2nd Feb 2006 07:00
Royal Dutch ShellSummary resultsFOURTH QUARTER $ million FULL YEAR 2005 2004 % 2005 2004 % Income attributable to shareholders 4,368 4,571 -4 1 25,311 18,540 +37 Estimated current cost of supplies (CCS) adjustment for Oil Products (1,027) (649) segment - see note 2 2,371 945 5,395 5,220 +3 CCS earnings 1 22,940 17,595 +30 8,465 6,349 Cash from operating activities 30,113 26,537 Cash from operating activities excluding net working capital movements and taxation paid/accrued 7,344 6,651 - see note 7 35,585 28,278 5,956 5,185 Capital investment 17,436 15,275 Upstream production (thousand boe/d) 3,500 3,837 2 3,518 3,772 1.including discontinued operations - see note 3 2.100% of Shell companies production plus Shell share of associates production Delivering good results in the quarter; building the future * Record full year results with basic earnings per share of $3.79 for 2005 and $0.67 for the fourth quarter * Solid Upstream performance in the quarter captures oil and gas price increases * Good Oil Products earnings in the quarter reflect operational delivery and favourable market conditions * 3.52 million barrels of oil equivalent (boe) per day production 2005 in line with guidance * Fourth quarter dividend of euro 0.23 per share equivalent to some $1.9 billion (subject to exchange rates) * $2.6 billion or 1.2% of Royal Dutch Shell shares bought back for cancellation in the fourth quarter and $1.7 billion paid for Royal Dutch shares Chief Executive Jeroen van der Veer said "Our good performance in thefourth quarter 2005 gives us a solid platform to build on in 2006. We deliveredrecord cash and earnings. Success in exploration and gaining access to newresources continues. We met our production expectations for the quarter and theyear despite the impact of the hurricanes. Our leading LNG and Oil Productsbusinesses had good operational and financial performance. We continue toexpand our portfolio of integrated gas, unconventional resources, material oilprojects and new energy technologies and expect to invest around $19 billion in2006. Our financial position is solid, and we returned over $17 billion to ourshareholders through dividends, buybacks and the payment to Royal Dutchminority shareholders in 2005. We focus on delivery now and building thefuture." A report by Royal Dutch Shell plc ('Royal Dutch Shell'). The informationin these quarterly results reflects the consolidated financial position andresults of Royal Dutch Shell. All amounts shown throughout this report areunaudited.Segment earningsFOURTHQUARTER $ million FULL YEAR 2005 2004 % 2005 2004 % Segment earnings 3,561 2,918 Exploration & Production 14,238 9,823 530 605 Gas & Power 1,573 1,815 Oil Products (CCS basis - see note 1,898 2,338 2) 7,532 6,592 (38) (20) Chemicals 991 1,148 Other segments/Corporate/Minority (556) (621) interest (1,394) (1,783) ______ 5,395 5,220 +3 CCS earnings 22,940 17,595 +30 Earnings in the fourth quarter 2005 reflected the following items, which inaggregate were a net gain of $34 million (compared to a net gain of $499million in the fourth quarter 2004): * Exploration & Production earnings included a net gain of $152 million, mainly related to tax credits, partly offset by a charge related to the mark-to-market valuation of certain UK gas contracts of $154 million, versus a gain of $405 million in 2004 mainly due to the reversal in 2004 of earlier impairments. * Gas & Power fourth quarter 2004 earnings included a net gain of $157 million related to divestments partly offset by impairment charges. * Oil Products fourth quarter 2004 earnings included a net gain of $391 million mainly related to divestments. * Chemicals earnings included net charges of $84 million mainly for legal charges versus a net charge of $353 million in the fourth quarter 2004 for the impairment of the polyolefins joint venture Basell. * Other Industry and Corporate segments included a net gain of $2 million mainly related to impairment charges of $91 million offset by a net gain from tax and insurance. The fourth quarter 2004 included charges of $101 million. * Income attributable to shareholders and CCS earnings include a deduction of minority income attributable to the former Royal Dutch shareholders of $36 million (in the third quarter of 2005 this amounted to $46 million). The minority interest was eliminated in the fourth quarter 2005.Key features of the fourth quarter and full year 2005 * Fourth quarter basic earnings per share for Royal Dutch Shell (see note 9) in 2005 were $0.67. Fourth quarter basic CCS earnings per share for Royal Dutch Shell were $0.82. * Fourth quarter 2005 dividends have been announced of euro 0.23 per share for Royal Dutch Shell. For 2005 total dividends are equivalent to an aggregate of euro 0.92 per share. * Fourth quarter reported income of $4,368 million was 4% lower than a year ago. * Fourth quarter CCS earnings (i.e. on an estimated current cost of supplies basis for the Oil Products segment earnings) were $5,395 million or 3% higher. * Full year 2005 reported income of $25,311 million was 37% higher than a year ago. * Full year 2005 CCS earnings were $22.94 billion, 30% higher than a year ago. Upstream earnings in Exploration & Production and Gas & Power reflected high price realisations and increased LNG volumes partly offset by lower oil and gas production volumes. Downstream earnings were very strong on good operational performance. Income in 2005 included a net gain of $1.27 billion mainly from divestments partly offset by mark-to-market valuations in Exploration & Production and charges mainly in Chemicals and Gas & Power, versus a net gain of $391 million mainly from divestments included in 2004 earnings. * Return on average capital employed (ROACE) on a reported income basis (see note 4) was 25.6% for 2005. * Exploration & Production 2005 segment earnings of $14,238 million were 45% higher than a year ago mainly reflecting higher prices partly offset by lower volumes and higher costs. Earnings in 2005 included a net gain of $1,727 million, mainly from the divestment gain in the Netherlands (Gasunie), partly offset by a charge related to the mark-to-market valuation of certain UK gas contracts ($492 million). * Hydrocarbon production in 2005 was 3,518 thousand boe per day in line with guidance for production for 2005. Excluding the loss of production due to hurricanes in the Gulf of Mexico, the end of a production sharing contract in the Middle East, lower entitlements due to higher hydrocarbon prices and the impact of divestments, production would be 3,738 thousand boe per day or 1% lower than a year ago. * During 2005, a total of between 750-850 million boe is expected to be added to proved reserves. Around 75%-85% of these proved reserves are expected to come from Group companies and the remainder from associates. In addition, net proved mineable reserves of 166 million boe were added from Athabasca Oil Sands in 2005. The Reserves Replacement Ratio (see note 10) for 2005 is expected to be in the range of 70%-80%, including mineable reserves from Athabasca Oils Sands and also including year-end pricing impact and acquisitions and divestments. Excluding mineable reserves from Athabasca Oil Sands the Reserves Replacement Ratio is expected to be in the range of 60%-70%. Year-end pricing effects amount to between 40-80 million boe and impact the Reserves Replacement Ratio by 3-6% points. * The Group continues to target 100% Reserves Replacement over the period 2004-2008. Most proved reserves are expected to be added in the latter part of the period as new projects are developed and brought on stream. * The exploration discoveries, appraisals programme and new business development in 2005 added over 2 billion boe resources. * Gas & Power segment earnings were $1,573 million in 2005, compared to $1,815 million in 2004. 2005 earnings reflected record LNG volumes and strong prices, and favourable Marketing and Trading conditions. Earnings in 2005 included net charges of $84 million mainly related to divestments including the power generation assets held through the joint venture company InterGen. Earnings in 2004 included net gains of $444 million also mainly related to divestments. * Full year 2005 Oil Products CCS earnings were $7,532 million, up $940 million from earnings of $6,592 million in 2004, reflecting strong refining margins and operational performance. Earnings included $427 million of net gains from divestments in 2005 compared to net gains of $540 million last year. Increased refining earnings and higher trading profits were partially offset by lower marketing results. * Full year 2005 Chemicals segment earnings were $991 million and included $565 million of net charges, mainly from the divestment of the polyolefins joint venture Basell and legal provisions. 