RESULTS
SECOND QUARTER $ million HALF YEAR
2003 2002 % 2003 2002 %
2,828 2,212 +28 Net Income 8,159 4,474 +82
(508) 112 Estimated current cost of supplies (382) 297
(CCS) adjustment
3,336 2,100 +59 CCS earnings 8,541 4,177 +104
Special credits/(charges) - see note
- (102) 4 1,036 (18)
Asset retirement obligations - see
note 1 255
3,336 2,202 +51 Adjusted CCS earnings 7,250 4,195 +73
Return on Average Capital Employed on a Net Income basis 17.1% 11.7%
Return on Average Capital Employed on a CCS earnings
basis 17.4% 12.3%
To facilitate a better understanding of the underlying business
performance, the financial results are analysed on an estimated current cost of
supplies (CCS) basis adjusting for those credits or charges resulting from
transactions or events which, in the view of management, are not representative
of normal business activities of the period and which affect comparability of
earnings. It should be noted that adjusted CCS earnings is not a measure of
financial performance under generally accepted accounting principles in the
Netherlands and the USA.
Key features of the second quarter 2003
* Reported net income of $2,828 million was 28% higher than last year.
* The Group's adjusted CCS earnings (i.e. on an estimated current cost of
supplies basis excluding special items) for the quarter were $3,336
million, 51% higher than a year ago.
* On an adjusted CCS basis, Royal Dutch earnings per share were euro 0.85
($0.96 per share), an increase compared with last year of 23% (52% in $ per
share), and Shell Transport earnings per share were 8.5p, an increase of
37%.
* Increased interim dividends have been announced of euro 0.74 per share for
Royal Dutch (up 2.8%) and of 6.10p per share for Shell Transport (up 2.5%).
* Exploration and Production adjusted segment earnings of $2,023 million were
up from $1,809 million a year ago. The increase reflected significantly
higher gas realisations and higher oil prices.
* The final investment decision for the Sakhalin II LNG project (Shell share
55%) was announced, the biggest single integrated oil and gas project ever
undertaken in the industry.
* Gas & Power adjusted segment earnings were $452 million compared to $149
million a year ago. Increased earnings reflect record second quarter
volumes and higher prices in liquefied natural gas (LNG), improved trading
earnings and a gain arising from the sale of Shell's 25% shareholding in
Thyssengas, Germany.
* Oil Products adjusted CCS segment earnings were $975 million compared to
$347 million achieved a year ago. Stronger margins supported higher
refining and marketing earnings.
* Chemicals adjusted segment earnings of $111 million were 16% lower than in
the second quarter 2002 as volume growth was more than offset by lower
margins, high turnaround costs and lower polyolefins earnings.
* Capital investment for the quarter totalled $3.4 billion including the
Sakhalin II LNG project on a 100% basis.
* Divestment proceeds for the year to date total $2.3 billion. Additional
announced divestments with an expected value of over $1 billion have either
been completed in July or are in progress.
* The Return on Average Capital Employed (ROACE) on a net income basis for
the 12 months ending June 30, 2003 was 17.1%. The ROACE on a CCS earnings
basis for the 12 months ending June 30, 2003 was 17.4%. The main difference
is the CCS adjustment to net income.
* At the end of the quarter the debt ratio was 18.8% and cash, cash
equivalents and short-term securities amounted to $1.9 billion.
* Cash flow from operations for the quarter was $5.4 billion bringing the 6
months total to $12.1 billion. This cash funded the investment programme
and reduced gearing; $3.9 billion of dividends were paid. In addition, $0.7
billion was used to buy out a preferred equity minority interest in the US
upstream. The $1.35 billion payment related to the 2002 acquisition of DEA
in Germany took place on July 1, 2003.
* As explained in the Group's 2002 Financial Statements, recent changes in US
Generally Accepted Accounting Principles (GAAP) related to the accounting
for long-term obligations, have brought US GAAP and Netherlands GAAP into
better alignment. Consequently with effect from the third quarter 2003, the
Group's Statement of Assets and Liabilities will include some $4 billion of
additional fixed assets and related long-term liabilities. There is no
impact on the Statement of Cash Flows. If this treatment had been adopted
at the end of the second quarter, the debt ratio would have been some 3 to
4 percentage points higher.
Commentary
Crude prices fell sharply early in the quarter largely as a result of a
reduced Iraqi war premium. OPEC, in particular Saudi Arabia, supported
increased crude production during the second quarter to cover the Iraqi supply
shortfall. This had the effect of dampening oil prices in general and keeping
them on average just above the mid-point of OPEC's desired price band. In the
second quarter of 2003, Brent crude prices averaged $26.05 a barrel compared
with $25.05 a barrel in 2002, while WTI prices averaged $29.00 a barrel in 2003
compared with $26.30 a year earlier. Crude prices for the second half of this
year will depend on OPEC supply in response to the return of Iraqi exports to
the oil markets, and on the state of the global economy.
The North American natural gas market continued to see high prices over
the second quarter of 2003, as the Henry Hub index averaged $5.63 per million
Btu, down from $6.90 in the first quarter but almost $2.25 above the same
quarter of 2002. Reduced demand by about 4 billion cubic feet (bcf) per day
compared to a year ago allowed inventories to build for the next winter. Supply
increased due to LNG imports, running at about 0.25 bcf per day above the
second quarter in 2002. Reduced demand and increased LNG imports are offsetting
the decline in domestic production in the US and Canada estimated at 1-1.5 bcf/
day compared to levels a year ago. Near term North American natural gas prices
are expected to remain strong by historical standards.
