RESULTS
THIRD QUARTER $ million NINE MONTHS
2003 2002 % 2003 2002 %
2,665 2,631 +1 Net Income 10,824 7,105 +52
70 212 Estimated current cost of supplies (312) 509
(CCS) adjustment
2,595 2,419 +7 CCS earnings 11,136 6,596 +69
- 178 Special credits/(charges) - see note 1,036 160
3
Asset retirement obligations - see 255
note 1
2,595 2,241 +16 Adjusted CCS earnings 9,845 6,436 +53
Return on Average Capital Employed on a Net Income basis 15.9% 11.6%
Return on Average Capital Employed on a CCS earnings 16.5% 11.9%
basis
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 third quarter 2003
* Reported net income of $2,665 million was 1% above 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 $2,595
million, 16% higher than a year ago.
* On an adjusted CCS basis, Royal Dutch earnings per share were Euro0.66 ($0.75
per share), an increase compared with last year of 2% (17% in $ per share),
and Shell Transport earnings per share were 6.7p, an increase of 12%.
* The 2003 interim dividends of $2.7 billion were paid to shareholders during
the quarter, bringing the year to date payments for dividends to $6.4
billion.
* Consistent progress on strategic milestones for the year to date includes:
Athabasca oil sands production, first deepwater Brazil and offshore Nigeria
production, the investment decision for Sakhalin II, increased shareholding
in Kashagan, entry into Qatar and Saudi Arabia and further extension of the
global liquefied natural gas (LNG) portfolio.
* Exploration and Production adjusted segment earnings of $2,057 million were
up from $1,684 million a year ago. The increase reflected significantly
higher gas realisations and higher oil prices partly offset by lower
hydrocarbon volumes. Gains on divestments and one-off tax benefits were
offset by impairments of various assets.
* The Heads of Agreement with Qatar Petroleum for the $5 billion development
of the world largest Gas to Liquids plant (Shell share 100%) in Qatar was
announced in October.
* Gas & Power adjusted segment earnings were $65 million compared to $127
million a year ago. The results include net unusual charges of $239 million
related to impairments in the power sector partially offset by a credit
resulting from the change in the accounting for tolling arrangements. The
earnings reflect strong market demand for LNG and continued high LNG
prices.
* Oil Products adjusted CCS segment earnings were $880 million compared to
$527 million a year ago. Stronger margins in all regions supported higher
earnings.
* Chemicals adjusted segment earnings of $12 million compared to $164 million
a year ago. Earnings were impacted by declining unit margins, higher cost,
business restructuring and asset impairment charges totalling $56 million,
which were partly offset by higher volumes.
* Capital investment for the quarter totalled $3.6 billion, including the
Sakhalin II LNG project on a 100% basis, and the increased shareholding in
Kashagan.
* Divestment proceeds for the year to date total $3.4 billion.
* The Return on Average Capital Employed (ROACE) on a net income basis for
the 12 months ending September 30, 2003 was 15.9%. The ROACE on a CCS
earnings basis for the 12 months ending September 30, 2003 was 16.5%. The
main difference is the CCS adjustment to net income.
* At the end of the quarter the debt ratio was 22%, including the effect of
recognition of long-term obligations. Cash and cash equivalents amounted to
$2.5 billion.
* Cash flow from operations for the quarter was $5.2 billion (9 months total
$17.3 billion). This cash, together with quarterly divestment proceeds
($1.1 billion) and an increase in debt, funded the investment programme,
dividend payments of $2.5 billion and the $1.3 billion payment related to
the 2002 acquisition of the DEA assets in Germany.
* 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, at the end of the
third quarter 2003, the Group's Statement of Assets and Liabilities
includes some $3.4 billion of additional tangible fixed assets and
liabilities mainly relating to tolling arrangements (see note 1).