2004 earnings were $1,148 million and included charges of $368 million mainly from impairments. Excluding these effects, 2005 earnings were 3% higher than a year ago reflecting improved margins and chemicals feedstock trading partly offset by the loss of earnings from discontinued operations. * Cash flow from operating activities, excluding net working capital movements, taxation and taxation paid, was $35.6 billion, compared to $28.3 billion a year ago. * The 2004-2006 divestment target of $12-$15 billion has been achieved ahead of plan in 2005. Proceeds from the divestment programme to date were $14.3 billion, with proceeds of $6.6 billion in 2005. * Gearing, including other commitments such as operating leases and retirement benefits, and net of cash holdings minus operational cash requirements, was 12.0% versus, on a comparable Royal Dutch Shell basis, 15.4% at the end of 2004. In 2005 cash and cash equivalents increased by $2.5 billion to $11.7 billion and debt decreased by $1.7 billion. Total cash returned to shareholders was over $17 billion. * Capital investment for 2005 was $15.6 billion (excluding the minority share of Sakhalin of $1.8 billion). Increases reflected exploration expenditure of $2.1 billion, including Australia and Canada. * Share purchases for cancellation amounted to $5 billion (or 2.3% of shares) plus $1.7 billion for the cash payment for the minority interest in Royal Dutch in 2005. * In December 2005 the restructuring of certain of Royal Dutch Shell's subsidiaries, including the merger of Royal Dutch Petroleum Company (Royal Dutch) and Shell Petroleum N.V. (SPNV) was completed. As a result of the merger of Royal Dutch and SPNV, former minority shareholders in Royal Dutch were paid euro 52.21 per Royal Dutch share held (or the equivalent in exchangeable loan notes of SPNV) in consideration for their shares. The total cash amount paid to minority shareholders was $1.7 billion and subsequently, in January 2006, the loan notes were exchanged into 4,827,974 new Royal Dutch Shell A shares or approximately 0.07% of the total A and B shares outstanding at the time.Royal Dutch Shell outlook 2006 * Share buyback plans will be reviewed periodically, and are subject to market conditions and the capital requirements of the company. Royal Dutch Shell currently expects to return up to $5 billion to shareholders via buy back of shares for cancellation in 2006. In line with the financial framework, the target for gearing over time in the 20%-25% range remains unchanged, including other commitments such as operating leases, contingent liabilities and retirement benefits and operating cash requirements. * Including the impact on production from the hurricanes in the Gulf of Mexico in 2005, the production outlook for 2006 is unchanged from earlier guidance and in the lower half of the range of 3.5 to 3.8 million boe per day. Due to the hurricanes in the Gulf of Mexico in 2005, 7-8 million barrels (Shell share) are expected to be deferred in the first quarter 2006. The Mars platform is expected to start production by the middle of 2006 with full production restored in the second half of 2006. * LNG sales are expected to benefit from recently completed expansions in Nigeria and Oman. LNG capacity growth remains in line with guidance of 14% average annual increase for 2004 to 2009. * Guidance for 2006 capital expenditure is $19 billion excluding the minority share of Sakhalin and reflects new project opportunities under development, existing project progress and market conditions.Fourth quarter 2005 investments and portfolio developmentsUpstream portfolio developments during the quarter: In Nigeria, Shell started oil production from the Bonga offshore deepwaterfield (Shell share 55%) which is expected to ramp up production to over 200thousand barrels of oil per day in 2006. The Bonga development and thediscoveries in and around the Bonga Main facility are likely to develop over 1billion barrels of recoverable resources. In the USA, Shell exchanged its interest of 17% in the Tahiti field,deepwater Gulf of Mexico, for Total's 100% interest in four producing naturalgas fields in South Texas with current production of 107 million standard cubicfeet (scf) per day. The swap will be completed in the first quarter of 2006. In Russia, Salym Petroleum Development (Shell share 50%) achievedcommercial production in West Salym, when the Central Processing Facility (CPF)and the oil export pipeline commenced operations on schedule. In 2006, UpperSalym and Vadelyp will be tied-in to the CPF. The production is expected toramp up with the development of fields over the coming years. The Sakhalin IIproject (Shell share 55%) is proceeding in line with earlier guidance. In Malaysia, Shell delivered first gas from the Shallow Clastics fieldwhich, once fully developed, is expected to produce 430 million scf per day tothe E11 hub integrated gas project (Shell share 50%). The E11 hub will befurther developed to reach a capacity of 2 billion scf per day (100%) fromvarious new and existing fields. In the Ukraine, a cooperation agreement was signed with the National OilCompany (NAK) for a farm-in by Shell into 10 NAK licences in the Dniepr-DonetsBasin. Shell will acquire a 50% interest in a Joint Activity Agreement in theselicences (excluding producing fields) by committing to a seismic andexploration drilling programme. Shell Canada acquired unconventional gas leases in the Athabasca areacovering 66,400 acres in the deep basin area near Hinton, Alberta and aninterest in approximately 20,000 acres in the northeastern British Columbiafoothills with conventional gas prospects. In Brazil, Shell acquired interests in five offshore exploration blocks inthe Espƒrito Santos Basin. In the fourth quarter 2005, 20 successful exploration and exploratoryappraisal wells were drilled in Australia, Brazil, Brunei, Egypt, Germany,Malaysia, Netherlands, Nigeria, Oman, UK and USA. The overall success rate in2005 was 72%. Seismic operations started in Libya in the Sirte basin. In 2005, Shell drilled or participated in 15 Big Cat prospects, of which 3were still being drilled at year-end. Hydrocarbons were found in seven of the12 Big Cat wells that reached target depth at year-end. In Qatar, the final investment decision for the Qatargas 4 LNG project(Shell share 30%) was taken in December 2005. Qatargas 4 will produce 1.4billion scf per day of natural gas including an average of approximately 70thousand barrels per day of associated natural gas liquids from Qatar's NorthField over the 25-year life of the project. The project comprises theintegrated development of upstream gas production facilities, a single LNGtrain yielding approximately 7.8 mtpa of LNG and associated shipping. LNGdeliveries are expected to commence around the end of the decade. In the USA, Shell acquired, subject to the U.S. Federal Energy RegulatoryCommission's approval, additional capacity at the Elba Island LNG importterminal bringing Shell's total regasification capacity at Elba to 0.9 billionscf per day. The capacity is intended to be utilised to import Qatargas 4 LNGvolumes. In Nigeria, production commenced from the two train 'NLNG Plus' expansionproject (Shell share 26%). The first cargo from Train 4 was loaded in January2006 for delivery to North America. Production from Train 5 is expected in thefirst quarter of 2006. The expansion project was completed within budget andschedule expectations. Completion of Trains 4 and 5 increases Nigeria LNG'sproduction capacity from 9.6 mtpa to over 17 mtpa. The 3.7 mtpa Qalhat LNG plant in Oman (Shell share 11% indirect) commencedproduction in the quarter. The project was delivered within budget and ahead ofschedule. Shell's equity LNG production capacity increased 13% during 2005, from 11.0mtpa at the end of 2004, to 12.4 mtpa at the end of 2005, consistent with theoutlook to deliver 14% average annual increase in LNG equity capacity from 2004to 2009. Shell completed the exit from InterGen (Shell share 68%) with the sale ofits interest in the remaining power projects in Turkey and Colombia. Downstream portfolio