29th Jan 2009 07:01
4TH QUARTER AND FULL YEAR 2008 UNAUDITED RESULTS
* Royal Dutch Shell's fourth quarter 2008 earnings, on a current cost of
supplies (CCS) basis, were $4.8 billion compared to $6.7 billion a year
ago. Basic CCS earnings per share decreased by 27% versus the same quarter
a year ago.
* Full year 2008 CCS earnings were $31.4 billion compared to $27.6 billion
for the full year 2007. Basic CCS earnings per share for the full year 2008
increased by 16% when compared to 2007.
* Cash flow from operating activities for the fourth quarter 2008 was $10.3
billion. Net capital investment for the quarter was $6.8 billion. Total cash returned to shareholders, in the form of dividends and share repurchases, was $2.7 billion.
* A fourth quarter 2008 dividend has been announced of $0.40 per share, an
increase of 11% over the US dollar dividend for the same period in 2007.
* The first quarter 2009 dividend is expected to be declared at $0.42 per
share, an increase of 5% compared to the first quarter 2008 US dollar
dividend.
Royal Dutch Shell Chief Executive Jeroen van der Veer commented: "We deliveredsatisfactory performance in the fourth quarter of 2008, given the pressure ondemand for oil and gas due to a weaker global economy. Our strategy remains topay competitive and progressive dividends, and to make significant investmentsin the company for future profitability. Industry conditions remainchallenging, and we are continuing the focus on capital and cost discipline inShell."SUMMARY OF UNAUDITED RESULTS Quarters $ million Full Year Q4 Q4 2008 Q3 2008 2007 %1 2008 2007 % Income attributable to (2,810) 8,448 8,467 - shareholders 26,277 31,331 -16 Less: Estimated CCS adjustment for Oil Products and Chemicals (7,595) (2,455) 1,783 (see Note 2) (5,089) 3,767 4,785 10,903 6,684 -28 CCS earnings 31,366 27,564 +14 (0.44) 1.37 1.36 - Basic earnings per share ($) 4.27 5.00 -15 Less: Estimated CCS adjustment (1.22) (0.40) 0.29 per share ($) (0.82) 0.60 Basic CCS earnings per share 0.78 1.77 1.07 -27 ($) 5.09 4.40 +16 0.40 0.40 0.36 +11 Dividend per ordinary share ($) 1.60 1.44 +11 1 Q4 on Q4 change
KEY FEATURES OF THE FOURTH QUARTER 2008 AND FULL YEAR 2008
* Fourth quarter 2008 CCS earnings were $4,785 million, 28% lower than in the
same quarter a year ago. Full year 2008 CCS earnings were $31,366 million,
14% higher than in 2007.
* Fourth quarter 2008 reported results were a loss of $2,810 million compared
to earnings of $8,467 million in the same quarter a year ago, reflecting
the impact of downstream net realised inventory effects as a consequence of
applying the first-in, first-out (FIFO) inventory accounting method, under
IFRS accounting rules. Full year 2008 reported income was $26,277 million,
16% lower than in 2007.
To facilitate a better understanding of the underlying business performance,
the financial results are also analysed on an estimated current cost of
supplies (CCS) basis as applied for the Downstream segments (see Note 2).
* Basic CCS earnings per share decreased by 27% versus the same quarter a
year ago. Full year 2008 basic CCS earnings per share increased 16% when
compared to 2007.
* Total cash returned to shareholders in the form of dividends and share
repurchases in the fourth quarter 2008 was $2.7 billion, bringing the total
for the full year 2008 to $13.1 billion. * Cash flow from operating activities was $10.3 billion compared to $5.3 billion for the same quarter last year. Full year 2008 cash flow from
operating activities was $43.9 billion compared to $34.5 billion in 2007.
* Capital investment for the fourth quarter 2008 was $9.2 billion. Net
capital investment (capital investment, less divestment proceeds) for the
fourth quarter 2008 was $6.8 billion, bringing the total for the full year
2008 to some $32 billion, lower than previously planned, as divestment
proceeds for the year exceeded prior expectations. Net capital investment
for 2009 is expected to be in the range of $31 to $32 billion, balancing
Shell's commitments to projects under construction and growth, with the
more challenging economic landscape in 2009.
* Return on average capital employed (ROACE), on a reported income basis (see
Note 3), was 18.3%.
* Gearing was 7.5% at the end of the fourth quarter 2008 versus 7.9% at the
end of the fourth quarter 2007. Gearing including certain off-balance sheet
obligations was 23.1% at the end of the fourth quarter 2008 versus 16.6% at
the end of the fourth quarter 2007 (see Note 5).
* Oil and gas production, including oil sands production, for the fourth
quarter 2008 was 3,415 thousand barrels of oil equivalent per day (boe/d),
essentially unchanged compared to the same quarter last year (3,436
thousand boe/d). New field start-ups and increased production from existing
producing facilities offset natural field declines and the residual impact
to production resulting from hurricane-related shut-ins in the USA during
the third quarter 2008. Production in the fourth quarter 2008 excluding the
impact of divestments, production sharing contracts (PSC) pricing effects,
OPEC quota restrictions and hurricanes increased by 2% compared to the same
quarter last year.
Full year 2008 oil and gas production, including oil sands production, was
3,248 thousand boe/d, compared to 3,315 thousand boe/d in 2007. Production for
the full year 2008 excluding the impact of divestments, production sharing
contracts (PSC) pricing effects, OPEC quota restrictions and hurricanes was in
line with 2007.
* Liquefied Natural Gas (LNG) sales volumes of 3.36 million tonnes were 1%
higher than in the same quarter a year ago. Full year 2008 LNG sales were
13.05 million tonnes compared to 13.18 million tonnes in 2007.
* Oil Products refinery availability was 90%, compared to 94% in the fourth
quarter 2007 (91% for the full year 2008 which is at the same level as in
2007). Chemicals manufacturing plant availability was 93%, unchanged from
the fourth quarter 2007 (94% for the full year 2008 versus 93% in 2007).
Oil Sands upgrader availability was 87%, 8% higher than in the same quarter
last year (93% for the full year 2008 versus 89% in 2007).
* Oil Products marketing sales volumes in the fourth quarter 2008 decreased
by 6% compared to the same quarter last year. Volumes were impacted by
weaker global demand and, excluding the impact of divestments, decreased by
3%. Volumes for the full year 2008 decreased by 2% versus 2007 levels and
were unchanged when excluding the impact of divestments. Chemical product
sales volumes in the fourth quarter 2008 were impacted by weaker global
demand and decreased by 20% compared to the fourth quarter 2007. Volumes
for the full year 2008 decreased by 10% versus 2007 levels.
SUMMARY OF UNAUDITED RESULTS Quarters $ million Full Year Q4 2008 Q3 2008 Q4 2007 %1 2008 2007 % 3,710 5,501 4,867 Exploration & Production 20,235 14,686 981 2,774 631 Gas & Power 5,328 2,781 (30) 371 82 Oil Sands 941 582 582 2,304 876 Oil Products (CCS basis) 5,155 6,951 (19) 116 348 Chemicals (CCS basis) 156 1,682 (373) (43) (4) Corporate (69) 1,387 (66) (120) (116) Minority interest (380) (505) 4,785 10,903 6,684 -28 CCS earnings 31,366 27,564 +14 1 Q4 on Q4 change
SUMMARY OF IDENTIFIED ITEMS
Earnings in the fourth quarter 2008 reflected the following items, which in aggregate amounted to a net gain of $897 million (compared to a net gain of $963 million in the fourth quarter 2007), as summarised in the table below:
* Exploration & Production earnings included a net gain of $1,303 million,
reflecting gains from divestments of $1,104 million and a gain of $261
million related to the mark-to-market valuation of certain UK gas
contracts, which were partly offset by impairment charges of $62 million.
