Realisations for Shell’s total production were 36% lower for liquids and 36% lower for natural gas than for the same quarter a year ago.
First quarter 2016 production was 2,828 thousand boe/d compared with 2,544 thousand boe/d a year ago. Liquids production was 16% higher than in the same period a year ago and natural gas production increased by 6% compared with the first quarter 2015.
New field start-ups and the continuing ramp-up of existing fields, in particular North American shales, Erha North ph2 in Nigeriaand the Corrib gas field in Ireland, contributed some 62 thousand boe/d to production compared with the first quarter 2015.
DOWNSTREAM
$ million Quarters
Q1 2016 Q4 2015 Q1 2015 %[1]
Downstream earnings excluding
identified items[2] 2,010 1,524 2,646 -24
Of which:
Oil Products 1,633 1,342 2,237 -27
Chemicals 377 182 409 -8
Downstream earnings[2] 1,700 2,502 2,514 -32
Downstream cash flow from operating
activities (1,434) 2,101 1,554 -192
Downstream capital investment 1,092 1,974 849 +29
Refinery processing intake (thousand
b/d) 2,645 2,630 2,871 -8
Oil products sales volumes (thousand
b/d) 6,225 6,297 6,313 -1
Chemicals sales volumes (thousand
tonnes) 4,050 4,178 4,192 -3
1. Q1 on Q1 change
2. Earnings are presented on a CCS basis
First quarter Downstream earnings excluding identified items were $2,010 million compared with $2,646 million for the first quarter 2015. Identified items were a net charge of $310 million, compared with a net charge of $132 million for the first quarter 2015 (see page 6).
Compared with the first quarter 2015, Downstream earnings excluding identified items were mainly impacted by weaker refining industry conditions. Contributions from marketing were lower, driven by the negative impact of exchange rate effects and divestments, despite stronger underlying performance. Downstream earnings benefited from lower costs, including the impact of favourable exchange rate effects and divestments.
Downstream cash flow from operating activities was a negative $1,434 million, which included negative working capital movements of $3,582 million. The negative working capital movement included the settlement of a previously Generally Embargoed Country payable of $1,942 million, increased trading inventory, and an inter-segment allocation which had a nil impact on a consolidated basis.
Oil Products
- Refining & Trading earnings excluding identified items were $662 million in the first quarter 2016 compared with $1,262 million for the same period last year. First quarter 2016 earnings were impacted by lower realised refining margins, reflecting the weaker global refining industry conditions due to oversupply and high inventory levels, and operating performance.
Refinery intake volumes were 8% lower compared with the same quarter last year. Excluding portfolio impacts, refinery intake volumes were 6% lower compared with the same period a year ago. Refinery availability decreased to 90% compared with 95% in the first quarter 2015, mainly as a result of increased maintenance.
- Marketing earnings excluding identified items were $971 million in the first quarter 2016 compared with $975 million for the same period a year ago. First quarter 2016 earnings benefited from stronger underlying unit margins and lower costs, offsetting the impact of adverse exchange rate effects and divestments.
Oil products sales volumes decreased by 1% compared with the same period a year ago, reflecting lower trading volumes partly offset by higher marketing volumes.
Chemicals
- Chemicals earnings excluding identified items were $377 million in the first quarter 2016 compared with $409 million for the same period last year. First quarter 2016 earnings were primarily impacted by lower realised base chemicals margins in the United States. Earnings benefited from lower costs and from recovery at the Moerdijk chemical site in the Netherlands, which more than offset the impact of unit shutdowns at the Bukom chemical site in Singapore.
Chemicals sales volumes decreased by 3% compared with the same quarter last year, mainly as a result of reduced availability driven by unit shutdowns at Bukom, partly offset by recovery at Moerdijk. Chemicals manufacturing plant availability increased to 88% from 84% in the first quarter 2015, mainly reflecting recovery at Moerdijk, partly offset by unit shutdowns at Bukom.