Refining margins reverted to lower levels during the second quarter, as
the impact of supply disruptions, heavy US refinery turnarounds and a cold
northern hemisphere winter abated. Margin decline in Europe was cushioned to
some extent by the refinery turnaround season and demand for heating oil.
Refining margins in Asia were hit by low product demand, particularly jet
kerosene for civil aviation, following the outbreak of SARS. The quarter saw
discretionary run cuts. In the second quarter of 2003, industry refining
margins averaged $2.55, 0.10, 3.85 and 4.50 a barrel in Rotterdam, Singapore,
US Gulf Coast and US West Coast respectively, compared to $0.30, 0.25 and 2.95
and 3.55 a barrel for the same period in 2002. The heavy crude coking margin
strengthened versus the light crude coking margin in the US Gulf Coast during
the second quarter due to rising Venezuelan and Saudi Arabian crude supply. The
margin outlook for the balance of 2003 is uncertain. Much will depend on the
state of the global, and in particular the US, economy. Singapore margins are
expected to remain depressed for the rest of the year given the substantial
refinery capacity overhang in the region.
In Chemicals difficult trading conditions continued as a result of
volatility in feedstock prices and weak product margins negatively impacting
earnings. However, industry cracker margins improved in Europe and the USA from
a year ago as a result of the decline in feedstock prices from first quarter
levels. In the USA, feedstock prices relative to crude prices favoured chemical
crackers using liquid feedstocks. The outlook for chemicals remains vulnerable
due to uncertainty and volatility in feedstock costs and the global economy.
In Exploration and Production pre-emption rights were exercised on the sale
of British Gas' interest in the Kashagan Consortium Production Sharing
Agreement (PSA) in Kazhakstan, to increase Shell's interest in the PSA from
16.67% to 20.37%. In Canada fully integrated operations began for the Athabasca
Oil Sands Project (Shell Canada share 60%) with the Scotford Upgrader
processing bitumen from the Muskeg River mine to manufacture synthetic crude
oil products. Total production averaged about 85,000 barrels per day (100%) of
bitumen in June.
As part of ongoing portfolio optimisation, Shell's 45% interest in KMOC in
Russia was sold during the quarter. In the UK various ex-Enterprise Oil mature
assets were divested in July. In the USA, the divestment of mature assets in
the Gulf of Mexico was concluded in July for a sum of $500 million, equivalent
to over $12 per barrel of proven reserves.
During the quarter a significant discovery was made in Malaysia and
successful appraisals took place in the Gulf of Mexico and in Egypt.
Progress on synergies from the Enterprise acquisition continues ahead of
plan with $180 million of synergies delivered to date.
The Declaration of Development Date for the second phase of the Sakhalin II
LNG project was announced in May. This first LNG plant in Russia is planned to
come on stream in 2007 and will reinforce Shell's position as the world leader
in LNG. Marketing of LNG from the two train 9.6 million tonnes per annum (mtpa)
plant continues with long-term offtake agreements announced for 2.8 mtpa with
Tokyo Gas, Tokyo Electric and Kyushu Electric and negotiations with other
potential offtakers are progressing.
In Gas & Power significant progress was achieved in Nigeria LNG (Shell
share 25.6%), where volumes from the fourth and fifth liquefaction trains'
expansion are now fully committed with the signing of Memoranda of
Understanding for supply into the US East Coast and to Europe. The Malaysia LNG
Tiga joint venture (Shell share 15%) signed an agreement to deliver up to 2
mtpa over 7 years to Kogas in Korea. In China the first coal gasification joint
venture (Shell share 50%) with Sinopec was announced, and in Germany Shell sold
its 25% interest in Thyssengas, a gas transportation company.
In Oil Products, an expansion of the retail alliance with Sainsbury's
Supermarkets Ltd in the UK and a new retail alliance with Coles Myer Ltd in
Australia were announced. The expansion in the UK will involve up to 100 retail
sites over the coming 2 to 3 years. In Australia, Coles Myer will progressively
become operator of the Shell-branded retail network starting in Victoria. In
both alliances, Shell will exclusively supply the fuel products. Additionally,
Shell sold its 20.69% interest in Skeljungur in Iceland, where retail
operations will continue under the Shell brand. Shell Hydrogen's involvement in
the pilot retail hydrogen site in Iceland is unaffected by this development.
Progress continues in the US retail network restructuring, the DEA
acquisition in Germany and in the integration of Pennzoil-Quaker State Company
(PQS). Since the programs started 2,096 retail sites have been rebranded from
Texaco to Shell in the US and 415 retail sites from DEA to Shell in Germany.
Synergy capture in both acquisitions is ahead of plan with $295 million synergy
deliveries in the US and $130 million in Germany. Synergy deliveries from the
acquisition of PQS totalled $55 million to the end of the second quarter and
are ahead of plan.
In Chemicals, major construction has started on schedule at the Nanhai
petrochemicals plant in Guangdong (Shell share 50%) with the lower olefins
plant, which is at the heart of the complex, to produce feedstock for the other
downstream processes. Shell is a partner with CNOOC Petrochemicals Investment
Ltd in the $4.3 billion plant expected to go on stream at the end of 2005.
The construction of a polymer polyols plant at Pernis in the Netherlands
was completed and is now operational. The plant, one of the largest of its kind
in Europe, will produce 50,000 tonnes per annum of high solids styrene
acrylonitrile (SAN) co-polymer polyol, designed to meet the growing needs of
furniture, bedding and automobile manufacturers.
In Renewables the acquisition of a 40% interest in the La Muela Wind Park
(99 megawatt) in Spain was announced in July marking the beginning of
commercial-scale wind operations in Europe for Shell.