Earnings for the fourth quarter 2007 included a net gain of $715 million.
* Gas & Power earnings included a charge of $55 million, reflecting an
impairment of $44 million and a charge of $11 million related to the
mark-to-market valuation of certain gas contracts. Earnings for the fourth
quarter 2007 included a charge of $7 million. * Oil Sands earnings for the fourth quarter 2007 included a gain of $94 million. * Oil Products earnings included a net charge of $233 million, reflecting impairment charges of $312 million, which were partly offset by a divestment gain of $79 million. Earnings for the fourth quarter 2007 included a net gain of $177 million.
* Chemicals earnings included impairment charges of $22 million. Earnings for
the fourth quarter 2007 included a net charge of $46 million.
* Corporate earnings included a charge of $96 million related to a provision
on receivables. Earnings for the fourth quarter 2007 included a gain of $30 million.SUMMARY OF IDENTIFIED ITEMS Quarters $ million Full Year Q4 2008 Q3 2008 Q4 2007 2008 2007 Segment earnings impact of identified items: 1,303 575 715 Exploration & Production 1,910 1,102 (55) 1,368 (7) Gas & Power 1,302 275 - 25 94 Oil Sands 25 94 (233) 77 177 Oil Products (CCS basis) 25 327 (22) 18 (46) Chemicals (CCS basis) (210) (28) (96) - 30 Corporate (96) 489 - - - Minority interest - - 897 2,063 963 CCS earnings impact 2,956 2,259 These identified items generally relate to events with an impact of more than$50 million on Royal Dutch Shell's earnings and are shown to provide additionalinsight into its segment earnings, CCS earnings and income attributable toshareholders. Further additional comments on the business segments are providedin the section 'Earnings by business segment' on page 5 and onwards.
Commodity price effects (see Note 8 - Accounting for Derivatives)
During the fourth quarter 2008 worldwide oil and gas related commodity marker prices declined significantly.
As a consequence, net working capital decreased by some $15 billion during the fourth quarter 2008, mainly due to the lower valued inventory in Oil Products.
As a result of fair value accounting of commodity derivatives associated withlong-term contracts, required under International Financial Reporting Standards(IFRS), Gas & Power earnings were increased by non-cash gains of some $150million.As required under IFRS, commodity derivatives are recorded at fair value, whichis based on market prices, and physical crude oil and oil products inventoriesare recorded at the lower of historical cost or net realisable value. Duringthe fourth quarter 2008, Oil Products earnings were reduced by non-cash chargesof some $150 million.EARNINGS BY BUSINESS SEGMENTEXPLORATION & PRODUCTION Quarters $ million Full Year Q4 Q3 Q4 2008 2008 2007 %1 2008 2007 % 3,710 5,501 4,867 -24 Segment earnings 20,235 14,686 +38 Crude oil production (thousand b/ 1,693 1,612 1,798 -6 d) 1,693 1,818 -7 Natural gas production available 9,531 7,207 9,185 +4 for sale (million scf/d) 8,569 8,214 +4 Barrels of oil equivalent 3,336 2,854 3,381 -1 (thousand boe/d) 2 3,170 3,234 -2 1 Q4 on Q4 change 2 Excludes oil sands bitumen production Fourth quarter Exploration & Production segment earnings were $3,710 millioncompared to $4,867 million a year ago. Earnings included a net gain of $1,303million related to identified items, compared to a net gain of $715 million inthe fourth quarter 2007 (see page 4 for details).Earnings compared to the fourth quarter 2007 reflected the impact of lower oilprices on revenues, lower production volumes in the USA as a consequence of thethird quarter 2008 hurricanes, and higher exploration expenses, which werepartly offset by reduced royalty expenses.Global liquids realisations were 31% lower than in the fourth quarter 2007.Global gas realisations were 13% higher than a year ago. Outside the USA, gasrealisations increased by 22% whereas in the USA gas realisations decreased by14%.
Fourth quarter 2008 production (excluding oil sands bitumen production) was 3,336 thousand barrels of oil equivalent per day (boe/d) compared to 3,381 thousand boe/d a year ago. Crude oil production was down 6% and natural gas production was up 4% compared to the fourth quarter 2007.
Production in the fourth quarter 2008 was supported by new field start-upssince the end of the fourth quarter 2007, which contributed some 80 thousandboe/d of new production to the quarter. New field start-ups include Angel(Shell share 22.3%) and Vincent (Shell share 20.6%) in Australia, E11 Hub Stage2 (Shell share 50%), M3S (Shell share 70%) and Saderi (Shell share 37.5%) inMalaysia, Starling (Shell share 28%) and Curlew C (Shell share 100%) in theUnited Kingdom and Sakhalin (Shell share 27.5%), from the Piltun-Astokhskoye Bplatform, in Russia. In addition, production volumes were supported bycontinued growth at Stybarrow (Shell share 17.1%) and Geographe & Thylacine(Shell share 17.7%) in Australia, Champion West Phase 3B/C (Shell share 50%) inBrunei, Duvernay (Shell share 100%) in Canada, Changbei (Shell share 50%) inChina, Ormen Lange (Shell share 17%) in Norway and West Salym (Shell share 50%)in Russia.Full year Exploration & Production segment earnings were $20,235 millioncompared to $14,686 million a year ago. Earnings included a net gain of $1,910million related to identified items, compared to a net gain of $1,102 millionin 2007.Earnings compared to full year 2007 reflected the benefit of higher oil and gasprices on revenues, which was partly offset by increased exploration expenses,lower production volumes, particularly in the USA mainly as a consequence ofhurricane impacts during the third quarter 2008, higher operating costs androyalty expenses.
Global liquids realisations were 36% higher than in 2007. Global gas realisations were 33% higher than a year ago. Outside the USA, gas realisations increased by 36% whereas in the USA gas realisations increased by 33%.
Full year 2008 production (excluding oil sands bitumen production) was 3,170 thousand boe/d compared to 3,234 thousand boe/d a year ago. Crude oil production was down 7% and natural gas production was up 4% compared to 2007.
Production for the full year 2008 was supported by new field start-ups sincethe end of the fourth quarter 2007, which contributed some 30 thousand boe/d ofnew production to the full year 2008. New field start-ups include E11 Hub Stage2 (Shell share 50%) in Malaysia and Starling (Shell share 28%) in the UnitedKingdom. In addition, production volumes were supported by continued growth atStybarrow (Shell share 17.1%) in Australia, Champion West Phase 3B/C (Shellshare 50%) in Brunei, Duvernay (Shell share 100%) in Canada, Changbei (Shellshare 50%) in China, Ormen Lange (Shell share 17%) in Norway, West Salym (Shellshare 50%) in Russia and Deimos (Shell share 71.5%) in the USA.
