30th Jul 2009 07:30
2ND QUARTER 2009 UNAUDITED RESULTS
* Royal Dutch Shell's second quarter 2009 earnings, on a current cost of supplies (CCS) basis, were $2.3 billion compared to $7.9 billion a year ago. Basic CCS earnings per share decreased by 70% versus the same quarter a year ago. * Cash flow from operating activities for the second quarter 2009 was $0.9 billion, including $3.6 billion of cash contributions to pension plans and a $2.8 billion increase in working capital. * Net capital investment for the quarter was $7.8 billion. Total cash returned to shareholders in the form of dividends was $2.9 billion. * A second quarter 2009 dividend has been announced of $0.42 per share, an increase of 5% over the US dollar dividend per share for the same period in 2008.SUMMARY OF UNAUDITED RESULTS Quarters $ million Six Months Q2 2009 Q1 2009 Q2 2008 %1 2009 2008 % 2,089 2,169 6,857 Upstream2 4,258 13,197 (273) 1,018 933 Downstream (CCS basis)3 745 2,328 524 110 112 Corporate and Minority interest 634 153 2,340 3,297 7,902 -70 CCS earnings 5,637 15,678 -64 Estimated CCS adjustment for 1,482 191 3,654 Downstream3 (see Note 2) 1,673 4,961 Income attributable to 3,822 3,488 11,556 -67 shareholders 7,310 20,639 -65 0.38 0.54 1.28 -70 Basic CCS earnings per share ($) 0.92 2.54 -64 Estimated CCS adjustment per 0.24 0.03 0.59 share ($) 0.27 0.80 0.62 0.57 1.87 -67 Basic earnings per share ($) 1.19 3.34 -64 0.42 0.42 0.40 +5 Dividend per ordinary share ($) 0.84 0.80 +5 1 Q2 on Q2 change 2 Exploration & Production, Gas & Power and Oil Sands earnings. 3 Oil Products and Chemicals earnings.
KEY FEATURES OF THE SECOND QUARTER 2009
Royal Dutch Shell Chief Executive Officer Peter Voser commented:
"Our second quarter results were affected by the weak global economy. This weakness is creating a difficult environment both in Upstream and Downstream.
Energy demand is weak. There is excess capacity in the market, and industry costs remain high.
Conditions are likely to remain challenging for some time, and we are not banking on a quick recovery. Shell is adapting to this new situation, and we must do more. We are sharpening our focus on delivery and affordability.
We are in the middle of a programme to build 1 million barrels of oil equivalent per day (boe) of additional Upstream capacity, with selective Downstream investment.
New production start-ups in the first half 2009, at Sakhalin II in Russia, and Parque das Conchas (BC-10) in Brazil are important milestones in the delivery of this strategy.
This is the most competitive programme in our industry, and managing affordability in today's climate is a key priority for Shell.
Taking new steps to reduce our costs, combined with Shell's financing capabilities, allows us to continue with our investments for medium term shareholder value, despite today's tough market conditions.
Shell has a number of initiatives underway to reduce costs. Through a combination of self-help, reduced supply-chain costs, and lower discretionary spending, we have reduced operating costs by $0.7 billion in the first half 2009, compared to the first half 2008. This reduction excludes the impact of exchange rate movements and non-cash pension costs. We expect to reduce 2010 organic capital spending by over 10% compared to 2009 levels, to around $28 billion.
A new restructuring programme - called 'Transition 2009' - which we announced in June, will be completed by the end of this year. This will simplify Shell, and increase personal accountabilities. The top 600 management positions in the new organisation have been announced. This has enabled us to reduce the number of senior management positions by 20%, and substantial further staff reductions are likely.
Looking beyond 2009, Shell needs to become a more efficient company, with faster decision-making, sharper implementation of strategy, and more focus on costs and value. The 'Transition 2009' programme is the beginning of that change.
Further out, beyond 2012, we have an industry-leading Upstream option set that can deliver growth to 2020. In addition, we continue to find new fields through exploration. The 6 notable discoveries in the first half of 2009 contribute to at least 0.7 billion boe of new resources potential.
We are keeping our pre-FID options warm, but managing affordability and profitability are key priorities.
The industry outlook remains a challenging one, despite the rally in oil prices in recent months. We are taking steps to improve our performance, to bridge the company, and our shareholders, into a period of significant growth in the coming years."
SUMMARY OF UNAUDITED RESULTS Quarters $ million Six Months Q2 2009 Q1 2009 Q2 2008 %1 2009 2008 % 1,334 1,697 5,881 Exploration & Production 3,031 11,024 705 514 625 Gas & Power 1,219 1,573 50 (42) 351 Oil Sands 8 600 (255) 1,092 1,075 Oil Products (CCS basis) 837 2,269 (18) (74) (142) Chemicals (CCS basis) (92) 59 548 133 201 Corporate 681 347 (24) (23) (89) Minority interest (47) (194) 2,340 3,297 7,902 -70 CCS earnings 5,637 15,678 -64 1 Q2 on Q2 change
KEY FEATURES OF THE SECOND QUARTER 2009 (continued)
* Second quarter 2009 CCS earnings were $2,340 million, 70% lower than in the same quarter a year ago. * Second quarter 2009 reported earnings were $3,822 million compared to earnings of $11,556 million in the same quarter a year ago. * Basic CCS earnings per share decreased by 70% versus the same quarter a year ago. * Total cash returned to shareholders in the form of dividends in the second quarter 2009 was $2.9 billion. * Cash flow from operating activities for the second quarter 2009 was $0.9 billion, compared to $4.2 billion in the same quarter last year. Excluding cash contributions to pension plans of $3.6 billion and net working capital movements of $2.8 billion, cash flow from operating activities was $7.4 billion in the second quarter 2009, compared to $16.1 billion, on the same basis, for the second quarter 2008. * Capital investment for the second quarter 2009 was $8.1 billion. Net capital investment (capital investment, less divestment proceeds) for the second quarter 2009 was $7.8 billion. * Return on average capital employed (ROACE), on a reported income basis (see Note 3), was 8.3%. * Gearing was 12.6% at the end of the second quarter 2009 versus 5.0% at the end of the second quarter 2008. * Oil and gas production, including oil sands production, for the second quarter 2009 was 2,960 thousand barrels of oil equivalent per day (boe/d). Security in Nigeria remains a significant challenge. Excluding the impact of the security situation in Nigeria, divestments, production sharing contracts (PSC) pricing effects and OPEC quota restrictions, production was broadly similar to the same quarter last year. * Liquefied Natural Gas (LNG) sales volumes of 2.89 million tonnes were 6% lower than in the same quarter a year ago. Excluding the impact of the security situation in Nigeria, LNG sales volumes were 7% higher than in the same quarter last year. * Oil Products marketing sales volumes were 4% lower than in the second quarter 2008. Excluding the impact of divestments, marketing sales volumes decreased by 3%. Chemical product sales volumes in the second quarter 2009 decreased by 17% compared to the second quarter 2008. * Oil Products refinery availability was 95% compared with 92% in the second quarter 2008. Chemicals manufacturing plant availability was 88%, 7% lower than in the second quarter 2008. Oil Sands upgrader availability was 88% compared to 96% in the same quarter last year.