Commentary
Crude prices rose in the third quarter with only modest Iraqi export recovery,
OPEC supply restraint and low crude and gasoline stocks in the US at the height
of the driving season. Brent prices reached $30 a barrel during the quarter but
weakened as demand softened, tempered by the OPEC decision to reduce the crude
allocation quota later in the year. In the third quarter of 2003, Brent crude
prices averaged $28.35 a barrel compared with $26.90 a barrel in the same
quarter last year, while WTI prices averaged $30.20 a barrel in the third
quarter of 2003 compared with $28.25 a year earlier. Crude prices will be
influenced by the combination of OPEC supply restraints, non-OPEC production
and Iraqi oil coming to market and the development of demand.
$4.89 per million Btu. Although lower than the second quarter average of $5.63,
prices were high relative to historic third quarter prices. In the third
quarter of 2002, the average Henry Hub price was $3.18. The main drivers behind
lower prices in the third quarter were a record build of storage inventories
during the quarter as a result of moderate weather and price-induced demand
erosion, particularly in the industrial sector. Gas storage levels are within
the normal range ahead of the upcoming winter.
In the third quarter of 2003, industry refining margins averaged $6.00, 7.15,
2.15 and 0.80 a barrel in the US Gulf Coast, US West Coast, Rotterdam, and
Singapore, compared to $2.45, 3.25, 1.00 and 0.15 a barrel respectively in the
same period last year. Refining margins on the US Gulf Coast increased amid
refinery disruptions on the East Coast and in the Midcontinent following a
power disruption. The heavy crude coking margin on the US Gulf Coast weakened
relative to the light crude coking margin. US West Coast margins improved as a
result of unplanned refinery and pipeline outages and reduced imports. European
margins were lower than in the second quarter as refineries resumed normal
operation after the spring turnaround season and weak heating oil demand
depressed prices relative to the second quarter. Some support came from
gasoline arbitrage opportunities to the USA. Singapore margins improved
compared with the second quarter as the product supply demand balance tightened
due to a high level of refinery maintenance and increased demand. Similar to
Europe this was tempered by falling fuel oil demand. Overall margins are
envisaged to return to a lower, more structural level for the remainder of the
year and will be influenced by the pace of economic recovery and the
availability of crude supply. Singapore margins are expected to remain low
given the substantial refinery capacity overhang in the region.
Difficult industry conditions in Chemicals continued as margins were impacted
by the high feedstock costs coupled with low demand and lower product prices.
In Europe industry margins in base chemicals declined, while margins in
intermediates sustained their second quarter level. In the US liquid feed
industry cracker margins declined as crude prices increased. The short-term
outlook for Chemicals remains weak and uncertain.
In Exploration and Production the final investment decision for Salym (Shell
share 50%) in Western Siberia was announced.
Production started from Bijupir�-Salema (Shell share 80%) in the Campos basin
offshore Brazil. The Campos basin is considered Brazil's most prolific
hydrocarbon province.
An agreement was signed with the Government of the Kingdom of Saudi Arabia, to
form a joint venture (Shell share 40%) with Saudi Aramco and Total for the
exploration of gas in the southern part of the Rub Al-Khali.
In China, production-sharing agreements (Shell share 20%) were signed for
natural gas, oil and condensate in three exploration and two development areas
in the Xihu Trough in the East China Sea. In Malaysia a new production sharing
agreement was signed with Petronas for the offshore development of Baram Delta
(Shell share 40%).
In North West Europe, landmark agreements were signed between Shell, ExxonMobil
and Statoil for the export of Norwegian wet gas (Shell share 9%) to the United
Kingdom, optimising existing UK infrastructure (Shell share 50%).
During the quarter, successful exploration and appraisal activities took place
in Norway, USA, Kazakhstan, Angola, Nigeria and Brazil.
In the USA, the sale of upstream assets in Michigan for a price of $445 million
was announced. In Bangladesh an agreement was signed to divest from the Sangu
Development Area and two exploration blocks.
Shell and Qatar Petroleum signed a detailed Heads of Agreement (HoA) for the
construction of the world's largest Gas to Liquids (GTL) plant in Qatar in
October. The project will develop upstream gas and liquids facilities and an
onshore GTL plant to produce 140,000 barrels per day of GTL products (primarily
naphtha and transport fuels and secondly light detergent feedstock, normal
paraffins and lubricant base oils) and significant quantities of associated
condensate and Liquefied Petroleum Gas (LPG). The project will be executed
under an integrated Development and Production Sharing Agreement. The first
phase is planned to be operational late 2008 / early 2009, producing around
70,000 barrels per day of GTL products. The second phase will be completed less
than two years later.
