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Royal Dutch Shell July 27, 2017
Royal Dutch Shell July 27, 2017
Second quarter 2017 results Re-shaping Shell, to create a - - PowerPoint PPT Presentation
Second quarter 2017 results Re-shaping Shell, to create a - - PowerPoint PPT Presentation
Second quarter 2017 results Re-shaping Shell, to create a world-class investment case Royal Dutch Shell plc July 27, 2017 #makethefuture Royal Dutch Shell July 27, 2017 Ben van Beurden Chief Executive Officer Royal Dutch Shell Royal Dutch
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Royal Dutch Shell July 27, 2017 3
Definitions & cautionary note
Underlying operating expenses are defined as operating expenses less identified items. A reconciliation can be found in the quarterly results announcement. The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate legal entities. In this presentation “Shell”, “Shell group” and “Royal Dutch Shell” are sometimes used for convenience where references are made to Royal Dutch Shell plc and its subsidiaries in general. Likewise, the words “we”, “us” and “our” are also used to refer to subsidiaries in general or to those who work for them. These expressions are also used where no useful purpose is served by identifying the particular company or companies. ‘‘Subsidiaries’’, “Shell subsidiaries” and “Shell companies” as used in this presentation refer to companies over which Royal Dutch Shell plc either directly or indirectly has control. Entities and unincorporated arrangements over which Shell has joint control are generally referred to as “joint ventures” and “joint operations” respectively. Entities over which Shell has significant influence but neither control nor joint control are referred to as “associates”. The term “Shell interest” is used for convenience to indicate the direct and/or indirect ownership interest held by Shell in a venture, partnership or company, after exclusion of all third- party interest. This presentation contains forward-looking statements concerning the financial condition, results of operations and businesses of Royal Dutch Shell. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of Royal Dutch Shell to market risks and statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of terms and phrases such as ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘estimate’’, ‘‘expect’’, ‘‘goals’’, ‘‘intend’’, ‘‘may’’, ‘‘objectives’’, ‘‘outlook’’, ‘‘plan’’, ‘‘probably’’, ‘‘project’’, ‘‘risks’’, “schedule”, ‘‘seek’’, ‘‘should’’, ‘‘target’’, ‘‘will’’ and similar terms and phrases. There are a number of factors that could affect the future operations of Royal Dutch Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this presentation, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for Shell’s products; (c) currency fluctuations; (d) drilling and production results; (e) reserves estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and regulatory developments including regulatory measures addressing climate change; (k) economic and financial market conditions in various countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; and (m) changes in trading conditions. No assurance is provided that future dividend payments will match or exceed previous dividend payments. All forward-looking statements contained in this presentation are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Additional risk factors that may affect future results are contained in Royal Dutch Shell’s Form 20-F for the year ended December 31, 2016 (available at www.shell.com/investor and www.sec.gov ). These risk factors also expressly qualify all forward-looking statements contained in this presentation and should be considered by the reader. Each forward-looking statement speaks only as of the date of this presentation, July 27, 2017. Neither Royal Dutch Shell plc nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking statement as a result
- f new information, future events or other information. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this
- presentation. This presentation may contain references to Shell’s website. These references are for the readers’ convenience only. Shell is not incorporating by reference any information posted on
www.shell.com. We may have used certain terms, such as resources, in this presentation that United States Securities and Exchange Commission (SEC) strictly prohibits us from including in our filings with the SEC. U.S. investors are urged to consider closely the disclosure in our Form 20-F, File No 1-32575, available on the SEC website www.sec.gov.
