3rd May 2007 07:00
1st Quarter 2007 results
* Royal Dutch Shell's first quarter 2007 CCS earnings were $6.9 billion compared to $6.1 billion a year ago. CCS earnings per share increased by 17% versus the same quarter a year ago. * From 2007 onwards the Group is declaring its dividends in US dollars rather than in euros. A first quarter 2007 dividend has been announced of $0.36 per share, an increase of 14% over the US dollar dividend for the same period in 2006. * $0.5 billion or 0.2% of Royal Dutch Shell shares were bought back for cancellation during the quarter.Royal Dutch Shell Chief Executive Jeroen van der Veer commented: "These areagain competitive results, driven by operating performance." He continued: "Wehave progressed two large and complex transactions, Sakhalin II and ShellCanada, which consolidate our position in two major resources areas. Ourstrategy is on track. We continue to refocus our portfolio, through disciplinedcapital choices."Summary unaudited results$ million QUARTERS Q1 Q4 Q1 2007 2006 2006 %1 Income attributable to shareholders 7,281 5,283 6,893 +6 Estimated current cost of supplies (CCS) adjustment for Oil Products and Chemicals (see note 2) (349) 732 (805) CCS earnings 6,932 6,015 6,088 +14 Basic earnings per share ($) 1.16 0.84 1.06 Estimated CCS adjustment per share ($) (0.06) 0.11 (0.12) Basic CCS earnings per share ($) 1.10 0.95 0.94 +17 Dividend per ordinary share ($)2 0.36 0.325 0.315 +14 1 Q1 on Q1 change
2 First quarter 2007 dividends are declared in US dollars. Comparable periods were declared in euros and translated, for comparison purposes, to US dollars (based on the US dollar dividend of American Depositary Receipts in the applicable period converted to ordinary shares).
Key features of the first quarter 2007
* First quarter 2007 CCS earnings were $6,932 million or 14 % higher than the same quarter a year ago. * First quarter 2007 reported income was $7,281 million or 6% higher than the same quarter a year ago. * Exploration & Production segment earnings were $3,508 million compared with $3,743 million in the first quarter 2006. Earnings, when compared to the first quarter 2006, were mainly impacted by lower oil and gas price realisations, lower volumes and higher costs, reflecting current industry conditions. * Gas & Power segment earnings were $803 million compared to $760 million a year ago. Earnings, when compared to the same quarter in 2006, reflected increased LNG sales volumes and LNG equity dividends, which were offset by lower marketing and trading results. * Oil Products CCS earnings were $1,488 million compared to $1,333 million in 2006. Earnings reflected higher refinery and marketing margins partly offset by lower refinery utilisation and higher operational costs when compared to the first quarter 2006. Also in Downstream, Chemicals CCS earnings were $480 million compared to $139 million in 2006. Chemicals earnings reflected higher unit margins and full operations in the quarter at the Nanhai petrochemicals complex in China when compared to the same quarter in 2006. * Cash flow from operating activities was $11.2 billion compared to $7.8 billion in the first quarter 2006. Excluding working capital movements and taxation effects, cash flow from operating activities was $9.7 billion compared to $9.2 billion a year ago (see note 7). * Total cash returned to shareholders in the first quarter 2007 was $2.6 billion in the form of dividends and share repurchases. * Capital investment for the first quarter 2007 was $5.6 billion, excluding the minority share of Sakhalin of $0.4 billion. Approximately $0.4 billion of proceeds were realised from divestments, and some $7.1 billion was used for acquisitions, mainly related to Shell Canada. * Return on average capital employed (ROACE), on a reported income basis (see note 3), was 23.2%. * Gearing (see note 5) was 14.6% at the end of the first quarter 2007 versus 12.0 % at the end of the first quarter 2006. * As at March 31, 2007 Shell Investments Ltd (SIL), a wholly owned subsidiary of Royal Dutch Shell plc, had taken up and accepted for payment approximately 94.5% of the outstanding common shares of Shell Canada not already owned by SIL. SIL has since exercised its right to acquire the remaining shares not already owned by SIL or its affiliates at the same price of C$45 per common share. The cash purchase price for the shares amounts to some $7.1 billion (See note 6). * On April 11, 2007, Royal Dutch Petroleum Company (now merged into Shell Petroleum N.V.) and The Shell Transport and Trading Company, Ltd., (formerly: The "Shell" Transport and Trading Company, p.l.c.) without admitting any wrongdoing, reached a settlement of asserted and unasserted claims arising out of the recategorisation of its proved reserves with representatives of shareholders who both resided and purchased Shell shares outside of the United States during the period of April 8, 1999 through March 18, 2004, inclusive. The agreement depends on the Amsterdam Court of Appeals declaring the settlement binding for all of the shareholders that it covers and is further subject to agreed opt-out and termination provisions. * On April 18, 2007, Royal Dutch Shell completed the farm-out to OAO Gazprom of a 50% stake (plus 1 share) in the Sakhalin project in Russia. Royal Dutch Shell diluted its stake in the project from 55% to 27.5% for a total sale price of $4.1 billion. This transaction will be accounted for in the second quarter 2007. In addition, the Ministry of Natural Resources of the Russian Federation has announced its approval of the revised Environmental Action Plan, and the Supervisory Board of Sakhalin Energy has approved the Amended Development Budget. Additional agreements were also signed with the Russian Government, addressing the economic balance of the project.