Shares totalling $0.3 billion were purchased during the quarter to underpin
employee share option schemes, bringing the year to date amount to $0.7
billion.
Earnings by industry segment
Exploration and Production
SECOND QUARTER $ million HALF YEAR
2003 2002 % 2003 2002 %
2,023 1,759 +15 Segment earnings 5,065 3,329 +52
- (50) Special credits/(charges) - 65
Asset retirement obligations (see
note 1) 255
2,023 1,809 +12 Adjusted segment earnings 4,810 3,264 +47
2,361 2,413 -2 Crude oil production (thousand b/d) 2,384 2,307 +3
Natural gas production available for
8,271 8,386 -1 sale (million scf/d) 9,447 9,416 -
Second quarter adjusted earnings of $2,023 million were 12% higher than a
year ago mainly due to significantly higher hydrocarbon prices with gas
realisations 41% higher than the same period last year. Gas realisations in the
USA increased by 62% and outside the USA by 30%. Oil realisations were up 7%.
Earnings reflected higher depreciation charges and higher operating costs, both
of which were impacted by a weaker US dollar. Exploration costs were $152
million lower.
Hydrocarbon production decreased 2%, reflecting a 2% decrease in oil
production and a 1% decrease in gas production.
The 2% decrease in oil production reflected field declines, mainly in the
USA and the UK, community disturbances in Nigeria, maintenance in Draugen
(Norway) and Shearwater in the UK. Production from new fields in Nigeria (EA),
Canada (Athabasca Oil Sands), the UK and the USA and higher OPEC quotas in
Nigeria and Abu Dhabi partly offset the decreases.
Gas production reflected lower demand in the Netherlands and New Zealand,
field declines in the USA and the UK, divestments in New Zealand and lower
entitlements under production sharing contracts. These decreases were partly
offset by new production mainly in Pakistan and the USA and higher demand in
Malaysia, Brunei, Germany and Australia.
Excluding the effects of community disturbances in Nigeria, lower
entitlements under production sharing contracts due to higher hydrocarbon
prices, and divestments, total hydrocarbon production for the quarter was ahead
of a year ago.
Capital investment in the second quarter of $2.4 billion was 17% higher
than the corresponding period last year excluding the acquisition amount for
Enterprise Oil. The investment related to the Kashagan pre-emption will be
included in the financial statements when completed. Exploration expense
amounted to $0.2 billion.
Gas & Power
SECOND QUARTER $ million HALF YEAR
2003 2002 % 2003 2002 %
452 128 +253 Segment earnings 1,958 382 +413
- (21) Special credits/(charges) 1,036 17
452 149 +203 Adjusted segment earnings 922 365 +153
Equity LNG sales volume (million
2.22 1.76 +26 tonnes) 4.55 4.20 +8
Second quarter adjusted earnings were $452 million compared to $149 million
a year ago. Earnings from liquefied natural gas (LNG) operations were higher
due to a 26% increase in volumes reflecting strong demand and the build-up of
volumes from the third LNG liquefaction train in Nigeria. LNG prices were some
26% above those last year reflecting the higher crude and product prices and
volume mix. Trading earnings benefited from more favourable trading conditions
in the USA. The quarter benefited by $140 million from non-recurring items
including sale of Shell's 25% shareholding in Thyssengas. This was partly
offset by the absence of Ruhrgas dividends ($47 million) compared to the second
quarter of 2002 following the divestment in 2003.
Oil Products
SECOND QUARTER $ million HALF YEAR
2003 2002 % 2003 2002 %
448 444 +1 Segment earnings 1,643 1,029 +60
(527) 118 CCS adjustment (388) 342
975 326 +199 Segment CCS earnings 2,031 687 +196
- (21) Special credits/(charges) - (101)
975 347 +181 Adjusted segment CCS earnings 2,031 788 +158
4,127 3,837 +8 Refinery intake (thousand b/d) 4,147 4,011 +3
7,474 7,396 +1 Oil product sales (thousand b/d) 7,407 7,311 +1
Second quarter earnings on an adjusted CCS basis of $975 million were 181%
higher than a year ago. Refining earnings improved substantially reflecting
stronger industry margins in all regions excluding Asia-Pacific. Marketing
income also increased significantly as marketing margins benefited from the
decline in crude prices from the first quarter.
The results for the second quarter of 2003 include Pennzoil-Quaker State
(PQS) in the US acquired effective October 1, 2002.
Outside the USA, adjusted CCS earnings increased to $839 million compared
to $322 million a year ago. Refining earnings increased significantly in Europe
reflecting the strong rebound in industry refining margins in Rotterdam,
partially offset by increased costs associated with the strengthening euro.
Refining earnings in Asia were similar to a year ago as industry margins in
this region returned to historically low levels. Refinery utilisation was 7
percentage points higher than a year ago. Marketing earnings improved over the
prior year as a result of stronger fuels margins more than offsetting a 2%
reduction in total inland sales, reflecting the impact of reduced industry
demand. Lower supply costs early in the quarter contributed to the marketing
margin improvement.
In the USA, adjusted earnings were $136 million compared to $25 million a
year ago. This also reflects an increase compared to first quarter this year
when overall margins were more favourable. Earnings benefited from realising
synergies associated with the Texaco and PQS acquisitions, implementing the
refining improvements and retail network restructuring programs as planned, and
stronger refining and retail margins on both the West Coast and Gulf Coast as
compared to a year ago. Overall refinery utilisation was 2 percentage points
lower than a year earlier whilst refinery intake rose 1%. Total inland sales
volumes benefited from the integration of US trading operations with the Shell
Global Trading Network. Trading earnings improved over last year while
transportation income was slightly down due to reduced product demand. Earnings
for the quarter were negatively impacted by some $33 million for provisions
primarily related to litigation and environmental remediation.
