First quarter 2018 results Delivering a world-class investment case - - PowerPoint PPT Presentation

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Royal Dutch Shell April 26, 2018

Royal Dutch Shell plc April 26, 2018

First quarter 2018 results

Delivering a world-class investment case

#makethefuture

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Royal Dutch Shell April 26, 2018

Jessica Uhl Chief Financial Officer

Royal Dutch Shell

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Royal Dutch Shell April 26, 2018 3

Definitions & cautionary note

Reserves: Our use of the term “reserves” in this presentation means SEC proved oil and gas reserves. Resources: Our use of the term “resources” in this presentation includes quantities of oil and gas not yet classified as SEC proved oil and gas reserves. Resources are consistent with the Society of Petroleum Engineers (SPE) 2P + 2C definitions. The Mountains and Oceans scenarios are based on plausible assumptions and quantification, and they are designed to stretch management thinking and even to consider events that may only be remotely possible. Scenarios therefore, are not intended to be prediction of likely future events or outcomes. Accordingly, investors should not rely on them when making an investment decision with regard to Royal Dutch Shell plc securities. Operating costs are defined as underlying operating expenses, which are operating expenses less identified items. Organic free cash flow is defined as free cash flow excluding inorganic capital investment and divestment

• proceeds. Unit costs for Refining and Trading are defined as operating expenses divided by refinery intake volumes. Yield on costs for Marketing are defined as CCS earnings excluding identified items divided by operating
• expenses. Integrated indicative margin is defined as a theoretical margin available to be captured by our integrated portfolio of Refining and Trading assets excluding portfolio impact. Breakeven margin is defined as minimum

integrated margin required for zero earnings in Refining and Trading. Gross margin is defined as net proceeds less cost of goods sold, on a CCS basis, and primary transport expenses. Income per site is defined as ratio of CCS earnings excluding identified items to the total number of Retail branded sites. Sales by region is defined as sales volumes across each of the regions Americas, East and Europe & Africa. Earnings per FTE is defined as ratio of CCS earnings excluding identified items to the number of employees in Lubricants, Aviation and Specialties. Clean CCS ROACE (Return on Average Capital Employed) is defined as 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. Capital employed consists of total equity, current debt and non-current debt. Capital investment comprises capital expenditure, exploration expense excluding well write-offs, new investments in joint ventures and associates, new finance leases and investments in Integrated Gas, Upstream and Downstream equity securities, all of which on an accruals basis. Divestments comprises proceeds from sale of property, plant and equipment and businesses, joint ventures and associates, and other Integrated Gas, Upstream and Downstream investments, reported in “Cash flow from investing activities (CFFI)”, adjusted onto an accruals basis and for any share consideration received or contingent consideration recognised upon divestment, as well as proceeds from the sale of interests in entities while retaining control (for example, proceeds from sale of interest in Shell Midstream Partners, L.P.), This presentation contains the following forward-looking Non-GAAP measures: Organic Free Cash Flow, Free Cash Flow, Capital Investment, CCS Earnings less identified items, Operating Expenses, ROACE, Capital Employed and Divestments. We are unable to provide a reconciliation of the above forward-looking Non-GAAP measures to the most comparable GAAP financial measures because certain information needed to reconcile the above Non-GAAP measure to the most comparable GAAP financial measure is dependent on future events some which are outside the control of the company, such as oil and gas prices, interest rates and exchange rates. Moreover, estimating such GAAP measures consistent with the company accounting policies and the required precision necessary to provide a meaningful reconciliation is extremely difficult and could not be accomplished without unreasonable effort. Non-GAAP measures in respect of future periods which cannot be reconciled to the most comparable GAAP financial measure are calculated in a manner which is consistent with the accounting policies applied in Royal Dutch Shell plc’s financial

• statements. The forward-looking breakeven price (BEP) presented for Vito is calculated based on all forward-looking costs associated from FID. Accordingly, this typically excludes exploration and appraisal costs, lease

bonuses, exploration seismic and exploration team overhead costs. The forward-looking breakeven price is calculated based on our estimate of resources volumes that are currently classified as 2p and 2c under the Society of Petroleum Engineers’ Resource Classification System. As this project is expected to be multi-decade producing, the less than $35 per barrel projection will not be reflected either in earnings or cash flow in the next five years. The financial measures provided by strategic themes represent a notional allocation of ROACE, capital employed, capital investment, free cash flow, organic free cash flow and underlying operating expenses of Shell’s strategic

• themes. Shell’s segment reporting under IFRS 8 remains Integrated Gas, Upstream, Downstream and Corporate.