developments during the quarter: Shell completed the sale of its marketing and distribution business in theRepublic of Ireland and Northern Ireland as well as the sale of the refining,marketing and distribution business in the French Antilles and French Guyana.Combined proceeds from these sales amounted to some $220 million. The exchange of Shell's 20% interest in its Rome refinery for Total's 18%interest in the Reichstett refinery in France was completed. The transactionincreased Shell's ownership interest in the Reichstett refinery to 83%. Shell started operations of its first retail site in Indonesia. Shell isthe first international oil company to re-enter this retail fuels market.Indonesia is one of Shell's key strategic markets targeted for growth. Agreements were signed relating to the sale of the marketing anddistribution businesses in Uruguay and Paraguay, the retail and commercialfuels marketing business and lubricants blending and distribution business inColombia and Shell's retail business in Ecuador. Agreement was also reachedregarding divestments of Oil Products businesses in Rwanda, Cameroon, theCarribean (Bahamas, Turks and Caicos and Jamaica) and in Papua New Guinea.These sales are expected to be completed in 2006 with total combined proceedsof some $350 million. In China, the CNOOC and Shell Petrochemicals Company Limited joint venture(Shell share 50%) completed the construction of the Nanhai petrochemicalscomplex at Daya Bay, Guangdong, within the expected schedule and budget.Start-up of the complex is in progress; when fully operational, Nanhai isexpected to produce 2.3 mtpa of petrochemical products. Shell completed the sale of the 50% share in the ethylene cracker and thebutadiene business and assets at Berre in France and various related logisticassets. Earnings by industry segmentExploration & ProductionFOURTHQUARTER $ million FULL YEAR 2005 2004 % 2005 2004 % 3,561 2,918 +22 Segment earnings 14,238 9,823 +45 1,986 2,163 -8 Crude oil production (thousand b/d)1 2,093 2,253 -7 Natural gas production available for 8,784 9,710 -10 sale (million scf/d) 1 8,263 8,808 -6 1. 100% of Shell companies production plus Shell share of associates production In the fourth quarter of 2005, Shell restored Gulf of Mexico production(operated and non-operated) to 340 thousand boe per day (Shell share) of theapproximately 450 thousand boe per day (Shell share) prior to hurricane Katrinaand Rita and up from a level of 200 thousand boe per day at the end of thethird quarter. Approximately 16 million barrels (Shell share) were deferred inthe fourth quarter 2005, an improvement on earlier guidance of 18 millionbarrels for the quarter. In the first quarter 2006, 7-8 million barrels (Shellshare) are expected to be deferred. The Mars platform is expected to startproduction by the middle of 2006 with full production restored in the secondhalf of 2006. Upstream cost after tax (Shell share) associated with hurricane evacuation,people displacement, and repairs to assets and facilities is expected to bebetween $250 and $300 million, prior to insurance recovery. Costs after taxwere $130 million in 2005, with the remainder expected to be spent in 2006. Fourth quarter segment earnings of $3,561 million were 22% higher than ayear ago ($2,918 million), mainly reflecting strong oil and gas pricerealisations partly offset by lower volumes. Exploration & Production earnings included a net gain of $152 million,mainly from tax credits offset by a charge related to the mark-to-marketvaluation of certain UK gas contracts ($154 million) versus a gain of $405million in 2004. Segment unit earnings, calculated as segment earnings dividedby production for the quarter, are $11.06 per boe. Excluding the net gainsdescribed above earnings increased by 36% compared to a year ago and on thesame basis unit earnings were $10.59 per boe or 49 % higher than in the samequarter a year ago. Liquids realisations were 31% higher than a year ago, exceeding increasesin marker crudes Brent of 29% and WTI of 24%. Outside the USA, gas realisationsincreased by 47% and in the USA, gas realisations increased by 71%. Fourth quarter 2005 production was 3,500 thousand boe per day, reflectingthe loss of production from hurricanes in the Gulf of Mexico. Excluding thehurricane loss of production of some 129 thousand boe per day compared to thesame quarter last year, the end of a production sharing contract in the MiddleEast of some 100 thousand boe per day, the impact of divestments and lowerentitlements due to higher hydrocarbon prices, production was 1% lower than ayear ago. Production included first contributions from new fields at Bonga (Shellshare 55%) in Nigeria, West Salym (Shell share 50%) in Russia, E11 (Shell share50%) in Malaysia and the ramp-up of additional production mainly in Goldeneye(Shell share 49%) in the UK and Holstein (Shell share 50%) in the USA added 63thousand boe per day versus the same quarter a year ago. Versus the samequarter a year ago, field declines were 134 thousand boe per day, mainly in theUSA, Norway and the UK. Operational downtime, excluding the impact ofhurricanes, was up 38 thousand boe per day mainly in the North Sea. Capital investment in the fourth quarter of $3.8 billion, excluding theminority share of Sakhalin and including exploration expense of $0.4 billion,was 35% higher than in the corresponding period last year. Full year segment earnings of $14,238 million were 45% higher than a yearago ($9,823 million), mainly reflecting strong oil and gas price realisationspartly offset by lower volumes and higher costs. The earnings included a net gain of $1,727 million versus a net charge of$4 million a year ago. The 2005 net gain is attributable mainly to divestmentgains ($2,027 million) in the Netherlands (Gasunie), the UK, Norway andAustralia, partly offset by a cumulative loss related to the mark-to-marketvaluation of certain UK gas contracts ($492 million). Excluding these effectsearnings increased by 27% compared to a year ago. Segment unit earnings, calculated as segment earnings divided by productionfor the year are $11.09 per boe. Excluding the effects described above, unitearnings were $9.74 per boe and increased by 37% compared to a year ago. Liquids realisations in 2005 were 41% higher than a year ago in line withincreases in marker crudes Brent of 43% and WTI of 36%. Gas realisationsoutside the USA increased by 37% and in the USA increased by 33%. Hydrocarbon production in 2005 was 3,518 thousand boe per day. Excludingthe loss of production due to hurricanes in the Gulf of Mexico of 60 thousandboe per day compared to last year, the end of a production sharing contract inthe Middle East of some 100 thousand boe per day, lower entitlements due tohigher hydrocarbon prices and the impact of divestments, production was 1%lower than a year ago. Production benefited from new fields, mainly from Goldeneye (Shell share49%) in the UK, Jintan (Shell share 37.5%) in Malaysia and Holstein (Shellshare 50%) in the USA and ramp-up of production in the USA, totalling some 131thousand boe per day versus a year ago. Field declines were 145 thousand boeper day, mainly in the USA, Brazil, Norway and the UK. Operational downtime,excluding the impact of hurricanes, was an additional 66 thousand boe per dayversus last year, mainly in the North Sea. Cost increases reflect increased market rates and commodity prices, thebuild-up of new production and the development of future projects. Capital investment of $10.8 billion, excluding the minority share ofSakhalin and including exploration expenditure of $2.1 billion, was 25% higherthan last year.Gas & PowerFOURTHQUARTER $ million FULL YEAR 2005 2004 % 2005 2004 % 530 605 -12 Segment earnings 1,573 1,815 -13 Equity LNG sales volume (million 2.81 2.76 +2 tonnes) 10.65 10.15 +5 Fourth quarter Gas & Power segment earnings were $530 million compared to$605 million a year ago, reflecting record fourth quarter LNG volumes of 2.81million tonnes, strong LNG prices and continued favourable Marketing andTrading conditions in the USA. Earnings in 2004 included net gains of $157million mainly related to asset divestments partly offset by impairmentcharges. Excluding these effects earnings were up 18%. LNG volumes increased by2% due to higher production in Brunei and Oman. Full year Gas & Power segment earnings were $1,573 million, compared to$1,815 million in 2004. 2005 reflected record LNG volumes and strong prices,and favourable Marketing and Trading conditions. 