SUMMARY OF IDENTIFIED ITEMS
Earnings in the second quarter 2009 reflected the following items, which in aggregate amounted to a net charge of $810 million (compared to a net charge of $677 million in the second quarter 2008), as summarised in the table below:
* Exploration & Production earnings included a net charge of $109 million, reflecting a charge of $389 million related to the mark-to-market valuation of certain UK gas contracts and a charge of $19 million related to a retirement healthcare plan modification in the USA. These charges were partly offset by a gain related to a lease litigation settlement of $229 million and a divestment gain of $70 million. Earnings for the second quarter 2008 included a net gain of $98 million. * Gas & Power earnings included a charge of $6 million related to a retirement healthcare plan modification in the USA. Earnings for the second quarter 2008 included a charge of $300 million. * Oil Products earnings included a charge of $611 million, reflecting charges related to the estimated fair value accounting of commodity derivatives of $450 million (see Note 7), an asset impairment of $120 million and a charge of $41 million related to a retirement healthcare plan modification in the USA. Earnings for the second quarter 2008 included a net charge of $269 million. * Chemicals earnings included a charge of $67 million, reflecting an impairment charge of $57 million and $10 million related to a retirement healthcare plan modification in the USA. Earnings for the second quarter 2008 included a net charge of $206 million. * Corporate earnings included a charge of $17 million related to a retirement healthcare plan modification in the USA.SUMMARY OF IDENTIFIED ITEMS1 Quarters $ million Six Months Q2 2009 Q1 2009 Q2 2008 2009 2008 Segment earnings impact of identified items: (109) 345 98 Exploration & Production 236 32 (6) (15) (300) Gas & Power (21) (311) - - - Oil Sands - - (611) (186) (269) Oil Products (CCS basis) (797) (269) (67) (19) (206) Chemicals (CCS basis) (86) (206) (17) 162 - Corporate 145 - - - - Minority interest - - (810) 287 (677) CCS earnings impact (523) (754)
1 As from the second quarter 2009, the summary of identified items includes the estimated fair value accounting of commodity derivatives related to operational activities (see Note 7). For comparison purposes, the first quarter 2009 was reclassified by a charge of $50 million in the Oil Products segment. The second quarter 2008 was reclassified by a charge of $300 million in the Gas & Power segment and by a charge of $450 million in the Oil Products segment.
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 additional insight into its segment earnings, CCS earnings and income attributable to shareholders. Further additional comments on the business segments are provided in the section 'Earnings by business segment' on page 5 and onwards.
EARNINGS BY BUSINESS SEGMENT
EXPLORATION & PRODUCTION Quarters $ million Six Months Q2 Q1 Q2 2009 2009 2008 %1 2009 2008 % 1,334 1,697 5,881 -77 Segment earnings 3,031 11,024 -73 Crude oil production (thousand b/ 1,569 1,639 1,711 -8 d) 1,604 1,733 -7 Natural gas production available 7,614 9,751 7,789 -2 for sale (million scf/d) 8,676 8,772 -1 Barrels of oil equivalent 2,882 3,321 3,054 -6 (thousand boe/d) 2 3,100 3,246 -4 1 Q2 on Q2 change 2 Excludes oil sands bitumen production
Second quarter Exploration & Production segment earnings were $1,334 million compared to $5,881 million a year ago. Earnings included a net charge of $109 million related to identified items, compared to a net gain of $98 million in the second quarter 2008 (see page 4 for details).
Earnings compared to the second quarter 2008 reflected the impact of significantly lower oil and gas prices on revenues, lower oil and gas production volumes, higher exploration expenses and non-cash pension charges, which were partly offset by lower royalty and tax expenses.
Although oil prices increased during the quarter, realised natural gas prices remained at low levels mainly due to contractual lag effects. European gas demand declined in the second quarter 2009, impacting natural gas production compared to the second quarter 2008.
Global liquids realisations were 53% lower than in the second quarter 2008. Global gas realisations were 47% lower than a year ago. Outside the USA, gas realisations decreased by 39% whereas in the USA gas realisations decreased by 68%.
Second quarter 2009 production (excluding oil sands bitumen production) was 2,882 thousand boe/d compared to 3,054 thousand boe/d a year ago. Crude oil production was down 8% and natural gas production was down 2% compared to the second quarter 2008.
In Nigeria, the security situation remains a significant challenge. As a consequence, The Shell Petroleum Development Company of Nigeria Ltd's (SPDC) onshore and shallow water oil and gas production declined from some 210 thousand boe/d (Shell share) in the second quarter 2008 to approximately 120 thousand boe/d (Shell share) in the second quarter 2009.