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Royal Dutch Shell July 27, 2017 4
Summary
Q2 2017 7 - cash momen entum um
Underlying CCS earnings $3.6 billion CFFO $11.3 billion Q217 dividend $0.47 per share
Re Re-shapin aping g Shell - on track ck
Divestments: >$25 billion completed, announced or advanced progress Projects delivery for 2018 on track Capital investment – discipline, efficiency and flexibility Operational excellence and driving down costs
4Q rollin ing g – oil at less than $50 per barr rrel
$38 billion CFFO Cash dividend covered and net debt reduced Balance sheet strengthened: 25.3% gearing
Lea eader: val er: value ue + infl + influen uence ce Red educ ucing g our ur carb carbon intens tensity ty Shared red val value ue with th socie ciety ty
World-class investment case
FCF/share + ROCE growth Conservative financial
management
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Royal Dutch Shell July 27, 2017 5
Q2 2017
Portfolio updates
Schiehallion redevelopment – start of production V-Power now in >60 markets – differentiated fuels Prelude – sail away Brazil – first replicant FPSO
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Royal Dutch Shell July 27, 2017
Divestmen estments ts progr gress ess
6
Divestments progress: >$25 billion
Vivo vo Energy gy April 26, 2017 Motiva va May 1, 2017 Austr tral alia a Aviati ation May 31, 2017 Oil Sands ds May 31, 2017 Corrib b July 12, 2017 Up to $1.23 billion
Divest stments ts Reduce capital investment Reduce
- perating costs
Deliver new projects
Completed in Q2’17 Announced since Q1’17 Divestme estment t progr gramm amme on trac ack
Completed in 2016 & 2017
$15 billion
Announced
$7 billion
Advanced progress
>$4 billion
$30 billion 2016-18 $9.6 billion divestment in Q2’17
($6.7 billion in cash)
Portfolio impact included in 2020 FCF outlook
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Royal Dutch Shell July 27, 2017 7
Capital discipline and efficiency
Excludes BG acquisition in 2016 Historical BG Capital investment is based on BG’s published 2014 Annual Report
$ billion
Capital pital investmen estment
- $20 billion
Shell BG 30 25
2018-20: $25 billion “soft
floor’’
$25 billi
lion
- n p.a.
.a. consis isten tent t with the free e cash sh flow growth th to 2020
Divestments Reduce ce capita ital investm stment Reduce
- perating costs
Deliver new projects
Appomattox Gannet C Geismar
- 20% saving compared to
investment promise
- >20% cost saved compared to
investment promise
- 17% saved with respect to original
proposal
Shell intere rest st 79% 175 175 kboe/d peak 425,000 ,000 tonnes s addition ional al capacit ity 50% equity ty in the Gannet t field
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Royal Dutch Shell July 27, 2017 8
Reduce
- perating costs:
more than 20% down since 2014
$ billion $ billion
Underly erlying ng operating rating expenses nses
Shell BG Underlying operating expenses – 4 quarters rolling (RHS)
Divestments Reduce capital investment Reduce ce
- peratin
ting costs Deliver new projects
Underlying operating expenses measures Shell’s total operating expenses performance excluding identified items # FTE in SBOs (thousands)
Shell Busines ness Operati ations ns (SBOs Os)
7 Shell operated centres Standard processes, increasing
capability
Scope: functions + business
# of FTE (thousands)
Curlew, ew, UK: Mainte ntenan nance e in-sour urcing ng
Using a marine approach to
maintenance applied on the FPSO
Reducing reliance on vendors offshore
by 50%, reducing costs by 35% FTE E movem ements ents
Reduction of 6,500 FTEs in 2016 Reduction of 6,500 FTEs completed
by mid-2017
“Lower forever” mindset Q2’17 4 quarters rolling
underlyi derlying ng opex: : $38 billio lion
Underly
erlying ng costs ts trending nding down
Shell BG
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Royal Dutch Shell July 27, 2017
Deliver new projects: ~$10 billion CFFO by 2018
Divestments Reduce capital investment Reduce
- perating costs
Deliv iver new proje jects cts
Deliver
very y de-risked risked
On
On-str stream eam projec jects ts ramp mping ing up
BG organic growth from January1, 2016; LNG volume includes offtake; pricing assumes $50 Brent in 2017E + $60 real terms 2016 in 2018