CORPORATE AND NON-CONTROLLING INTEREST
$ million Quarters
Q1 2016 Q4 2015 Q1 2015
Corporate and Non-controlling
interest earnings excl. identified
items (14) (188) (204)
Of which:
Corporate 69 (154) (83)
Non-controlling interest (83) (34) (121)
Corporate and Non-controlling
interest earnings (441) (329) (292)
First quarter Corporate results and Non-controlling interest excluding identified items were a loss of $14 million, compared with a loss of $204 million for the same period last year. Identified items for the first quarter 2016 were a net charge of $427 million, whereas earnings for the first quarter 2015 included a net charge of $88 million (see page 6).
Compared with the first quarter 2015, Corporate results excluding identified items mainly reflected favourable exchange rate effects and lower net interest expense, partly offset by lower tax credits.
OUTLOOK FOR THE SECOND QUARTER 2016
Compared with the second quarter 2015, Integrated Gas earnings are expected to be negatively impacted by a reduction of some 30 thousand boe/d associated with the impact of maintenance, including some 25 thousand boe/d associated with continued planned maintenance at the Pearl GTL plant in Qatar.
Upstream earnings are expected to be negatively impacted by a reduction of some 25 thousand boe/d related to a Malaysia PSC expiry, and some 10 thousand boe/d as a result of divestments. Upstream earnings are expected to be positively impacted by lower levels of curtailment and underground storage utilisation at NAM in the Netherlands, and maintenance of some 60 thousand boe/d.
Refinery availability is expected to decline in the second quarter 2016 as a result of higher planned maintenance compared with the same period a year ago. Unit shutdowns at the Bukom chemical site in Singapore are expected to result in similar Chemicals manufacturing plant availability as in the second quarter 2015, which was heavily impacted by unit shutdowns at the Moerdijk chemical site in the Netherlands.
There are expected divestment tax payments related to 2015 divestments of some $830 million in the second quarter 2016 impacting cash flow from operating activities.
There are expected to be substantial redundancy and restructuring charges, which will be included as identified items, in the second quarter 2016.
BG will be consolidated within Shell’s results for the full second quarter. Compared with the second quarter 2015, the BG purchase price allocation is expected to increase depreciation by approximately $0.3 billion.
Given the significant decline in oil and gas prices in the first quarter 2016, second quarter earnings are expected to be negatively impacted by the price-lag effect in our LNG contracts.
FORTHCOMING EVENTS
The Annual General Meeting will be held on May 24, 2016.
Second quarter 2016 results and second quarter 2016 dividend are scheduled to be announced on July 28, 2016. Third quarter 2016 results and third quarter 2016 dividend are scheduled to be announced on October 27, 2016.
Shell’s Capital Markets Day will be held on June 7, 2016 in London, United Kingdom.
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME
$ million Quarters
Q1 2016 Q4 2015 Q1 2015
Revenue[1],[2] 48,554 58,146 65,706
Share of profit of joint ventures
and associates 789 793 1,405
Interest and other income 389 1,237 1,735
Total revenue and other income 49,732 60,176 68,846
Purchases 33,286 43,166 47,425
Production and manufacturing
expenses 6,765 7,515 6,655
Selling, distribution and
administrative expenses 3,106 3,090 2,894
Research and development 243 297 253
Exploration 457 549 800
Depreciation, depletion and
amortisation 6,147 5,281 4,604
Interest expense 370 519 376
Total expenditure 50,374 60,417 63,007
Income/(loss) before taxation (642) (241) 5,839
Taxation charge/(credit) (1,097) (1,183) 1,302
Income/(loss) for the period[1],[2] 455 942 4,537