Underlying production, compared to the second quarter 2008, increased by some 210 thousand boe/d from new field start-ups and the continuing ramp-up of fields over the last 12 months, more than offsetting field declines.
Second quarter portfolio developments
During the first half of 2009, Shell made 6 notable discoveries in the US Gulf of Mexico, Australia, Malaysia and Norway. Shell also increased its overall acreage position through acquisitions of new exploration licences in Guyana, Italy, Brazil, USA, Norway, Egypt and Jordan.
In Brazil, on July 13, 2009, production started from the multi-field Parque das Conchas (BC-10) project (Shell share 50%). Production wells, which are some 2 kilometres deep, are linked to a Floating Production, Storage and Offloading (FPSO) vessel with a capacity to process 100 thousand barrels of oil and 50 million cubic feet of natural gas a day (100% basis).
GAS & POWER Quarters $ million Six Months Q2 Q1 Q2 2009 2009 2008 %1 2009 2008 % 705 514 625 +13 Segment earnings 1,219 1,573 -23 LNG sales volumes (million 2.89 3.06 3.08 -6 tonnes) 5.95 6.59 -10 1 Q2 on Q2 change
Second quarter Gas & Power segment earnings were $705 million compared to $625 million a year ago. Earnings included a charge of $6 million related to identified items, compared a charge of $300 million in the second quarter 2008 (see page 4 for details).
Earnings compared to the second quarter 2008 mainly reflected lower LNG earnings, reduced gas-to-liquids product prices and non-cash pension charges, which were offset by higher natural gas and power trading contributions.
LNG earnings were lower than in the same quarter last year reflecting the significant impact of lower oil prices on revenues and lower LNG sales volumes. These were partly offset by increased contributions from the North West Shelf (Train 5) and Sakhalin II LNG projects, higher income from LNG cargo diversion opportunities and the benefit of recent sales contract renegotiations.
LNG sales volumes of 2.89 million tonnes were 6% lower than in the same quarter a year ago. Volumes reflected lower contributions from Nigeria LNG due to continued natural gas supply disruptions and reduced Asia Pacific LNG demand, which were partly offset by the ramp-up in sales volumes from Train 5, at the North West Shelf project, and the Sakhalin II LNG project. Excluding the impact of the security situation in Nigeria, LNG sales volumes were 7% higher than the same quarter last year.
Natural gas and power marketing and trading earnings were higher than in thesame quarter a year ago, reflecting increased contributions from both Europeand North America.OIL SANDS Quarters $ million Six Months Q2 2009 Q1 2009 Q2 2008 %1 2009 2008 % 50 (42) 351 -86 Segment earnings 8 600 -99 Bitumen production (thousand b/ 78 75 72 +8 d) 76 78 -3 101 110 104 -3 Sales volumes (thousand b/d) 106 124 -15 88 96 96 Upgrader availability (%) 92 94 1 Q2 on Q2 change
Second quarter Oil Sands segment earnings were $50 million compared to $351 million in the same quarter last year.
Earnings compared to the second quarter 2008 mainly reflected the impact of significantly lower oil prices on revenues and non-cash pension charges.
Bitumen production compared to the same quarter last year increased by 8%. Upgrader availability was 88% compared to 96% in the same quarter last year.
OIL PRODUCTS Quarters $ million Six Months Q2 Q1 Q2 2009 2009 2008 %1 2009 2008 % (255) 1,092 1,075 Segment CCS earnings 837 2,269 -63 Estimated CCS adjustment (see 1,418 304 3,464 Note 2) 1,722 4,637 1,163 1,396 4,539 Segment earnings 2,559 6,906 3,136 3,153 3,464 -9 Refinery intake (thousand b/d) 3,144 3,579 -12 Total Oil Products sales 6,174 6,029 6,642 -7 (thousand b/d) 6,102 6,737 -9 95 92 92 Refinery availability (%) 93 92 1 Q2 on Q2 change
Second quarter Oil Products segment earnings were $1,163 million compared to $4,539 million for the same period last year.
Second quarter Oil Products CCS segment results were a loss of $255 million compared to earnings of $1,075 million in the second quarter 2008. Results included a charge of $611 million related to identified items, compared to a net charge of $269 million in the second quarter 2008 (see page 4 for details).
CCS earnings compared to the second quarter 2008 reflected significantly lower refining earnings and non-cash pension charges, which were partly offset by higher marketing contributions.
Marketing earnings increased compared to the same period a year ago reflecting higher retail, B2B and lubricants earnings and improved trading contributions.
Oil Products (marketing and trading) sales volumes decreased by 7% compared to the same quarter last year mainly as a result of reduced global demand. Marketing sales volumes were 4% lower than in the second quarter 2008. Excluding the impact of divestments, marketing sales volumes decreased by 3%.
Industry refining margins declined worldwide compared to the same period a year ago.
Oil Products CCS earnings in the second quarter 2009 reflected refining losses mainly as a consequence of declining worldwide realised refining margins and reduced demand for refined products.
Refinery intake volumes decreased by 9% compared to the same quarter last year. Refinery availability was 95% compared to 92% at the second quarter 2008.
CHEMICALS Quarters $ million Six Months Q2 2009 Q1 2009 Q2 2008 %1 2009 2008 % (18) (74) (142) +87 Segment CCS earnings (92) 59 Estimated CCS adjustment (see 121 (108) 299 Note 2) 13 446 103 (182) 157 Segment earnings (79) 505 4,459 4,294 5,396 -17 Sales volumes (thousand tonnes) 8,753 10,855 -19 Manufacturing plant availability 88 92 95 (%) 90 95 1 Q2 on Q2 change
Second quarter Chemicals segment earnings were $103 million compared to earnings of $157 million for the same period last year.