Thousand boe per day / mtpa
Shell ll proj
- ject
ect start-ups ps 2014 through
- ugh 2018
/ 15 / 10 / 5 $ billion p.a. Production LNG volume CFFO (RHS)
Mars B Brazil FPSO 7-10 Brazil FPSO 11-13 Stones Malikai Permian + Fox Creek Gorgon QCLNG Prelude Kashagan Schiehallion redevelopment Clair Ph2
Started Under construction
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Select ect key y proj
- jects
ects
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Royal Dutch Shell July 27, 2017 10
Safety and
- perational
excellence
Availa ilabili bility: ty: Gulf lf of Mexic ico,
- , USA
Availa ilabili bility: ty: Gum umusut sut, Malay laysi sia
Proactive integrated surveillance System + leadership Unplanned production losses
reduced from >5% to 2.7% over the period ‘15 -‘17
Focus
us on availab ailability lity impro provem vement nt across ross portfo tfolio lio
Using
ng safety ety prac actic tices s and culture lture to impro prove ve availabi ailability lity
Use an appropriate picture Use an appropriate picture Use an appropriate picture
Availability improved by 6% over
the period ‘12-’17 compared to ‘08-’11 through relentless focus on reliability
Goal-zero mindset across
- perations from safety to reliability
Strong process safety record 98% availability in 2017
Availa ilabili bility: ty: Pernis nis, the Netherla erlands nds
2017 data based on year-to-date performance GoM: Unplanned production losses on surface facility equipment excluding weather, pipeline and subsurface outages
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Royal Dutch Shell July 27, 2017
Jessica Uhl Chief Financial Officer
Royal Dutch Shell
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Royal Dutch Shell July 27, 2017 12
Q2 2017
Financial highlights
Earnings and ROACE on CCS basis, excluding identified items NCI: Non Controlling Interest Dividend: Dividend distributed
$ billion
Earnings nings Q2 2016 to Q2 2017
CCS earnin ings gs $ billion
- n
Q2 2016 Q2 2017 Upstream (1.3) 0.3 Integrated Gas 0.9 1.2 Downstream (CCS) 1.8 2.5 Corporate & non-controlling interest (0.3) (0.4) CCS net earnings 1.0 3.6 CCS earnings, $ per share 0.13 0.44 Cash flow
- w from
- m operatio
erations 2.3 2.3 11.3 11.3 Free cash flow
- w
(3.2) 12.2 Dividend end 3.7 3.9 ROACE (%) 2.5 4.2
Q2’17 vs. Q2’16:
Earnings:
nings: + $2.6 .6 billi llion
- n
CFFO:
O: +$9.0 billi llion
- n
Free
e cash sh flow: : +15.4 billi lion
- n
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Royal Dutch Shell July 27, 2017 13
Q2 2017
Cash momentum
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)
Stro
rong ng cash h flow moment entum um continued inued from m 2016 into 2017
$38bln
bln CFFO O (4 quar uarters ters rolling) ling) at <$50 50/bbl bbl
Average Brent oil price - 4 quarters rolling ($/bbl) Clean earnings $ billion $ billion
$99/bbl $43/bbl $50/bbl
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Royal Dutch Shell July 27, 2017 14
Downstream financial performance
Earnings and ROACE on CCS basis, excluding identified items
$ billion
Earnings nings + ROACE CE Capital pital employed ployed
$52.5 billion at end Q2’17
Cash sh flow
Working Capital movement CFFO excluding working capital Refining & Trading Chemicals Marketing ROACE (RHS) Refining & Trading Chemicals Marketing $ billion %
Stro
rong ng cash h genera rati tion
- n
Competit
petitive ive return urns
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Royal Dutch Shell July 27, 2017 15
The world’s largest fuel retailer
*Source: Brand Finance Global 500
Most st valua luable ble oil and d gas s brand and in the world* d*
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Royal Dutch Shell July 27, 2017
Q2 2017
Synergies
*Exchange rates assumed for synergies calculation purposes at the time of BG combination for 2017, 2018 FTE: Full time equivalent
FTE reduc ductio tions ns
$3.5 billion synergies by 2018 as per BG prospectus exceeded $4.5 billion expected by the end of 2017at planned exchange rates*
Exploration synergies Costs and corporate synergies Synergies target as per BG prospectus
More
re syner nergies, gies, delivered ivered faster ter than expec ected ted
Syner
nergies gies included luded in
- perating