2005 earnings included netcharges of $84 million mainly related to divestments including the powergeneration assets held through the joint venture company InterGen. Earnings in2004 included net gains of $444 million also mainly related to divestments. Record LNG sales volumes were up 5% on last year driven by the ramp up ofthe fourth train at the North West Shelf project (Shell share 22%) inAustralia. Marketing and Trading benefited from price volatility and favourabletrading conditions.Oil ProductsFOURTHQUARTER $ million FULL YEAR 2005 2004 % 2005 2004 % 828 1,673 -51 Segment earnings 9,982 7,597 +31 1,070 665 CCS adjustment - see note 2 (2,450) (1,005) 1,898 2,338 -19 Segment CCS earnings 7,532 6,592 +14 3,978 4,124 -4 Refinery intake (thousand b/d) 3,981 4,162 -4 6,695 7,699 -13 Oil product sales (thousand b/d)1 7,057 7,600 -7 1Certain contracts are classified as held for trading purposes and reported net rather than gross with effect from Q3 2005. The effect in Q4 2005 is a reduction in Total Oil products sales of approximately 820 thousand b/d. In the fourth quarter of 2005, lost refinery intake due to the hurricaneswas some 3.3 million barrels (Shell share) versus earlier guidance of 4.5million barrels (Shell share). Downstream costs after tax and prior toinsurance recovery associated with the hurricanes were around $50 million(Shell share). All assets are back to normal operations except for some onshoreproduct pipeline sections. Fourth quarter segment earnings were $828 million compared to $1,673million for the same period last year. Fourth quarter CCS earnings were $1,898 million compared to $2,338 millionfor the fourth quarter of 2004 which included net gains of $391 million. Thefourth quarter 2005 reflected higher trading profits offset by lower refiningand lower marketing earnings. In Manufacturing, Supply and Distribution, fourth quarter 2005 averageindustry refining margins declined in Europe, Asia Pacific and on the US WestCoast. Refinery intake increased 0.5% excluding refineries divested in 2004 and2005 which amounted to about 4% of global intake in the fourth quarter of 2004.Lower intake due to hurricanes in the Gulf of Mexico amounted to 1%. Despitehurricane related downtime at the start of the fourth quarter, refineryutilisation on an Equivalent Distillation Capacity (EDC) basis increased to78.9%. In Marketing including Lubricants and B2B, earnings declined in the fourthquarter of 2005 compared to the same period a year ago. The decrease was due tolower volumes, lower bitumen and LPG margins and higher costs in Lubricants.These were partially offset by higher earnings in Commercial Fuels, Aviationand Marine due to higher margins. Marketing sales volumes declined 4.2%compared to the fourth quarter of 2004 including an impact from divestedvolumes of 1.3%. Full year segment earnings were $9,982 million compared to $7,597 millionfor the same period last year. Full year CCS earnings were $7,532 million, up $940 million from earningsof $6,592 million in 2004 reflecting strong refining margins and operationalperformance. Earnings included $427 million of net gains from divestments in2005 compared to net gains of $540 million last year. Increased refiningearnings and higher trading profits were partially offset by lower marketingresults. In Manufacturing, Supply and Distribution, average industry refiningmargins for the year increased in all regions, with the most significantincreases in the USA. Refinery intake increased by almost 1% compared to a yearago excluding lost intake from divested refineries in 2004 and 2005, whichamounted to some 5% of global intake in 2004. Refinery utilisation on an EDCbasis was at 79.6% versus 80.0% in 2004. Overall unplanned downtime excludinghurricanes improved to 4.0% compared to 4.4% last year reflecting improvedasset performance and operational excellence initiatives. In Marketing including Lubricants and B2B, earnings declined in 2005compared to 2004 mainly due to lower retail margins in the USA and Europe,lower earnings from Lubricants and lower volumes mainly due to divestments.Marketing sales volumes declined 3.6% compared to 2004 largely due todivestments in 2004 and 2005 which accounted for 2.2 percentage points of thereduction.ChemicalsFOURTHQUARTER $ million FULL YEAR 2005 2004 % 2005 2004 % (38) (20) Segment earnings 991 1,148 -14 5,729 5,964 -4 Sales volumes (thousand tonnes) 22,826 24,160 -6 In the fourth quarter the impact of the hurricanes in the USA reduced assetutilisation by 3.4%, above the earlier expected range of 2-3%. All assets wereback to normal operations by the end of the quarter. Fourth quarter Chemicals segment earnings were a loss of $38 million andincluded net charges of $84 million mainly from legal provisions, compared to aloss of $20 million in the same quarter last year, which included the $353million impairment of the investment in Basell. Compared to the same quarter a year ago lower earnings reflected reducedsales volumes and lower margins, higher fixed costs and the loss of earningsfrom discontinued operations. Asset utilisation was below last year asoperations in the USA recovered from the disruptions caused by the hurricanes.Although industry margins improved compared to third quarter, productiondowntime combined with inventory effects resulted in higher cost of salesimpacting margin realisations. Trading results increased versus a year ago butwere $43 million lower than the strong third quarter. The fourth quarter 2005included costs of some $90 million mainly related to progress in projectdevelopment, portfolio changes and tax . The estimated effect of changingprices negatively impacted fourth quarter earnings as reported on a first-in,first-out (FIFO) inventory valuation basis, by $46 million. Full year Chemicals segment earnings were $991 million and included $565million of net charges, mainly from the divestment of the polyolefins jointventure Basell and legal provisions. 2004 earnings were $1,148 million andincluded charges of $368 million mainly from impairments. Excluding these effects 2005 earnings were 3% higher than a year agoreflecting higher margins and improved chemicals feedstock trading partlyoffset by the loss of earnings ($155 million) from discontinued operations. Asset utilisation declined by some 3% mainly due to the impact of thehurricanes on operations in the USA. Sales volumes declined by 6%, however,excluding product trading they were in line with last year.Other Industry & Corporate segmentsFOURTHQUARTER $ million FULL YEAR 2005 2004 2005 2004 (110) (82) Other Industry segment earnings (202) (145) (167) (354) Corporate segment earnings (321) (983) Other Industry and Corporate segments (277) (436) earnings (523) (1,128) Fourth quarter Other Industry and Corporate segments results were a loss of$277 million and included a net gain of $2 million mainly related to impairmentcharges ($91 million) offset by a net gain from tax and insurance, compared toa loss of $436 million a year ago which included charges of $101 million. Netinterest income reflected improved cash balances and lower debt levels. Full year Other Industry and Corporate segments results were a loss of $523million and included charges of $154 million, compared to a loss of $1,128million a year ago which included charges of $221 million. Net interest expensereflected lower debt levels resulting from strong cash generation anddivestment of debt in divested associates, InterGen and Basell, which more thanoffset currency exchange losses. Note All amounts shown throughout this report are unaudited. First quarter results for 2006 are expected to be announced on May 4, 2006,second quarter results for 2006 are expected to be announced on July 27, 2006and third quarter results for 2006 are expected to be announced on October 26,2006. This announcement contains forward-looking statements that are subject torisk factors associated with the oil, gas, power, chemicals and renewablesbusinesses. It is believed that the expectations reflected in these statementsare reasonable, but may be affected by a variety of variables which could causeactual results, trends or reserves replacement to differ materially, including,but not limited to: price fluctuations in crude oil, natural gas and refinedproducts, changes in demand for the Shell Group's products, currencyfluctuations, drilling and production results, reserve estimates, loss ofmarket, industry competition, environmental