Basic earnings per share (see notes 1, 2 and 8)
QUARTERS Q1 Q4 Q1 2007 2006 2006 Earnings per share ($) 1.16 0.84 1.06 CCS earnings per share ($) 1.10 0.95 0.94
Diluted earnings per share (see notes 1, 2 and 8)
QUARTERS Q1 Q4 Q1 2007 2006 2006 Earnings per share ($) 1.15 0.83 1.05 CCS earnings per share ($) 1.10 0.95 0.93 Summary segment earnings$ million QUARTERS Q1 Q4 Q1 2007 2006 2006 %1 Segment earnings Exploration & Production 3,508 3,710 3,743 Gas & Power2 803 579 760 Oil Products (CCS basis) 1,488 1,469 1,333 Chemicals (CCS basis) 480 273 139 Corporate2 801 249 227 Minority interests (148) (265) (114) ______ ______ ______ CCS earnings 6,932 6,015 6,088 +14 ______ ______ ______ 1 Q1 on Q1 change 2 As from the first quarter 2007, the segment Other Industry and
Corporate has been renamed as Corporate. Its earnings no longer include the results generated by the Wind and Solar businesses, which were previously reported as part of Other Industry Segments, but continue to include some non-material businesses. The Wind and Solar businesses earnings are, as from the first quarter 2007, reported under the Gas & Power segment. For comparison purposes, the first and fourth quarters 2006 results were reclassified and are impacted by $(5) million and $(3) million in the Gas & Power segment and by $5 million and $3 million in the Corporate segment, respectively.
Summary segment earnings - continued
Earnings in the first quarter 2007 reflected the following items, which in aggregate were a net gain of $371 million (compared to a net gain of $113 million in the first quarter 2006) as summarised in the table below:
* Exploration & Production earnings included a net income of $104 million, reflecting both a gain from divestments of $126 million and a charge of $22 million related to the mark-to-market valuation of certain UK gas contracts. Exploration & Production first quarter 2006 earnings included net gains of $113 million (mainly related to the resolution of contractual issues, partly offset by a $34 million charge related to the mark-to-market valuation of certain UK gas contracts). * Gas & Power earnings included a net income of $39 million, reflecting gains of $110 million related to divestments and a charge of $71 million related to gas contract mark-to-market valuation. * Oil Products earnings included a charge of $176 million related to impairment of certain assets. * Corporate included a gain of $404 million related to the realisation of gains on the sale of the equity portfolio held by Group insurance companies.
The reduced effective tax rate for the quarter has been caused by a change in the mix of the Group's profits, partly as a result of specific items and partly as a result of production locations. The effective tax rate in future quarters is uncertain, and is impacted by changes in the mix of the Group's profits.
Summary table:$ million QUARTERS Q1 Q4 Q1 2007 2006 2006 Segment earnings impact of identified items: Exploration & Production 104 387 113 Gas & Power 39 - - Oil Products (CCS basis) (176) 103 - Chemicals (CCS basis) - (83) - Corporate 404 108 - Minority interests - - - ______ ______ ______ CCS earnings impact 371 515 113 ======== ======= ======== == === == These items generally relate to events with an impact of greater than $50million on earnings and are shown to provide additional insight in the segmentearnings, CCS earnings and income attributable to shareholders. Furtheradditional comments are provided in the section 'Earnings per industry segment'on page 5 and onwards. Earnings per industry segmentUpstream QUARTERS Q1 Q4 Q1 2007 2006 2006 Realised Oil Prices (period average) $/bbl WOUSA 54.88 54.93 57.67 USA 51.91 52.94 55.16 Global 54.45 54.65 57.39 Realised Gas Prices (period average) $/thousand scf Europe 7.84 7.63 7.08 WOUSA (including Europe) 4.71 4.59 4.76 USA 7.20 6.87 9.56 Global 5.21 5.06 5.64 Oil and gas marker industry prices (period average) Brent ($/bbl) 57.76 59.59 61.80 WTI ($/bbl) 58.05 59.90 63.30 Henry Hub ($/MMBtu) 7.15 6.68 7.75 UK National Balancing Point (pence/therm) 22.31 29.93 69.42 Exploration & Production$ million QUARTERS Q1 Q4 Q1 2007 2006 2006 %1 Segment earnings 3,508 3,710 3,743 -6 Crude oil production (thousand b/d) 1,961 2,201 1,966 0 Natural gas production available for sale (million scf/d) 8,981 8,377 10,324 -13
Barrels of oil equivalent (thousand boe/d) 3,509 3,645 3,746 -6
1 Q1 on Q1 change
First quarter Exploration & Production segment earnings were $3,508 million compared to $3,743 million a year ago.
First quarter 2007 earnings included a net income of $104 million, reflecting both a gain from divestments of $126 million and a charge of $22 million related to the mark-to-market valuation of certain UK gas contracts. Exploration & Production first quarter 2006 earnings included net gains of $113 million (mainly related to the resolution of contractual issues, partly offset by a $34 million charge related to the mark-to-market valuation of certain UK gas contracts). Excluding these effects earnings were 6 % lower than a year ago.
Earnings reflected lower production volumes and oil and gas prices, higher costs, reflecting current industry conditions and increased pre-development activity levels, compared to the first quarter 2006.
Liquids realisations were 5% lower than a year ago, approximately in line with the marker crudes Brent (-7%) and WTI (-8%). Outside the USA gas realisations decreased by 1% whereas in the USA gas realisations decreased by 25%.