Income/(loss) attributable to
non-controlling interest (29) 3 107
Income/(loss) attributable to Royal
Dutch Shell plc shareholders 484 939 4,430
Basic earnings per share[3] 0.07 0.15 0.70
Diluted earnings per share[3] 0.07 0.15 0.69
1. See Note [2] "Acquisition of BG Group plc"
2. See Note [3] "Segment information"
3. See Note [4] "Earnings per share"
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
$ million Quarters
Q1 2016 Q4 2015 Q1 2015
Income/(loss) for the period 455 942 4,537
Other comprehensive income net of tax:
Items that may be reclassified to income
in later periods:
- Currency translation differences 2,319 (1,249) (4,199)
- Unrealised gains/(losses) on securities (12) (119) (135)
- Cash flow hedging gains/(losses) 324 (202) (9)
- Net investment hedging
gains/(losses)[1] 136 - -
- Share of other comprehensive
income/(loss) of joint ventures and
associates 8 (41) 7
Total 2,775 (1,611) (4,336)
Items that are not reclassified to income
in later periods:
- Retirement benefits remeasurements (1,634) 3,140 (1,316)
Other comprehensive income/(loss) for the
period 1,141 1,529 (5,652)
Comprehensive income/(loss) for the
period 1,596 2,471 (1,115)
Comprehensive income/(loss) attributable
to non-controlling interest 4 (16) 63
Comprehensive income/(loss) attributable
to Royal Dutch Shell plc shareholders 1,592 2,487 (1,178)
1. See Note [1] "Basis of preparation"
CONDENSED CONSOLIDATED BALANCE SHEET
$ million
Mar 31,2016[1] Dec 31, 2015 Mar 31, 2015
Assets
Non-current assets
Intangible assets 21,327 6,283 6,852
Property, plant and
equipment 245,133 182,838 189,263
Joint ventures and
associates 35,654 30,150 31,643
Investments in
securities 3,474 3,416 3,952
Deferred tax 15,311 11,033 8,439
Retirement benefits 3,108 4,362 1,912
Trade and other
receivables[2] 11,047 8,717 8,240
335,054 246,799 250,301
Current assets
Inventories 17,396 15,822 19,968
Trade and other
receivables[2] 52,835 45,784 51,696
Cash and cash
equivalents 11,019 31,752 19,867
81,250 93,358 91,531
Total assets 416,304 340,157 341,832
Liabilities
Non-current
liabilities
Debt 73,005 52,849 35,703
Trade and other
payables[2] 3,917 4,528 4,769
Deferred tax 16,677 8,976 10,240
Retirement benefits 13,516 12,587 17,642
Decommissioning and
other provisions 32,710 26,148 25,154
139,825 105,088 93,508
Current liabilities
Debt 7,868 5,530 8,137
Trade and other
payables[2] 56,032 52,770 55,761
Taxes payable 10,387 8,233 11,705
Retirement benefits 401 350 361
Decommissioning and
other provisions 3,777 4,065 3,538
78,465 70,948 79,502
Total liabilities 218,290 176,036 173,010
Equity attributable to
Royal Dutch Shell plc
shareholders 196,521 162,876 167,960
Non-controlling
interest 1,493 1,245 862
Total equity 198,014 164,121 168,822
Total liabilities and
equity 416,304 340,157 341,832
1. See Note [2] "Acquisition of BG Group plc"
2. See Note [7] "Derivative contracts"
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Equity attributable to Royal Dutch
Shell plc shareholders
Share Shares Other Non-
capital held in reserves Retained controlling Total
$ million [1] trust [2] earnings Total interest equity
At January 1,
2016 546 (584) (17,186) 180,100 162,876 1,245 164,121
Comprehensive
income/(loss)
for the period - - 1,108 484 1,592 4 1,596
Dividends paid - - - (3,734) (3,734) (35) (3,769)
Scrip dividends 5 - (5) 1,476 1,476 - 1,476
Shares issued
for the
acquisition of
BG Group plc[3] 120 - 33,930 - 34,050 - 34,050
Repurchases of
shares - - - - - - -
Shares held in
trust:
net sales and
dividends
received - 369 - 15 384 - 384
Capital
contributions
from, and other
changes
in,
non-controlling
interest - - - 150 150 279 429
Share-based
compensation - - (381) 108 (273) - (273)
At March 31,
2016 671 (215) 17,466 178,599 196,521 1,493 198,014
At January 1,
2015 540 (1,190) (14,365) 186,981 171,966 820 172,786
Comprehensive
income/(loss)