risks, physical risks, risksassociated with the identification of suitable potential acquisition propertiesand targets and the successful negotiation and consummation of transactions,the risk of doing business in developing countries and countries subject tointernational sanctions, legislative, fiscal and regulatory developmentsincluding potential litigation and regulatory effects arising fromrecategorisation of reserves, economic and financial market conditions invarious countries and regions, political risks, project delay or advancement,approvals and cost estimates. Please refer to the Royal Dutch and Shell Transport Annual Reports on Form20-F for the year ended December 31, 2004 (as amended) for a description ofcertain important factors, risks and uncertainties that may affect Royal DutchShell businesses. Royal Dutch Shell does not undertake any obligation topublicly update or revise any of these forward-looking statements, whether toreflect new information, future events or otherwise. Cautionary Note to US Investors: The United States Securities and Exchange Commission (SEC) permits oil andgas companies, in their filings with the SEC, to disclose only proved reservesthat a company has demonstrated by actual production or conclusive formationtests to be economically and legally producible under existing economic andoperating conditions. We use certain terms in this announcement, such as"recoverable resources" that the SEC's guidelines strictly prohibit us fromincluding in filings with the SEC. U.S. Investors are urged to consider closelythe disclosure in our Form 20-F, File No 1-3788 and disclosure in our Forms 6-Kfile No, 1-32575, available on our website www.shell.com. You can also obtainthese forms from the SEC by calling 1-800-SEC-0330. February 2, 2006Appendix 1: Royal Dutch Shell financial report and tablesStatement of income (see note 1)QUARTERS $ million FULL YEAR Q4 Q3 Q4 2005 2005 2004 % 1 2005 2004 % 92,840 94,717 95,122 -2 Sales proceeds 379,008 338,756 +12 Less: Sales taxes, excise duties 17,344 18,282 18,821 and similar levies 72,277 72,370 ______ ______ ______ ______ ______ 75,496 76,435 76,301 -1 Revenue 306,731 266,386 +15 63,889 60,704 65,358 Cost of sales 252,622 223,259 ______ ______ ______ ______ ______ 11,607 15,731 10,943 +6 Gross profit 54,109 43,127 +25 Selling, distribution and 4,263 3,763 4,406 administrative expenses 15,482 15,098 502 275 515 Exploration 1,286 1,809 Share of profit of equity 1,389 3,081 1,519 accounted investments 7,123 5,015 Net finance costs and other 56 (268) (392) (income)/expense (103) (424) ______ ______ ______ ______ ______ 8,175 15,042 7,933 +3 Income before taxation 44,567 31,659 +41 3,572 5,558 2,893 Taxation2 17,999 12,168 ______ ______ ______ ______ ______ 4,603 9,484 5,040 Income from continuing operations 26,568 19,491 Income from discontinued - (93) (299) operations (307) (234) ______ ______ ______ ______ ______ 4,603 9,391 4,741 -3 Income for the period 26,261 19,257 +36 ====== ====== ====== ======= ======= ==== ==== ==== === === Income attributable to minority 235 359 170 interests 950 717 ______ ______ ______ ______ ______ Income attributable to 4,368 9,032 4,571 -4 shareholders 25,311 18,540 +37 ______ ______ ______ ______ ______ 1 Q4 on Q4 change 2 Includes UK taxation of $1,209 million for full year 2005 and $646 million for full year 2004 Basic earnings per share (see notes 1 and 9)QUARTERS FULL YEAR Q4 Q3 Q4 2005 2005 2004 2005 2004 0.67 1.35 0.68 Income per share ($) 3.79 2.74 0.82 1.10 0.77 CCS earnings per share ($) 3.44 2.60 Diluted earnings per share (see notes 1 and 9)QUARTERS FULL YEAR Q4 Q3 Q4 2005 2005 2004 2005 2004 0.66 1.35 0.68 Income per share ($) 3.78 2.74 0.82 1.10 0.77 CCS earnings per share ($) 3.43 2.60 Earnings by industry segment (see notes 2 and 5)QUARTERS $ million FULL YEAR Q4 Q3 Q4 2005 2005 2004 % 1 2005 2004 % Exploration & Production: 2,836 4,051 1,832 +55 World outside USA 10,541 6,511 +62 725 926 1,086 -33 USA 3,697 3,312 +12 ______ ______ ______ ______ ______ 3,561 4,977 2,918 +22 14,238 9,823 +45 ______ ______ ______ ______ ______ Gas & Power: 465 469 847 -45 World outside USA 1,526 2,011 -24 65 87 (242) USA 47 (196) ______ ______ ______ ______ ______ 530 556 605 -12 1,573 1,815 -13 ______ ______ ______ ______ ______ Oil Products: 1,583 1,229 1,683 -6 World outside USA 5,787 4,926 +17 315 497 655 -52 USA 1,745 1,666 +5 ______ ______ ______ ______ ______ 1,898 1,726 2,338 -19 7,532 6,592 +14 ______ ______ ______ ______ ______ Chemicals: 140 291 50 +180 World outside USA 932 1,023 -9 (178) 30 (70) USA 59 125 -53 ______ ______ ______ ______ ______ (38) 321 (20) 991 1,148 -14 ______ ______ ______ ______ ______ (110) (76) (82) Other industry segments (202) (145) ______ ______ ______ ______ ______ 5,841 7,504 5,759 +1 TOTAL OPERATING SEGMENTS 24,132 19,233 +25 ______ ______ ______ ______ ______ Corporate: 51 71 (231) Interest income/(expense) (22) (744) Currency exchange gains/ (145) 126 42 (losses) (65) 68 (73) (24) (165) Other - including taxation (234) (307) ______ ______ ______ ______ ______ (167) 173 (354) (321) (983) ______ ______ ______ ______ ______ (279) (308) (185) Minority interests (871) (655) ______ ______ ______ ______ ______ 5,395 7,369 5,220 +3 CCS EARNINGS 22,940 17,595 +30 ______ ______ ______ ______ ______ (1,027) 1,663 (649) CCS adjustment for Oil Products 2,371 945 ______ ______ ______ ______ ______ Income attributable to 4,368 9,032 4,571 -4 shareholders 25,311 18,540 +37 ______ ______ ______ ______ ______ 1 Q4 on Q4 change Summarised balance sheet (see notes 1 and 6) $ million Dec 31 Sep 30 Dec 31 ASSETS 2005 2005 2004 Non-current assets: Property, plant and equipment 87,558 85,601 87,918 Intangible assets 4,350 4,361 4,528 Investments: Equity accounted investments 16,905 17,138 20,493 Financial assets 3,672 3,236 2,700 Deferred tax 2,562 3,039 2,789 Employee benefit assets 2,486 2,453 2,479 Other 4,091 4,102 4,490 ______ ______ ______ 121,624 119,930 125,397 ______ ______ ______ Current assets: Inventories 19,776 21,490 15,375 Accounts receivable 66,386 83,812 37,473 Cash and cash equivalents 11,730 15,998 9,201 ______ ______ ______ 97,892 121,300 62,049 ______ ______ ______ ______ ______ ______ TOTAL ASSETS 219,516 241,230 187,446 ______ ______ ______ LIABILITIES Non-current liabilities: Debt 7,578 7,795 8,858 Deferred tax 10,763 12,411 12,930 Employee benefit obligations 5,807 6,018 6,795 Other provisions 7,385 7,114 6,828 Other 5,095 4,395 5,800 ______ ______ ______ 36,628 37,733 41,211 ______ ______ ______ Current liabilities: Debt 5,338 6,714 5,734 Accounts payable and accrued liabilities 69,013 82,912 37,909 Taxes payable 8,782 12,510 9,058 Employee benefit obligations 282 302 339 Other provisions 1,549 1,254 1,812 ______ ______ ______ 84,964 103,692 54,852 ______ ______ ______ ______ ______ ______ TOTAL LIABILITIES 121,592 141,425 96,063 ______ ______ ______ Equity attributable to shareholders 90,924 92,353 86,070 Minority interests 7,000 7,452 5,313 ______ ______ ______ TOTAL EQUITY 97,924 99,805 91,383 ______ ______ ______ TOTAL LIABILITIES AND EQUITY 219,516 241,230 187,446 ______ ______ ______ Summarised statement of cash flows (see notes 1 and 7)QUARTERS $ million FULL YEAR Q4 Q3 Q4 2005 2005 2004 2005 2004 CASH FLOW FROM OPERATING ACTIVITIES: 4,603 9,391 4,741 Income for the period 26,261 19,257 Adjustment for: 4,490 5,548 3,537 Taxation 19,435 13,081 148 120 158 Interest (income)/expense 632 803 Depreciation, depletion and 2,787 2,903 4,190 amortisation 11,981 12,845 (210) (352) (2,228) (Profit)/loss on sale of assets (1,313) (3,087) Decrease/(increase) in net working 3,295 (5,490) 175 capital (5,664) (4,062) Share of profit of equity accounted (1,389) (3,073) (1,220) investments (6,901) (4,782) Dividends received from equity 1,441 2,761 1,459 accounted investments 6,709 4,190 Deferred taxation and other (869) (112) (864) provisions (1,515) (1,007) 833 (1,159) 415 Other (269) 59 ______ ______ ______ ______ ______ Cash flow from operating activities 15,129 10,537 10,363 (pre-tax) 49,356 37,297 ______ ______ ______ ______ ______ (6,664) (3,891) (4,014) Taxation paid (19,243) (10,760) ______ ______ ______ ______ ______ 8,465 6,646 6,349 Cash flow from operating activities 30,113 26,537 ______ ______ ______ ______ ______ CASH FLOW FROM INVESTING ACTIVITIES: (5,447) (3,787) (4,655) Capital expenditure (15,904) (13,566) 396 416 3,842 Proceeds from sale of assets 2,310 5,142 Proceeds from sales/(additions): 