The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate legal entities. In this presentation “Shell”, “Shell group” and “Royal Dutch Shell” are sometimes used for convenience where references are made to Royal Dutch Shell plc and its subsidiaries in general. Likewise, the words “we”, “us” and “our” are also used to refer to Royal Dutch Shell plc and subsidiaries in general or to those who work for them. These terms are also used where no useful purpose is served by identifying the particular entity or entities. ‘‘Subsidiaries’’, “Shell subsidiaries” and “Shell companies” as used in this presentation refer to entities 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

• ver 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 an entity or unincorporated joint arrangement, after exclusion of all third-party interest. This presentation contains forward-looking statements (within the meaning of the U.S. Private Securities Litigation Reform Act of 1995) 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 “aim”, “ambition’, ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘estimate’’, ‘‘expect’’, ‘‘goals’’, ‘‘intend’’, ‘‘may’’, ‘‘objectives’’, ‘‘outlook’’, ‘‘plan’’, ‘‘probably’’, ‘‘project’’, ‘‘risks’’, “schedule”, ‘‘seek’’, ‘‘should’’, ‘‘target’’, ‘‘will’’ and similar terms and phrases. There are a number of factors that could affect the future operations of Royal Dutch Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this presentation, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for Shell’s products; (c) currency fluctuations; (d) drilling and production results; (e) reserves estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and regulatory developments including regulatory measures addressing climate change; (k) economic and financial market conditions in various countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; and (m) changes in trading conditions. No assurance is provided that future dividend payments will match or exceed previous dividend payments. All forward-looking statements contained in this presentation are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Additional risk factors that may affect future results are contained in Royal Dutch Shell’s 20-F for the year ended December 31, 2017 (available at www.shell.com/investor and www.sec.gov ). These risk factors also expressly qualify all forward looking statements contained in this presentation and should be considered by the reader. Each forward-looking statement speaks only as of the date of this presentation, April 26, 2018. Neither Royal Dutch Shell plc nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this presentation. We may have used certain terms, such as resources, in this presentation that United States Securities and Exchange Commission (SEC) strictly prohibits us from including in our filings with the SEC. U.S. Investors are urged to consider closely the disclosure in our Form 20-F, File No 1-32575, available on the SEC website www.sec.gov

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Royal Dutch Shell April 26, 2018 4

Summary

Divestments: headline, cash proceeds in 2016 + 2017 + Q1 2018: $18.1 billion (in CFFI), $2.1 billion related to Shell Midstream Partners, L.P. (in CFFF)

Q1 1 20 2018 18

 Strong results  Underlying growth continues

Portfolio io reshapin ing

 Divestments: $26 billion completed (headline)  Resilience and growth

Fin inancia ial f framework

 Cash priorities unchanged  Capital discipline unchanged Thrive in the energy transition World-class

investment case Strong license to operate

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Royal Dutch Shell April 26, 2018 5

Q1 2018

Financial highlights

Earnings and ROACE on CCS basis, excluding identified items. Dividend distributed to RDS shareholders

$ billion

Earnin ings Q1 2017 to Q Q1 2018

$ b $ bil illion ion

Q1 201 1 2017 Q1 201 1 2018 Upstream 0.5 1.6 Integrated Gas 1.2 2.4 Downstream (CCS) 2.5 1.7 Corporate & non-controlling interest ~(0.5) ~(0.4)

CCS earnin ings 3.8 3.8 5.3 5.3

CCS earnings, $ per share 0.46 0.64

Cash flow from

• peratio

ions 9.5 9.5 9.4 9.4 Free cash flow 5.2 5.2 5.2 5.2 Div ivid idend 3.9 3.9 4.0 4.0 ROACE (%) 3.3 3.3 6.0 6.0

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Royal Dutch Shell April 26, 2018 6

Q1 2018

Earnings and cash flow from

• perations

Earnings on CCS basis, excluding identified items

Cash flow from operations excluding working capital Cash flow from operations excluding working capital – 4 quarters rolling (RHS) Average Brent oil price - 4 quarters rolling ($/bbl) Earnings $ billion $ billion

86 48 49 57 #

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Royal Dutch Shell April 26, 2018 7

Q1 2018

Integrated Gas performance

Earnings and ROACE on CCS basis, excluding identified items. 2016 Free cash flow excludes cash element of BG acquisition

