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

Royal Dutch Shell July 26, 2018

Royal Dutch Shell plc July 26, 2018

Second quarter 2018 results

Delivering a world-class investment case

#makethefuture

Royal Dutch Shell July 26, 2018

Ben van Beurden Chief Executive Officer

Royal Dutch Shell

Royal Dutch Shell July 26, 2018

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. 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. 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 prices (BEP) presented are 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 the projects are expected to be multi-decade producing the 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, July 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

3

Definitions & cautionary note

Royal Dutch Shell July 26, 2018 4

Summary

1 Divestments: headline, cash proceeds in 2016, 2017 and H1 2018: $23.8 billion (in CFFI), $2.1 billion related to Shell Midstream Partners, L.P. (in CFFF).

Key m messages

 Confidence in free cash flow outlook  Focus on capital discipline in line with financial framework  $30 billion divestments1 completed or announced  $25 billion share buyback programme launched

Q2 2 201 2018

 Strong results, momentum continues  Portfolio reshaping and project delivery Thrive in the energy transition World-class investment case Strong license to operate

Royal Dutch Shell July 26, 2018

HSSE performance

1 Revised July 27, 2018.

Injuries – TRCF (per million working hours)

Goal Zero on safety

Million tonnes CO2e

Upstream flaring

Volume in thousand tonnes

Operational spills1

Number of incidents

Process safety

 HSSE priority  Performance and

transparency

million working hours # Working hours (RHS) TRCF Volume of spills Number of spills (RHS) Tier 1 incidents Tier 2 incidents

5

Royal Dutch Shell July 26, 2018 6

H1 2018

Financial summary

Earnings and ROACE on CCS basis, excluding identified items

10.1 18.9

Earnings ($ billion); EPS +34% versus H1 2017 Cash flow from operations ($ billion)

14.7 6.5

Free cash flow ($ billion) ROACE (%)

23.6

Gearing (%)

Nanhi petrochemicals plant - China

Royal Dutch Shell July 26, 2018 7

Portfolio & projects

Recent portfolio developments

 Whale and Dover discoveries in the Gulf of Mexico  Bid rounds in Mexico and Brazil  Entry into Mauritania  FID: Gumusut Kakap Ph2, Vito, Penguins, Fram and Borssele 3/4  Start-up: Kaikias and Nanhai petrochemicals facility  Progress: Appomattox sail away and Prelude LNG import  Downstream: Argentina  Integrated Gas: Bongkot Thailand,

New Zealand, Malaysia LNG Tiga

 Upstream: Norway, West Qurna

Portfolio io re-shapin ing (A&D) Proje ject deliv ivery Exploration s success

Divestments based on headline size, announced in H1 2018.

 Continue to grow &

high-grade portfolio

 >100kboe/d Shell

share new FIDs

Div ivestments: : ~$4 ~$4.0 b .0 bil illio ion

 First Utility  Silicon Ranch  Other

Acquis isitions: : ~$0 ~$0.5 b .5 bil illio ion

Royal Dutch Shell July 26, 2018 8

Portfolio & projects

Gulf of Mexico

 Leading position  Growth and

longevity

• peratio

ional e excellence Proje ject deliv ivery Exploration s success

Whale – dis iscovery Dover – dis iscovery Bid id round - Mexic ico Appomattox on locatio ion Kaik ikia ias start-up up Vit Vito FID Bid id round – Mexic ico

Royal Dutch Shell July 26, 2018 9

Portfolio & projects

Projects delivery

Nanhai petrochemic icals expansion – start-up Prelude – progress towards start-up up

 Floating LNG facility offshore Australia  Final plant commissioning underway with start-up

expected in 2018

 LNG production 3.6 million tonnes per annum with

1.7 million tonnes per annum natural gas liquids

 Shell share 68%  New ethylene cracker and derivatives unit in China  Key component of growth and competitiveness in

chemicals strategic theme

 1.2 million tonnes per annum ethylene capacity  Shell share 50%

Projects delivery

• n track

Royal Dutch Shell July 26, 2018

Percentage of capital investment 0% 100% 50% Percentage of capital investment

10

Portfolio & projects

High-quality Upstream growth options

Reserves and resources as per year end 2017 excluding Groningen; Break-even price charts as per November 2017 Management Day; Unit development costs are defined as lifecycle capital expenditure divided by total production (Shell working interest share, present value).