for the period - - (5,608) 4,430 (1,178) 63 (1,115)
Dividends paid - - - (2,932) (2,932) (18) (2,950)
Scrip dividends - - - - - - -
Repurchases of
shares (1) - 1 1 1 - 1
Shares held in
trust:
net sales and
dividends
received - 650 - 24 674 - 674
Capital
contributions
from, and other
changes
in,
non-controlling
interest - - - (1) (1) (3) (4)
Share-based
compensation - - (549) (21) (570) - (570)
At March 31,
2015 539 (540) (20,521) 188,482 167,960 862 168,822
1. See Note [5] "Share capital"
2. See Note [6] "Other reserves"
3. See Note [2] "Acquisition of BG Group plc"
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
$ million Quarters
Q1 2016 Q4 2015 Q1 2015
Cash flow from operating
activities
Income/(loss) for the period 455 942 4,537
Adjustment for:
- Current tax 753 1,212 2,947
- Interest expense (net) 272 405 303
- Depreciation, depletion and
amortisation 6,147 5,281 4,604
- Net (gains)/losses on sale of
non-current assets and
businesses (175) (1,108) (1,612)
- Decrease/(increase) in working
capital (3,909) 1,598 (372)
- Share of (profit)/loss of
joint ventures and associates (789) (793) (1,405)
- Dividends received from joint
ventures and associates 688 1,440 1,077
- Deferred tax, retirement
benefits, decommissioning
and other provisions (1,755) (1,827) (1,503)
- Other (292) (3) 94
Net cash from operating
activities (pre-tax) 1,395 7,147 8,670
Tax paid (734) (1,724) (1,564)
Net cash from operating
activities 661 5,423 7,106
Cash flow from investing
activities
Capital expenditure (5,324) (7,299) (6,215)
Acquisition of BG Group plc, net
of cash and cash equivalents
acquired[1] (11,421) - -
Investments in joint ventures
and associates (332) (5) (409)
Proceeds from sale of property,
plant and equipment and
businesses 46 1,398 2,203
Proceeds from sale of joint
ventures and associates 16 26 4
Interest received 136 91 56
Other (37) (397) (79)
Net cash used in investing
activities (16,916) (6,186) (4,440)
Cash flow from financing
activities
Net increase/(decrease) in debt
with maturity period
within three months 873 (9) (255)
Other debt:
- New borrowings 264 5,213 752
- Repayments (1,969) (1,818) (630)
Interest paid (534) (484) (409)
Change in non-controlling
interest 422 177 (5)
Cash dividends paid to:
- Royal Dutch Shell plc
shareholders (2,258) (1,782) (2,932)
- Non-controlling interest (35) (45) (18)
Repurchases of shares - - (409)
Shares held in trust: net
sales/(purchases) and dividends
received (4) 7 (40)
Net cash from/(used in)
financing activities (3,241) 1,259 (3,946)
Currency translation differences
relating to cash and
cash equivalents (1,237) (590) (460)
Increase/(decrease) in cash and
cash equivalents (20,733) (94) (1,740)
Cash and cash equivalents at
beginning of period 31,752 31,846 21,607
Cash and cash equivalents at end
of period 11,019 31,752 19,867
1. See Note [2] "Acquisition of BG Group plc"
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. Basis of preparation
These unaudited Condensed Consolidated Interim Financial Statements (“Interim Statements”) of Royal Dutch Shell plc (“the Company”) and its subsidiaries (collectively referred to as “Shell”) have been prepared in accordance with IAS 34 Interim Financial Reporting as issued by the International Accounting Standards Board and as adopted by the European Union, and on the basis of the same accounting principles as, and should be read in conjunction with, the Annual Report and Form 20-F for the year endedDecember 31, 2015 (pages 120 to 125) as filed with the U.S. Securities and Exchange Commission. In addition to those accounting policies, following the acquisition of BG Group plc, Shell accounts for net investment hedges where the effective portion of gains and losses arising on hedging instruments that are used to hedge net investments in foreign operations are recognised in other comprehensive income until the related investment is disposed of.