Fourth quarter portfolio developments
In Australia, first gas was delivered from the Angel field (Shell share 22.3%).
In Russia, the Sakhalin II project (Shell share 27.5%) started production from the Piltun-Astokhskoye B platform and began year-round oil exports.
In Nigeria, the AFAM Gas and Power project started up. First gas was suppliedto the power plant, with a peak production (Shell share 30%) of approximately20 thousand boe/d.Also in Nigeria, Shell completed the divestment of offshore deepwater blocksOML 125 (Abo field) and 134 with total sale proceeds of some $0.6 billion and aproduction impact of approximately 7 thousand boe/d.In the United Kingdom, Shell completed the sale of a number of northern NorthSea assets. In the Netherlands the sale of assets situated along the NOGATpipeline was completed. The consolidated production impact is approximately 27thousand boe/d (Shell share) and total sale proceeds are some $0.9 billion.GAS & POWER Quarters $ million Full Year Q4 Q3 Q4 2008 2008 2007 %1 2008 2007 % 981 2,774 631 +55 Segment earnings 5,328 2,781 +92 LNG sales volumes (million 3.36 3.10 3.34 +1 tonnes) 13.05 13.18 -1 1 Q4 on Q4 change Fourth quarter Gas & Power segment earnings were $981 million compared to $631million a year ago. Earnings included a charge of $55 million related toidentified items, compared to a net charge of $7 million in the fourth quarter2007 (see page 4 for details). In addition, fourth quarter 2008 earnings wereincreased by non-cash gains of approximately $150 million as a result of fairvalue accounting of commodity derivatives associated with long-term contracts(see Note 8).
Earnings compared to the fourth quarter 2007 reflected the benefit of strong LNG prices on revenues, higher dividends from LNG joint ventures and higher income from LNG cargo diversion opportunities.
LNG sales volumes of 3.36 million tonnes were 1% higher than in the same quarter a year ago. Sales volumes benefited from the start-up of North West Shelf Train 5 in Australia and increased feedgas supply in Malaysia, which were partly offset by the gas supply disruption to Nigeria LNG in December.
Natural gas and power marketing and trading earnings were higher than in thesame quarter a year ago, reflecting increased earnings in both North Americaand Europe.Full year Gas & Power segment earnings were $5,328 million compared to $2,781million a year ago. Earnings included a net gain of $1,302 million related toidentified items, compared to a net gain of $275 million in 2007.Earnings compared to the full year 2007 reflected the impact of strong LNG andgas to liquids (GTL) product prices on revenues, higher dividends from LNGjoint ventures, higher income from LNG cargo diversion opportunities and highermarketing and trading contributions.
LNG sales volumes of 13.05 million tonnes were 1% lower than in 2007.
Natural gas and power marketing and trading earnings were higher than in 2007, reflecting increased earnings in both North America and Europe.
Fourth quarter portfolio developments
In China, Shell and PetroChina signed a binding Sales and Purchase Agreement for a 20-year supply of up to two million tonnes per annum of LNG from the Gorgon project, conditional upon project approval, in Western Australia.
In the USA, the 100 Megawatt (MW) Mount Storm Phase II wind farm (Shell share 50%) in West Virginia became operational.
In Bolivia, the divestment of Transredes Transporte De Hidrocarburos S.A. (Shell share 25%), a pipeline business, was completed.
OIL SANDS Quarters $ million Full Year Q4 2008 Q3 2008 Q4 2007 %1 2008 2007 % (30) 371 82 - Segment earnings 941 582 +62 Bitumen production (thousand b/ 79 77 55 +44 d) 78 81 -3 112 97 97 +15 Sales volumes (thousand b/d) 114 125 -9 87 96 79 Upgrader availability (%) 93 89 1 Q4 on Q4 change Fourth quarter Oil Sands segment results were a loss of $30 million compared toearnings of $82 million in the same quarter last year. Earnings for the fourthquarter 2007 included a gain of $94 million related to an identified item.
Earnings compared to the fourth quarter 2007 reflected the impact of lower oil prices on revenues and higher operating costs, which were partly offset by higher production volumes and lower royalty expenses.
Bitumen production increased by 44% compared to the same quarter last year, which was impacted by an unplanned shut-down at the Scotford Upgrader. Upgrader availability was 87% compared to 79% in the same quarter last year.
Full year Oil Sands segment earnings were $941 million compared to $582 millionin 2007. Earnings included a gain of $25 million related to an identified item,compared to a gain of $94 million in 2007.
Earnings compared to full year 2007 reflected the benefit of higher oil prices on revenues and lower royalty expenses, which were partly offset by lower production volumes and higher operating costs.
Bitumen production decreased by 3% compared to the full year 2007. Upgrader availability was 93% compared to 89% in 2007.
OIL PRODUCTS Quarters $ million Full Year Q4 Q4 2008 Q3 2008 2007 %1 2008 2007 % (6,416) (44) 2,556 Segment earnings 446 10,439 Less: Estimated CCS adjustment (6,998) (2,348) 1,680 (see Note 2) (4,709) 3,488 582 2,304 876 -34 Segment CCS earnings 5,155 6,951 -26 3,125 3,273 3,812 -18 Refinery intake (thousand b/d) 3,388 3,779 -10 Total Oil Products sales 6,400 6,403 6,842 -6 (thousand b/d) 6,568 6,625 -1 90 88 94 Refinery availability (%) 91 91 1 Q4 on Q4 change
Fourth quarter Oil Products segment results were a loss of $6,416 million, reflecting the result of oil products net realised inventory effects due to declining prices, compared to earnings of $2,556 million for the same period last year.
Fourth quarter Oil Products CCS segment earnings were $582 million compared to$876 million in the fourth quarter 2007. Earnings included a net charge of $233million related to identified items, compared to a net gain of $177 million inthe fourth quarter 2007 (see page 4 for details). In addition, fourth quarter2008 earnings were reduced by non-cash charges of around $150 million as aresult of fair value accounting of commodity derivatives (see Note 8).CCS earnings compared to the fourth quarter 2007 reflected lower refineryintake volumes and lower total oil products sales volumes as a consequence ofreduced worldwide demand, and impairment charges, which were partly offset byhigher realised refining margins, higher marketing margins and increasedtrading contributions. In addition currency exchange rate effects, mainlyrelated to the strengthening of the US dollar against most major currencies,also negatively impacted fourth quarter 2008 earnings.Industry refining margins compared to the same quarter a year ago were higherin Europe and the Asia-Pacific region and declined in the US Gulf Coast and USWest Coast. Refinery availability was 90%, compared to 94% in the fourthquarter of 2007.Marketing earnings, excluding identified items, compared to the same period ayear ago increased due to higher retail, B2B and base oil lubricants margins,which were partly offset by lower sales volumes.Oil Products (marketing and trading) sales volumes decreased by 6% compared tothe same quarter last year. Marketing sales volumes were 6% lower than in thefourth quarter 2007. Excluding the impact of divestments, marketing salesvolumes decreased by 3% mainly as a result of reduced global demand.Full year Oil Products segment earnings were $446 million compared to $10,439million for the full year 2007. The significant earnings decrease between fullyear 2008 and 2007 reflects the result of oil products net realised inventoryeffects due to declining commodity prices in the second half of 2008.