Billion boe

Reserves & r resources

Pre-FID funnel break-even price $ per barrel

Upstream – Conventio ional oil il & g gas

Pre-FID funnel break-even price $ per barrel

Upstream – Deepwater

Permian – break-even price $ per barrel

Upstream – Shales Since 2014: >45% reduction in expected unit development cost for major projects

2014 2017 40 20 Net risked well count 2600 1300 <$40 $40-50 Reserves (SEC proved) Discovered resources (2P+2C development pending) Conventional

• il & gas

Deep water Shales

Royal Dutch Shell July 26, 2018 11

Cash momentum

1 Pricing assumption 2019-21: $60 per barrel real term 2016. 2 At $71 per barrel.

$ billion

Total c cash flow

 New p

New proje

• jects

cts cas cash h deli deliver very y on

• n trac

track

 Confi

Confidence dence in in 2020 2020 free free cas cash h fl flow

• w
• utlook
• utlook

54 52 44 64 Cash flow from operations (excluding working capital movements) Average Brent oil price ($/bbl)

#

Organic free cash flow $ billion cash flow per annum

Proje ject start-ups 201 2014 4 to 202 2020

~$10 billion CFFO1 2018 YTD estimate2 ~651 $/bbl

Royal Dutch Shell July 26, 2018 12

Financial framework

Capital discipline supporting growth

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

$ billion

Capit ital in investment

 $25-30 billion

• rganic & inorganic

 2018: lower part of

the range Capit ital in investment

$ $ bil illio ion (p.a .a.) .) 2018 2018-20 20 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 To Total 25 25-30 30

• $12 billion

30 25 Shell BG

Royal Dutch Shell July 26, 2018

 Attractive dividend key to

total shareholder return and world-class investment case

 $25 billion share buyback

by end 20201

 First buyback tranche

$2 billion in Q3 2018

13

Shareholder returns

1 Subject to further progress with debt reduction and oil price conditions.

Total shareholder return calculated on a basis of 90-day average around period start and end dates.

%

Total s shareholder returns January 201 2016 6 to end June 201 2018 Delivering a world- class investment case

Shell

Royal Dutch Shell July 26, 2018

Jessica Uhl Chief Financial Officer

Royal Dutch Shell

Royal Dutch Shell July 26, 2018 15

Foundation of the world-class investment case

Key f features

 Maximising value for shareholders through cycle  Focus on shareholder distributions  Multi-year timescales  Surplus free cash flow in up-cycle and dividends fully covered

in down-cycle

 Gearing 0-30%; AA equivalent credit metrics Thrive in the energy transition World-class investment case Strong license to operate

 Conservative

financial management

 FCF &

ROACE growth

Royal Dutch Shell July 26, 2018 16

Financial framework

Cash flow priorities

Priorities for cash

Debt reduction Dividends Buybacks & capital investment

1 2 3

Continue to reduce gearing Cancel scrip dividend Buy back shares Progress towards a world-class investment case Increase shareholder distributions

Royal Dutch Shell July 26, 2018

%

17

Financial summary

Earnings and ROACE on CCS basis, excluding identified items. Divestments: headline, cash proceeds in 2016, 2017 and H1 2018: $23.8 billion (in CFFI), $2.1 billion related to Shell Midstream Partners, L.P. (in CFFF).