Chemicals
SECOND QUARTER $ million HALF YEAR
2003 2002 % 2003 2002 %
111 122 -9 Segment earnings 96 197 -51
- (10) Special credits/(charges) - (10)
111 132 -16 Adjusted segment earnings 96 207 -54
Adjusted earnings for the second quarter were $111 million compared with
$132 million a year ago. Despite volume growth across much of the portfolio,
earnings were negatively impacted by volatility of feedstock costs and higher
costs, principally related to higher turnaround activity and the weaker US
dollar. However, Shell cracker margins improved from a year ago in both the USA
and Europe. In the USA, the economics of cracking liquid feedstocks were
favourable relative to the more commonly used ethane feedstocks. In Europe,
cracker margins ($/mt) improved as feedstock prices fell from first quarter
levels, coupled with the impact of a stronger euro. However, global product
unit margins ($/mt) declined from prior year reflecting the inability to
recover feedstock cost increases across the portfolio. Earnings from Basell,
the polyolefins joint venture, were down sharply compared with the same period
a year ago as both volumes and margins declined mainly in Europe due to weak
demand and imported product.
Other industry segments
SECOND QUARTER $ million HALF YEAR
2003 2002 2003 2002
(27) (89) Segment earnings (67) (130)
- - Special credits/(charges) - -
(27) (89) Adjusted segment earnings (67) (130)
Adjusted earnings for the second quarter were a loss of $27 million
compared to a loss of $89 million in 2002 due to improved results in Shell
Consumer in the US and the transfer of certain support services to Corporate.
Corporate
SECOND QUARTER $ million HALF YEAR
2003 2002 2003 2002
(112) (148) Segment net costs (380) (322)
- - Special credits/(charges) - -
(112) (148) Adjusted segment net costs (380) (322)
Second quarter net costs of $112 million were less than a year ago (costs
of $148 million) and reflected non-recurring tax credits and increased interest
cost as a result of higher average net borrowing.
Note
The results shown for the second quarter and half year are unaudited.
Quarterly results are expected to be announced on October 23 for the third
quarter of 2003. Results for the fourth quarter together with the final
dividend proposals for 2003 are expected to be announced on February 5, 2004.
This publication contains forward-looking statements that are subject to
risk factors associated with the oil, gas, power, chemicals and renewables
businesses. It is believed that the expectations reflected in these statements
are reasonable, but may be affected by a variety of variables which could cause
actual results or trends to differ materially, including, but not limited to:
price fluctuations, actual demand, currency fluctuations, drilling and
production results, reserve estimates, loss of market, industry competition,
environmental risks, physical risks, legislative, fiscal and regulatory
developments, economic and financial market conditions in various countries and
regions, political risks, project delay or advancement, approvals and cost
estimates.
July 24, 2003
Statement of income
QUARTERS $ million HALF YEAR
Q2 Q1 Q2
2003 2003 2002 % * 2003 2002 %
64,880 69,374 55,124 +18 Sales proceeds ** 134,254 103,006 +30
Sales taxes, excise duties and
16,805 15,559 13,221 similar levies 32,364 25,915
______ ______ ______ ______ ______
48,075 53,815 41,903 +15 Net proceeds 101,890 77,091 +32
40,027 43,479 35,381 Cost of sales ** 83,506 64,455
______ ______ ______ ______ ______
8,048 10,336 6,522 +23 Gross profit 18,384 12,636 +45
Selling, distribution and
3,427 3,023 2,703 administrative expenses 6,450 5,137
152 248 304 Exploration 400 479
145 132 130 Research and development 277 216
______ ______ ______ ______ ______
Operating profit of Group
4,324 6,933 3,385 +28 companies 11,257 6,804 +65
Share of operating profit of
836 1,196 734 associated companies 2,032 1,415
______ ______ ______ ______ ______
5,160 8,129 4,119 +25 Operating profit 13,289 8,219 +62
175 1,469 177 Interest and other income 1,644 361
300 374 261 Interest expense 674 502
Currency exchange gains/
(102) (17) (38) (losses) (119) (68)
______ ______ ______ ______ ______
4,933 9,207 3,997 +23 Income before taxation 14,140 8,010 +77
2,038 3,787 1,781 Taxation 5,825 3,525
______ ______ ______ ______ ______
2,895 5,420 2,216 +31 Income after taxation 8,315 4,485 +85
67 89 4 Minority interests 156 11
______ ______ ______ ______ ______
2,828 5,331 2,212 +28 NET INCOME 8,159 4,474 +82
______ ______ ______ ______ ______
* Q2 on Q2 change
** Certain amounts for 2002 have been reclassified (see
note 1)