First quarter 2007 production was 3,509 thousand boe per day compared to 3,746 thousand boe per day a year ago. Year-on-year, oil production was broadly unchanged. Unusually low seasonal gas demand related to warm weather in North West Europe continued to impact gas sales.
Production compared to the first quarter 2006 included volumes from new fields including Erha (Shell share 44%) in Nigeria, E8 and B12 (Shell share 50%) in Malaysia, BlackRock (Shell share 100%) in Canada, Pohokura (Shell share 48%) in New Zealand, Enfield in Australia (Shell share 34%), Changbei (Shell share 50%) in China and Champion West Phase III (Shell share 50%) in Brunei.
Production from Shell Petroleum Development Company's Nigerian operations was 78 thousand boe per day (Shell share) lower than a year ago due to deferred production mainly in the Western Delta resulting from security concerns. At the end of the quarter 188 thousand boe per day (Shell share) remained shut-in. Efforts continue towards restoring safe operational conditions in the Niger Delta and, following an improvement in the security situation, preparations for a restart are underway. No firm date can be given for a return to full production, nor the rate of ramp-up to full production. Restricted access to the area continues to impact the future drilling programme and the progress of new projects.
First quarter portfolio developments:
In China, Shell and PetroChina started commercial production and gas delivery from the Changbei gas field.
In New Zealand, Shell delivered first offshore gas from the Pohokura field. This follows the delivery of onshore gas achieved in September 2006.
Shell sold 45% of the newly created Shell Technology Ventures Fund 1 BV (STV), an energy technology fund, to Coller Capital. Shell will remain the majority shareholder in the fund, which will focus on investing in non-exclusive Shell and third party exploration and production technologies.
Gas & Power$ million QUARTERS Q1 Q4 Q1 2007 2006 2006 %1 Segment earnings 2 803 579 760 +6
Equity LNG sales volume (million tonnes) 3.30 3.34 3.00 +10
1 Q1 on Q1 change
2As from the first quarter 2007, the Gas & Power earnings include earnings generated by the Wind and Solar businesses, which were previously reported as part of Other Industry Segments. For comparison purposes, the first and fourth quarters 2006 results were reclassified and were impacted by $(5) million and $ (3) million respectively.
First quarter Gas & Power segment earnings were $803 million compared to $760 million a year ago. First quarter 2007 earnings included a net income of $39 million, reflecting gains of $110 million related to divestments and a charge of $71 million related to gas contract mark-to-market valuation. Excluding these items, earnings reflected strong equity LNG sales volumes and higher LNG equity dividends, which were offset by lower marketing and trading results compared to the same quarter in 2006.
LNG equity sales volumes of 3.30 million tonnes were 10% higher than in the same quarter a year ago, driven by additional sales at Nigeria LNG (Shell interest 26%) due to increased feedgas supply. This was complemented by high plant reliability across all of our LNG joint venture liquefaction plants.
Marketing and trading earnings benefited from storage optimisation in the first quarter 2007, but were lower than in the same period last year mainly due to milder weather in the first quarter 2007.
First quarter portfolio developments:
In Australia, the North West Shelf venture (Shell direct and indirect interests22%) completed the renewal of long-term LNG purchase commitments with eightJapanese customers, totaling 4.3 million tonnes per annum over 6 to 8 years asfrom 2009.Downstream QUARTERS Q1 Q4 Q1 2007 2006 2006 Refining marker industry gross margins(period average) $/bbl ANS US West Coast coking margin 22.16 15.69 13.01 WTS US Gulf Coast coking margin 12.87 10.05 12.49 Rotterdam Brent complex 3.70 2.06 2.34 Singapore 80/20 Arab light/Tapis complex 3.06 1.10 1.18 Oil Products$ million QUARTERS Q1 Q4 Q1 2007 2006 2006 %1 Segment earnings 1,802 791 2,103 CCS adjustment - see note 2 (314) 678 (770) ______ ______ ______ Segment CCS earnings 1,488 1,469 1,333 +12 Refinery intake (thousand b/d) 3,608 3,890 3,862 -7
Total Oil products sales (thousand b/d) 6,406 6,467 6,525 -2
1 Q1 on Q1 change
First quarter segment earnings were $1,802 million compared to $2,103 million for the same period last year.
First quarter CCS earnings were $1,488 million compared to $1,333 million in the first quarter of 2006. Earnings for the first quarter 2007 included a net charge of $176 million related to impairment of certain assets.
CCS earnings increased as a result of higher refining margins, increased retail marketing margins and stronger margins in Lubricants. Earnings were partly offset by reduced refinery utilisation, higher operating costs, reduced trading profits, impairment charges and tax charges compared to first quarter 2006.
In Manufacturing, Supply and Distribution, industry refining margins were up significantly on the US West Coast, Europe and the East. Strong US Gulf Coast margins continued at similar levels to the first quarter of 2006. Refinery availability declined to 85.3% from 89.9% in the first quarter of 2006 mainly due to high levels of planned maintenance.
In Marketing, earnings increased compared to the same period a year ago mainly due to higher retail marketing margins, improved finished lubricants margins and continued strong base oil margins.
Marketing sales volumes declined 4.6% compared to volumes in the first quarter of 2006, including the impact of divested volumes (2.1%) and rationalised B2B and Retail volumes (0.7%).