$ billion

Earnin ings & R ROACE

$ billion

Div ivestments

$ billion

Cash flow

$ billion

Net d debt & g gearin ing

% Upstream ROACE (RHS) Downstream Integrated Gas Corporate + NCI CFFO CFFI FCF Net debt Gearing (RHS)

Royal Dutch Shell July 26, 2018 18

Q2 2018

Financial highlights

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

$ billion

Earnin ings Q2 2 201 2017 7 to Q2 2 201 2018

$ $ bil illio ion

Q2 2017 2 2017 Q2 2018 2 2018 Upstream 0.3 1.5 Integrated Gas 1.2 2.3 Downstream (CCS) 2.5 1.7 Corporate & non-controlling interest (0.4) (0.7)

CCS earnings 3.6 3.6 4.7 4.7

CCS earnings, $ per share 0.44 0.56

Cash flow f from

• perations

11.3 11.3 9.5 9.5 Free cash flow 12.2 12.2 9.5 9.5 Div ivid idend 3.9 3.9 3.9 3.9 ROACE (%) 4.2 4.2 6.5 6.5

Royal Dutch Shell July 26, 2018 19

Downstream

US Gulf Coast:

• ne year after

Motiva

Integration Integration deli delivering vering value value

Shell terminals Shell refineries

Deer Park: crude and feedstock flexibility integrated with trading

Norco Convent Deer Park Mobile

Shell chemical plants

Geismar

Retail il product supply: end to end value generation Sewaren: integrated

• perations

Mobil ile: retail, refining & trading integration Norco: hydrocracker upgrade & integration Convent: FCC reliability & integration

Royal Dutch Shell July 26, 2018 20

Integrated Gas

LNG portfolio

Million tonnes per annum (DES)

Emergin ing LNG S Supply – Demand gap

LNG supply in operation LNG supply under construction Demand forecasts

LNG M Market & & o

• utlook

 LNG is the fastest-growing gas supply source  2017-18: continued supply/demand balance  Early 2020s: supply gap

Shell response

 Globally balanced and resilient portfolio  Competitive pre-FID opportunities in all supply

basins Pre-FID opportunit itie ies – LNG C Canada

 Attractive and differentiated position  Decision criteria:

 Competitiveness  Affordability  Returns

Royal Dutch Shell July 26, 2018 21

Upstream

Permian Performance

Thousand boe per day

 ~260,000 net acres with ongoing efforts to

consolidate footprint through swaps

 Strong delivery to date and more than 30%

annual production growth through 2020

 Growth plans not impacted by infrastructure

bottlenecks

 Free cash flow growth well into the next decade  Continue to reduce costs despite supply chain

pressure Productio ion growth

$ per boe

Dir irect fie ield unit it operatin ing costs Continued strong delivery of organic growth and improved cost performance

+160% +85%

• 18%

Royal Dutch Shell July 26, 2018

Capit ital employed

($ bln)

Free cash flow

($ bln p.a)

ROACE

(%)

~70% ~70% 25 25-30 30 >10 >10 ~20% ~20% 1-2 ~5 ~5 ~5% ~5% (2) 2) - (1) 1) ~5 ~5 25 25-30 30 >5 ~290 ~290 30 30-35 35 ~10 ~10

22

Strategic themes delivery:

• n track

2019-21: 2016 RT $60 per barrel, mid-cycle Downstream; includes Deepwater in cash engines and Shales in growth priorities by 2020.