Second quarter Chemicals CCS segment results were a loss of $18 million compared to a loss of $142 million in the same quarter last year. Results included a charge of $67 million related to identified items, compared to a charge of $206 million in the second quarter 2008 (see page 4 for details).
CCS earnings compared to the second quarter 2008 reflected lower sales volumes, lower realised margins, and non-cash pension charges, which were partly offset by higher income from equity-accounted investments and lower operating costs.
Sales volumes decreased by 17% compared to the second quarter 2008, mainly as a result of reduced global demand.
Chemicals manufacturing plant availability was 88%, 7% lower than in the second quarter 2008. The reduced global demand for chemical products significantly impacted the chemicals manufacturing plant utilisation rate, which dropped to 68% from 84% in the second quarter 2008.
CORPORATE Quarters $ million Six Months Q2 2009 Q1 2009 Q2 2008 2009 2008 548 133 201 Segment earnings 681 347
Second quarter Corporate segment earnings were $548 million compared to $201 million for the same period last year. Earnings included a charge of $17 million related to an identified item (see page 4 for details). Currency exchange gains in the second quarter 2009 were $379 million compared to $27 million in the second quarter 2008.
Earnings, when compared to the second quarter 2008, mainly reflected higher currency exchange gains combined with higher net underwriting income and increased tax credits, which were partly offset by lower net interest income.
PRICE AND MARGIN INFORMATION OIL & GAS Six Quarters Months Q2 2009 Q1 2009 Q2 2008 2009 2008 Realised oil prices - Exploration & Production (period $/bbl average) $/bbl World 52.19 42.88 110.96 outside USA 47.56 101.15 55.25 37.81 118.07 USA 46.62 105.02 52.62 42.16 111.92 Global 47.43 101.70 Realised oil prices - Oil Sands (period $/bbl average) $/bbl 53.91 37.94 116.20 Canada 45.64 98.12 $/ Realised gas prices thousand $/thousand scf (period average) scf 5.93 9.44 9.38 Europe 7.76 9.19 World outside USA (including 3.88 5.75 6.31 Europe) 4.83 6.09 3.82 4.80 11.89 USA 4.32 10.69 3.87 5.57 7.30 Global 4.74 6.91 Oil and gas marker industry prices (period average) Brent ($/ 59.13 44.46 121.26 bbl) 51.60 108.96 59.71 43.20 123.81 WTI ($/bbl) 51.26 110.83 Edmonton 56.85 40.25 125.18 Par ($/bbl) 48.55 111.58 Henry Hub 3.67 4.61 11.36 ($/MMBtu) 4.14 9.95 UK National Balancing Point (pence/ 27.54 46.90 60.41 therm) 37.22 56.73 Japanese Crude Cocktail - JCC ($/bbl) 49.79 44.28 110.35 1 46.48 101.76 REFINING & CRACKER INDUSTRY MARGINS2 Six Quarters Months Q2 2009 Q1 2009 Q2 2008 2009 2008 Refining marker industry gross margins (period $/bbl average) $/bbl ANS US West Coast coking 6.05 10.65 11.55 margin 8.30 10.10 WTS US Gulf Coast coking 7.20 7.90 10.55 margin 7.55 9.60 Rotterdam Brent 1.65 3.00 5.85 complex 2.35 4.70 Singapore 80/20 Arab light/Tapis 0.20 2.85 3.95 complex 1.50 2.85 Cracker industry margins (period $/tonne average) $/tonne 290.00 352.00 413.00 US ethane 321.00 386.00 Western Europe 239.00 164.00 262.00 naphtha 202.00 348.00 North East Asia (8.00) (67.00) 28.00 naphtha (37.00) 18.00 1 JCC prices for the second quarter 2009 are based on available market data up to the end of May 2009. Prices for these periods will be updated when full market data is 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 Six Months Q2 2009 Q1 2009 Q2 2008 %1 2009 2008 % thousand b/d Crude oil production thousand b/d 306 361 390 Europe 333 402 256 274 314 Africa 265 318 181 207 196 Asia Pacific 194 202 470 455 434 Middle East, Russia, CIS 463 431 278 275 293 USA 277 297 78 67 84 Other Americas 72 83 Total crude oil production 1,569 1,639 1,711 -8 excluding oil sands 1,604 1,733 -7 78 75 72 Bitumen production - oil sands 76 78 Total crude oil production 1,647 1,714 1,783 -8 including oil sands 1,680 1,811 -7 Natural gas production available million scf/d2 for sale million scf/d2 2,532 4,762 2,930 Europe 3,641 3,912 256 253 549 Africa 254 584 2,673 2,708 2,512 Asia Pacific 2,691 2,475 402 340 230 Middle East, Russia, CIS 371 231 1,056 1,110 1,096 USA 1,082 1,101 695 578 472 Other Americas 637 469 7,614 9,751 7,789 -2 8,676 8,772 -1 Total production in barrels of thousand boe/d3 oil equivalent thousand boe/d3 743 1,182 895 Europe 961 1,077 300 318 409 Africa 309 419 642 674 629 Asia Pacific 658 628 539 514 474 Middle East, Russia, CIS 527 471 460 466 482 USA 463 487 198 167 165 Other Americas 182 164 Total production excluding oil 2,882 3,321 3,054 -6 sands 3,100 3,246 -4 78 75 72 Bitumen production - oil sands 76 78 Total production including oil 2,960 3,396 3,126 -5 sands 3,176 3,324 -4 1 Q2 on Q2 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 Six Months Q2 Q1 Q2 2009 2009 2008 %1 2009 2008 % thousand b/d Refinery processing intake thousand b/d 1,360 1,357 1,498 Europe 1,359 1,619 612 644 741 Africa, Asia, Australia/Oceania 628 749 829 794 874 USA 811 859 335 358 351 Other Americas 346 352 3,136 3,153 3,464 -9 3,144 3,579 -12 Oil sales 2,107 1,957 2,067 Gasolines 2,031 2,076 727 718 816 Kerosenes 723 815 2,047 2,046 2,225 Gas/diesel oils 2,047 2,281 572 620 776 Fuel oil 596 807 721 688 758 Other products 705 758 6,174 6,029 6,642 -7 Total oil products * 6,102 6,737 -9 *Comprising: 1,610 1,645 1,781 Europe 1,627 1,870 1,273 1,229 1,276 Africa, Asia, Australia/Oceania 1,251 1,260 1,368 1,335 1,436 USA 1,352 1,416 690 682 704 Other Americas 686 730 1,233 1,138 1,445 Export sales 1,186 1,461 Chemical sales volumes by main thousand tonnes product category 2** thousand tonnes 2,429 2,419 3,061 Base chemicals 4,848 6,180 2,030 1,875 2,335 First line derivatives 3,905 4,675 4,459 4,294 5,396 -17 8,753 10,855 -19 **Comprising: 1,874 1,782 2,189 Europe 3,656 4,478 1,116 1,123 1,294 Africa, Asia, Australia/Oceania 2,239 2,522 1,414 1,321 1,760 USA 2,735 3,544 55 68 153 Other Americas 123 311 1 Q2 on Q2 change 2 Excluding volumes sold by equity-accounted investments, chemical feedstock trading and by-products. NOTE
All amounts shown throughout this Report are unaudited.