First quarter portfolio developments:
In the first quarter, Shell announced the sale of the Los Angeles Refinery, Wilmington Products Terminal and approximately 250 retail sites to Tesoro Corporation. The sale of the refinery, terminal and retail sites is expected to close in mid 2007 after all regulatory approvals are obtained.
Shell announced a strategic review of the Petit-Couronne and Reichstett-Vendenheim refineries and the Berre-l'Etang refinery site complex in France, with a combined capacity of around 300 thousand barrels per day (Shell share 100%), and the Yabucoa petrochemical feedstock refinery in Puerto Rico, which has a capacity of 79 thousand barrels per day (Shell share 100%).
In Ukraine, Shell and OJSC Alliance Group announced a commitment to establish a joint venture to operate 150 Shell branded retail sites. Shell will have a 51% share of the joint venture. Start-up of operations is subject to fulfilment of certain conditions and regulatory approval.
In Europe, Shell signed agreements for the sale of its LPG businesses in Bulgaria, the Czech Republic, Germany, Romania, Spain and Switzerland. The sale is subject to regulatory approval and is expected to close later this year.
Chemicals$ million QUARTERS Q1 Q4 Q1 2007 2006 2006 %1 Segment earnings 527 184 183 CCS adjustment - see note 2 (47) 89 (44) ______ ______ ______ Segment CCS earnings 480 273 139 +245 Sales volumes (thousand tonnes) 5,567 5,690 5,941 -6 1 Q1 on Q1 change
First quarter segment earnings were $527 million compared to $183 million for the same period last year.
First quarter CCS segment earnings were $480 million compared to $139 million in the same quarter last year.
Earnings reflected improved margins and higher profits from equity-accounted investments, partly offset by lower trading earnings when compared to the same quarter in 2006. Higher earnings from equity-accounted investments included a full quarter of the Nanhai petrochemicals complex in China (Shell share 50%), which started up during the first quarter 2006. The decline in sales volumes mainly reflected a reduction in sales of lower margin products, including aromatics trading, as well as the marketing impact of planned turnaround activities in the Middle East. Chemicals manufacturing plant availability was 91%, approximately in line with availability rates in the first quarter 2006.
Corporate segment$ million QUARTERS Q1 Q4 Q1 2007 2006 2006 %1 Segment earnings2 801 249 227 +253 1 Q1 on Q1 change
2 As from the first quarter 2007, the segment Other Industry and Corporate has been renamed as Corporate. Its earnings no longer include the results generated by the Wind and Solar businesses, which were previously reported as part of Other Industry Segments, but continue to include some non-material businesses. For comparison purposes, the first and fourth quarters 2006 results were reclassified and are impacted by $5 million and $3 million respectively.
First quarter Corporate segment results were $801 million, including realisation of gains on the sale of the equity portfolio held by the Group insurance companies of some $404 million, compared to $227 million for the same period last year.
Earnings reflected higher capitalised interest, higher insurance underwriting income and lower currency exchange rate results when compared to the first quarter 2006.
Note
All amounts shown throughout this report are unaudited.
Second quarter results for 2007 are expected to be announced on July 26, 2007 and third quarter results are expected to be announced on October 25, 2007.
In this Report "Group" is defined as Royal Dutch Shell together with all of its consolidated subsidiaries. The expressions "Shell", "Group", "Shell Group" and "Royal Dutch Shell" are sometimes used for convenience where references are made to the Group or Group companies in general. Likewise, the words "we", "us" and "our" are also used to refer to Group companies 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. The expression "Group companies" as used in this Report refers to companies in which Royal Dutch Shell either directly or indirectly has control, by having either a majority of the voting rights or the right to exercise a controlling influence. The companies in which the Group has significant influence but not control are referred to as "associated companies" or "associates" and companies in which the Group has joint control are referred to as "jointly controlled entities". In this Report, associates and jointly controlled entities are also referred to as "equity accounted investments".
This document contains forward-looking statements concerning the financial condition, results of operations and businesses of Royal Dutch Shell. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management's current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of Royal Dutch Shell to market risks and statements expressing management's expectations, beliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of terms and phrases such as ''anticipate'', ''believe'', ''could'', ''estimate'', ''expect'', ''intend'', ''may'', ''plan'', ''objectives'', ''outlook'', ''probably'', ''project'', ''will'', ''seek'', ''target'', ''risks'', ''goals'', ''should'' and similar terms and phrases. There are a number of factors that could affect the future operations of Royal Dutch Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this Report, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for the Group's products; (c) currency fluctuations; (d) drilling and production results; (e) reserve estimates; (f) loss of market and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and regulatory developments including potential litigation and regulatory effects arising from recategorisation of reserves; (k) economic and financial market conditions in various countries and regions; (l) political risks, project delay or advancement, approvals and cost estimates; and (m) changes in trading conditions. All forward-looking statements contained in this Report 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. Each forward-looking statement speaks only as of the date of this Report. Neither Royal Dutch Shell nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this Report.
Please refer to the Annual Report and Form 20-F for the year ended December 31, 2006 for a description of certain important factors, risks and uncertainties that may affect Shell's businesses.
Cautionary Note to US Investors:
The United States Securities and Exchange Commission (SEC) permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We may use certain terms in this announcement that the SEC's guidelines strictly prohibit us from including in filings with the SEC. US Investors are urged to consider closely the disclosure in our Form 20-F, File No 1-32575 and disclosure in our Forms 6-K, File No 1-32575, available on the SEC's website www.sec.gov . You can also obtain these forms from the SEC by calling 1-800-SEC-0330.