73 3,734 638 Equity accounted investments 3,608 258 (1) 113 670 Investments: financial assets 362 1,739 245 251 131 Interest received 863 463 ______ ______ ______ ______ ______ (4,734) 727 626 Cash flow from investing activities (8,761) (5,964) ______ ______ ______ ______ ______ CASH FLOW FROM FINANCING ACTIVITIES: (1,994) 1,138 (1,526) Net increase/(decrease) in debt (1,555) (4,489) (311) (284) (291) Interest paid (1,124) (962) 250 90 (48) Change in minority interests 1,143 812 (2,555) (1,937) - Net issue/(repurchase) of shares (4,988) (698) Dividends paid to: (1,732) (1,910) 79 Shareholders of Royal Dutch Shell (10,556) (7,230) (58) (130) (62) Minority interests (293) (264) Cash payment to former Royal Dutch (1,651) - - shareholders (1,651) - Treasury shares: Net sales/(purchases) and dividends 52 125 (23) received 451 (761) ______ ______ ______ ______ ______ (7,999) (2,908) (1,871) Cash flow from financing activities (18,573) (13,592) ______ ______ ______ ______ ______ Currency translation differences relating to cash and cash - 13 149 equivalents (250) 112 ______ ______ ______ ______ ______ INCREASE/(DECREASE) IN CASH AND CASH (4,268) 4,478 5,253 EQUIVALENTS 2,529 7,093 ______ ______ ______ ______ ______ Cash and cash equivalents at 15,998 11,520 3,948 beginning of period 9,201 2,108 Cash and cash equivalents at end of 11,730 15,998 9,201 period 11,730 9,201 Operational data - UpstreamQUARTERS FULL YEAR Q4 Q3 Q4 2005 2005 2004 %1 2005 2004 % thousand b/d CRUDE OIL PRODUCTION thousand b/d 510 516 565 Europe 541 580 370 370 372 Africa 373 399 227 222 219 Asia Pacific 228 243 455 512 467 Middle East, Russia, CIS 443 471 243 289 383 USA 333 375 75 70 94 Other Western Hemisphere 80 105 ______ ______ ______ ______ ______ Total crude oil production 1,880 1,979 2,100 excluding oil sands 1,998 2,173 106 98 63 Oil sands 95 80 ______ ______ ______ ______ ______ Total crude oil production 1,986 2,077 2,163 -8 including oil sands 2,093 2,253 -7 ______ ______ ______ ______ ______ million scf/d 2 NATURAL GAS PRODUCTION million scf/d 2 AVAILABLE FOR SALE 4,266 2,268 4,559 Europe 3,659 3,739 397 341 383 Africa 377 375 2,436 2,267 2,256 Asia Pacific 2,325 2,132 255 231 676 Middle East, Russia, CIS 253 691 919 948 1,302 USA 1,150 1,332 511 496 534 Other Western Hemisphere 499 539 ______ ______ ______ ______ ______ 8,784 6,551 9,710 -10 8,263 8,808 -6 ______ ______ ______ ______ ______ thousand b/d3 BARRELS OF OIL EQUIVALENT thousand b/d3 1,246 907 1,351 Europe 1,172 1,224 438 429 438 Africa 438 464 647 613 608 Asia Pacific 629 611 499 552 584 Middle East, Russia, CIS 487 590 401 453 607 USA 531 605 163 155 186 Other Western Hemisphere 166 198 ______ ______ ______ ______ ______ Total production excluding oil 3,394 3,109 3,774 sands 3,423 3,692 106 98 63 Oil sands 95 80 ______ ______ ______ ______ ______ Total production including oil 3,500 3,207 3,837 -9 sands 3,518 3,772 -7 ______ ______ ______ ______ ______ 1 Q4 on Q4 change 2 scf/d = standard cubic feet per day; 1 standard cubic feet = 0.0283 cubic metre 3 Natural gas converted to oil equivalent at 5.8 million scf/d = thousand b/d Operational data - Upstream (continued)QUARTERS FULL YEAR Q4 Q3 Q4 2005 2005 2004 %1 2005 2004 % million tonnes LIQUEFIED NATURAL GAS (LNG) million tonnes 2.81 2.48 2.76 +2 Equity LNG sales volume 10.65 10.15 +5 $/bbl Realised Oil Prices $/bbl 52.74 56.89 40.08 WOUSA 50.56 35.53 53.10 56.24 40.68 USA 48.94 36.15 52.77 56.83 40.16 Global 50.36 35.61 $/thousand scf Realised Gas Prices $/thousand scf 5.73 4.24 4.09 Europe 4.99 3.76 4.47 3.70 3.05 WOUSA (including Europe) 3.84 2.81 12.40 8.35 7.27 USA 8.43 6.33 5.78 4.59 3.94 Global 4.77 3.59 1 Q4 on Q4 change Operational data - DownstreamQUARTERS FULL YEAR Q4 Q3 Q4 2005 2005 2004 %1 2005 2004 % thousand b/d thousand b/d REFINERY PROCESSING INTAKE 1,861 1,774 1,767 Europe 1,804 1,770 847 853 940 Other Eastern Hemisphere 849 962 916 909 1,031 USA 953 1,055 354 374 386 Other Western Hemisphere 375 375 ______ ______ ______ ______ ______ 3,978 3,910 4,124 -4 3,981 4,162 -4 ______ ______ ______ ______ ______ OIL SALES 2,271 2,230 2,773 Gasolines 2,404 2,760 791 770 842 Kerosines 811 833 2,154 2,142 2,537 Gas/Diesel oils 2,296 2,398 814 783 801 Fuel oil 844 849 665 700 746 Other products 702 760 ______ ______ ______ ______ ______ 6,695 6,625 7,699 -13 Total oil products*2 7,057 7,600 -7 2,404 2,864 4,837 Crude oil2 3,695 5,160 ______ ______ ______ ______ ______ 9,0992 9,489 12,536 -27 Total oil sales 10,752 12,760 -16 ______ ______ ______ ______ ______ *comprising 2,119 2,094 2,122 Europe 2,093 2,112 1,219 1,236 1,299 Other Eastern Hemisphere 1,232 1,320 1,551 1,558 2,500 USA2 2,013 2,516 714 722 745 Other Western Hemisphere 708 744 1,092 1,015 1,033 Export sales 1,011 908 CHEMICAL SALES VOLUMES BY MAIN thousand tonnes PRODUCT CATEGORY3** thousand tonnes 3,455 3,324 3,575 Base chemicals 13,710 14,184 2,154 2,238 2,252 First line derivatives 8,891 9,499 120 27 137 Other 225 477 ______ ______ ______ ______ ______ 5,729 5,589 5,964 -4 22,826 24,160 -6 ______ ______ ______ ______ ______ **comprising 2,506 2,495 2,376 Europe 10,018 10,159 1,362 1,305 1,348 Other Eastern Hemisphere 5,252 5,526 1,693 1,630 2,079 USA 6,893 7,819 168 159 161 Other Western Hemisphere 663 656 $ million CHEMICAL SALES - NET PROCEEDS4 $ million 2,271 2,092 2,244 Europe 8,981 7,873 1,177 1,123 1,327 Other Eastern Hemisphere 4,640 4,530 1,703 1,512 1,863 USA 6,564 6,159 192 174 182 Other Western Hemisphere 735 616 ______ ______ ______ ______ ______ 5,343 4,901 5,616 -5 20,920 19,178 +9 730 709 591 By-products 2,998 2,311 ______ ______ ______ ______ ______ 6,073 5,610 6,207 -2 23,918 21,489 +11 ______ ______ ______ ______ ______ 1 Q4 on Q4 change 2 Certain contracts are classified as held for trading purposes and reported net rather than gross with effect from Q3 2005. The effect in Q3 2005 is a reduction in Total oil products sales of approximately 850 thousand b/d and a reduction on Crude oil sales of 2,000 thousand b/d and in Q4 2005 820 thousand b/d and 1,490 thousand b/d respectively. 3 Excluding volumes sold by equity accounted investments, chemical feedstock trading and by-products. 4 Excluding proceeds from equity accounted investments and chemical feedstock trading. Capital investmentQUARTERS $ million FULL YEAR Q4 Q3 Q4 2005 2005 2004 2005 2004 Capital expenditure: Exploration & Production: 3,271 2,276 2,494 World outside USA 9,633 7,638 450 318 273 USA 1,225 1,061 ______ ______ ______ ______ ______ 3,721 2,594 2,767 10,858 8,699 ______ ______ ______ ______ ______ Gas & Power: 440 334 298 World outside USA 1,564 1,325 2 - 4 USA 4 32 ______ ______ ______ ______ ______ 442 334 302 1,568 1,357 ______ ______ ______ ______ ______ Oil Products: Refining: 359 290 344 World outside USA 1,107 937 119 56 109 USA 272 338 ______ ______ ______ ______ ______ 478 346 453 1,379 1,275 ______ ______ ______ ______ ______ Marketing: 554 317 749 World outside USA 1,254 1,326 77 34 94 USA 177 160 ______ ______ ______ ______ ______ 631 351 843 1,431 1,486 ______ ______ ______ ______ ______ Chemicals: 48 52 111 World outside USA 170 247 44 46 92 USA 217 282 ______ ______ ______ ______ ______ 92 98 203 387 529 ______ ______ ______ ______ ______ 95 64 87 Other segments 293 220 ______ ______ ______ ______ ______ 5,459 3,787 4,655 TOTAL CAPITAL EXPENDITURE 15,916 13,566 ______ ______ ______ ______ ______ Exploration expense: 215 127 181 World outside USA 555 430 143 56 102 USA 260 221 ______ ______ ______ ______ ______ 358 183 283 815 651 ______ ______ ______ ______ ______ New equity in equity accounted investments 95 85 147 World outside USA 373 430 2 12 7 USA 17 251 ______ ______ ______ ______ ______ 97 97 154 390 681 ______ ______ ______ ______ ______ New loans to equity accounted 42 38 93 investments 315 377 ______ ______ ______ ______ ______ 5,956 4,105 5,185 TOTAL CAPITAL INVESTMENT* 17,436 15,275 ______ ______ ______ ______ ______ *comprising 4,144 2,839 3,131 Exploration & Production 12,046 9,708 457 342 304 Gas & Power 1,602 1,633 1,127 707 1,337 Oil Products 2,844 2,823 118 152 322 Chemicals 599 868 110 65 91 Other segments 345 243 ______ ______ ______ ______ ______ 5,956 4,105 5,185 17,436 15,275 ______ ______ ______ ______ ______ NotesNOTE 1. Accounting policies and basis of presentation In the third quarter 2005, under the Unification Transaction, Royal DutchShell plc became the Parent Company of Royal Dutch Petroleum Company (RoyalDutch) and The ''Shell'' Transport