Third quarter results are expected to be announced on October 29, 2009.
The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate entities. In this document "Shell", "Shell group" and "Royal Dutch Shell" are sometimes used for convenience where references are made to Royal Dutch Shell plc and its subsidiaries in general. Likewise, the words "we", "us" and "our" are also used to refer to subsidiaries in general or to those who work for them. These expressions are also used where no useful purpose is served by identifying the particular company or companies. ''Subsidiaries'', "Shell subsidiaries" and "Shell companies" as used in this document refer to companies in which Royal Dutch Shell either directly or indirectly has control, by having either a majority of the voting rights or the right to exercise a controlling influence. The companies in which Shell has significant influence but not control are referred to as "associated companies" or "associates" and companies in which Shell has joint control are referred to as "jointly controlled entities". In this document, associates and jointly controlled entities are also referred to as "equity-accounted investments". The term "Shell interest" is used for convenience to indicate the direct and/or indirect (for example, through our 34% shareholding in Woodside Petroleum Ltd.) ownership interest held by Shell in a venture, partnership or company, after exclusion of all third-party interest.
This document contains forward-looking statements concerning the financial condition, results of operations and businesses of Royal Dutch Shell. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management's current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of Royal Dutch Shell to market risks and statements expressing management's expectations, beliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of terms and phrases such as ''anticipate'', ''believe'', ''could'', ''estimate'', ''expect'', ''intend'', ''may'', ''plan'', ''objectives'', ''outlook'', ''probably'', ''project'', ''will'', ''seek'', ''target'', ''risks'', ''goals'', ''should'' and similar terms and phrases. There are a number of factors that could affect the future operations of Royal Dutch Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this document, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for the Group's products; (c) currency fluctuations; (d) drilling and production results; (e) reserve estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and regulatory developments including potential litigation and regulatory effects arising from recategorisation of reserves; (k) economic and financial market conditions in various countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; and (m) changes in trading conditions. All forward-looking statements contained in this document are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Additional factors that may affect future results are contained in Royal Dutch Shell's Annual Report and Form 20-F for the year ended December 31, 2008 (available at www.shell.com/investor and www.sec.gov). These factors also should be considered by the reader. Each forward-looking statement speaks only as of the date of this document, July 30, 2009. Neither Royal Dutch Shell nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this document.
The United States Securities and Exchange Commission (SEC) permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We use certain terms in this document that SEC's guidelines strictly prohibit us from including in filings with the SEC. U.S. Investors are urged to consider closely the disclosure in our Form 20-F, File No 1-32575, available on the SEC website www.sec.gov . You can also obtain these forms from the SEC by calling 1-800-SEC-0330.
July 30, 2009
APPENDIX: ROYAL DUTCH SHELL FINANCIAL REPORT AND TABLES
STATEMENT OF INCOME (SEE NOTE 1) Quarters $ million Six Months Q2 Q1 2009 2009 Q2 2008 %1 2009 2008 % 63,882 58,222 131,419 Revenue2 122,104 245,721 55,415 49,245 109,261 Cost of sales 104,660 206,041 8,467 8,977 22,158 -62 Gross profit 17,444 39,680 -56 Selling, distribution and 3,953 3,693 4,444 administrative expenses 7,646 8,413 606 496 408 Exploration 1,102 733 Share of profit of 1,535 928 2,671 equity-accounted investments 2,463 5,096 Net finance costs and other (400) (18) (140) (income)/expense (418) (193) 5,843 5,734 20,117 -71 Income before taxation 11,577 35,823 -68 1,940 2,218 8,363 Taxation 4,158 14,868 3,903 3,516 11,754 -67 Income for the period 7,419 20,955 -65 Income attributable to minority 81 28 198 interest 109 316 Income attributable to Royal
3,822 3,488 11,556 -67 Dutch Shell plc shareholders 7,310 20,639 -65
1 Q2 on Q2 change
2 Revenue is stated after deducting sales taxes, excise duties and similar levies of $19,251 million in Q2 2009, $17,555 million in Q1 2009, $25,462 million in Q2 2008 and $22,920 million in Q1 2008.