May 3, 2007
Appendix 1: Royal Dutch Shell financial report and tables
Statement of income (see note 1)
$ million Q1 Q4 Q1 2007 2006 2006 %2 Revenue1 73,480 75,500 75,964 Cost of sales 60,666 62,846 61,922 ______ ______ ______ Gross profit 12,814 12,654 14,042 -9 Selling, distribution and administrative expenses 3,778 4,648 3,413 Exploration expenses 272 630 281 Share of profit of equity accounted investments 1,808 1,661 1,823 Net finance costs and other (income)/expense (901) (111) (155) ______ ______ ______ Income before taxation 11,473 9,148 12,326 -7 Taxation 4,032 3,635 5,310 ______ ______ ______ Income for the period 7,441 5,513 7,016 Attributable to minority interest 160 230 123 ______ ______ ______
Income attributable to shareholders 7,281 5,283 6,893 +6
______ ______ ______ 1 Revenue is stated after deducting sales taxes, excise duties and similar levies of $17,305 million in Q1 2007, $17,764 million in Q4 2006 and $16,709 million in Q1 2006. 2 Q1 on Q1 change
Earnings by industry segment (see notes 2 and 5)
$ million Q1 Q4 Q1 2007 2006 2006 %1 Exploration & Production: World outside USA 2,656 3,007 2,795 -5 USA 852 703 948 -10 ______ ______ ______ 3,508 3,710 3,743 -6 ______ ______ ______ Gas & Power: World outside USA 682 582 714 -4 USA 121 (3) 46 +163 ______ ______ ______ 803 579 760 +6 ______ ______ ______ Oil Products: World outside USA 1,158 1,254 1,071 +8 USA 330 215 262 +26 ______ ______ ______ 1,488 1,469 1,333 +12 ______ ______ ______ Chemicals: World outside USA 469 233 173 +171 USA 11 40 (34) ______ ______ ______ 480 273 139 +245 ______ ______ ______ TOTAL OPERATING SEGMENTS 6,279 6,031 5,975 +5 ______ ______ ______ Corporate: Interest and investment income/(expense) 583 1 - Currency exchange gains/(losses) 46 93 112 -59 Other - including taxation 172 155 115 +50 ______ ______ ______ 801 249 227 +253 ______ ______ ______ Minority interest (148) (265) (114) ______ ______ ______ CCS EARNINGS 6,932 6,015 6,088 +14 ______ ______ ______ CCS adjustment for Oil Products and Chemicals 349 (732) 805 ______ ______ ______ Income attributable to shareholders of Royal Dutch Shell plc 7,281 5,283 6,893 +6 ======== ======== ======== == == == 1 Q1 on Q1 change
Summarised balance sheet (see notes 1 and 6)
$ million Mar 31 Dec 31 Mar 31 2007 2006 2006 ASSETS Non-current assets: Intangible assets 5,117 4,808 4,444 Property, plant and equipment 103,624 100,988 88,537 Investments: equity accounted investments 22,001 20,740 18,153 financial assets 3,538 4,493 3,929 Deferred tax 3,135 2,968 2,393 Prepaid pension costs 4,289 3,926 2,742 Other 5,285 5,468 4,667 ________ ________ ________ 146,989 143,391 124,865 ________ ________ ________ Current assets: Inventories 23,960 23,215 21,600 Accounts receivable 58,998 59,668 60,801 Cash and cash equivalents 11,184 9,002 12,767 ________ ________ ________ 94,142 91,885 95,168 ________ ________ ________ ________ ________ ________ TOTAL ASSETS 241,131 235,276 220,033 ======== ======== ======== ==== ==== ==== LIABILITIES Non-current liabilities: Debt 11,978 9,713 7,347 Deferred tax 13,114 13,094 11,061 Retirement benefit obligations 6,219 6,096 5,926 Other provisions 10,514 10,355 7,708 Other 4,154 4,325 4,550 ________ ________ ________ 45,979 43,583 36,592 ________ ________ ________ Current liabilities: Debt 5,393 6,060 5,185
Accounts payable and accrued liabilities 64,156 62,556 62,350
Taxes payable 9,835 6,021 11,047 Retirement benefit obligations 326 319 289 Other provisions 1,932 1,792 1,599 ________ ________ ________ 81,642 76,748 80,470 ________ ________ ________ ________ ________ ________ TOTAL LIABILITIES 127,621 120,331 117,062 ________ ________ ________ Equity attributable to shareholders of Royal Dutch Shell plc 105,105 105,726 95,501 Minority interest 8,405 9,219 7,470 ________ ________ ________ TOTAL EQUITY 113,510 114,945 102,971 ________ ________ ________ TOTAL LIABILITIES AND EQUITY 241,131 235,276 220,033 ======== ======== ======== ==== ==== ====
Summarised statement of cash flows (see notes 1 and 7)
$ million Q1 Q4 Q1 2007 2006 2006 CASH FLOW FROM OPERATING ACTIVITIES: Income for the period 7,441 5,513 7,016 Adjustment for: Current taxation 4,267 3,157 5,015 Interest (income)/expense 198 218 232 Depreciation, depletion and amortisation 3,260 3,306 2,812 (Profit)/loss on sale of assets (362) (292) (185)
Decrease/(increase) in net working capital (399) 643 (1,979)
Share of profit of equity accounted investments (1,808) (1,661) (1,823) Dividends received from equity accounted investments 1,587 1,422 1,060 Deferred taxation and other provisions (152) 219 578 Other (447) 51 (507) ______ ______ ______ Cash flow from operating activities (pre-tax) 13,585 12,576 12,219 ______ ______ ______ Taxation paid (2,404) (6,617) (4,395) ______ ______ ______ Cash flow from operating activities 11,181 5,959 7,824 ______ ______ ______ CASH FLOW FROM INVESTING ACTIVITIES: Capital expenditure (5,361) (7,065) (3,819) Investments in equity accounted investments (370) (317) (231) Proceeds from sale of assets 380 605 506 Proceeds from sale of equity accounted investments 115 201 8 Proceeds from sale of / (additions to) financial assets 555 55 (40) Interest received 285 238 234 ______ ______ ______