Full year Oil Products CCS segment earnings were $5,155 million compared to $6,951 million in 2007. Earnings included a net gain of $25 million related to identified items, compared to a net gain of $327 million in the full year 2007.
CCS earnings compared to the full year 2007 reflected lower refinery intakevolumes and reduced total oil products sales volumes, as a consequence ofworldwide demand slow-down and asset sales, lower realised refining margins andhigher operating costs which were partly offset by higher marketing margins andincreased trading contributions. In addition currency exchange rate effects,mainly related to the strengthening of the US dollar against most majorcurrencies, also negatively impacted the full year 2008 earnings.
Industry refining margins compared to a year ago were higher in Europe and the Asia-Pacific region and declined in the US Gulf Coast and US West Coast. Refinery availability was 91%, at the same levels as in 2007.
Marketing earnings, excluding identified items, compared to 2007 increased dueto higher retail, B2B and base oil lubricants margins, which were partly offsetby lower sales volumes.Oil Products (marketing and trading) sales volumes decreased by 1% compared tothe full year 2007. Marketing sales volumes were 2% lower than in the full year2007, and, excluding the impact of divestments, volumes were in line with 2007.
Fourth quarter portfolio developments
In the Dominican Republic, Shell completed the sale of its 50% shareholding inRefinera Dominicana de Petr³leo, S.A. (REFIDOMSA), with 34 thousand barrelsper day processing capacity, for a total of $110 million.
In Africa, Shell completed the sale of its Downstream businesses in Sudan, Djibouti, Gambia, Ethiopia, and Swaziland.
CHEMICALS Quarters $ million Full Year Q4 2008 Q3 2008 Q4 2007 %1 2008 2007 % (831) (79) 501 Segment earnings (405) 2,051 Less: Estimated CCS adjustment (812) (195) 153 (see Note 2) (561) 369 (19) 116 348 - Segment CCS earnings 156 1,682 -91 4,483 4,989 5,633 -20 Sales volumes (thousand tonnes) 20,327 22,555 -10 Manufacturing plant availability 93 86 93 (%) 94 93 1 Q4 on Q4 change
Fourth quarter Chemicals segment results were a loss of $831 million, reflecting the result of chemicals net realised inventory effects due to declining commodity prices, compared to earnings of $501 million for the same period last year.
Fourth quarter Chemicals CCS segment results were a loss of $19 millioncompared to earnings of $348 million in the same quarter last year. Earningsincluded a charge of $22 million related to identified items, compared to a netcharge of $46 million in the fourth quarter 2007 (see page 4 for details).
CCS earnings compared to the fourth quarter 2007 reflected lower sales volumes, lower income from equity-accounted investments and higher operating costs, which were partly offset by higher realised margins and higher trading contributions.
Sales volumes decreased by 20% compared to the fourth quarter 2007, mainly as a result of reduced global demand.
Chemicals manufacturing plant availability was 93%, unchanged from the fourth quarter 2007. The reduced global demand for chemicals products has significantly impacted the chemicals manufacturing plant utilisation rate, which dropped to 67 % from 86 % in the fourth quarter 2007.
Full year Chemicals segment results were a loss of $405 million, reflecting theresult of chemicals net realised inventory effects due to declining commodityprices in the second half of 2008, compared to earnings of $2,051 million in2007.
Full year Chemicals CCS segment earnings were $156 million compared to $1,682 million in 2007. Earnings included a net charge of $210 million related to identified items, compared to a net charge of $28 million in 2007.
CCS earnings compared to full year 2007 reflected lower income from equity-accounted investments, lower realised margins, reduced sales volumes and higher operating costs.
Sales volumes decreased by 10% compared to full year 2007, mainly as a result of reduced global demand.
Chemicals manufacturing plant availability was 94%, some 1% higher than in2007.CORPORATE Quarters $ million Full Year Q4 2008 Q3 2008 Q4 2007 2008 2007 (373) (43) (4) Segment earnings (69) 1,387 Fourth quarter Corporate segment results were a loss of $373 million comparedto a loss of $4 million for the same period last year. Earnings included acharge of $96 million related to identified items, compared to a gain of $30million in the fourth quarter 2007 (see page 4 for details). Currency exchangelosses in the fourth quarter 2008 were $351 million compared to gains of $ 82million in the fourth quarter 2007.Earnings compared to the fourth quarter 2007 reflected currency exchange rateimpacts, lower net interest income and reduced net underwriting results, whichwere partly offset by lower shareholder costs.Full year Corporate segment results were a loss of $69 million compared toearnings of $1,387 million for the same period last year. Earnings included acharge of $96 million related to identified items, compared to a gain of $489million for the full year 2007.Earnings compared to full year 2007 reflected currency exchange rate impacts,lower net underwriting results mainly as a consequence of hurricane impacts inthe USA during the third quarter 2008, and reduced net interest income, whichwere partly offset by lower shareholder costs. PRICE AND MARGIN INFORMATION OIL & GAS Quarters Full Year Q4 2008 Q3 2008 Q4 2007 2008 2007 Realised oil prices - Exploration & Production (period $/bbl average) $/bbl World 58.40 110.08 82.11 outside USA 92.39 68.24 52.32 119.25 88.92 USA 95.01 66.49 57.60 111.18 82.96 Global 92.75 67.99 Realised oil prices - Oil Sands (period $/bbl average) $/bbl 47.26 113.90 71.45 Canada 88.98 61.97 $/ Realised gas prices thousand $/thousand scf (period average) scf 10.58 8.89 8.15 Europe 9.46 7.24 World outside USA (including 6.89 5.91 5.64 Europe) 6.25 4.61 6.37 10.82 7.45 USA 9.61 7.23 6.80 6.77 6.00 Global 6.85 5.14 Oil and gas marker industry prices (period average) Brent ($/ 55.48 115.15 88.35 bbl) 97.14 72.45 59.13 118.07 90.47 WTI ($/bbl) 99.72 72.16 Edmonton Par 52.83 117.88 89.00 ($/bbl) 98.45 72.13 Henry Hub ($ 6.38 9.11 6.93 /MMBtu) 8.85 6.94 UK National Balancing Point (pence 57.03 61.75 46.86 /therm) 58.06 30.01 Japanese Crude Cocktail - 88.11 129.15 82.80 JCC ($/bbl)1 106.71 72.83 REFINING & CRACKER INDUSTRY MARGINS2 Quarters Full Year Q4 2008 Q3 2008 Q4 2007 2008 2007 Refining marker industry gross margins (period $/bbl average) $/bbl ANS US West Coast coking 8.60 8.25 10.60 margin 9.40 15.95 WTS US Gulf Coast coking 4.10 12.30 9.65 margin 8.95 16.30 Rotterdam Brent 5.55 6.00 4.35 complex 5.25 4.45 Singapore 80 /20 Arab light/Tapis 4.45 1.85 1.95 complex 3.00 2.80 Cracker industry margins (period $/tonne average) $/tonne 547.00 460.00 334.00 US ethane 445.00 334.00 Western Europe 1,357.00 648.00 279.00 naphtha 675.00 424.00 North East (30.00) 65.00 (17.00) Asia naphtha 17.00 216.00 1 JCC prices for the fourth quarter and full year 2008 are based on available market data up to the end of October 2008. Prices for these periods will be updated when full market data are available. 2 The refining and cracker industry margins shown above do not represent actual Shell realised margins for the periods. These are estimated industry margins based on available market information at the end of the quarter.