Earnings by industry segment
QUARTERS $ million HALF YEAR
Q2 Q1 Q2
2003 2003 2002 % * 2003 2002 %
Exploration and Production:
1,374 2,307 1,257 +9 World outside USA 3,681 2,463 +49
649 735 502 +29 USA 1,384 866 +60
______ ______ ______ ______ ______
2,023 3,042 1,759 +15 5,065 3,329 +52
______ ______ ______ ______ ______
Gas & Power:
356 1,472 108 +230 World outside USA 1,828 364 +402
96 34 20 +380 USA 130 18 +622
______ ______ ______ ______ ______
452 1,506 128 +253 1,958 382 +413
______ ______ ______ ______ ______
Oil Products:
839 929 322 +161 World outside USA 1,768 704 +151
136 127 4 USA 263 (17) -
______ ______ ______ ______ ______
975 1,056 326 +199 2,031 687 +196
______ ______ ______ ______ ______
Chemicals:
166 196 145 +14 World outside USA 362 240 + 51
(55) (211) (23) - USA (266) (43) -
______ ______ ______ ______ ______
111 (15) 122 -9 96 197 -51
______ ______ ______ ______ ______
(27) (40) (89) Other industry segments (67) (130)
______ ______ ______ ______ ______
3,534 5,549 2,246 +57 TOTAL OPERATING SEGMENTS 9,083 4,465 +103
______ ______ ______ ______ ______
Corporate:
(178) (259) (120) Interest income/(expense) (437) (235)
Currency exchange gains/
(19) (10) 32 (losses) (29) 25
85 1 (60) Other - including taxation 86 (112)
______ ______ ______ ______ ______
(112) (268) (148) (380) (322)
______ ______ ______ ______ ______
(86) (76) 2 Minority interests (162) 34
______ ______ ______ ______ ______
3,336 5,205 2,100 +59 CCS EARNINGS 8,541 4,177 +104
______ ______ ______ ______ ______
(508) 126 112 CCS adjustment (382) 297
______ ______ ______ ______ ______
2,828 5,331 2,212 +28 NET INCOME 8,159 4,474 +82
______ ______ ______ ______ ______
* Q2 on Q2 change
Summarised statement of assets and liabilities
$ million
June 30 Mar 31 June 30
2003 2003 2002
Fixed assets:
Tangible fixed assets 82,377 79,986 74,535
Intangible fixed assets 4,747 4,659 1,304
Investments 21,454 21,055 20,582
______ ______ ______
108,578 105,700 96,421
______ ______ ______
Other long-term assets 8,025 7,307 8,744
Current assets:
Inventories 10,976 11,007 9,451
Accounts receivable 28,246 31,111 23,467
Short-term securities - 1 1
Cash and cash equivalents 1,937 3,991 4,141
______ ______ ______
41,159 46,110 37,060
______ ______ ______
Current liabilities:
Short-term debt 9,564 9,567 11,574
Accounts payable and accrued
liabilities 30,650 32,808 23,299
Taxes payable 7,234 7,669 5,905
Dividends payable to Parent
Companies 2,520 5,235 3,168
______ ______ ______
49,968 55,279 43,946
______ ______ ______
Net current assets/
(liabilities) (8,809) (9,169) (6,886)
______ ______ ______
Total assets less current
liabilities 107,794 103,838 98,279
______ ______ ______
Long-term liabilities:
Long-term debt 7,209 6,799 6,518
Other 6,048 5,838 6,009
______ ______ ______
13,257 12,637 12,527
______ ______ ______
Provisions:
Deferred taxation 12,428 12,684 12,383
Other 9,469 8,809 6,717
______ ______ ______
21,897 21,493 19,100
______ ______ ______
Minority interests 3,240 3,686 5,396
______ ______ ______
NET ASSETS 69,400 66,022 61,256
______ ______ ______
Summarised statement of cash flows (Note 7)
QUARTERS $ million HALF YEAR
Q2 Q1 Q2
2003 2003 2002 2003 2002
CASH FLOW PROVIDED BY
OPERATING ACTIVITIES:
2,828 5,331 2,212 Net income 8,159 4,474
Depreciation, depletion and
2,390 2,498 2,036 amortisation 4,888 3,786
(Profit)/loss on sale of
(149) (1,301) (11) assets (1,450) (173)
Decrease/(increase) in net
550 256 (903) working capital 806 (1,671)
Associated companies:
dividends more/(less) than
168 (226) 64 net income (58) 18
Deferred taxation and other
128 242 (172) provisions 370 (159)
(490) (112) (74) Other (602) 88
______ ______ ______ ______ ______
Cash flow provided by
5,425 6,688 3,152 operating activities 12,113 6,363
______ ______ ______ ______ ______
CASH FLOW USED IN
INVESTING ACTIVITIES:
(3,081) (2,173) (7,818) Capital expenditure (5,254) (11,899)
105 268 225 Proceeds from sale of assets 373 460
Net investments in associated
130 (321) (72) companies (191) (337)
Proceeds from sale and other
44 1,675 84 movements in investments 1,719 3
______ ______ ______ ______ ______
Cash flow used in investing
(2,802) (551) (7,581) activities (3,353) (11,773)
______ ______ ______ ______ ______
CASH FLOW PROVIDED BY/
(USED IN) FINANCING
ACTIVITIES:
Net increase/(decrease) in
306 (409) 2,145 long-term debt (103) 225
Net increase/(decrease) in
(445) (2,971) 6,334 short-term debt (3,416) 6,967
(465) 12 19 Change in minority interests (453) 405
Dividends paid to: Parent
(3,779) - (3,493) Companies (3,779) (3,789)
(108) (43) (71) Minority interests (151) (144)