Cash flow from investing activities (4,396) (6,283) (3,342)
______ ______ ______ CASH FLOW FROM FINANCING ACTIVITIES: Net Increase/(decrease) in debt with maturity period within three months 341 124 (204) Other debt: New borrowings 2,762 2,190 784 Repayments (1,613) (872) (925) Interest paid (351) (344) (361) Change in minority interest (3,110) 364 360 Net issue/(repurchase) of shares (486) (1,390) (1,344) Dividends paid to:
Shareholders of Royal Dutch Shell plc (2,100) (2,130) (1,838)
Minority interest (42) (31) (44) Treasury shares: net sales/(purchases) and dividends received (16) 118 91 ______ ______ ______
Cash flow from financing activities (4,615) (1,971) (3,481)
______ ______ ______ Currency translation differences relating to cash and cash equivalents 12 57 36 ______ ______ ______ INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 2,182 (2,238) 1,037 ______ ______ ______ Cash and cash equivalents at beginning of period 9,002 11,240 11,730
Cash and cash equivalents at end of period 11,184 9,002 12,767
Operational data - Upstream Q1 Q4 Q1 2007 2006 2006 %1 CRUDE OIL PRODUCTION thousand b/d Europe 447 533 531 Africa 339 352 336 Asia Pacific 231 251 232 Middle East, Russia, CIS 422 480 408 USA 343 349 291 Other Western Hemisphere 83 130 91 ______ ______ ______ Total crude oil production excluding oil sands 1,865 2,095 1,889 Production from oil sands 96 106 77 ______ ______ ______ Total crude oil production including oil sands 1,961 2,201 1,966 0 ______ ______ ______ NATURAL GAS PRODUCTION AVAILABLE FOR SALE million scf/d 2 Europe 4,110 3,529 5,447 Africa 519 418 444 Asia Pacific 2,455 2,459 2,488 Middle East, Russia, CIS 260 268 320 USA 1,162 1,173 1,117 Other Western Hemisphere 475 530 508 ______ ______ ______ 8,981 8,377 10,324 -13 ______ ______ ______ TOTAL PRODUCTION IN BARRELS OF OIL EQUIVALENT thousand boe/d 3 Europe 1,156 1,142 1,470 Africa 428 424 413 Asia Pacific 654 675 660 Middle East, Russia, CIS 467 526 463 USA 543 551 484 Other Western Hemisphere 165 221 179 ______ ______ ______ Total barrels of oil equivalent excluding oil sands 3,413 3,539 3,669 Oil sands 96 106 77 ______ ______ ______ Total barrels of oil equivalent including oil sands 3,509 3,645 3,746 -6 ______ ______ ______ 1 Q1 on Q1 change
2 scf/d = standard cubic feet per day; 1 standard cubic foot = 0.0283 cubic metre
3 Natural gas converted to oil equivalent at 5.8 million scf/d = thousand boe/d
Operational data - Downstream
Q1 Q4 Q1 2007 2006 2006 %1 REFINERY PROCESSING INTAKE thousand b/d Europe 1,590 1,800 1,742 Other Eastern Hemisphere 759 791 813 USA 893 933 948 Other Western Hemisphere 366 366 359 ______ ______ ______ 3,608 3,890 3,862 -7 ______ ______ ______ OIL SALES Gasolines 2,263 2,232 2,148 Kerosines 720 732 732 Gas/Diesel oils 2,114 2,087 2,196 Fuel oil 679 715 808 Other products 630 701 641 ______ ______ ______ Total oil products* 6,406 6,467 6,525 -2 Crude oil 2,655 2,443 2,493 ______ ______ ______ Total oil sales 9,061 8,910 9,018 ______ ______ ______ *comprising Europe 1,832 1,976 2,021 Other Eastern Hemisphere 1,245 1,248 1,216 USA 1,401 1,398 1,477 Other Western Hemisphere 653 654 666 Export sales 1,275 1,191 1,145 CHEMICAL SALES VOLUMES BY MAIN PRODUCT CATEGORY2** thousand tonnes Base chemicals 3,280 3,498 3,714 First line derivatives 2,282 2,188 2,215 Other 5 4 12 ______ ______ ______ 5,567 5,690 5,941 -6 ______ ______ ______ **comprising Europe 2,273 2,233 2,463 Other Eastern Hemisphere 1,253 1,474 1,444 USA 1,871 1,825 1,880 Other Western Hemisphere 170 158 154 1 Q1 on Q1 change 2 Excluding volumes sold by equity accounted investments, chemical feedstock trading and by-products. Capital investment $ million Q1 Q4 Q1 2007 2006 2006 Capital expenditure: Exploration & Production: World outside USA 3,240 3,612 2,500 USA 587 694 312 ______ ______ ______ 3,827 4,306 2,812 ______ ______ ______ Gas & Power1: World outside USA 657 681 392 USA 1 68 4 ______ ______ ______ 658 749 396 ______ ______ ______ Oil Products: Refining: World outside USA 260 292 242 USA 181 87 61 ______ ______ ______ 441 379 303 ______ ______ ______ Marketing: World outside USA 214 714 189 USA 14 59 18 ______ ______ ______ 228 773 207 ______ ______ ______ Chemicals: World outside USA 153 254 36 USA 83 152 50 ______ ______ ______ 236 406 86 ______ ______ ______ Corporate1: 45 250 18 ______ ______ ______ TOTAL CAPITAL EXPENDITURE 5,435 6,863 3,822 ______ ______ ______ Exploration expense: World outside USA 127 235 114 USA 42 106 63 ______ ______ ______ 169 341 177 ______ ______ ______ New equity in equity accounted investments: World outside USA 247 226 64 USA 17 49 5 ______ ______ ______ 264 275 69 ______ ______ ______ New loans to equity accounted investments 106 42 162 ______ ______ ______ TOTAL CAPITAL INVESTMENT*2 5,974 7,521 4,230 ______ ______ ______ *comprising Exploration & Production 4,260 4,740 3,167 Gas & Power1 732 940 399 Oil Products 699 1,178 518 Chemicals 238 412 128 Corporate1 45 251 18 ______ ______ ______ 5,974 7,521 4,230 ______ ______ ______