OIL & GAS - OPERATIONAL DATA Quarters Full Year Q4 2008 Q3 2008 Q4 2007 %1 2008 2007 % thousand b/d Crude oil production thousand b/d 361 335 395 Europe 375 423 293 305 352 Africa 309 332 218 200 227 Asia Pacific 206 227 480 459 438 Middle East, Russia, CIS 450 433 264 231 310 USA 272 324 77 82 76 Other Western Hemisphere 81 79 Total crude oil production 1,693 1,612 1,798 -6 excluding oil sands 1,693 1,818 -7 79 77 55 Bitumen production - oil sands 78 81 Total crude oil production 1,772 1,689 1,853 -4 including oil sands 1,771 1,899 -7 Natural gas production available million scf/ million scf/d2 for sale d2 4,450 2,446 4,569 Europe 3,679 3,350 448 591 594 Africa 552 584 2,718 2,508 2,166 Asia Pacific 2,544 2,405 257 229 239 Middle East, Russia, CIS 237 250 1,071 942 1,138 USA 1,053 1,130 587 491 479 Other Western Hemisphere 504 495 9,531 7,207 9,185 +4 8,569 8,214 +4 Total production in barrels of thousand boe/d3 oil equivalent thousand boe/d3 1,128 757 1,183 Europe 1,009 1,001 370 407 454 Africa 404 433 687 631 600 Asia Pacific 645 641 524 499 479 Middle East, Russia, CIS 491 476 449 393 506 USA 453 519 178 167 159 Other Western Hemisphere 168 164 Total production excluding oil 3,336 2,854 3,381 -1 sands 3,170 3,234 -2 79 77 55 Bitumen production - oil sands 78 81 Total production including oil 3,415 2,931 3,436 -1 sands 3,248 3,315 -2 1 Q4 on Q4 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. OIL PRODUCTS AND CHEMICALS - OPERATIONAL DATA Quarters Full Year Q4 Q3 Q4 2008 2008 2007 %1 2008 2007 % thousand b/d Refinery processing intake thousand b/d 1,227 1,462 1,803 Europe 1,481 1,731 746 674 821 Other Eastern Hemisphere 729 811 808 777 869 USA 826 879 344 360 319 Other Western Hemisphere 352 358 3,125 3,273 3,812 -18 3,388 3,779 -10 Oil sales 2,025 2,028 2,051 Gasolines 2,051 2,178 728 810 802 Kerosenes 792 756 2,225 2,231 2,429 Gas/diesel oils 2,254 2,295 732 623 769 Fuel oil 742 704 690 711 791 Other products 729 692 6,400 6,403 6,842 -6 Total oil products * 6,568 6,625 -1 *Comprising: 1,791 1,795 1,983 Europe 1,831 1,886 1,245 1,262 1,369 Other Eastern Hemisphere 1,257 1,283 1,409 1,366 1,485 USA 1,402 1,487 698 718 678 Other Western Hemisphere 719 672 1,257 1,262 1,327 Export sales 1,359 1,297 Chemical sales volumes by main thousand tonnes product category 2** thousand tonnes 2,584 2,809 3,164 Base chemicals 11,573 12,968 1,897 2,178 2,467 First line derivatives 8,746 9,577 2 2 2 Other 8 10 4,483 4,989 5,633 -20 20,327 22,555 -10 **Comprising: 1,882 2,112 2,190 Europe 8,472 8,908 1,179 1,223 1,457 Other Eastern Hemisphere 4,924 5,466 1,306 1,512 1,802 USA 6,362 7,469 116 142 184 Other Western Hemisphere 569 712 1 Q4 on Q4 change. 2 Excluding volumes sold by equity-accounted investments, chemical feedstock trading and by-products. NOTE
All amounts shown throughout this Report are unaudited.
In this announcement, excluding in the financial report and tables, we have aggregated our equity position in projects for both direct and indirect interest (for example, we have aggregated our indirect interest in North West Shelf LNG and the Pluto project via our 34% shareholding in Woodside Energy Ltd).
First quarter results for 2009 are expected to be announced on April 29, 2009,second quarter results are expected to be announced on July 30, 2009 and thirdquarter results are expected to be announced on October 29, 2009. There will bea Shell strategy update on March 17, 2009.In this document "Shell", "Shell group" and "Royal Dutch Shell" are sometimesused for convenience where references are made to Royal Dutch Shell plc and itssubsidiaries in general. Likewise, the words "we", "us" and "our" are also usedto refer to subsidiaries in general or to those who work for them. Theseexpressions are also used where no useful purpose is served by identifying theparticular company or companies. ''Subsidiaries'', "Shell subsidiaries" and"Shell companies" as used in this document refer to companies in which RoyalDutch Shell plc either directly or indirectly has control, by having either amajority of the voting rights or the right to exercise a controlling influence.The companies in which Shell has significant influence but not control arereferred to as "associated companies" or "associates" and companies in whichShell has joint control are referred to as "jointly controlled entities". Inthis document, associates and jointly controlled entities are also referred toas "equity-accounted investments".This document contains forward-looking statements concerning the financialcondition, results of operations and businesses of Royal Dutch Shell. Allstatements other than statements of historical fact are, or may be deemed tobe, forward-looking statements. Forward-looking statements are statements offuture expectations that are based on management's current expectations andassumptions and involve known and unknown risks and uncertainties that couldcause actual results, performance or events to differ materially from thoseexpressed or implied in these statements. Forward-looking statements include,among other things, statements concerning the potential exposure of Royal DutchShell to market risks and statements expressing management's expectations,beliefs, estimates, forecasts, projections and assumptions. Theseforward-looking statements are identified by their use of terms and phrasessuch 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 anumber of factors that could affect the future operations of Royal Dutch Shelland could cause those results to differ materially from those expressed in theforward-looking statements included in this document, including (withoutlimitation): (a) price fluctuations in crude oil and natural gas; (b) changesin demand for Shell's products; (c) currency fluctuations; (d) drilling andproduction results; (e) reserve estimates; (f) loss of market and industrycompetition; (g) environmental and physical risks; (h) risks associated withthe identification of suitable potential acquisition properties and targets,and successful negotiation and completion of such transactions; (i) the risk ofdoing business in developing countries and countries subject to internationalsanctions; (j) legislative, fiscal and regulatory developments includingpotential litigation and regulatory effects arising from recategorisation ofreserves; (k) economic and financial market conditions in various countries andregions; (l) political risks, including the risks of expropriation andrenegotiation of the terms of contracts with governmental entities, delays oradvancements in the approval of projects and delays in the reimbursement forshared costs; and (m) changes in trading conditions. All forward-lookingstatements contained in this document are expressly qualified in their entiretyby the cautionary statements contained or referred to in this section. Readersshould not place undue reliance on forward-looking statements. Eachforward-looking statement speaks only as of the date of this document, January29, 2009. Neither Royal Dutch Shell nor any of its subsidiaries undertake anyobligation to publicly update or revise any forward-looking statement as aresult of new information, future events or other information. In light ofthese risks, results could differ materially from those stated, implied orinferred from the forward-looking statements contained in this document.Please refer to the Annual Report and Form 20-F for the year ended December 31,2007 for a description of certain important factors, risks and uncertaintiesthat may affect Shell's businesses.