The financial information presented in the Interim Statements does not constitute statutory accounts within the meaning of section 434(3) of the Companies Act 2006 (“the Act”). Statutory accounts for the year ended December 31, 2015 were published in Shell’s Annual Report and a copy was delivered to the Registrar of Companies in England and Wales. The auditors’ report on those accounts was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report and did not contain a statement under sections 498(2) or 498(3) of the Act.
2. Acquisition of BG Group plc
On February 15, 2016, the Company acquired all the voting rights in BG by means of a Scheme of Arrangement under Part 26 of the Act for a purchase consideration of $54,034 million. This included cash of $19,036 million and the fair value ($34,050 million) of 218.7 million A shares and 1,305.1 million B shares issued in exchange for all BG shares. The fair value of the shares issued was calculated using the market price of the Company’s A and B shares of 1,545.0 and 1,538.5 pence respectively on the London Stock Exchange at its opening of business on February 15, 2016.
Following completion of the acquisition on February 15, 2016, BG Group plc (“BG”) has been consolidated within Royal Dutch Shell’s results. For practical purposes, this includes February and March 2016, as the impact for the first half of February is deemed immaterial.
BG’s activities mainly comprise exploration, development, production, liquefaction and marketing of hydrocarbons, the development and use of LNG import facilities, and the purchase, shipping and sale of LNG and regasified natural gas. The acquisition is expected to accelerate Shell’s growth strategy in global LNG and deep water. It is expected to add material proved oil and gas reserves and production volumes, and provides Shell with enhanced positions in competitive new oil and gas projects, particularly in AustraliaLNG and Brazil deep water.
Goodwill of $9,024 million was recognised on the acquisition, being the excess of the purchase consideration over the fair value of net assets acquired as set out below. The net asset value, in line with accounting standards, is determined by reference to oil and gas prices, as reflected in the prevailing market view on the day of completion. Oil and gas prices are based on the forward price curve for the first two years, and subsequent years based on the market consensus price view.
The fair values of the net assets, and therefore the resultant goodwill, are provisional because of the limited period since the acquisition date when access was obtained to information required to assess the market participant value to be assigned to individual assets acquired and liabilities assumed at that date.
FAIR VALUE OF NET ASSETS ACQUIRED (PROVISIONAL)
$ million
Assets
Non-current assets
Intangible assets 6,178
Property, plant and equipment 58,444
Joint ventures and associates 4,702
Deferred tax 2,432
Other 2,181
73,937
Current assets
Inventories 417
Trade and other receivables 4,202
Cash and cash equivalents 6,803
11,422
Total assets 85,359
Liabilities
Non-current liabilities
Debt 18,949
Deferred tax 8,393
Decommissioning and other provisions 6,401
Other 665
34,408
Current liabilities
Debt 1,345
Trade and other payables 3,926
Other 670
5,941
Total liabilities 40,349
Total 45,010
Acquisition costs of $391 million were recognised in the Consolidated Statement of Income in production and manufacturing and selling, distribution and administrative expenses, of which $47 million in 2015 and $344 million in the first quarter 2016.
The acquired activities have contributed third-party revenue and income since the date of acquisition, included in the Consolidated Statement of Income for the first quarter 2016, of $2,272 million and $455 million respectively.
3. Segment information
Segmental reporting has been changed with effect from 2016, in line with a change in the way Shell’s businesses are managed. Shell now reports its business through the segments Integrated Gas (previously part of Upstream), Upstream, Downstream and Corporate. Comparative information has been reclassified.
Integrated Gas is engaged in the liquefaction and transportation of gas, and the conversion of natural gas to liquids to provide fuels and other products, as well as projects with an integrated activity from producing to commercialising gas. Upstream combines the operating segments Upstream, which is engaged in the exploration for and extraction of crude oil, natural gas and natural gas liquids, the transportation of oil and wind energy, and Oil Sands, which is engaged in the extraction of bitumen from oil sands that is converted into synthetic crude oil. These operating segments have similar economic characteristics because their earnings are significantly dependent on crude oil and natural gas prices and production volumes, and because their projects generally require significant investment, are complex and generate revenues for many years.