1 As from the first quarter 2007, the segment Other Industry and Corporate has been renamed as Corporate. Its financial information no longer includes data related to the Wind and Solar businesses, which were previously reported as part of Other Industry Segments, but continues to include some non-material businesses. The Wind and Solar businesses financial data are, as from the first quarter 2007, reported under the Gas & Power segment. For comparison purposes, the first and fourth quarters 2006 results were reclassified and are impacted by $3 million and $113 million in the Gas & Power segment and by $(3) million and $(113) million in the Corporate segment, respectively.
2 In addition to the above amounts, see Note 6 regarding accounting impacts related to the Shell Canada minority interest acquisition.
Notes
NOTE 1. Accounting policies and basis of presentation
The quarterly financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) and are also in accordance with IFRS as adopted by the European Union.
With effect from the first quarter 2007, Wind and Solar are reported within the Gas & Power segment and all other activities within Other industry segments are reported within the Corporate segment. Prior period financial statements have been reclassified accordingly.
Purchases of minority interest in Group companies, and disposals of shares in Group companies whilst retaining control, are accounted for as transactions within equity. The difference between the purchase price/disposal proceeds and the relevant proportion of the minority interest is reported in retained earnings as a movement in the Group share of equity. The remaining accounting policies are set out in Note 2 to the Consolidated Financial Statements of Royal Dutch Shell plc in the Annual Report and Form 20-F for the year ended December 31, 2006 on pages 108 to 112.
NOTE 2. Earnings on an estimated current cost of supplies (CCS) basis
To facilitate a better understanding of underlying business performance, the financial results are also analysed on an estimated current cost of supplies (CCS) basis as applied for the Oil Products and Chemicals segment earnings. Earnings on an estimated current cost of supplies basis provide useful information concerning the effect of changes in the cost of supplies on Royal Dutch Shell's results of operations and is a measure to manage the performance of the Oil Products and Chemicals segments but is not a measure of financial performance under IFRS.
On this basis, Oil Products and Chemicals segment cost of sales of the volumes sold during the period is based on the cost of supplies during the same period after making allowance for the estimated tax effect, instead of the first-in, first-out (FIFO) method of inventory accounting. Earnings calculated on this basis do not represent an application of the last-in, first-out (LIFO) inventory basis and do not reflect any inventory drawdown effects.
NOTE 3. Return on average capital employed (ROACE)
ROACE is defined as the sum of the current and previous three quarters' income attributable to shareholders adjusted for Shell's share of interest expenses after tax as a percentage of Shell's share of average capital employed for the period.
Components of the calculation ($ million):
Q1 2007 Q1 2006
Income attributable to shareholders (four quarters) 25,830 25,529
Royal Dutch Shell share of interest expense after tax 652 576
______ ______ ROACE numerator 26,482 26,105
Royal Dutch Shell share of capital employed - opening 107,124 99,613
Royal Dutch Shell share of capital employed - closing 121,190 107,124
________ ________
Royal Dutch Shell share of capital employed - average 114,157 103,369
ROACE 23.2% 25.3%
NOTE 4. Earnings by industry segment
Operating segment results are before deduction of minority interest and also exclude interest and other income of a non-operational nature, interest expense, non-trading currency exchange effects and tax on these items, which are included in the results of the Corporate segment. Operating segment results are after tax and include equity accounted investments.
NOTE 5. Gearing
The Group aims to maintain an efficient balance sheet with an average gearing ratio over time of between 20% and 25%. The numerator and denominator in the gearing calculation used by the Group are calculated by adding to reported debt and equity certain off-balance sheet obligations as at the beginning of the year such as operating lease commitments and unfunded retirement benefits (as applicable) which the Group believes to be in the nature of incremental debt, and deducting cash and cash equivalents judged to be in excess of amounts required for operational purposes.