Cautionary Note to US Investors:
The United States Securities and Exchange Commission (SEC) permits oil and gascompanies, in their filings with the SEC, to disclose only proved reserves thata company has demonstrated by actual production or conclusive formation teststo be economically and legally producible under existing economic and operatingconditions. We may use certain terms in this announcement that the SEC'sguidelines strictly prohibit us from including in filings with the SEC. USInvestors are urged to consider closely the disclosure in our Form 20-F, FileNo 001-32575 and disclosure in our Forms 6-K, File No 001-32575, available onthe SEC's website www.sec.gov . You can also obtain these forms from the SEC bycalling 1-800-SEC-0330. January 29, 2009
APPENDIX: ROYAL DUTCH SHELL FINANCIAL REPORT AND TABLES
STATEMENT OF INCOME (SEE NOTE 1) Quarters $ million Full Year Q4 2008 Q3 2008 Q4 2007 %1 2008 2007 % 81,073 131,567 106,703 Revenue2 458,361 355,782 76,349 113,249 90,603 Cost of sales 395,639 296,697 4,724 18,318 16,100 -71 Gross profit 62,722 59,085 +6 Selling, distribution and 4,476 4,139 4,880 administrative expenses 17,028 16,621 778 538 382 Exploration 2,049 1,712 Share of profit of 350 2,000 2,376 equity-accounted investments 7,446 8,234 Net finance costs and other 290 174 (174) (income)/expense 271 (1,590) (470) 15,467 13,388 - Income before taxation 50,820 50,576 - 2,489 6,987 4,755 Taxation 24,344 18,650 (2,959) 8,480 8,633 - Income for the period 26,476 31,926 -17 Income attributable to minority (149) 32 166 interest 199 595 Income attributable to shareholders of Royal Dutch (2,810) 8,448 8,467 - Shell plc 26,277 31,331 -16 1 Q4 on Q4 change.
2 Revenue is stated after deducting sales taxes, excise duties and similar
levies of $20,413 million in Q4 2008, $25,323 million in Q3 2008, $25,462
million in Q2 2008, $22,920 million in Q1 2008, $21,552 million in Q4 2007,
$20,830 million in Q3 2007, $18,993 million in Q2 2007 and $17,305 million in Q1 2007. BASIC EARNINGS PER SHARE (SEE NOTES 1, 2 AND 7) Quarters Full Year Q4 2008 Q3 2008 Q4 2007 2008 2007 (0.44) 1.37 1.36 Earnings per share ($) 4.27 5.00 0.78 1.77 1.07 CCS earnings per share ($) 5.09 4.40 DILUTED EARNINGS PER SHARE (SEE NOTES 1, 2 AND 7) Quarters Full Year Q4 2008 Q3 2008 Q4 2007 2008 2007 (0.44) 1.37 1.36 Earnings per share ($) 4.26 4.99 0.78 1.77 1.07 CCS earnings per share ($) 5.08 4.39 EARNINGS BY BUSINESS SEGMENT (SEE NOTES 2 AND 4) Quarters $ million Full Year Q4 Q4 2008 Q3 2008 2007 %1 2008 2007 % Exploration & Production: 3,477 3,885 3,763 -8 - World outside USA 14,854 10,954 +36 233 1,616 1,104 -79 - USA 5,381 3,732 +44 3,710 5,501 4,867 -24 20,235 14,686 +38 Gas & Power: 956 2,437 639 +50 - World outside USA 5,114 2,315 +121 25 337 (8) - - USA 214 466 -54 981 2,774 631 +55 5,328 2,781 +92 (30) 371 82 - Oil Sands 941 582 +62 Oil Products (CCS basis): 1,375 2,307 789 +74 - World outside USA 5,425 5,090 +7 (793) (3) 87 - - USA (270) 1,861 - 582 2,304 876 -34 5,155 6,951 -26 Chemicals (CCS basis): 115 253 370 -69 - World outside USA 784 1,661 -53 (134) (137) (22) - - USA (628) 21 - (19) 116 348 - 156 1,682 -91 5,224 11,066 6,804 -23 Total operating segments 31,815 26,682 +19 Corporate: - Interest and investment (41) 178 12 income/(expense) 328 875 - Currency exchange gains/ (351) (264) 82 (losses) (650) 205 19 43 (98) - Other - including taxation 253 307 (373) (43) (4) (69) 1,387 (66) (120) (116) Minority interest (380) (505) 4,785 10,903 6,684 -28 CCS earnings 31,366 27,564 +14 Estimated CCS adjustment for (7,595) (2,455) 1,783 Oil Products and Chemicals (5,089) 3,767 Income attributable to shareholders of Royal Dutch (2,810) 8,448 8,467 - Shell plc 26,277 31,331 -16 1 Q4 on Q4 change SUMMARISED BALANCE SHEET (SEE NOTES 1 AND 6) $ million Sept 30, Dec 31, 2008 2008 Dec 31, 2007 Assets Non-current assets: Intangible assets 5,021 5,541 5,366 Property, plant and equipment 112,038 114,193 101,521 Investments: - equity-accounted investments 28,327 31,630 29,153 - financial assets 4,065 2,952 3,461 Deferred tax 3,418 3,978 3,253 Pre-paid pension costs 6,198 6,205 5,559 Other 6,764 6,219 5,760 165,831 170,718 154,073 Current assets: Inventories 19,342 33,442 31,503 Accounts receivable 82,040 90,100 74,238 Cash and cash equivalents 15,188 7,821 9,656 116,570 131,363 115,397 Total assets 282,401 302,081 269,470 Liabilities Non-current liabilities: Debt 13,772 10,742 12,363 Deferred tax 12,518 14,688 13,039 Retirement benefit obligations 5,469 5,961 6,165 Other provisions 12,570 13,499 13,658 Other 3,677 4,088 3,893 48,006 48,978 49,118 Current liabilities: Debt 9,497 5,984 5,736
Accounts payable and accrued liabilities 85,091 88,387 75,697
Taxes payable 8,107 15,632 9,733 Retirement benefit obligations 383 369 426 Other provisions 2,451 2,356 2,792 105,529 112,728 94,384 Total liabilities 153,535 161,706 143,502 Equity attributable to shareholders of Royal Dutch Shell plc 127,285 138,469 123,960 Minority interest 1,581 1,906 2,008 Total equity 128,866 140,375 125,968 Total liabilities and equity 282,401 302,081 269,470 SUMMARISED STATEMENT OF CASH FLOWS (SEE NOTE 1) Quarters $ million Full Year Q4 2008 Q3 2008 Q4 2007 2008 2007 Cash flow from operating activities: (2,959) 8,480 8,633 Income for the period 26,476 31,926 Adjustment for: 2,411 6,935 5,551 - Current taxation 24,452 20,076 414 178 96 - Interest (income)/expense 1,039 550 - Depreciation, depletion and 3,684 3,387 3,840 amortisation 13,656 13,180 (1,234) (1,799) (1,799) - (Profit)/loss on sale of assets (4,071) (3,349) - Decrease/(increase) in net 14,687 2,215 (3,375) working capital 7,935 (6,206) - Share of profit of (350) (2,000) (2,376) equity-accounted investments (7,446) (8,234) - Dividends received from 2,522 2,604 2,282 equity-accounted investments 9,325 6,955 - Deferred taxation and other (1,105) (95) (726) provisions (1,030) (773) (35) (618) (24) - Other (549) (801) Cash flow from operating 18,035 19,287 12,102 activities (pre-tax) 69,787 53,324 (7,748) (6,686) (6,809) Taxation paid (25,869) (18,863) Cash flow from operating 10,287 12,601 5,293 activities 43,918 34,461 Cash flow from investing activities: (7,892) (12,392) (8,013) Capital