In Gas & Power, further progress was made in Shell's global LNG business.
Nigeria LNG (Shell share 25.6%) signed a long term Sales and Purchase Agreement
to supply 2.2 million tonnes per annum (mtpa) of LNG to the Lake Charles LNG
import terminal in the USA, from the fourth and fifth trains' expansion.
Sakhalin II (Shell share 55%) announced its third sales' Heads of Agreement
with Kyushu Electric Power for the long-term supply of 0.5 mtpa of LNG.
Meanwhile the US Cove Point LNG regasification terminal opened, providing Shell
with access to the US East Coast gas market. Shell was awarded the long-term
supply contract of 0.5 billion cubic feet per day of natural gas to the
Comision Federal de Electricidad from an LNG re-gasification terminal to be
built in Altamira, Mexico (Shell share 75%). The Australian Gorgon Joint
Venture (Shell share 28.6%) was granted in-principle approval for a gas
development using Barrow Island.
In Oil Products, the mandatory divestment of Shell's 50% share of the Excel
Paralubes base oil plant was completed following the Pennzoil-Quaker State
(PQS) acquisition one year ago. Progress continued on the integration and
delivery of PQS acquisition synergies with $75 million delivered by end of the
third quarter.
Retail network restructuring, following the acquisition of Texaco's assets in
the US and DEA assets in Germany, progressed with a total of over 6,800 sites
rebranded and 2,200 rationalised in the US and 570 DEA sites rebranded to Shell
to date. The delivery of related synergies is ahead of schedule, with $330
million now delivered in the US and $150 million in Germany.
The sale of the LPG business in Brazil was completed.
In Chemicals, project financing for the Nanhai petrochemicals project (Shell
share 50%) in China was concluded successfully. At $2.7 billion, this is the
largest-ever private sector project financing in the Asia Pacific region. The
Nanhai project is scheduled for completion by the end of 2005.
As announced earlier in the year, the Bayer-Shell Isocyanates joint venture
(Shell share 50%), ceased operation.
Earnings by industry segment
Exploration and Production
THIRD QUARTER $ million NINE MONTHS
2003 2002 % 2003 2002 %
2,057 1,699 +21 Segment earnings 7,122 5,028 +42
- 15 Special credits/(charges) - 80
Asset retirement obligations (see 255
note 1)
2,057 1,684 +22 Adjusted segment earnings 6,867 4,948 +39
2,401 2,474 -3 Crude oil production (thousand b/d) 2,390 2,363 +1
7,466 8,523 -12 Natural gas production available for 8,780 9,114 -4
sale (million scf/d)
Third quarter adjusted earnings of $2,057 million were 22% higher than a year
ago mainly due to significantly higher hydrocarbon prices, with gas
realisations 45% higher than the same period last year. Gas realisations in the
USA increased by 59% and outside the USA by 39%. Oil realisations were up 9%.
Earnings reflected lower hydrocarbon production. Gains on the divestment of
mature assets in the USA and various one-off tax credits were offset by the
impairment of various assets in the UK and South America.
On a comparable basis oil production for the quarter was down 1% against the
same period last year and gas production reduced by 5%, with overall production
reducing 2%. This excludes the effects of divestments and lower entitlements
under production sharing contracts (including the effect of higher hydrocarbon
prices).
Oil production benefited from new fields in Nigeria (EA), Canada (Athabasca Oil
Sands), the UK and Brazil and increased production from Nigeria and Abu Dhabi.
This was offset by field declines, mainly in the USA (primarily the Brutus
field), Australia, Oman, the UK and Norway, community disturbances impacting
production in Nigeria and maintenance in the UK.
Gas production reflected lower demand in North West Europe and New Zealand,
field declines in the USA and the UK and maintenance in the UK partly offset by
higher production for LNG.
Capital investment in the third quarter of $2.4 billion was 3% lower than the
corresponding period last year and included 100% of Sakhalin and the planned
investment for the increased shareholding in Kashagan of $0.3 billion.