______ ______ ______ ______ ______
Cash flow provided by/(used
(4,491) (3,411) 4,934 in) financing activities (7,902) 3,664
______ ______ ______ ______ ______
Parent Companies' shares: net
sales/(purchases) and
(253) (315) (719) dividends received (568) (904)
Currency translation
differences relating
67 24 134 to cash and cash equivalents 91 121
______ ______ ______ ______ ______
INCREASE/(DECREASE) IN CASH
(2,054) 2,435 (80) AND CASH EQUIVALENTS 381 (2,529)
______ ______ ______ ______ ______
Operational data
QUARTERS HALF YEAR
Q2 Q1 Q2
2003 2003 2002 %* 2003 2002 %
thousand b/d CRUDE OIL PRODUCTION thousand b/d
665 741 783 Europe 703 668
1,132 1,112 1,084 Other Eastern Hemisphere 1,122 1,103
423 460 441 USA 441 429
141 94 105 Other Western Hemisphere 118 107
______ ______ ______ ______ ______
2,361 2,407 2,413 -2 2,384 2,307 +3
______ ______ ______ ______ ______
million scf/d ** NATURAL GAS PRODUCTION million scf/d **
AVAILABLE FOR SALE
2,649 5,228 2,844 Europe 3,931 3,704
3,350 3,128 3,223 Other Eastern Hemisphere 3,240 3,423
1,627 1,633 1,665 USA 1,630 1,616
645 647 654 Other Western Hemisphere 646 673
______ ______ ______ ______ ______
8,271 10,636 8,386 -1 9,447 9,416 -
______ ______ ______ ______ ______
million scm/d *** million scm/d ***
75 148 81 Europe 111 105
95 89 91 Other Eastern Hemisphere 92 97
46 46 47 USA 46 46
18 18 18 Other Western Hemisphere 18 19
______ ______ ______ ______ ______
234 301 237 -1 267 267 -
______ ______ ______ ______ ______
million tonnes LIQUEFIED NATURAL GAS (LNG) million tonnes
2.22 2.33 1.76 +26 Equity LNG sales volume 4.55 4.20 +8
$/bbl Realised Oil Prices $/bbl
25.03 29.49 23.52 WOUSA 27.50 21.54
25.23 29.01 23.28 USA 27.22 20.62
25.06 29.43 23.48 Global 27.46 21.38
$/thousand scf Realised Gas Prices $/thousand scf
2.69 2.69 2.07 WOUSA 2.69 2.08
5.63 6.87 3.47 USA 6.25 2.94
3.36 3.44 2.39 Global 3.40 2.26
* Q2 on Q2 change
** scf/d = standard cubic feet per day
*** scm/d = standard cubic metres per day
Operational data (continued)
QUARTERS HALF YEAR
Q2 Q1 Q2
2003 2003 2002 %* 2003 2002 %
thousand b/d thousand b/d
REFINERY PROCESSING INTAKE
1,736 1,816 1,642 Europe 1,776 1,720
960 964 908 Other Eastern Hemisphere 962 925
1,097 1,038 1,085 USA 1,068 1,085
334 348 202 Other Western Hemisphere 341 281
______ ______ ______ ______ ______
4,127 4,166 3,837 +8 4,147 4,011 +3
______ ______ ______ ______ ______
OIL SALES
2,820 2,677 2,893 Gasolines 2,749 2,793
745 809 740 Kerosines 776 731
2,302 2,261 2,234 Gas/Diesel oils 2,282 2,244
849 865 790 Fuel oil 857 781
758 728 739 Other products 743 762
______ ______ ______ ______ ______
7,474 7,340 7,396 +1 Total oil products** 7,407 7,311 +1
4,621 5,007 5,284 Crude oil 4,813 5,049
______ ______ ______ ______ ______
12,095 12,347 12,680 -5 Total oil sales 12,220 12,360 -1
______ ______ ______ ______ ______
**comprising
2,115 2,059 2,143 Europe 2,087 2,166
1,286 1,272 1,302 Other Eastern Hemisphere 1,279 1,279
2,503 2,215 2,239 USA 2,360 2,174
735 714 777 Other Western Hemisphere 724 768
835 1,080 935 Export sales 957 924
CHEMICAL SALES - NET PROCEEDS**
$ million * $ million
1,490 1,519 1,010 Europe 3,009 1,820
711 757 528 Other Eastern Hemisphere 1,468 912
1,390 1,462 1,203 USA 2,852 2,241
185 183 113 Other Western Hemisphere 368 197
______ ______ ______ ______ ______
3,776 3,921 2,854 +32 7,697 5,170 +49
______ ______ ______ ______ ______
* Q2 on Q2 change
*** Excluding proceeds from chemical trading activities
Capital investment
QUARTERS $ million HALF YEAR
Q2 Q1 Q2
2003 2003 2002 2003 2002
Capital expenditure:
Exploration and Production:
1,807 1,187 6,513 World outside USA 2,994 7,761
396 297 487 USA 693 828
______ ______ ______ ______ ______
2,203 1,484 7,000 3,687 8,589
______ ______ ______ ______ ______
Gas & Power:
222 212 34 World outside USA 434 99
12 1 4 USA 13 5
______ ______ ______ ______ ______
234 213 38 447 104
______ ______ ______ ______ ______
Oil Products:
Refining:
93 66 149 World outside USA 159 195
90 127 120 USA 217 1,410
______ ______ ______ ______ ______
183 193 269 376 1,605
______ ______ ______ ______ ______
Marketing:
246 115 255 World outside USA 361 461
48 39 14 USA 87 613
______ ______ ______ ______ ______
294 154 269 448 1,074
______ ______ ______ ______ ______
Chemicals:
32 24 65 World outside USA 56 121
82 66 120 USA 148 186
______ ______ ______ ______ ______
114 90 185 204 307
______ ______ ______ ______ ______
53 41 57 Other segments 94 220
______ ______ ______ ______ ______
3,081 2,175 7,818 TOTAL CAPITAL EXPENDITURE 5,256 11,899
______ ______ ______ ______ ______
Exploration expense:
116 139 257 World outside USA 255 352
37 84 53 USA 121 126