$ billion

Earnin ings and ROACE

Million tonnes

LNG liq iquefactio ion volumes

$ billion

Free cash flow and cash flow from operation ions

Million tonnes

LNG sales volumes

ROACE (RHS) Earnings Free cash flow Cash flow from operations % +50% +50% +75% +75%

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Royal Dutch Shell April 26, 2018

$ b $ bil illion ion

MLP cash proceeds ~0.7 Iraq West Qurna 1 ~0.6 Oman - Mukhaizna ~0.3 Others ~0.3

8

Q1 2018

Divestment headlines

Divestments: headline, cash proceeds in Q1 2018: $0.8 billion (in CFFI), $0.7 billion related to Shell Midstream Partners, L.P. (in CFFF)

Completio ions – Q1 2018 + A April il 2018

$ b $ bil illion ion

DS Argentina ~1.0 Bongkot - Thailand ~0.8 New Zealand ~0.6

Announcements – Q1 2 2018 + April il 2018

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Royal Dutch Shell April 26, 2018

Leading in transparency

RDS reporting

2018 2018 progress

 Disclosures aligned to Task Force on Climate-related Financial Disclosures (TCFD)  “Shell Energy Transition report” published  Annual report: additional disclosures on climate change risk and strategy  “Sky – meeting the goals of the Paris agreement” scenario published Strategic ambition – Thrive in the energy transition

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Royal Dutch Shell April 26, 2018 10

Portfolio reshaping

Downstream

Earnings on CCS basis, excluding identified items

Earnings per region

Geographic ical al exposure

$ billion

Marketin ing – earnin ings growth to 2025

% of feedstock

Chemic icals – feedstock exposure

$ per barrel

Refin inin ing g & Tradin ing – breakeven margin in

2025 East Europe & Africa Americas 2017 2021 2025 Oil Gas

By 2025:

 Organic FCF:

$9-12 billion (+50%)

 Capital employed:

+30%

 ROACE >15%

Global commercial Retail

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Royal Dutch Shell April 26, 2018

 2015-20: 50% supply capacity growth  50% of new supply capacity already in operation  2017: supply growth matched by solid demand  Supply/demand gap emerging early 2020’s  Industry FIDs challenged

11

Portfolio reshaping

Integrated Gas

Source: Shell interpretation of IHS Markit, Wood Mackenzie, FGE, BNEF and Poten & Partners Q4 2017 data

MTPA (DES)

LNG supply/deman and d gap

LNG Canada Lake C Charles Abadi Brow

• wse

Tanzania ia Sakhalin in expansion ion Nig igeria ia L LNG expansion ion Baltic ic L LNG Moz

• zambiq

ique GTL In-/Post-FEED Pre-FEED LNG supply in operation LNG supply under construction Demand forecasts

Competitive pre-FID

• pportunities in all

supply basins

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Royal Dutch Shell April 26, 2018 12

Portfolio reshaping

Upstream Pre-FID options & recent FIDs

Individual project volumes are Shell’s current estimates of total gross peak production; sum is estimate of Shell share production at peak excluding shales Pre-FID options for 2018-2022. Brazil FPSOs: production shown is FPSO oil capacity as per operator

Penguin ins r redevelop

• pment

▪ 45 kboe/d ▪ Shell 50% WDDM 9B 9B ▪ 60 kboe/d ▪ Shell 50% Gumusut-Kakap Ph2 ▪ 50 kboe/d ▪ Shell 30.4% Tyra future ▪ 75 kboe/d ▪ Shell 37% Pegaga ▪ 95 kboe/d ▪ Shell 20% Vit Vito ▪ 100 kboe/d ▪ Shell 63.11% Mero

• (Lib

ibra) 1 ▪ 180 kboe/d ▪ Shell 20% Mero

• (Lib

ibra) 2 ▪ ~180 kboe/d ▪ Shell 20% Argentin ina shales op

• ption

ions Nor

• rth Americ

ica shales op

• ption

ions Bon

• nga S

Sou

• uth West

▪ 175 kboe/d ▪ Shell 42.95% Va Val D’Agri Ph2 ▪ 65 kboe/d ▪ Shell 39% Pie ierce Depressuris isation ion ▪ 25 kboe/d ▪ Shell 92.52% HI HI d develop