Exploration expense amounted to $0.2 billion.
Gas & Power
THIRD QUARTER $ million NINE MONTHS
2003 2002 % 2003 2002 %
65 196 -67 Segment earnings 2,023 578 +250
- 69 Special credits/(charges) 1,036 86
65 127 -49 Adjusted segment earnings 987 492 +101
2.31 2.35 -2 Equity LNG sales volume (million 6.86 6.55 +5
tonnes)
Third quarter adjusted earnings were $65 million compared to $127 million a
year ago. The adjusted earnings were negatively impacted by net unusual charges
of $239 million as a result of impairments in the power sector relating to
InterGen and to a South American joint venture due to poor market conditions,
partly offset by a credit resulting from the change in accounting for tolling
arrangements. Without these effects year on year earnings of $304 million
benefited from strong performance in LNG. Strong LNG demand and the build up of
Nigeria LNG train 3 resulted in LNG volumes being 14% higher than in the same
period a year ago excluding the Malaysia Satu LNG volumes. LNG prices were
higher by some 5% compared to the same period last year reflecting higher crude
and product prices.
Oil Products
THIRD QUARTER $ million NINE MONTHS
2003 2002 % 2003 2002 %
953 808 +18 Segment earnings 2,596 1,837 +41
73 225 CCS adjustment (315) 567
880 583 +51 Segment CCS earnings 2,911 1,270 +129
- 56 Special credits/(charges) - (45)
880 527 +67 Adjusted segment CCS earnings 2,911 1,315 +121
4,113 4,130 Refinery intake (thousand b/d) 4,135 4,051 +2
7,408 7,467 -1 Oil product sales (thousand b/d) 7,407 7,364 +1
Third quarter earnings on an adjusted CCS basis of $880 million were 67% higher
than a year ago. Refining earnings contributed the majority of this increase as
industry margins improved in all regions. Offsetting this improvement was a
significant decline in the light to heavy crude coking margin in the US Gulf
Coast.
Outside the USA, adjusted CCS earnings increased to $706 million compared to
$464 million a year ago. Refining earnings improved significantly in Europe and
Asia reflecting improved margins from the weak refining environment a year ago.
Increased refining earnings in Europe were partly offset by higher costs
associated with a weaker US dollar and by a reduction in trading income versus
the same period a year ago. Relative to the second quarter this year weaker
refining margins mainly in Europe were offset by Asia. Marketing earnings were
comparable to the same period last year as margin strength was offset by a 3%
reduction in sales volumes attributable to network optimisation, shedding of
unprofitable volumes and a weak global economy.
In the USA, adjusted earnings were $174 million compared to $63 million a year
ago. Earnings increased as refining margins improved during the quarter and
refining utilisation continued to steadily improve. Refinery intake increased
by 1% versus the same period last year. Cost reductions were realised across
the business as progress continued in delivering acquisition-related synergies.
Retail sales volumes declined by 5% as a result of reduced demand and volume
loss associated with restructuring of the network in line with plan. Offsetting
this decline was an increase in trading volume following the integration of the
US operations with the Shell Global Trading Network. Reduced product demand
continued to impact product pipeline revenue and associated transportation
earnings.
Chemicals
THIRD QUARTER $ million NINE MONTHS
2003 2002 % 2003 2002 %
12 164 -93 Segment earnings 108 361 -70
- - Special credits/(charges) - (10)
12 164 -93 Adjusted segment earnings 108 371 -71
Adjusted earnings for the third quarter were $12 million compared with $164
million a year ago as a result of declining unit margins, higher costs,
business restructuring and asset impairment charges totalling $56 million,
partly offset by higher volumes. Shell lower olefins cracker margins decreased
from a year ago in both Europe and the US. Higher feedstock costs in Europe
coincided with lower product prices. In the US product prices increased from a
year ago, but were offset by higher feedstock and utility costs. Overall
utilisations remain low and unchanged from a year ago. Polyolefins margins
remained depressed though demand improved late in the quarter.