rating costs s and capital pital investment stment guid idan ance
2016 2017E 2018E
$ billion
Syner nergies gies upda date
Additional synergies # of FTE (thousands)
Contra racting ing and Procurement urement savi vings ngs
$ billion
16
Shell BG
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Royal Dutch Shell July 27, 2017 17
Q2 2017
Cash performance and distributions
$ billion
Dividen idend d + gearing aring
UPSTRE REAM AM IG IG
DOWNSTR TREAM /CORPOR PORATE
4 quar arters ters rolling: ling:
Cash
sh dividend idend covered ered at
- il price
e below w $50/bb bbl
Gearing
aring reduc duced ed to 25.3 .3%
$ billion
Sourc urces es and d uses s of cash h – 4 quar arters ters rolling ling
Dividend Buy-backs Gearing (RHS) % 26.4 Interest paid Debt repayments &
- ther financing
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Royal Dutch Shell July 27, 2017 18
Cash flow priorities 2016-18
Priorities for cash
Debt reduction Dividends Buy-backs & capital investment
1 2 3
Divestments Reduce capital investment Reduce
- perating costs
Deliver new projects
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Royal Dutch Shell July 27, 2017
Q3 2017 Outlook
Q3 Q3 – Q3 OUTLOOK: OK: Year-ago baseline reflects Shell’s earnings seasonality
Integ
egrat rated ed gas
Gorgon start-up partly offset by higher maintenance: positive impact of ~60 kboe/d
Upstr
trea eam
Divestment impact: reduction of ~190 kboe/d
Production in the Netherlands (NAM): reduction of ~40 kboe/d
Maintenance: negative impact of ~30 kboe/d
Restored production in Nigeria: positive impact of ~90 kboe/d
Downstr
trea eam
Refinery availability to increase
Chemicals availability to increase
Divestment impacts: reduction of ~240 thousand b/d in oil products sales volumes 2017 OUTLOO OOK: K:
Corpora
rate te segme ment: t: net charge of $350 – 450 million in Q3; $1.4 – 1.6 billion in 2017, excluding the impact of currency exchange rate effects and interest rate movements
Shell
ll earnings sensiti tivity ty:
Bren ent: $10/bbl Brent +/- ~$5 billion earnings per annum, of which: Upstream +/- ~$3 billion; Integrated Gas +/- ~$2 billion (4-6 month LNG price lag versus Brent)
Henry ry Hub: $1/mmbtu +/- ~$250 million earnings per annum
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Royal Dutch Shell July 27, 2017
Ben van Beurden Chief Executive Officer
Royal Dutch Shell
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Royal Dutch Shell July 27, 2017 21
World-class investment case
Transformation
ROACE on CCS basis, excluding identified items Organic free cash flow as CFFO minus CFFI excluding divestment proceeds 2019-2021 Brent price as 2016 RT
Strategy
rategy is worki king ng
Implemen
plementation tation is on trac ack
Q2’17 4Q rolling 2013-2015 average
Brent ROACE ~$50 4.2% ~$90 8% Organic free cash flow $16.6 billion $5 billion p.a.
2019-2021 average
~$60 ~10% $20-25 billion p.a.
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Royal Dutch Shell July 27, 2017 22
Questions & Answers
Ben van Beurden Chief Executive Officer Jessica Uhl Chief Financial Officer
Royal Dutch Shell July 27, 2017
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Royal Dutch Shell July 27, 2017
Royal Dutch Shell plc July 27, 2017
Second quarter 2017 results
Re-shaping Shell, to create a world-class investment case
#makethefuture
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Royal Dutch Shell July 27, 2017
Q2 2017
Prices & margins
$/barrel
Shell ll oil & gas s realisati alisations ns
$/barrel
Industr dustry refining ning marg rgin ins
$/tonne
Industr dustry chemic icals als marg rgin ins
US ethane Western Europe naphtha NE/SE Asia naphtha US West Coast US Gulf Coast coking Rotterdam complex Singapore Oil Gas (RHS)
24
$/mscf
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Royal Dutch Shell July 27, 2017 25
Q2 2017
Upstream results
$ billion
Earnings nings Q2 2016 to Q2 2017
Environment Choice
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Royal Dutch Shell July 27, 2017 26
Q2 2017
Integrated Gas results
$ billion
Earnings nings Q2 2016 to Q2 2017
Environment Choice
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Royal Dutch Shell July 27, 2017 27
Q2 2017
Downstream results
Earnings on CCS basis, excluding identified items.