BASIC EARNINGS PER SHARE (SEE NOTES 1, 2 AND 6) Quarters Six Months Q2 2009 Q1 2009 Q2 2008 2009 2008 0.62 0.57 1.87 Earnings per share ($) 1.19 3.34 0.38 0.54 1.28 Basic CCS earnings per share ($) 0.92 2.54 DILUTED EARNINGS PER SHARE (SEE NOTES 1, 2 AND 6) Quarters Six Months Q2 2009 Q1 2009 Q2 2008 2009 2008 0.62 0.57 1.87 Earnings per share ($) 1.19 3.33 Diluted CCS earnings per share 0.38 0.54 1.28 ($) 0.92 2.53 EARNINGS BY BUSINESS SEGMENT (SEE NOTES 2 AND 4) Quarters $ million Six Months Q2 Q1 Q2 2009 2009 2008 %1 2009 2008 % Exploration & Production: 822 1,753 3,952 -79 - World outside USA 2,575 7,492 -66 512 (56) 1,929 -73 - USA 456 3,532 -87 1,334 1,697 5,881 -77 3,031 11,024 -73 Gas & Power: 620 601 788 -21 - World outside USA 1,221 1,721 -29 85 (87) (163) - - USA (2) (148) -99 705 514 625 +13 1,219 1,573 -23 50 (42) 351 -86 Oil Sands 8 600 -99 Oil Products (CCS basis): (262) 1,036 765 - - World outside USA 774 1,743 -56 7 56 310 -98 - USA 63 526 -88 (255) 1,092 1,075 - 837 2,269 -63 Chemicals (CCS basis): 127 109 112 +13 - World outside USA 236 416 -43 (145) (183) (254) +43 - USA (328) (357) -8 (18) (74) (142) +87 (92) 59 - 1,816 3,187 7,790 -77 Total operating segments 5,003 15,525 -68 Corporate: - Interest and investment income 25 21 81 /(expense) 46 191 - Currency exchange gains/ 379 (46) 27 (losses) 333 (35) 144 158 93 - Other - including taxation 302 191 548 133 201 +173 681 347 +96 (24) (23) (89) Minority interest (47) (194) 2,340 3,297 7,902 -70 CCS earnings 5,637 15,678 -64 Estimated CCS adjustment for Oil 1,482 191 3,654 Products and Chemicals 1,673 4,961 Income attributable to Royal 3,822 3,488 11,556 -67 Dutch Shell plc shareholders 7,310 20,639 -65 1 Q2 on Q2 change SUMMARISED BALANCE SHEET (SEE NOTES 1 AND 5) $ million Jun 30, 2009 Mar 31, 2009 Jun 30, 2008 Assets Non-current assets: Intangible assets 5,197 4,961 5,336 Property, plant and equipment 121,708 113,255 109,191 Investments: - equity-accounted investments 29,986 28,516 32,514 - financial assets 4,130 4,092 2,975 Deferred tax 4,144 3,464 4,089 Pre-paid pension costs 9,640 5,575 6,215 Other 8,886 6,976 6,504 183,691 166,839 166,824 Current assets: Inventories 24,921 21,404 39,624 Accounts receivable 72,529 77,116 127,241 Cash and cash equivalents 10,596 15,961 8,990 108,046 114,481 175,855 Total assets 291,737 281,320 342,679 Liabilities Non-current liabilities: Debt 25,469 18,341 11,072 Deferred tax 13,726 12,778 13,994 Retirement benefit obligations 5,787 5,463 6,162 Other provisions 13,259 12,444 14,086 Other 4,619 3,642 4,857 62,860 52,668 50,171 Current liabilities: Debt 4,621 6,693 5,352
Accounts payable and accrued liabilities 76,298 81,554 126,246
Taxes payable 10,205 9,849 15,895 Retirement benefit obligations 410 386 419 Other provisions 2,221 2,229 2,687 93,755 100,711 150,599 Total liabilities 156,615 153,379 200,770 Equity attributable to Royal Dutch Shell plc shareholders 133,509 126,434 139,809 Minority interest 1,613 1,507 2,100 Total equity 135,122 127,941 141,909 Total liabilities and equity 291,737 281,320 342,679 SUMMARISED STATEMENT OF CASH FLOWS (SEE NOTE 1) Quarters $ million Six Months Q2 2009 Q1 2009 Q2 2008 2009 2008 Cash flow from operating activities: 3,903 3,516 11,754 Income for the period 7,419 20,955 Adjustment for: 2,367 1,844 8,701 - Current taxation 4,211 15,106 370 330 269 - Interest (income)/expense 700 447 - Depreciation, depletion and 3,279 3,090 3,439 amortisation 6,369 6,585 - (Gains)/losses on sale of (138) (147) (757) assets (285) (1,038) - Decrease/(increase) in net (2,835) (365) (11,751) working capital (3,200) (8,967) - Share of profit of (1,535) (928) (2,671) equity-accounted investments (2,463) (5,096) - Dividends received from 1,242 977 2,447 equity-accounted investments 2,219 4,199 - Deferred taxation and other (951) 365 (152) provisions (586) 170 (1,931) 141 10 - Other (1,790) 104 Cash flow from operating 3,771 8,823 11,289 activities (pre-tax) 12,594 32,465 (2,852) (1,264) (7,121) Taxation paid (4,116) (11,435) Cash flow from operating 919 7,559 4,168 activities 8,478 21,030 Cash flow from investing activities: (6,806) (5,985) (7,352) Capital expenditure (12,791) (14,781) Investments in equity-accounted (1,418) (436) (521) investments (1,854) (1,137) 274 204 2,026 Proceeds from sale of assets 478 2,471 Proceeds from sale of 203 17 272 equity-accounted investments 220 333 Proceeds from sale of /(additions (58) 6 275 to) financial assets (52) 285 69 101 269 Interest received 170 554 Cash flow from investing (7,736) (6,093) (5,031) activities (13,829) (12,275) Cash flow from financing activities: Net increase/(decrease) in debt with maturity period (2,046) (3,588) 839 within three months (5,634) (24) 7,044 6,884 131 Other debt: New borrowings 13,928 316 (430) (1,386) (1,479) Repayments (1,816) (2,143) (262) (262) (369) Interest paid (524) (667) 7 12 34 Change in minority interest 19 27 - - (1,350) Repurchases of shares - (2,423) Dividends paid to: - Shareholders of Royal Dutch (2,852) (2,405) (2,489) Shell plc (5,257) (4,818) (69) (30) (115) - Minority interest (99) (166) Treasury shares: - Net sales/(purchases) and (49) 136 242 dividends received 87 442 Cash flow from financing 1,343 (639) (4,556) activities 704 (9,456) Currency translation differences relating to cash and 109 (54) (8) cash equivalents 55 35 Increase/(decrease) in cash and (5,365) 773 (5,427) cash equivalents (4,592) (666) Cash and cash equivalents at 15,961 15,188 14,417 beginning of period 15,188 9,656 Cash and cash equivalents at end 10,596 15,961 8,990 of period 10,596 8,990 CAPITAL INVESTMENT Quarters $ million Six Months Q2 2009 Q1 2009 Q2 2008 2009 2008 Capital expenditure: Exploration & Production: 2,300 2,835 3,038 - World outside USA 5,135 5,240 969 801 916 - USA 1,770 3,446 3,269 3,636 3,954 6,905 8,686 Gas & Power: 846 877 1,006 - World outside USA 1,723 1,829 3 3 3 - USA 6 4 849 880 1,009 1,729 1,833 762 749 761 Oil Sands 1,511 1,472 Oil Products: 745 454 862 - World outside USA 1,199 1,318 168 188 68 - USA 356 129 913 642 930 1,555 1,447 Chemicals: 470 367 399 - World outside USA 837 773 62 49 34 - USA 111 68 532 416 433 948 841 63 62 83 Corporate 125 120 6,388 6,385 7,170 Total capital expenditure 12,773 14,399 Exploration expense 165 176 218 - World outside USA 341 353 82 79 86 - USA 161 166 247 255 304 502 519 New equity in equity-accounted investments 271 160 347 - World outside USA 431 712 9 36 41 - USA 45 46 280 196 388 476 758 New loans to equity-accounted 1,138 240 133 investments 1,378 379 8,053 7,076 7,995 Total capital investment* 15,129 16,055 *Comprising: 3,789 4,191 4,621 - Exploration & Production 7,980 10,060 942 959 1,156 - Gas & Power 1,901 2,081 762 749 761 - Oil Sands 1,511 1,472 1,962 699 934 - Oil Products 2,661 1,470 534 416 439 - Chemicals 950 851 64 62 84 - Corporate 126 121 8,053 7,076 7,995 15,129 16,055 ADDITIONAL SEGMENTAL INFORMATION1 Quarters $ million Six Months Q2 2009 Q1 2009 Q2 2008 2009 2008 Exploration & Production 1,334 1,697 5,881 Segment earnings 3,031 11,024 Including: 606 496 408 - Exploration 1,102 733 - Depreciation, depletion & 1,962 2,073 2,228 amortisation 4,035 4,393 - Share of profit of 813 548 1,103 equity-accounted investments 1,361 2,315 3,237 4,043 8,659 Cash flow from operations 7,280 18,988 Less: Net working capital 709 (901) (374) movements2 (192) 549 Cash flow from operations excluding net working capital 2,528 4,944 9,033 movements 7,472 18,439 59,713 55,882 49,185 Capital employed 59,713 49,185 Gas & Power 705 514 625 Segment earnings 1,219 1,573 Including: - Depreciation, depletion & 80 88 85 amortisation 168 166 - Share of profit of 312 319 620 equity-accounted investments 631 1,204 630 1,724 149 Cash flow from operations 2,354 2,066 Less: Net working capital (589) 1,030 (845) movements2 441 57 Cash flow from operations excluding net working capital 1,219 694 994 movements 1,913 2,009 23,964 22,169 21,010 Capital employed 23,964 21,010 Oil Sands 50 (42) 351 Segment earnings 8 600 Including: - Depreciation, depletion & 42 38 45 amortisation 80 89 141 5 645 Cash flow from operations 146 943 Less: Net working capital (7) (57) 66 movements2 (64) (36) Cash flow from operations excluding net working capital 148 62 579 movements 210 979 8,028 6,763 5,881 Capital employed 8,028 5,881
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 do not consider minority interest impacts on the segments.
2 Excluding working capital movements related to taxation. ADDITIONAL SEGMENTAL INFORMATION1 (continued) Quarters $ million Six Months Q2 2009 Q1 2009 Q2 2008 2009 2008 Oil Products (255) 1,092 1,075 Segment CCS earnings 837 2,269 Including: - Depreciation, depletion & 747 549 609 amortisation 1,296 1,217 - Share of profit of (4) 89 441 equity-accounted investments 85 708 (1,876) 526 (4,148) Cash flow from operations (1,350) (1,786) Less: Net working capital (2,367) (2,113) (9,439) movements2 (4,480) (9,874) Cash flow from operations excluding net working capital 491 2,639 5,291 movements 3,130 8,088 52,353 44,690 63,298 Capital employed 52,353 63,298 Chemicals (18) (74) (142) Segment CCS earnings (92) 59 Including: - Depreciation, depletion & 257 159 356 amortisation 416 518 - Share of profit of 187 68 92 equity-accounted investments 255 250 120 (110) 361 Cash flow from operations 10 747 Less: Net working capital 616 109 (216) movements2 725 (225) Cash flow from operations excluding net working capital (496) (219) 577 movements (715) 972 10,774 10,096 11,328 Capital employed 10,774 11,328
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 do 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 the accounting policies 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, 2008 on pages 118 to 122. The accounting policies are in accordance with IFRS as adopted by the European Union.
This publication is unaudited and does not comprise statutory accounts. Statutory accounts for the year ended December 31, 2008 were approved by the Board of Directors on March 11, 2009 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report, and did not contain any statement under sections 237(2) or (3) of the Companies Act 1985.