Other industry segments
THIRD QUARTER $ million NINE MONTHS
2003 2002 2003 2002
(160) 42 Segment earnings (227) (88)
- 38 Special credits/(charges) - 38
(160) 4 Adjusted segment earnings (227) (126)
Adjusted earnings for the third quarter were a loss of $160 million compared to
a profit of $4 million in 2002 mainly due to an impairment in Shell Solar ($127
million).
Corporate
THIRD QUARTER $ million NINE MONTHS
2003 2002 2003 2002
(141) (214) Segment net costs (521) (536)
- - Special credits/(charges) - -
(141) (214) Adjusted segment net costs (521) (536)
Third quarter net costs of $141 million were less than a year ago (costs of
$214 million) and reflected non-recurring income ($93 million) and lower
interest rates.
Note
The results shown for the third quarter and nine months are unaudited.
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.
October 23, 2003
Statement of income
QUARTERS $ million NINE MONTHS
Q3 Q2 Q3
2003 2003 2002 % * 2003 2002 %
66,134 64,880 59,301 +12 Sales proceeds ** 200,388 162,307 +23
Sales taxes, excise duties
and
16,669 16,805 14,518 similar levies 49,033 40,433
___________ ___________ ___________ ___________ ___________
49,465 48,075 44,783 +10 Net proceeds 151,355 121,874 +24
41,177 40,027 37,171 Cost of sales ** 124,683 101,626
___________ ___________ ___________ ___________ ___________
8,288 8,048 7,612 +9 Gross profit 26,672 20,248 +32
Selling, distribution and
3,338 3,427 2,807 administrative expenses 9,788 7,944
194 152 161 Exploration 594 640
152 145 121 Research and development 429 337
___________ ___________ ___________ ___________ ___________
4,604 4,324 4,523 +2 Operating profit of Group 15,861 11,327 +40
companies
Share of operating profit
of
653 836 709 associated companies 2,685 2,124
___________ ___________ ___________ ___________ ___________
5,257 5,160 5,232 - Operating profit 18,546 13,451 +38
221 175 211 Interest and other income 1,865 572
352 300 441 Interest expense 1,026 943
(16) (102) (32) Currency exchange gains/ (135) (100)
(losses)
___________ ___________ ___________ ___________ ___________
5,110 4,933 4,970 +3 Income before taxation 19,250 12,980 +48
2,324 2,038 2,275 Taxation 8,149 5,800
___________ ___________ ___________ ___________ ___________
2,786 2,895 2,695 +3 Income after taxation 11,101 7,180 +55
121 67 64 Minority interests 277 75
___________ ___________ ___________ ___________ ___________
2,665 2,828 2,631 +1 NET INCOME 10,824 7,105 +52
___________ ___________ ___________ ___________ ___________
* Q3 on Q3 change
** Certain amounts for 2002 have been reclassified (see note 1)
Earnings by industry segment
QUARTERS $ million NINE MONTHS
Q3 Q2 Q3
2003 2003 2002 % * 2003 2002 %
Exploration and Production:
1,303 1,374 1,173 +11 World outside USA 4,984 3,636 +37
754 649 526 +43 USA 2,138 1,392 +54
___________ ___________ ___________ ___________ ___________
2,057 2,023 1,699 +21 7,122 5,028 +42
___________ ___________ ___________ ___________ ___________
Gas & Power:
90 356 211 -57 World outside USA 1,918 575 +234
(25) 96 (15) USA 105 3
___________ ___________ ___________ ___________ ___________
65 452 196 -67 2,023 578 +250
___________ ___________ ___________ ___________ ___________
Oil Products:
706 839 464 +52 World outside USA 2,474 1,168 +112
174 136 119 +46 USA 437 102 +328
___________ ___________ ___________ ___________ ___________
880 975 583 +51 2,911 1,270 +129
___________ ___________ ___________ ___________ ___________
Chemicals:
75 166 189 -60 World outside USA 437 429 +2
(63) (55) (25) USA (329) (68)
___________ ___________ ___________ ___________ ___________
12 111 164 -93 108 361 -70