______ ______ ______ ______ ______
153 223 310 376 478
______ ______ ______ ______ ______
New equity investments in associated
companies:
1 119 37 World outside USA 120 75
9 24 19 USA 33 203
______ ______ ______ ______ ______
10 143 56 153 278
______ ______ ______ ______ ______
New loans to associated
158 196 133 companies 354 293
______ ______ ______ ______ ______
3,402 2,737 8,317 TOTAL CAPITAL INVESTMENT* 6,139 12,948
______ ______ ______ ______ ______
*comprising
2,356 1,707 7,313 Exploration and Production 4,063 9,072
247 289 64 Gas & Power 536 147
473 355 557 Oil Products 828 2,889
114 149 193 Chemicals 263 327
54 41 57 Other segments 95 220
New loans to associated
158 196 133 companies 354 293
______ ______ ______ ______ ______
3,402 2,737 8,317 6,139 12,948
______ ______ ______ ______ ______
Special items (Note 4)
QUARTERS $ million HALF YEAR
Q2 Q1 Q2
2003 2003 2002 credits/(charges) 2003 2002
Exploration and Production:
World outside USA
- - (68) Restructuring and redundancy - (68)
- - 18 Asset disposals/impairment - 32
USA
- - - Asset disposals/impairment - 101
______ ______ ______ ______ ______
- - (50) - 65
______ ______ ______ ______ ______
Gas & Power:
World outside USA
- 1,036 - Asset disposals/impairment 1,036 -
- - (21) Other - (21)
USA
- - - Asset disposals/impairment - 38
______ ______ ______ ______ ______
- 1,036 (21) 1,036 17
______ ______ ______ ______ ______
Oil Products:
World outside USA
- - - Restructuring and redundancy - (31)
- - - Asset disposals/impairment - (26)
USA
- - (21) Other - (44)
______ ______ ______ ______ ______
- - (21) - (101)
______ ______ ______ ______ ______
Chemicals:
USA
- - (10) Other - (10)
______ ______ ______ ______ ______
- - (10) - (10)
______ ______ ______ ______ ______
Minority interests:
- - - Asset disposals/impairment - 11
______ ______ ______ ______ ______
- - - - 11
______ ______ ______ ______ ______
- 1,036 (102) SPECIAL ITEMS 1,036 (18)
______ ______ ______ ______ ______
Adjusted CCS earnings by industry segment
QUARTERS $ million HALF YEAR
Q2 Q1 Q2
2003 2003 2002 % * 2003 2002 %
Exploration and Production:
1,374 2,307 1,307 +5 World outside USA 3,681 2,499 +47
649 735 502 +29 USA 1,384 765 +81
(255) Asset retirement obligations (255)
______ ______ ______ ______ ______
2,023 2,787 1,809 +12 4,810 3,264 +47
______ ______ ______ ______ ______
Gas & Power:
356 436 129 +176 World outside USA 792 385 +106
96 34 20 +380 USA 130 (20) -
______ ______ ______ ______ ______
452 470 149 +203 922 365 +153
______ ______ ______ ______ ______
Oil Products:
839 929 322 +161 World outside USA 1,768 761 +132
136 127 25 +444 USA 263 27 +874
______ ______ ______ ______ ______
975 1,056 347 +181 2,031 788 +158
______ ______ ______ ______ ______
Chemicals:
166 196 145 +14 World outside USA 362 240 +51
(55) (211) (13) - USA (266) (33) -
______ ______ ______ ______ ______
111 (15) 132 -16 96 207 -54
______ ______ ______ ______ ______
(27) (40) (89) Other industry segments (67) (130)
______ ______ ______ ______ ______
3,534 4,258 2,348 +51 TOTAL OPERATING SEGMENTS 7,792 4,494 +73
______ ______ ______ ______ ______
Corporate:
(178) (259) (120) Interest income/(expense) (437) (235)
Currency exchange gains/
(19) (10) 32 (losses) (29) 25
85 1 (60) Other - including taxation 86 (112)
______ ______ ______ ______ ______
(112) (268) (148) (380) (322)
______ ______ ______ ______ ______
(86) (76) 2 Minority interests (162) 23
______ ______ ______ ______ ______
3,336 3,914 2,202 +51 ADJUSTED CCS EARNINGS 7,250 4,195 +73
______ ______ ______ ______ ______
* Q2 on Q2 change
Proforma earnings per share (Note 8)
QUARTERS HALF YEAR
Q2 Q1 Q2
2003 2003 2002 2003 2002
ROYAL DUTCH
0.72 1.43 0.69 Net income per share (euro ) 2.15 1.43
0.81 1.54 0.63 Net income per share ($) 2.35 1.28
0.96 1.50 0.60 CCS earnings per share ($) 2.46 1.19
Adjusted CCS earnings per share
0.85 1.05 0.69 (euro ) 1.90 1.34
Adjusted CCS earnings per share
0.96 1.13 0.63 ($) 2.09 1.20
SHELL TRANSPORT
7.2 13.8 6.2 Net income per share (pence) 21.0 12.7
0.71 1.32 0.55 Net income per ADR ($) 2.03 1.10
0.83 1.29 0.52 CCS earnings per ADR ($) 2.12 1.03
Adjusted CCS earnings per share
8.5 10.1 6.2 (pence) 18.6 11.9
Adjusted CCS earnings per ADR
0.83 0.97 0.54 ($) 1.80 1.03
Notes
NOTE 1. Accounting policies
US accounting standard FAS 143 is effective for the Group from the first
quarter, 2003 and requires that an entity recognises the discounted ultimate
liability for an asset retirement obligation in the period in which it is
incurred together with an offsetting asset. The cumulative effect of the change
has been included within net income for the first quarter, 2003.