Segment earnings are presented on a current cost of supplies basis (CCS earnings), which is the earnings measure used by the Chief Executive Officer for the purposes of making decisions about allocating resources and assessing performance. On this basis, the purchase price of volumes sold during the period is based on the current cost of supplies during the same period after making allowance for the tax effect. CCS earnings therefore exclude the effect of changes in the oil price on inventory carrying amounts. Sales between segments are based on prices generally equivalent to commercially available prices.
INFORMATION BY SEGMENT
$ million Quarters
Q1 2016 Q4 2015 Q1 2015
Third-party revenue
Integrated Gas 5,679 5,210 5,949
Upstream 1,922 1,502 1,817
Downstream 40,929 51,410 57,916
Corporate 24 24 24
Total third-party revenue 48,554 58,146 65,706
Inter-segment revenue
Integrated Gas 788 917 977
Upstream 4,145 5,955 6,793
Downstream 1,455 386 362
Corporate - - -
CCS earnings
Integrated Gas 905 1,125 1,139
Upstream (1,350) (1,458) 1,400
Downstream 1,700 2,502 2,514
Corporate (456) (295) (171)
Total CCS earnings 799 1,874 4,882
RECONCILIATION OF CCS EARNINGS TO INCOME FOR THE PERIOD
$ million Quarters
Q1 2016 Q4 2015 Q1 2015
Total CCS earnings 799 1,874 4,882
Current cost of supplies
adjustment:
Purchases (398) (1,122) (352)
Taxation 120 320 102
Share of profit/(loss) of joint
ventures and associates (66) (130) (95)
Income/(loss) for the period 455 942 4,537
CCS EARNINGS ATTRIBUTABLE TO ROYAL DUTCH SHELL PLC SHAREHOLDERS
$ million Quarters
Q1 2016 Q4 2015 Q1 2015
CCS earnings 799 1,874 4,882
Attributable to non-controlling
interest (15) (34) (121)
CCS earnings attributable to Royal
Dutch Shell plc shareholders 814 1,840 4,761
4. Earnings per share
EARNINGS PER SHARE
Quarters
Q1 2016 Q4 2015 Q1 2015
Income attributable to Royal
Dutch Shell plc shareholders ($
million) 484 939 4,430
Weighted average number of
shares as the basis for:
Basic earnings per share
(million) 7,173.4 6,356.0 6,292.2
Diluted earnings per share
(million) 7,230.4 6,416.1 6,377.0
5. Share capital
ISSUED AND FULLY PAID
Sterling
Ordinary shares of EUR0.07 each deferred shares
Number of shares A B of GBP1 each
At January 1, 2016 3,990,921,569 2,440,410,614 50,000
Scrip dividends 65,704,048 0 0
Shares issued for
the acquisition of
BG Group plc[1] 218,728,308 1,305,076,117 0
Repurchases of
shares 0 0 0
At March 31, 2016 4,275,353,925 3,745,486,731 50,000
At January 1, 2015 3,907,302,393 2,440,410,614 50,000
Scrip dividends 0 0 0
Repurchases of
shares (12,717,512) 0 0
At March 31, 2015 3,894,584,881 2,440,410,614 50,000
1. See Note [2] "Acquisition of BG Group plc"
NOMINAL VALUE
Ordinary shares of EUR0.07 each
$ million A B Total
At January 1, 2016 340 206 546
Scrip dividends 5 - 5
Shares issued for
the acquisition of
BG Group plc[1] 17 103 120
Repurchases of
shares - - -
At March 31, 2016 362 309 671
At January 1, 2015 334 206 540
Scrip dividends - - -
Repurchases of
shares (1) - (1)
At March 31, 2015 333 206 539
1. See Note [2] "Acquisition of BG Group plc"
The total nominal value of sterling deferred shares is less than $1 million.
At Royal Dutch Shell plc’s Annual General Meeting on May 19, 2015, the Board was authorised to allot ordinary shares in Royal Dutch Shell plc, and to grant rights to subscribe for or to convert any security into ordinary shares in Royal Dutch Shell plc, up to an aggregate nominal amount of €147 million (representing 2,100 million ordinary shares of €0.07 each), and to list such shares or rights on any stock exchange. This authority expires at the earlier of the close of business on August 19, 2016, and the end of the Annual General Meeting to be held in 2016, unless previously renewed, revoked or varied by Royal Dutch Shell plc in a general meeting.