2. Earnings on an estimated current cost of supplies (CCS) basis
To facilitate a better understanding of underlying business performance, the financial results are also analysed on an estimated current cost of supplies (CCS) basis as applied for the Oil Products and Chemicals segment earnings. Earnings on an estimated current cost of supplies basis provides useful information concerning the effect of changes in the cost of supplies on Royal Dutch Shell's results of operations and is a measure to manage the performance of the Oil Products and Chemicals segments but is not a measure of financial performance under IFRS.
On this basis, Oil Products and Chemicals segment cost of sales of the volumes sold during the period is based on the cost of supplies during the same period after making allowance for the estimated tax effect, instead of the first-in, first-out (FIFO) method of inventory accounting. Earnings calculated on this basis do not represent an application of the last-in, first-out (LIFO) inventory basis and do not reflect any inventory drawdown effects.
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 Q2 2009 Q2 2008 Income (four quarters) 12,940 36,628 Interest expense after tax 437 752 ROACE numerator 13,377 37,380 Capital employed - opening 158,333 131,846 Capital employed - closing 165,212 158,333 Capital employed - average 161,773 145,090 ROACE 8.3% 25.8%
4. Earnings by business segment
Operating segment results are presented before deduction of minority interest and also exclude interest and other income of a non-operational nature, interest expense, non-trading currency exchange effects and tax on these items, which are included in the Corporate results. Operating segment results are after tax and include equity-accounted investments.
5. Equity
Total equity comprises equity attributable to shareholders of Royal Dutch Shell and to the minority interest. Other reserves comprise the capital redemption reserve, share premium reserve, merger reserve, share plan reserve, currency translation differences, unrealised gains/(losses) on securities and unrealised gains/(losses) on cash flow hedges.
Ordinary share capital Treasury Other Retained Minority Total $ million shares reserves earnings Total interest equity At December 31, 2008 527 (1,867) 3,178 125,447 127,285 1,581 128,866 Income for the period - - - 7,310 7,310 109 7,419 Other comprehensive income - - 3,882 - 3,882 3 3,885 Capital contributions/ (repayments) from/ to minority shareholders and other changes in minority interest - - - 3 3 19 22 Dividends paid - - - (5,257) (5,257) (99) (5,356) Treasury shares: net sales/ (purchases) and dividends received - 234 - - 234 - 234 Repurchases of shares - - - - - - Share-based compensation - - (175) 227 52 - 52 At June 30, 2009 527 (1,633) 6,885 127,730 133,509 1,613 135,122 Ordinary share Treasury Other Retained Minority Total $ million capital 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 - - - 20,639 20,639 316 20,955 Other comprehensive income - - 1,853 - 1,853 (110) 1,743 Capital contributions/ (repayments) from/ to minority shareholders and other changes in minority interest - - - 59 59 52 111 Dividends paid - - - (4,818) (4,818) (166) (4,984) Treasury shares: net sales/ (purchases) and dividends received - 442 - - 442 - 442 Repurchases of shares (5) - 5 (2,237) (2,237) - (2,237) Share-based compensation - - (107) 18 (89) - (89) At June 30, 2008 531 (1,950) 15,899 125,329 139,809 2,100 141,909
6. Basis for Royal Dutch Shell earnings per ordinary share
The total number of Royal Dutch Shell ordinary shares in issue at the end of the period was 6,241.5 million. Royal Dutch Shell reports earnings per share on a basic and on a diluted basis, based on the weighted average number of Royal Dutch Shell (combined A and B) ordinary shares outstanding. Shares held in respect of share options and other incentive compensation plans are excluded in determining basic and diluted earnings per share.
Basic earnings per share calculations are based on the following weighted average number of shares:
Millions Q2 2009 Q1 2009 Q2 2008 Royal Dutch Shell ordinary shares of euro 0.07 each 6,126.7 6,121.6 6,170.3
Diluted earnings per share calculations are based on the following weighted average number of shares. This adjusts the basic number of shares for all share options currently "in-the-money".
Millions Q2 2009 Q1 2009 Q2 2008 Royal Dutch Shell ordinary shares of euro 0.07 each 6,129.4 6,124.5 6,189.1
Basic shares outstanding at the end of the following periods are:
Millions Q2 2009 Q1 2009 Q2 2008 Royal Dutch Shell ordinary shares of euro 0.07 each 6,127.4 6,124.9 6,159.1
One American Depository Receipt (ADR) is equal to two Royal Dutch Shell ordinary shares.
7. 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 Downstream business as inventory are recorded at historical cost or net realisable value, whichever is lower, as required under IFRS. Consequently, any increase in value of the inventory over cost is not recognised in income until the sale of the commodity occurs in subsequent periods.
In the Downstream business, the buying and selling of commodities includes transactions conducted through the forward markets using commodity derivatives to reduce economic exposure. Some derivatives are associated with a future physical delivery of the commodities.
Differences in the accounting treatment for physical inventory (at cost or net realisable value, whichever is lower) and derivative instruments (at fair value) have resulted in timing differences in the recognition of gains or losses between reporting periods.
Similarly, earnings from long-term contracts held in the Upstream business are recognised in income upon realisation. Associated commodity derivatives are recognised at fair value as of the end of each quarter.
These differences in accounting treatment for long-term contracts (on accrual basis) and derivative instruments (at fair value) have resulted in timing differences in the recognition of gains or losses between the reporting periods.
The aforementioned timing differences for Downstream and Upstream are reported as identified items in the quarterly results and are estimates derived from the overall portfolio of derivatives.
Certain UK gas contracts held by Upstream contain embedded derivatives or written options, for which IFRS requires recognition at fair value, even though they are entered into for operational purposes. The impact of the mark-to-market calculation is also reported as an identified item in the quarterly results.
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