In addition, in the first quarter, 2003, the Group completed the
implementation of US accounting guidance EITF Issue No. 02-03, which includes
the requirement that gains and losses on certain derivative instruments be
shown net in the Statement of Income. Certain prior period amounts have been
reclassified, resulting in a reduction in sales proceeds and a corresponding
reduction in cost of sales.
In all other respects the Group's accounting policies are essentially
unchanged from those set out in Note 2 to the Financial Statements of the Royal
Dutch/Shell Group of Companies in the 2002 Annual Reports and Accounts on pages
58 to 60.
As explained in the Group's 2002 Financial Statements, recent changes in US
Generally Accepted Accounting Principles (GAAP) related to the accounting for
long-term obligations, have brought US GAAP and Netherlands GAAP into better
alignment. Consequently with effect from the third quarter 2003, the Group's
Statement of Assets and Liabilities will include some $4 billion of additional
fixed assets and related long-term liabilities.
NOTE 2. "Non-Generally Accepted Accounting Principles (GAAP)" financial
measures
The United States Securities and Exchange Commission (SEC) issued rules
entitled "Conditions for Use of non-GAAP Financial Measures", including
Regulation G on disclosures, implementing certain requirements of the
Sarbanes-Oxley Act.
Presentation of non-GAAP financial measures, including Special items, will
be under continued review by the Group in the light of the developing guidance
on the application of the SEC Regulation G.
NOTE 3. Earnings on an estimated current cost of supplies (CCS) basis
On this basis, cost of sales of the volumes sold in the period is based on
the cost of supplies of the same period (instead of using the first-in
first-out (FIFO) method of inventory accounting used by most Group companies)
and allowance is made for the estimated tax effect. These earnings are more
comparable with those of companies using the last-in first-out (LIFO) inventory
basis after excluding any inventory drawdown effects. The adjustment from net
income on to an estimated current cost of supplies basis has no related balance
sheet entry.
NOTE 4. Special items
Special items are those significant credits or charges resulting from
transactions or events which, in the view of management, are not representative
of normal business activities of the period and which affect comparability of
earnings. With effect from the first quarter, 2003, certain items which would
have been treated as special items under previous practice have not been so
treated, in line with SEC Regulation G, on the grounds that items of a similar
nature have occurred, or could occur, within a two-year period.
NOTE 5. Return on average capital employed (ROACE)
The Group's preferred measure of return on capital is on a CCS basis. The
nearest equivalent GAAP measure is the "net income" basis.
ROACE on a net income basis is the sum of the current and previous three
quarters' net income plus interest expense, less tax and minority interest
(both calculated at the average rate for the Group), as a percentage of the
average of the Group share of closing capital employed and the opening capital
employed a year earlier. In the calculation of ROACE on a CCS earnings basis,
the sum of the current and previous three quarters' net income is replaced by
the sum of the current and previous three quarters' CCS earnings, and total
interest expense is replaced by Group companies' interest expense only. The tax
rate and the minority interest components are derived from calculations at the
published segment level.
NOTE 6. Earnings by industry segment
Operating segment results exclude interest and other income of a
non-operational nature, interest expense, non-trading currency exchange effects
and tax on these items, which are included in the results of the Corporate
segment, and minority interests.
NOTE 7. Statement of cash flows
This statement reflects cash flows of Group companies as measured in their
own currencies, which are translated into US dollars at average rates of
exchange for the periods and therefore excludes currency translation
differences except for those arising on cash and cash equivalents.
NOTE 8. Proforma earnings per share
Group net income is shared between Royal Dutch and Shell Transport in the
proportion of 60:40 (as described in the Royal Dutch and Shell Transport 2002
Annual Reports and Accounts in Note 1 on page 58). For the purposes of these
proforma calculations, Group CCS earnings and adjusted CCS earnings are also
shared in the proportion 60:40. For Royal Dutch and Shell Transport, earnings
per share in euro and sterling respectively are translated from underlying US
dollars at average rates for the period.
In the first quarter 2001, Royal Dutch and Shell Transport each commenced a
share buyback programme under authorisation granted at shareholders' meetings
in May 2000. All Shell Transport shares bought as part of this programme are
cancelled immediately. Royal Dutch shares bought as part of this programme can
only be cancelled in arrears after such a resolution has been passed at the
General Meeting of Royal Dutch shareholders. The last such resolution was on
April 23, 2003 for shares bought under this programme since the previous
General Meeting. For the purpose of earnings per share calculations all shares
bought under the share buyback programme are deemed to have been cancelled upon
the day of purchase.
Earnings per share calculations are based on the following weighted average
number of shares:
Half
Q2 Q1 Q2 Half Year Year
2003 2003 2002 2003 2002
Royal Dutch shares of euro 0.56
(millions) 2,083.5 2,083.5 2,098.5 2,083.5 2,099.5
Shell Transport shares of 25p
(millions) 9,667.5 9,667.5 9,734.3 9,667.5 9,739.3
Shares at the end of the following periods are:
Q2 Q1 Q2
2003 2003 2002
Royal Dutch shares of euro 0.56
(millions) 2,083.5 2,083.5 2,094.0
Shell Transport shares of 25p
(millions) 9,667.5 9,667.5 9,713.7
One American Depository Receipt (ADR) or New York Share is equal to six 25p
Shell Transport shares.
All amounts shown throughout this report are unaudited.
END