expenditure (35,065) (24,576) Investments in equity-accounted (193) (555) (519) investments (1,885) (1,852) 1,179 1,087 1,742 Proceeds from sale of assets 4,737 8,566 Proceeds from sale of 569 1,160 561 equity-accounted investments 2,062 1,012 Proceeds from sale of /(additions (36) (25) (120) to) financial assets 224 1,055 191 267 353 Interest received 1,012 1,225 Cash flow from investing (6,182) (10,458) (5,996) activities (28,915) (14,570) Cash flow from financing activities: Net increase/(decrease) in debt with maturity period 3,970 215 317 within three months 4,161 (455) 3,001 238 195 Other debt: New borrowings 3,555 4,565 (581) (166) (182) Repayments (2,890) (2,796) (409) (295) (312) Interest paid (1,371) (1,235) 31 (18) (52) Change in minority interest 40 (6,757) (302) (848) (1,538) Repurchases of shares (3,573) (4,387) Dividends paid to: - Shareholders of Royal Dutch (2,408) (2,290) (2,318) Shell plc (9,516) (9,001) (54) (105) (17) - Minority interest (325) (203) Treasury shares: - Net sales/(purchases) and 47 36 124 dividends received 525 876 Cash flow from financing 3,295 (3,233) (3,783) activities (9,394) (19,393) Currency translation differences relating to cash and (33) (79) 50 cash equivalents (77) 156 Increase/(decrease) in cash and 7,367 (1,169) (4,436) cash equivalents 5,532 654 Cash and cash equivalents at 7,821 8,990 14,092 beginning of period 9,656 9,002 Cash and cash equivalents at end 15,188 7,821 9,656 of period 15,188 9,656 CAPITAL INVESTMENT Quarters $ million Full Year Q4 2008 Q3 2008 Q4 2007 2008 2007 Capital expenditure: Exploration & Production: 3,510 8,083 2,704 - World outside USA 16,833 10,320 965 688 1,321 - USA 5,099 3,403 4,475 8,771 4,025 21,932 13,723 Gas & Power: 1,033 1,030 862 - World outside USA 3,892 2,936 2 4 11 - USA 10 15 1,035 1,034 873 3,902 2,951 817 835 649 Oil Sands 3,124 1,931 Oil Products: 1,252 879 1,257 - World outside USA 3,449 3,141 158 92 123 - USA 379 530 1,410 971 1,380 3,828 3,671 Chemicals: 567 558 419 - World outside USA 1,898 1,068 70 49 103 - USA 187 347 637 607 522 2,085 1,415 98 23 193 Corporate 241 414 8,472 12,241 7,642 Total capital expenditure 35,112 24,105 Exploration expense 336 260 193 - World outside USA 949 646 153 179 170 - USA 498 469 489 439 363 1,447 1,115 New equity in equity-accounted investments 135 361 237 - World outside USA 1,208 1,407 19 21 40 - USA 86 65 154 382 277 1,294 1,472 New loans to equity-accounted 39 173 242 investments 591 380 9,154 13,235 8,524 Total capital investment* 38,444 27,072 *Comprising: 5,040 9,618 4,630 - Exploration & Production 24,718 15,919 1,096 1,169 1,091 - Gas & Power 4,346 3,532 817 835 649 - Oil Sands 3,124 1,931 1,464 983 1,438 - Oil Products 3,917 3,856 639 607 523 - Chemicals 2,097 1,419 98 23 193 - Corporate 242 415 9,154 13,235 8,524 38,444 27,072 ADDITIONAL SEGMENTAL INFORMATION1 Quarters $ million Full Year Q4 2008 Q3 2008 Q4 2007 2008 2007 Exploration & Production 3,710 5,501 4,867 Segment earnings 20,235 14,686 Including: 778 538 382 - Exploration 2,049 1,712 - Depreciation, depletion & 2,368 2,168 2,848 amortisation 8,929 9,338 - Share of profit of 1,297 1,358 1,278 equity-accounted investments 4,970 3,583 3,105 9,556 5,135 Cash flow from operations 31,649 24,348 Less: Net working capital 397 1,444 830 movements2 2,390 1,238 Cash flow from operations excluding net working capital 2,708 8,112 4,305 movements 29,259 23,110 55,274 53,276 47,682 Capital employed 55,274 47,682 Gas & Power 981 2,774 631 Segment earnings 5,328 2,781 Including: - Depreciation, depletion & 80 151 85 amortisation 397 315 - Share of profit of 550 787 533 equity-accounted investments 2,541 1,852 1,120 2,259 295 Cash flow from operations 5,445 1,408 Less: Net working capital (1) 718 (379) movements2 774 (514) Cash flow from operations excluding net working capital 1,121 1,541 674 movements 4,671 1,922 22,497 21,094 19,383 Capital employed 22,497 19,383 Oil Sands (30) 371 82 Segment earnings 941 582 Including: - Depreciation, depletion & 40 44 42 amortisation 173 166 (37) 684 208 Cash flow from operations 1,590 1,520 Less: Net working capital (34) 130 145 movements2 60 720 Cash flow from operations excluding net working capital (3) 554 63 movements 1,530 800 6,200 6,249 4,603 Capital employed 6,200 4,603
1 Corporate segment information has not been included in the table shown.
Please refer to the Earnings by business segment section for additional
information. The above data does not consider minority interest impacts on thesegments. 2 Excluding working capital movements related to taxation. ADDITIONAL SEGMENTAL INFORMATION1 (continued) Quarters $ million Full Year Q4 2008 Q3 2008 Q4 2007 2008 2007 Oil Products 582 2,304 876 Segment CCS earnings 5,155 6,951 Including: - Depreciation, depletion & 855 614 607 amortisation 2,686 2,440 - Share of profit of (239) 129 328 equity-accounted investments 598 1,723 6,521 2,068 (1,605) Cash flow from operations 6,803 3,682 Less: Net working capital 13,783 1,537 (3,929) movements2 5,446 (6,834) Cash flow from operations excluding net working capital (7,262) 531 2,324 movements 1,357 10,516 44,171 58,520 54,515 Capital employed 44,171 54,515 Chemicals (19) 116 348 Segment CCS earnings 156 1,682 Including: - Depreciation, depletion & 155 215 207 amortisation 888 666 - Share of profit of (99) 96 165 equity-accounted investments 247 694 890 164 688 Cash flow from operations 1,801 1,873 Less: Net working capital 1,439 207 (123) movements2 1,421 (796) Cash flow from operations excluding net working capital (549) (43) 811 movements 380 2,669 9,904 11,206 10,571 Capital employed 9,904 10,571
1 Corporate segment information has not been included in the table shown.
Please refer to the Earnings by business segment section for additional
information. The above data does not consider minority interest impacts on the segments. 2 Excluding working capital movements related to taxation. NOTES
1. Accounting policies and basis of presentation
The quarterly financial report and tables are prepared in accordance with International Financial Reporting Standards (IFRS) and are also in accordance with IFRS as adopted by the European Union.