6. Other reserves
OTHER RESERVES
Accumulated
Share Capital other
Merger premium redemption Share plan comprehensi
$ million reserve reserve reserve reserve ve income Total
At January 1, 2016 3,398 154 84 1,658 (22,480) (17,186)
Other comprehensive
income/(loss)
attributable to Royal
Dutch Shell plc
shareholders - - - - 1,108 1,108
Scrip dividends (5) - - - - (5)
Shares issued for the
acquisition of BG
Group plc[1] 33,930 - - - - 33,930
Repurchases of shares - - - - - -
Share-based
compensation - - - (381) - (381)
At March 31, 2016 37,323 154 84 1,277 (21,372) 17,466
At January 1, 2015 3,405 154 83 1,723 (19,730) (14,365)
Other comprehensive
income/(loss)
attributable to Royal
Dutch Shell plc
shareholders - - - - (5,608) (5,608)
Scrip dividends - - - - - -
Repurchases of shares - - 1 - - 1
Share-based
compensation - - - (549) - (549)
At March 31, 2015 3,405 154 84 1,174 (25,338) (20,521)
1. See Note [2] "Acquisition of BG Group plc"
The merger reserve and share premium reserve were established as a consequence of Royal Dutch Shell plc becoming the single parent company of Royal Dutch Petroleum Company and The “Shell” Transport and Trading Company, p.l.c., now The Shell Transport and Trading Company Limited, in 2005. The increase in the merger reserve in the first quarter 2016 in respect of the shares issued for the acquisition of BG represents the difference between the fair value (after deducting issue costs) and the nominal value of the shares. The capital redemption reserve was established in connection with repurchases of shares of Royal Dutch Shell plc. The share plan reserve is in respect of equity-settled share-based compensation plans.
7. Derivative contracts
The table below provides the carrying amounts of derivatives contracts held, disclosed in accordance with IFRS 13 Fair Value Measurement.
DERIVATIVE CONTRACTS
$ million Mar 31, 2016 Dec 31, 2015 Mar 31, 2015
Included within:
Trade and other receivables -
non-current 1,250 744 799
Trade and other receivables -
current 17,260 13,114 11,378
Trade and other payables -
non-current 1,369 1,687 1,643
Trade and other payables - current 15,989 10,757 9,644
As disclosed in the Consolidated Financial Statements for the year ended December 31, 2015, presented in the Annual Report and Form 20-F for that year, Shell is exposed to the risks of changes in fair value of its financial assets and liabilities. The fair values of the financial assets and liabilities are defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Methods and assumptions used to estimate the fair values at March 31, 2016 are consistent with those used in the year ended December 31, 2015, and the carrying amounts of derivative contracts measured using predominantly unobservable inputs have not changed materially since that date.
The fair value of debt excluding finance lease liabilities at March 31, 2016 was $71,903 million (December 31, 2015: $53,480 million; March 31, 2015: $39,753 million). Fair value is determined from the prices quoted for those securities.
DEFINITIONS
A. Identified items
Identified items are shown to provide additional insight into segment earnings and income attributable to shareholders. They include the full impact on Shell’s CCS earnings of the following items: Divestment gains and losses, impairments, fair value accounting of commodity derivatives and certain gas contracts (see below), and redundancy and restructuring. Further items may be identified in addition to the above.
Impacts of accounting for derivatives
In the ordinary course of business Shell enters into contracts to supply or purchase oil and gas products as well as power and environmental products. Derivative contracts are entered into for mitigation of resulting economic exposures (generally price exposure) and these derivative contracts are carried at period-end market price (fair value), with movements in fair value recognised in income for the period. Supply and purchase contracts entered into for operational purposes are, by contrast, recognised when the transaction occurs (see also below); furthermore, inventory is carried at historical cost or net realisable value, whichever is lower.