Components of the calculation ($ million):
Mar 31 Mar 31 2007 2006 Non current debt 11,978 7,347 Current debt 5,393 5,185 ______ ______ Total Debt 17,371 12,532
Add: Net present value of operating lease obligations 11,319 9,442
Unfunded pension benefit obligations - 2,919 Less: Cash and cash equivalents in excess of operational requirements (9,284) (10,867) ______ ______ Adjusted Debt 19,406 14,026 Total Equity 113,510 102,971 ________ ________ Total Capital 132,916 116,997 Gearing ratio (adjusted debt as a percentage of total capital) 14.6% 12.0% NOTE 6. Equity
Total equity comprises equity attributable to shareholders of Royal Dutch Shell and to the minority interest. Other reserves comprise the capital redemption reserve, share premium reserve, merger reserve, share-based compensation reserve, cumulative currency translation differences, unrealised gains/(losses) on securities and unrealised gains/(losses) on cash flow hedges.
Ordinary share Treasury Other Retained Minority Total $ million capital shares reserves earnings Total interest equity At December 31, 2006 545 (3,316) 8,820 99,677 105,726 9,219 114,945 Income for the period - - - 7,281 7,281 160 7,441 Income/(expense) recognised directly in equity - - 50 - 50 (128) (78) Capital contributions from minority shareholders - - - - - 869 869 Acquisition of Shell Canada - - - (5,445) (5,445) (1,656) (7,101) Other changes in minority interest - - - 22 22 (34) (12) Dividends paid - - - (2,100) (2,100) (25) (2,125) Treasury shares: net sales/(purchases) and dividends received - (16) - - (16) - (16) Shares repurchased for cancellation (1) - 1 (486) (486) - (486) Share-based compensation - - 73 - 73 - 73 At March 31, 2007 544 (3,332) 8,944 98,949 105,105 8,405 113,510 Ordinary share Treasury Other Retained Minority Total $ million capital shares reserves earnings Total interest equity At December 31, 2005 571 (3,809) 3,584 90,578 90,924 7,000 97,924 Income for the period - - - 6,893 6,893 123 7,016 Income/(expense) recognised directly in equity - - 703 - 703 26 729 Capital contributions from minority shareholders - - - - - 365 365 Effect of Unification - - 154 - 154 - 154 Dividends paid - - - (1,838) (1,838) (44) (1,882) Treasury shares: net sales/(purchases) and dividends received - 91 - - 91 - 91 Shares repurchased for cancellation (9) - 9 (1,498) (1,498) - (1,498) Share-based compensation - - 72 - 72 - 72 At March 31, 2006 562 (3,718) 4,522 94,135 95,501 7,470 102,971
Consistent with the accounting policies disclosed in Note 1, the acquisition of the minority interest in Shell Canada was accounted for as a transaction between shareholders with the impact reflected in the equity section of the balance sheet. As of the end of the first quarter 2007, the Group has paid cash of $3.7 billion for shares in Shell Canada that it did not already own and recognised a current liability of $3.4 billion for the remaining shares for which it has exercised the right to acquire, amounting to a total acquisition value of $7.1 billion. As a result of this transaction, the consolidated financial statements of Royal Dutch Shell plc as at March 31, 2007 reflects a $7.1 billion decrease in shareholders equity, causing a $1.7 billion decrease in minority interest, being the book value of the item acquired, with the excess of the purchase price over the book value of $5.4 billion being taken to retained earnings. In addition to the share purchase price, $0.4 billion of Shell Canada share options were exchanged for a corresponding amount of RDS share options.
NOTE 7. Statement of cash flows
This statement reflects cash flows of Royal Dutch Shell and its subsidiaries as measured in their own currencies, which are translated into US dollars at average rates of exchange for the periods and therefore exclude currency translation differences except for those arising on cash and cash equivalents.
Cash from operating activities excluding net working capital movements, currenttaxation and taxation paid is calculated using the following line items fromthe cash flow statement:$ million QUARTERS Q1 Q4 Q1 2007 2006 2006 Cash flow from operating activities 11,181 5,959 7,824 Current taxation 4,267 3,157 5,015
Decrease/(increase) in net working capital (399) 643 (1,979)
Taxation paid (2,404) (6,617) (4,395) ______ ______ ______ 9,717 8,776 9,183 ______ ______ ______
NOTE 8. Earnings per Royal Dutch Shell share
The total number of Royal Dutch Shell shares in issue at the end of the period was 6,440.9 million. Royal Dutch Shell reports earnings per share on a basic and on a diluted basis, based on the weighted average number of Royal Dutch Shell (combined A and B) shares outstanding. Shares held in respect of share options and other incentive compensation plans are excluded in determining basic earnings per share.
Basic earnings per share calculations are based on the following weightedaverage number of shares:millions Q1 Q4 Q1 2007 2006 2006
Royal Dutch Shell shares of euro 0.07 6,287.0 6,314.8 6,509.8
Diluted earnings per share calculations are based on the following weighted average number of shares. This adjusts the basic number of shares for all share options currently in-the-money.
millions Q1 Q4 Q1 2007 2006 2006
Royal Dutch Shell shares of euro 0.07 6,306.5 6,341.9 6,535.3
Basic shares at the end of the following periods are:
millions Q1 Q4 Q1 2007 2006 2006
Royal Dutch Shell shares of euro 0.07 6,282.9 6,298.8 6,485.4
One American Depository Receipt (ADR) is equal to two Royal Dutch Shell shares.
ROYAL DUTCH SHELL 'B' PLCRelated Shares:
RDSA.LRDSB.L