• pment

▪ 75 kboe/d ▪ Shell 40% Gbaran P Ph3 ▪ 50 kboe/d ▪ Shell 30% Marjor joram/Ros

• smari

▪ 60 kboe/d ▪ Shell 75% Bon

• nga m

main in lif ife extension ion ▪ 90 kboe/d ▪ Shell 55% Clair ir S Sou

• uth

▪ 60 kboe/d ▪ Shell 28% Ormen Lange Late L Lif ife recov

• very

▪ 60 kboe/d ▪ Shell 18% Assa Nor

• rth

▪ 60 kboe/d ▪ Shell 30% Uzu develop

• pment

▪ 45 kboe/d ▪ Shell 30% Kashagan CC01 01 ▪ 100 kboe/d ▪ Shell 17% KGK expansion ion Ph1 ▪ 40 kboe/d ▪ Shell 29% Pearls Khazar ▪ 40 kboe/d ▪ Shell 55% Kalamkas ▪ 55 kboe/d ▪ Shell 17% Jackdaw ▪ 40 kboe/d ▪ Shell 74% Trol

• ll Ph3

▪ 255 kboe/d ▪ Shell 8.1% SK408 408 ▪ 75 kboe/d ▪ Shell 30%

✓ FID taken since Nov 2017 Management Day ✓ ✓ ✓ ✓

Mexic ico

• bid

id r rou

• und

Brazil il bid id r rou

• und

Potential:

 Recent FIDs:

>200 kboe/d

 pre-FID options:

>550 kboe/d

 2 successful bid

rounds

Whale dis iscov

• very

✓ ✓ ✓ ✓

Jerun ▪ 95 kboe/d ▪ Shell 30% Mero

• (Lib

ibra) 3+4 3+4 ▪ ~TBD kboe/d ▪ Shell 20%

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Royal Dutch Shell April 26, 2018 13

Deep water

Vito – final investment decision

Vi Vito

 ~100 kboe/day peak production1  ~300 mln boe current estimated

recoverable resources1

 Shell-operated (63.11%)

Sustain ined d capit ital effic icie iency

 Economically resilient: <$35 per barrel

forward-looking break-even price

 Simpler, smaller, and safer to operate  Supply chain collaboration

A leadin ing IOC posit itio ion

 Strong capabilities and advantaged portfolio  Delivering competitive growth

Targeting Vito first oil in 2021

Perdid ido Stones Auger Ram Powell Appomattox Coulomb NaKik ika Olympus Mars Ursa Kaik aikias ias Whale VI VITO TO Enchil ilada Salsa Operatin ing Under Constructio ion Exploratio ion

1: 100% total gross

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Royal Dutch Shell April 26, 2018 14

World-class investment case

Cash flow priorities

*subject to further progress with debt reduction and oil price conditions

Priorities for cash

Debt reduction Dividends Buybacks & capital investment

1 2 3

 Continue to reduce

gearing to 20%

 Cancel scrip dividend  Buy back shares

Progress towards a world-class investment case Increase shareholder distributions At least $25 billion* buyback over 2018 - 2020

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Royal Dutch Shell April 26, 2018

 Capital investment  Dividend  Interest  Net debt reduction

to 20% gearing

 Buybacks*

Divestment proceeds CFFO Surplus CFFO

15

Financial framework

Cash allocation

*subject to further progress with debt reduction and oil price conditions. 20% as a proxy for AA equivalent credit metrics

Deliv ivering g on the BG p post-

• ffer in

intentio ion statements

 Buyback intention unchanged: at least $25 billion

• ver 2018-2020

 $25-30 billion p.a., organic + inorganic  Lower part of the range in 2018  $3.5-4 billion expected in 2018  24.7% as of Q1’18  $4 billion cash payment in Q1’18 (Q4’17 dividend, no scrip)

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Royal Dutch Shell April 26, 2018 16

Financial framework

Free cash flow performance and payout

* 2016 RT $60 per barrel, mid-cycle Downstream **subject to further progress with debt reduction and oil price conditions 2014 cash dividend includes $3.3bln share buy backs, more than offsetting scrip issuance of $2.4bln.