As a consequence, accounting mismatches occur because: (a) the supply or purchase transaction is recognised in a different period; or (b) the inventory is measured on a different basis.
In addition, certain UK gas contracts held by Upstream are, due to pricing or delivery conditions, deemed to contain embedded derivatives or written options and are also required to be carried at fair value even though they are entered into for operational purposes.
The accounting impacts of the aforementioned are reported as identified items in this Report.
Impacts of exchange rate movements on deferred tax balances
With effect from 2016, identified items include the impact on deferred tax balances of exchange rate movements arising on:
The conversion to dollars of the local currency tax base of non-monetary assets and liabilities, as well as losses. This primarily impacts the Integrated Gas and Upstream segments.
The conversion of dollar-denominated inter-segment loans to local currency. This primarily impacts the Corporate segment.
The comparative information presented in this Report has been restated for this definition change. The following table sets out the impact of the definition change on the identified items for the year 2015.
RESTATED IDENTIFIED ITEMS BY SEGMENT
$ million Quarters
Q1 2015 Q2 2015 Q3 2015 Q4 2015
Identified items as previously
reported
Integrated Gas 15 (117) (878) (347)
Upstream 1,849 (146) (7,340) (479)
Downstream (132) (215) (136) 978
Corporate and Non-controlling interest (217) 4 464 (137)
Impact of definition change
Integrated Gas (367) 50 (469) 227
Upstream (254) 53 (292) 30
Downstream - - - -
Corporate and Non-controlling interest 129 (28) 155 (4)
Identified items as restated
Integrated Gas (352) (67) (1,347) (120)
Upstream 1,595 (93) (7,632) (449)
Downstream (132) (215) (136) 978
Corporate and Non-controlling interest (88) (24) 619 (141)
B. Capital investment
Capital investment is a measure used to make decisions about allocating resources and assessing performance. It is defined as the sum of capital expenditure, acquisition of BG, exploration expense (excluding well write-offs), new investments in joint ventures and associates, new finance leases and other adjustments.
C. Divestments
“Divestments” is a measure used to monitor the progress of Shell’s divestment programme. This measure comprises proceeds from sale of property, plant and equipment and businesses, joint ventures and associates, and other Integrated Gas, Upstream and Downstream investments, adjusted onto an accruals basis, and proceeds from sale of interests in an entity while retaining control (for example, proceeds from sale of interest in Shell Midstream Partners, L.P.)
D. Return on average capital employed
Return on average capital employed (ROACE) measures the efficiency of Shell’s utilisation of the capital that it employs and is a common measure of business performance. In this calculation, ROACE is defined as the sum of income for the current and previous three quarters, adjusted for after-tax interest expense, as a percentage of the average capital employed for the same period. The tax rate used is Shell’s effective tax rate for the period. Capital employed consists of total equity, current debt and non-current debt.
Return on average capital employed on a CCS basis excluding identified items is defined as the sum of 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.
E. Gearing
Gearing, calculated as net debt (total debt less cash and cash equivalents) as a percentage of total capital (net debt plus total equity), is a key measure of Shell’s capital structure.
F. Operating expenses
Operating expenses comprise production and manufacturing expenses; selling, distribution and administrative expenses; and research and development expenses.
CAUTIONARY STATEMENT
All amounts shown throughout this announcement are unaudited. All peak production figures in Portfolio Developments are quoted at 100% expected production.
The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate legal entities. In this announcement “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 announcement 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 announcement 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 announcement, 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. All forward-looking statements contained in this announcement 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, 2015 (available athttp://www.shell.com/investor and http://www.sec.gov ). These risk factors also expressly qualify all forward-looking statements contained in this announcement and should be considered by the reader. Each forward-looking statement speaks only as of the date of this announcement, May 4, 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 announcement.
This Report contains references to Shell’s website. These references are for the readers’ convenience only. Shell is not incorporating by reference any information posted on http://www.shell.com
We may have used certain terms, such as resources, in this announcement 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 http://www.sec.gov . You can also obtain this form from the SEC by calling 1-800-SEC-0330.