and Trading Company, p.l.c. (ShellTransport) by acquiring all outstanding shares of Shell Transport andapproximately 98.5% of the outstanding shares of Royal Dutch. The comparative periods represent information for Royal Dutch Shell as ifit acquired 100% of Royal Dutch and Shell Transport. For financial reportingpurposes, the 1.5% minority holders in Royal Dutch has been shown in the RoyalDutch Shell consolidated financial statements as a minority interest in RoyalDutch Shell from August 10, 2005, as prior to that time those holders had aright to participate in the Exchange Offer and receive Royal Dutch Shellshares. As a result of the merger of Royal Dutch and Shell Petroleum NV on December21, 2005 the minority interests in the summarised balance sheet attributable tominority holders in Royal Dutch has ceased to exist as of that date. These Financial Statements are considered historical and give retroactiveeffect for all periods presented prior to the Unification Transaction, whichhas been accounted for using a carry-over basis of the historical costs of theassets and liabilities of Royal Dutch, Shell Transport and other companiescomprising the Royal Dutch/Shell Group of Companies. The interest of theminority shareholders in Royal Dutch has also been accounted for using acarry-over basis of the historical costs of its consolidated assets andliabilities. With effect from 2005, the quarterly financial statements, includingcomparative data, have been prepared in accordance with International FinancialReporting Standards (IFRS) and the financial statements are also in accordancewith IFRS as adopted by the European Union. The full details of the accountingpolicies under IFRS are available under www.shell.com/investor.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 ofsupplies (CCS) basis as applied for the Oil Products segment earnings. Earningson an estimated current cost of supplies basis provide useful informationconcerning the effect of changes in the cost of supplies on Royal Dutch Shell'sresults of operations but are not a measure of financial performance underIFRS. On this basis, Oil Products segment cost of sales of the volumes soldduring the period is based on the cost of supplies during the same period aftermaking allowance for the estimated tax effect, instead of use of the first-in,first-out (FIFO) method of inventory accounting. The adjustment from Income toan estimated current cost of supplies basis has no related balance sheet entry.Earnings calculated on this basis do not represent an application of thelast-in, first-out (LIFO) inventory basis and do not reflect any inventory drawdown effects.NOTE 3. Discontinued operations Income from discontinued operations, comprising gains and losses ondisposals and results of operations for the period, is provided in thestatement of income in accordance with IFRS for separate major lines ofbusiness or geographical areas of operations. Earnings by segment relating to discontinued operations, included withinthe segment earnings on page 15, are as follows: QUARTERS $ million FULL YEAR Q4 Q3 Q4 2005 2005 2004 2005 2004 - (93) (292) Chemicals segment earnings (307) (199) - - (7) Corporate segment earnings - (35) - Income from discontinued - (93) (299) operations (307) (234) Basic earnings per share for the fourth quarter 2005 for discontinuedoperations were nil. Basic earnings per share for the third quarter 2005 fordiscontinued operations were $(0.01). Basic earnings per share for 2005 fordiscontinued operations were $(0.05). Basic earnings per share for 2004 fordiscontinued operations were $(0.03).NOTE 4. Return on average capital employed (ROACE) ROACE on an income basis is the sum of the current and previous threequarters' income attributable to shareholders plus interest, less tax andminority interest as a percentage of the average of Royal Dutch Shell's shareof closing capital employed and the opening capital employed a year earlier.The tax rate and the minority interest components are derived from calculationsat the published segment level. Components of the calculation ($ million):Income attributable to shareholders (four quarters) 25,311 Royal Dutch Shell share of interest expense after tax 602 ROACE numerator 25,913 Royal Dutch Shell share of capital employed - opening 99,815 Royal Dutch Shell share of capital employed - closing 102,917 Royal Dutch Shell share of capital employed - average 101,366 ROACE 25.6% NOTE 5. Earnings by industry segment Operating segment results are before deduction of minority interest andalso exclude interest and other income of a non-operational nature, interestexpense, non-trading currency exchange effects and tax on these items, whichare included in the results of the Corporate segment. Operating segment resultsare after tax and include equity accounted investments. Segment results inaccordance with International Accounting Standard 14 "Segment Reporting" willbe disclosed in Royal Dutch Shell's Annual Report and Form 20-F, with areconciliation to the basis as presented here.NOTE 6. Equity Total equity is comprised of equity attributable to shareholders of RoyalDutch Shell and to the minority interest. Other shareholders equity comprisescapital redemption reserve, merger reserve, share-based compensation reserve,cumulative currency translation differences, unrealised gains/(losses) onsecurities and unrealised gains/(losses) on cash flow hedges. Equity Other share Preferenceshare Treasury shareholders Retained Minority Total capital capital shares equity earnings Total interests equity At January 1, 2005 584 20 (4,187) 8,865 80,788 86,070 5,313 91,383 IAS 32/39 Transition - (20) - 823 (7) 796 - 796 Income for 2005 - - - - 25,311 25,311 950 26,261 Income/(expense) recognised directly in equity - - - (4,188) - (4,188) 106 (4,082) Change in minority interests - - - - - - 954 954 Effect of Unification - - - (1,929) 30 (1,899) (30) (1,929) Dividends - - - - (10,556) (10,556) (293) (10,849) (Purchase)/release of treasury shares, net of dividends - - 378 - - 378 - 378 Shares repurchased for cancellation (13) - - 13 (4,988) (4,988) - (4,988) At December 31, 2005 571 - (3,809) 3,584 90,578 90,924 7,000 97,924 Equity Other share Preferenceshare Treasury shareholders Retained Minority Total capital capital shares equity earnings Total interests equity At January 1, 2004 587 20 (3,428) 5,944 70,412 73,535 3,408 76,943 Income for 2004 - - - - 18,540 18,540 717 19,257 Income/(expense) recognised directly in equity - - - 2,922 - 2,922 609 3,531 Change in minority interests - - - - - - 843 843 Dividends - - - - (7,391) (7,391) (264) (7,655) (Purchase)/release of treasury shares, net of dividends - - (759) - - (759) - (759) Shares repurchased for cancellation (3) - - (1) (773) (777) - (777) At December 31, 2004 584 20 (4,187) 8,865 80,788 86,070 5,313 91,383 NOTE 7. Statement of cash flows This statement reflects cash flows of Royal Dutch Shell and itssubsidiaries as measured in their own currencies, which are translated into USdollars at average rates of exchange for the periods and therefore excludecurrency translation differences except for those arising on cash and cashequivalents. Under IFRS, income for the periods in these statements is before deductionof minority interests, unlike previous practice where it was added back in'other'. This change has no impact on total cash from operating activities. Write offs of previously capitalised exploratory well costs are now addedback within 'cash flow from operating activities' under 'other' and are notdeducted from capital expenditure. This is also reflected in the capitalinvestment table with no change in total capital investment. Cash from operating activities excluding net working capital movements,taxation and taxation paid is calculated using the following line items fromthe cash flow statement: QUARTERS $ million FULL YEAR Q4 Q3 Q4 2005 2005 2004 2005 2004 8,465 6,646 6,349 Cash flow from operating activities 30,113 26,537 4,490 5,548 3,537 Taxation 19,435 13,081 Decrease/(increase) in net working 3,295 (5,490) 175 capital (5,664) (4,062) (6,664) (3,891) (4,014) Taxation paid (19,243) (10,760) ______ ______ ______ ______ ______ 7,344 10,479 6,651 35,585 28,278 ______ ______ ______ ______ ______ NOTE 8. Contingencies and legal proceedings - Reserves recategorisation The US Department of Justice investigation and proceedings by the USSecurities and Exchange Commission (SEC) and the UK Financial ServicesAuthority (FSA) with respect to Shell in regards of the recategorisation ofShell's proved oil and gas reserves for periods prior to 2004, have all beensettled. The Dutch Authority for the Financial Markets (AFM) have announcedthat their findings do not give rise to any further actions at this time. Theclass action against certain Shell companies on behalf of employeesparticipating in US savings plans under the US Employee Retirement IncomeSecurity Act (ERISA) has been settled. Shell also has reached a settlement inthe Derivative action case. Pending in relation to the recategorisation issues are investigations byEuronext Amsterdam and the California Department of Corporations, and asecurities class action in United States courts. On January 6, 2006, certainDutch pension funds, and German and Luxembourgian institutional shareholdersfiled two new related actions in the court in which the class action ispending. With respect to these pending actions and investigations, themanagement cannot currently predict the manner and timing of the resolution ofthese pending matters, is currently unable to estimate the range of possiblelosses from such matters and does not currently believe the resolution of thesepending matters will have a material impact on Royal Dutch Shell's financialcondition, although such resolutions could have a significant effect onperiodic results for the period in which they are recognised.NOTE 9. Earnings per Royal Dutch Shell share The total number of Royal Dutch Shell shares in issue at the end of theperiod was 6,695.0 million. Royal Dutch Shell reports earnings per share on a basic and on a dilutedbasis, based on the weighted average number of Royal Dutch Shell (combined Aand B) shares outstanding. Shares held in respect of share options and otherincentive compensation plans are deducted in determining basic earnings pershare. Basic earnings per share calculations are based on the followingweighted average number of shares (millions): Full Full Q4 Q3 Q4 Year Year 2005 2005 2004 2005 2004 Royal Dutch Shell shares of euro 0.07 6,563.7 6,676.5 6,737.2 6,674.2 6,770.5 Diluted earnings per share calculations are based on the followingweighted average number of shares (millions). This adjusts the basic number ofshares for all stock options currently in-the-money. Full Full Q4 Q3 Q4 Year Year 2005 2005 2004 2005 2004 Royal Dutch Shell shares of euro 0.07 6,586.4 6,703.5 6,748.2 6,694.4 6,776.4 Basic shares at the end of the following periods are (millions): Q4 Q3 Q4 2005 2005 2004 Royal Dutch Shell shares of euro 0.07 6,525.1 6,608.2 6,737.7 One (1) American Depository Receipt (ADR) is equal to two (2) Royal Dutch Shellshares.NOTE 10. Reserves Replacement For Group companies, without associates, the Reserves Replacement Ratio for2005 is expected to be in the range of 65%-75%. The Reserve Replacement Ratio is a measure used by management to indicatethe extent to which production is replaced by proved reserves additions duringa particular period. The ratio is calculated based on barrels of oil equivalentand reflects changes resulting from revisions and reclassifications ofpreviously reported reserves, improved recovery, extensions, discoveries andother additions. It includes the impact of sales and purchases ofreserves-in-place. Statement of Financial Accounting Standards No.69 requires separatedisclosure of proved reserves associated with (i) consolidated entities and(ii) investments in entities that are accounted for in the financial statementsusing equity method accounting. The SEC has also advised the Company that theybelieve Reserve Replacement Ratio should be calculated on a similar basis. The Reserve Replacement Ratio is not an indicator of future productionbecause the ultimate development and production of reserves is subject to anumber of risks and uncertainties. These include the risks associated with thesuccessful completion of large-scale projects, including addressing ongoingregulatory issues and completion of infrastructure, as well as changes in oiland gas prices, political risks and geological and other environmental risks. Appendix 2: Market Commentary In 2005 Brent crude prices averaged $54.55 per barrel compared with $38.30in 2004, while WTI averaged $56.60 per barrel in 2005 compared to $41.50 in2004. The first three quarters saw an increase of prices followed in the latterhalf of the third quarter with production disruptions due to the hurricanes inthe Gulf of Mexico. In the USA WTI almost reached $70 per barrel before thedecision to release crude from the strategic stocks. In the fourth quarter the average of Brent crude prices were $56.90 perbarrel compared with $44.05 per barrel in the same quarter last year. WTIprices averaged $60.00 per barrel compared with $48.30 a year earlier. In 2005, Henry Hub gas prices averaged $8.80 per million Btu, a 50%increase over prices in 2004 of $5.87 per million Btu. The hurricane inducedsupply losses were the main factor in pushing prices higher. Additionally,market anticipated increases in LNG imports to the US did not materialisebecause of increased demand for LNG in Asian markets and in Spain. In the fourth quarter of 2005, North American natural gas prices wereimpacted by supply disruptions caused by hurricanes estimated at a cumulativesupply loss by year-end of approximately 650 billion scf or approximately 20%of annual offshore Gulf of Mexico production. Henry Hub gas prices hit a newaverage record of $12.29 per million Btu compared with a third quarter 2005average price of $9.50 and a fourth quarter 2004 average price of $6.25. Demandwas impacted by the hurricane damage on the Gulf Coast, the high prices andmild weather, with an estimated demand reduction of 5-8% or 300-350 billion scfversus the same quarter in 2004. In 2005, industry refining margins averaged $12.30, $14.45, $4.60 and $2.90per barrel in US Gulf Coast, US West Coast, Rotterdam, and Singapore, comparedto $8.05, $11.65, $4.50 and $2.90 per barrel in the same period last year. Refining margins were well supported in the first two quarters of the yearby refinery turnaround activities in the US, Europe and Northeast Asia, a coldnorthern hemisphere winter and a string of unplanned refinery outages in theUS. Singapore margins were in general dampened by Chinese gasoil importrequirements as regulated domestic prices lagged behind international prices.Margins were high in the latter half of the third quarter due to thehurricane-related refinery disruptions in the US Gulf Coast. Rotterdam andSingapore margins benefited from product arbitrage opportunities. Margins fellsharply in the first half of the fourth quarter with a growing number ofrefineries returning to normal operation in the US Gulf Coast and a mild startto winter. Margins in Singapore in the fourth quarter were lower. In the fourth quarter of 2005, industry refining margins averaged $12.65,$10.30, $4.80 and $2.45 per barrel in the US Gulf Coast, US West Coast,Rotterdam and Singapore, compared to $6.50, $11.65, $5.50 and $5.10 per barrelin the same period last year. The margin differential between heavy and lightcrude in the US Gulf Coast widened in the latter half of the quarter reflectingheavy crude discounts. Overall the average light to heavy crude coking margindifferential for the fourth quarter was at a similar level to the thirdquarter. Petrochemicals trading conditions early in the fourth quarter werecharacterised by continuing supply disruptions in the USA and in Europe. Pricesincreased for most chemicals products reflecting continued high productioncosts and product shortages, particularly in the USA. Demand in Asia remainedweak, which impacted margins and led to exports to other regions. In the latterpart of the quarter, prices in the USA declined as a result of improving supplyand weakening demand. Industry cracker margins in Europe increased substantially in the fourthquarter from the third quarter with high ethylene prices and supply disruptionsearly in the quarter. However profitability remained below last year's levelsreflecting higher feedstock and utility costs and the weaker Euro. In the USA,industry cracker margins improved from the third quarter and relative to a yearago due to much higher ethylene prices following the high feedstock costs andsupply disruptions in the wake of the hurricanes. However, storm-relatedproduction outages and logistics difficulties impacted margins realisations.ENDROYAL DUTCH SHELL PLCRelated Shares:
RDSA.LRDSB.L