$ billion
Earnings nings Q2 2016 to Q2 2017
$ billion
Earnings nings mix
Marketing Refining & Trading Chemicals
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Royal Dutch Shell July 27, 2017 28
Q2 2017
Oil and gas production
Million boe per day
Upstream stream + Integr grated ated Gas s – oil & gas
Million tonnes
LNG G liquefacti uefaction n volum umes es
Choice
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Royal Dutch Shell July 27, 2017
Projects under construction
29 Start t up Proje ject Countr try Shell ll share (direct t & indir irect) % Peak k Productio ion n 100% kboe/d /d LNG 100% Capacity ity mtpa Products Legen gend Theme Shell ll Operate ted 2017-18 Baronia / Tukau Timur Malaysia 40 65
Conventional oil + gas Berbigão** Brazil 25 150
Deep water Clair Ph2 United Kingdom 28 100
Conventional oil + gas Coulomb United States 100 20
Deep water
P
Fox Creek* Canada various 26
Shales
P
Forcados Yokri Integrated Project (FYIP) Nigeria 30 50
Conventional oil + gas
P
Gbaran-Ubie Ph2 Nigeria 30 150
Conventional oil + gas
P
Geismar AO4 United States 100 425 ktpa AO
Chemicals
P
Lula Extreme South** Brazil 25 150
Deep water Lula North** Brazil 25 150
Deep water Permian* United States various 54
Shales
P
Pernis Solvent Deasphalting Netherlands 100 50 kbpd
Oil Products
P
Prelude FLNG Australia 68 131 3.6 1.7 mtpa NGLs
Integrated Gas
P
Tempa Rossa Italy 25 50
Conventional oil + gas 2019+ Appomattox United States 79 175
Deep water
P
Atapu 1** Brazil 25 150
Deep water Atapu 2** Brazil 25 150
Deep water Bokor Malaysia 40 12
Conventional oil + gas Kaikias Ph1 United States 80 40
Deep water
P
Nanhai China Chemicals China 50 1.2 mtpa C2
Chemicals Pennsylvania cracker United States 100 1.5 mtpa C2
Chemicals
P
Rabab Harweel Integrated Project Oman 34 40
Conventional oil + gas Southern Swamp AG Nigeria 30 30
Conventional oil + gas
P
* Permian and Fox Creek production represents Shell entitlement share of production. 2017-18: production growth expected between 2016 peak to 2018 peak production. 2019+: production growth expected between 2018 peak to 2020. ** The Lula, Berbigão, Atapu accumulations are subject to unitisation agreements; production shown is FPSO oil capacity as per operator
2017-18 18
~430 kboe/d
/d
2.5 mtpa
pa LNG
50
50 kbpd pd refin ined ed products
- ducts
0.4 mtpa
pa AO AO 2019+
~270 kboe/d
/d
2.1 mtpa
pa ethyle lene ne
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Royal Dutch Shell July 27, 2017
Pre-FID options
* Production shown is FPSO oil capacity as per operator 30 Phase Proje ject Countr try Shell ll share (direct t & indir irect) % Peak k Productio ion n 100% kboe/d /d LNG 100% Capacity ity mtpa Products Legen gend Theme Shell ll Operate ted
Select
Bonga Main Integrated Redevelopment Nigeria 55 112
Deep water
P
KGK Expansion Project (KEP 1A) Kazakhstan 29 TBD
Conventional oil + gas Libra 2* Brazil 20 180
Deep water LNG Canada T3-4 Canada 50 14
Integrated Gas Sakhalin T3 Russia 28 69 ~5
Integrated Gas
Define
Bonga South West Nigeria 43 154
Deep water
P
Changbei II China 50 57
Integrated Gas
P
Lake Charles LNG United States TBD 16
Integrated Gas Libra pilot FPSO* Brazil 20 180
Deep water LNG Canada T1-2 Canada 50 14
Integrated Gas Penguins Redevelopment United Kingdom 50 40
Conventional oil + gas
P
Val d'Agri Ph2 Italy 39 60
Conventional oil + gas Vito United States 63 100
Deep water
P
>350 kboe/d
/d
>15 mtpa
pa LNG
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Royal Dutch Shell July 27, 2017 31
Divestments progress: >$25 billion
Complet eted ed in 2016 & 2017: $15 billion Announ unced ed: : $7 billion In progress: : >$4 billion
Divestmen estments ts progr gress ess
Divest stments ts Reduce capital investment Reduce
- perating costs
Deliver new projects
$30 billi
lion
- n 2016-18
18
$9.6
.6 billion lion divestmen estment t proceeds in Q2’17 ($6.7 billio lion n in cash) h)
Portfo
foli lio
- impact
pact included luded in 2020 FCF outlo look
- k
Picture
Vivo vo Energy gy Austr tral alia a Aviati ation Oil Sands ds Motiva va
Completed in Q2’17
Divestme estments ts impact pact
UK North th Sea assets ets: announced January 2017 1 Oil sands ds mini ning ng + in-situ: tu: completed May 2017 1, 2 Motiva va JV exit: t: completed May 2017 3
Production
- 162 kboe/d
CFFO
- $0.5 billion
Operating expenses
- $1.4 billion
Capital investment
- $0.2 billion
Production
- 116 kboe/d
CFFO
- $1.2 billion
Operating expenses
- $0.5 billion
Capital investment
- $0.4 billion
Announced since Q1’17
Corrib b – up to $1.23 billion
1 Full-year basis, based on 2016 actuals 2 Represents 60% of AOSP 3 2017 estimates, shown on full-year basis, excluding consolidation effects.
Refining capacity
- 57 kboe/d
Oil product sales
- 221 kboe/d
Operating expenses +$1.0 billion Capital investment +$0.5 billion Depreciation +$0.4 billion
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Royal Dutch Shell July 27, 2017