$ billion

Dis istrib ibution ions from free cash flow

Organic FCF Divestment proceeds less acquisitions Cash dividend Scrip dividend Interest paid

$99/bbl $57/bbl $60/bbl* 2014 18Q1 4Q rolling 2019-2021 average

 Financial

transformation 2014-2017

 2019-2021 average:

FCF $30-35 billion

 At least $25 billion**

**

buyback over 2018 - 2020

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Royal Dutch Shell April 26, 2018

Financial framework

Capital discipline supporting growth

Excludes BG acquisition in 2016; historical BG capital investment is based on BG’s published Annual Report

Capit ital in investment

$ billion

Capit ital in investment

$ billion

Capit ital in investment

$ $ billion (p.a.) 2018 2018 – 2020 2020 Oil products 4-5 Conventional

• il + gas

4-5 Integrated gas 4-5 Deep water 5-6 Chemicals 3-4 Shales 2-3 New energies 1-2 Total 25 25-30 30

17

• $12 billion

Shell BG 30 25

 $25 – 30 billion

• rganic + inorganic

 2018: lower part of

the range

Non- and little discretionary spend Small scale and large value growth options Capital investment p.a. 2018-’20 Cash engines Growth priorities Emerging opportunities

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Royal Dutch Shell April 26, 2018

$ billion

18

Financial framework

Divestments + net debt

Divestments: headline, cash proceeds in 2016 + 2017 + Q1 2018: $18.1 billion (in CFFI), $2.1 billion related to Shell Midstream Partners, L.P. (in CFFF)

$ billion

Div ivestment headlin ines – sin ince Q1 2016 Net debt + gearin ing

$ billion

Div ivestment + MLP cash proceeds – sin ince Q1 2 2016

Net debt Gearing (RHS) Cumulative cash proceeds Range %

Rule of thumb:

 +/-$10/bbl Brent =

+/-$6 billion CFFO

• $13.4 billion

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Royal Dutch Shell April 26, 2018 19

Summary

Divestments: headline, cash proceeds in 2016 + 2017 + Q1 2018: $18.1 billion (in CFFI), $2.1 billion related to Shell Midstream Partners, L.P. (in CFFF)

Q1 1 20 2018 18

 Strong results  Underlying growth continues

Portfolio io reshapin ing

 Divestments: $26 billion completed (headline)  Resilience and growth

Fin inancia ial f framework

 Cash priorities unchanged  Capital discipline unchanged Thrive in the energy transition World-class

investment case Strong license to operate

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Royal Dutch Shell April 26, 2018 20

Questions & Answers

Jessica Uhl Chief Financial Officer

Royal Dutch Shell April 26, 2018

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Royal Dutch Shell April 26, 2018

Q2 2018 Outlook

Q2 2 – Q2 2 Outlook: : year-ago baseline reflects Shell’s earnings seasonality

 Integrated gas 

Production volumes: positive impact of ~140-160 thousand boe/d, mainly due to lower maintenance.



Liquefaction volumes are expected to be at similar level

 Upstream 

Production volumes: reduction of ~230-260 thousand boe/d, mainly due to portfolio impacts, higher maintenance, lower production at NAM in the Netherlands and field decline more than offsetting project start-ups

 Downstream 

Oil products sales volumes increase of ~70 thousand boe/d as result of separation of Motiva, partly offset by completed divestments



Refinery availability to decrease



Chemicals availability to increase 20 2018 18 OUTLOOK:

 Corporate segment:

: net charge of $300 – 350 million in Q2; $1.4 – 1.6 billion for the full year, excluding the impact of currency exchange rate effects and interest rate movements

21

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Royal Dutch Shell April 26, 2018

Q1 2018

Prices & margins

$/barrel

Shell oil il & g gas realis isatio ions

$/barrel

Industry refin inin ing margin ins

$/tonne

Industry chemic icals margin ins

US ethane Western Europe naphtha NE/SE Asia naphtha US West Coast US Gulf Coast coking Rotterdam complex Singapore Oil Gas (RHS)

22

$/mscf

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Royal Dutch Shell April 26, 2018 23

Q1 2018

Integrated Gas results

$ billion

Earnin ings Q1 2017 to Q Q1 2018

Environment Choice

Earnings on CCS basis, excluding identified items

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Royal Dutch Shell April 26, 2018 24

Q1 2018

Upstream results

$ billion

Earnin ings Q1 2017 to Q Q1 2018

Environment Choice

Earnings on CCS basis, excluding identified items

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Royal Dutch Shell April 26, 2018 25

Q1 2018

Downstream results

Earnings on CCS basis, excluding identified items

$ billion

Earnin ings Q1 2017 to Q Q1 2018

$ billion

Earnin ings mix ix

Marketing Refining & Trading Chemicals

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Royal Dutch Shell April 26, 2018