The accounting policies are unchanged from those 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, 2007 on pages 117 to 121.
2. Earnings on an estimated current cost of supplies (CCS) basis
To facilitate a better understanding of underlying business performance, thefinancial 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 provides usefulinformation concerning the effect of changes in the cost of supplies on RoyalDutch Shell's results of operations and is a measure to manage the performanceof the Oil Products and Chemicals segments but is not a measure of financialperformance under IFRS.On this basis, Oil Products and Chemicals segment cost of sales of the volumessold during the period is based on the cost of supplies during the same periodafter making allowance for the estimated tax effect, instead of the first-in,first-out (FIFO) method of inventory accounting. Earnings calculated on thisbasis do not represent an application of the last-in, first-out (LIFO)inventory basis and do not reflect any inventory drawdown effects.
3. Return on average capital employed (ROACE)
ROACE is defined as the sum of the current and previous three quarters' income adjusted for interest expense, after tax, divided by the average capital employed for the period.
Components of the calculation are:
$ million Q4 2008 Q4 2007 Income (four quarters) 26,476 31,926 Interest expense after tax 615 699 ROACE numerator 27,091 32,625 Capital employed - opening 144,067 130,718 Capital employed - closing 152,135 144,067 Capital employed - average 148,101 137,393 ROACE 18.3% 23.7%
4. Earnings by business segment
Operating segment results are presented before deduction of minority interestand 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 Corporate results. Operating segment results areafter tax and include equity-accounted investments.
5. Gearing
The numerator and denominator in the gearing calculation, as demonstratedbelow, used by Shell are calculated by adding to reported debt and equitycertain off-balance sheet obligations as at the beginning of the year such asoperating lease commitments and underfunded retirement benefits obligations (ifapplicable) which Shell believes to be in the nature of incremental debt, anddeducting cash and cash equivalents judged to be in excess of amounts requiredfor operational purposes.$ million Dec 31, 2008 Dec 31, 2007 Non-current debt 13,772 12,363 Current debt 9,497 5,736 Total debt 23,269 18,099 Add: Net present value of operating lease obligations 16,445 14,387 Underfunded retirement benefit obligations (after tax) 11,834 - Less: Cash and cash equivalents in excess of operational requirements 12,888 7,356 Adjusted debt 38,660 25,130 Total equity 128,866 125,968 Total capital 167,526 151,098 Gearing ratio (adjusted debt as a percentage of total capital) 23.1% 16.6% 6. EquityTotal equity comprises equity attributable to shareholders of Royal Dutch Shelland to the minority interest. Other reserves comprise the capital redemptionreserve, share premium reserve, merger reserve, share plan reserve, currencytranslation differences, unrealised gains/(losses) on securities and unrealisedgains/(losses) on cash flow hedges. Ordinary share capital Treasury Other Retained Minority Total $ million shares reserves earnings Total interest equity At December 31, 2007 536 (2,392) 14,148 111,668 123,960 2,008 125,968 Income for the period - - - 26,277 26,277 199 26,476 Income/(expense) recognised directly in equity - - (11,049) - (11,049) (341) (11,390) Capital contributions/ (repayments) from/ to minority shareholders and other changes in minority interest - - - 58 58 40 98 Dividends paid - - - (9,516) (9,516) (325) (9,841) Treasury shares: net sales/ (purchases) and dividends received - 525 - - 525 - 525 Repurchases of shares (9) - 9 (3,082) (3,082) - (3,082) Share-based compensation - - 70 42 112 - 112 At December 31, 2008 527 (1,867) 3,178 125,447 127,285 1,581 128,866 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 - - - 31,331 31,331 595 31,926 Income/(expense) recognised directly in equity - - 4,933 - 4,933 27 4,960 Capital contributions/ (repayments) from/ to minority shareholders - - - - - 748 748 Acquisition of Shell Canada - - - (5,445) (5,445) (1,639) (7,084) Sakhalin partial divestment - - - - - (6,711) (6,711) Other changes in minority interest - - - (28) (28) (28) (56) Dividends paid - - - (9,001) (9,001) (203) (9,204) Treasury shares: net sales/ (purchases) and dividends received - 924 - - 924 - 924 Repurchases of shares (9) - 9 (4,866) (4,866) - (4,866) Share-based compensation - - 386 - 386 - 386 At December 31, 2007 536 (2,392) 14,148 111,668 123,960 2,008 125,968
7. Basis for Royal Dutch Shell earnings per ordinary share
The total number of Royal Dutch Shell ordinary shares in issue at the end ofthe period was 6,241.5 million. Royal Dutch Shell reports earnings per share ona basic and on a diluted basis, based on the weighted average number of RoyalDutch Shell (combined A and B) ordinary shares outstanding. Shares held inrespect of share options and other incentive compensation plans are excluded indetermining basic earnings per share.Basic earnings per share calculations are based on the following weightedaverage number of shares: Full Year Full YearMillions Q4 2008 Q3 2008 Q4 2007 2008 2007 Royal Dutch Shell ordinary shares of euro 0.07 each 6,123.8 6,147.3 6,225.3 6,159.1 6,263.8
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".
Full Year Full YearMillions Q4 2008 Q3 2008 Q4 2007 2008 2007 Royal Dutch Shell ordinary shares of euro 0.07 each 6,127.5 6,159.8 6,248.8 6,171.5 6,283.8
Basic shares outstanding at the end of the following periods are:
Millions Q4 2008 Q3 2008 Q4 2007 Royal Dutch Shell ordinary shares of euro 0.07 each 6,121.7 6,133.4 6,210.4
One American Depository Receipt (ADR) is equal to two Royal Dutch Shell ordinary shares.
8. Accounting for Derivatives
IFRS require that derivative instruments be recognised in the financial statements at fair value. Any change in the current period between the period end market price and the contract settlement price is recognised in income where hedge accounting is either not permitted or not applied to these contracts.
The physical crude oil and related products held by the Oil Products businessas inventory are recorded at historical cost or net realisable value, whicheveris lower, as required under IFRS. Consequently, any increase in value of theinventory over cost is not recognised in income until the sale of the commodityoccurs in subsequent periods.In the Oil Products business, the buying and selling of commodities includestransactions conducted through the forward markets using commodity derivativesto reduce economic exposure. The derivatives are typically associated with afuture physical delivery of the commodities.These differences in accounting treatment for physical inventory (at cost ornet realisable value, whichever is lower) and derivative instruments (at fairvalue) have resulted in timing differences in the recognition of gains orlosses between reporting periods.Similarly, earnings from long-term contracts held by Gas & Power are recognisedin income upon realisation. Associated commodity derivatives are recognised atfair value as of the end of each quarter.
These differences in accounting treatment for long-term contracts (on an accrual basis) and derivative instruments (at fair value) have resulted in timing differences in the recognition of gains or losses between reporting periods.
_________________________________________________________________________________
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