2019-21 ~$60 Q2 2018 4Q rolling ~$64

Strategic ic themes Cash engin ines Growth prio iorit itie ies Emergin ing

• pportunit

itie ies Organic ic FCF Divestments & acquisitions To Total ( (in incl. . Corporate) Capit ital employed

($ bln end 2017)

Free cash flow

($ bln p.a)

ROACE

(%)

~60% ~60% ~10 ~10 ~10 ~10 ~28% ~28% ~4 ~4 ~5 ~5 ~6% ~6% ~( ~(2) 2) ~( ~(4) 4) ~13 ~13 ~12 284 284 ~25 ~25 ~6 ~6

Price sensitivity: +/- $10 Brent = +/- ~$6 billion CFFO

Royal Dutch Shell July 26, 2018

Ben van Beurden Chief Executive Officer

Royal Dutch Shell

Royal Dutch Shell July 26, 2018 24

Summary

1 Divestments: headline, cash proceeds in 2016, 2017 and H1 2018: $23.8 billion (in CFFI), $2.1 billion related to Shell Midstream Partners, L.P. (in CFFF)

Key m messages

 Confidence in free cash flow outlook  Focus on capital discipline in line with financial framework  $30 billion divestments1 completed or announced  $25 billion share buyback programme launched

Q2 2 201 2018

 Strong results, momentum continues  Portfolio reshaping and project delivery Thrive in the energy transition World-class investment case Strong license to operate

Royal Dutch Shell July 26, 2018 25

Questions & Answers

Ben van Beurden Chief Executive Officer Jessica Uhl Chief Financial Officer

Royal Dutch Shell July 26, 2018

Royal Dutch Shell July 26, 2018

Q3 2018 Outlook

Q3 3 – Q3 O 3 OUTLOOK: : Year-ago baseline reflects Shell’s earnings seasonality

 Integrated gas 

Production volumes: negative impact of 40-70 thousand boe/d, mainly due to divestments and higher maintenance



Liquefaction volumes: at similar level

 Upstream 

Production volumes: negative impact of 210-240 thousand boe/d, mainly due to divestments, field decline and higher maintenance, partly offset by volumes from new fields

 Downstream 

Refinery availability to increase: given unplanned downtime events in Q3 2017, partly offset by higher planned maintenance in Q3 2018



Chemicals availability to increase: given unplanned downtime events in Q3 2017, partly offset by higher planned maintenance in Q3 2018



Oil products sales volumes: at similar level 20 2018 O OUTLOOK:

 Corporate s

segment: : net charge of $400-450 million in Q3; $1.4-1.6 billion for the full year, excluding the impact of currency exchange rate effects.

26

Royal Dutch Shell July 26, 2018

Q2 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)

27

$/mscf

Royal Dutch Shell July 26, 2018 28

Q2 2018

Financial highlights

Earnings and ROACE on CCS basis, excluding identified items

$ billion

Earnin ings Q2 2 201 2017 7 to Q2 2 201 2018

$ $ bil illio ion

Q2 2017 2 2017 Q2 2018 2 2018 Upstream 0.3 1.5 Integrated Gas 1.2 2.3 Downstream (CCS) 2.5 1.7 Corporate & non-controlling interest (0.4) (0.7)

CCS earnings 3.6 3.6 4.7 4.7

CCS earnings, $ per share 0.44 0.56

Cash flow f from

• perations

11.3 11.3 9.5 9.5 Free cash flow 12.2 12.2 9.5 9.5 Div ivid idend 3.9 3.9 3.9 3.9 ROACE (%) 4.2 4.2 6.5 6.5

Royal Dutch Shell July 26, 2018 29

Q2 2018

Integrated Gas results

$ billion

Earnin ings Q2 2 201 2017 7 to Q2 2 201 2018

Environment Choice

Earnings on CCS basis, excluding identified items

Royal Dutch Shell July 26, 2018 30

Q2 2018

Upstream results

$ billion

Earnin ings Q2 2 201 2017 7 to Q2 2 201 2018

Environment Choice

Earnings on CCS basis, excluding identified items

Royal Dutch Shell July 26, 2018 31

Q2 2018

Downstream results

Earnings on CCS basis, excluding identified items

$ billion

Earnin ings Q2 2 201 2017 7 to Q2 2 201 2018

$ billion

Earnin ings mix ix

Marketing Refining & Trading Chemicals

Royal Dutch Shell July 26, 2018