___________ ___________ ___________ ___________ ___________
(160) (27) 42 Other industry segments (227) (88)
___________ ___________ ___________ ___________ ___________
2,854 3,534 2,684 +6 TOTAL OPERATING SEGMENTS 11,937 7,149 +67
___________ ___________ ___________ ___________ ___________
Corporate:
(155) (178) (268) Interest income/(expense) (592) (503)
(31) (19) (16) Currency exchange gains/ (60) 9
(losses)
45 85 70 Other - including taxation 131 (42)
___________ ___________ ___________ ___________ ___________
(141) (112) (214) (521) (536)
___________ ___________ ___________ ___________ ___________
(118) (86) (51) Minority interests (280) (17)
___________ ___________ ___________ ___________ ___________
2,595 3,336 2,419 +7 CCS EARNINGS 11,136 6,596 +69
___________ ___________ ___________ ___________ ___________
70 (508) 212 CCS adjustment (312) 509
___________ ___________ ___________ ___________ ___________
2,665 2,828 2,631 +1 NET INCOME 10,824 7,105 +52
___________ ___________ ___________ ___________ ___________
* Q3 on Q3 change
Summarised statement of assets and liabilities
$ million
Sept 30 June 30 Sept 30
2003 2003 2002
Fixed assets:
Tangible fixed assets 86,034 82,377 75,882
Intangible fixed assets 4,809 4,747 1,362
Investments 21,479 21,454 20,214
___________ ___________ ___________
112,322 108,578 97,458
___________ ___________ ___________
Other long-term assets 8,232 8,025 8,280
Current assets:
Inventories 11,413 10,976 10,295
Accounts receivable 27,665 28,246 25,916
Cash and cash equivalents 2,467 1,937 4,318
___________ ___________ ___________
41,545 41,159 40,529
___________ ___________ ___________
Current liabilities:
Short-term debt 12,248 9,564 14,331
Accounts payable and 28,911 30,650 27,713
accrued liabilities
Taxes payable 8,050 7,234 7,056
Dividends payable to - 2,520 -
Parent Companies
___________ ___________ ___________
49,209 49,968 49,100
___________ ___________ ___________
Net current assets/ (7,664) (8,809) (8,571)
(liabilities)
___________ ___________ ___________
Total assets less current 112,890 107,794 97,167
liabilities
___________ ___________ ___________
Long-term liabilities:
Long-term debt 9,299 7,209 5,225
Other 5,923 6,048 5,761
___________ ___________ ___________
15,222 13,257 10,986
___________ ___________ ___________
Provisions:
Deferred taxation 12,486 12,428 12,568
Other 9,433 9,469 6,839
___________ ___________ ___________
21,919 21,897 19,407
___________ ___________ ___________
Minority interests 3,135 3,240 3,517
___________ ___________ ___________
NET ASSETS 72,614 69,400 63,257
___________ ___________ ___________
Summarised statement of cash flows (Note 6)
QUARTERS $ million NINE MONTHS
Q3 Q2 Q3
2003 2003 2002 2003 2002
CASH FLOW PROVIDED BY
OPERATING ACTIVITIES:
2,665 2,828 2,631 Net income 10,824 7,105
2,995 2,390 2,228 Depreciation, depletion 7,883 6,014
and amortisation
(315) (149) (156) (Profit)/loss on sale of (1,765) (329)
assets
292 550 1,091 Decrease/(increase) in 1,098 (580)
net working capital
Associated companies:
196 168 65 dividends more/(less) 138 83
than net income
(251) 128 185 Deferred taxation and 119 26
other provisions
(405) (490) (440) Other (1,007) (352)
___________ ___________ ___________ ___________ ___________
5,177 5,425 5,604 Cash flow provided by 17,290 11,967
operating activities
___________ ___________ ___________ ___________ ___________
CASH FLOW USED IN
INVESTING ACTIVITIES:
(3,124) (3,081) (3,534) Capital expenditure (8,378) (15,433)
911 105 376 Proceeds from sale of 1,284 836
assets
(150) 130 (152) Net investments in (341) (489)
associated companies
475 44 29 Proceeds from sale and 2,194 32
other movements in
investments
___________ ___________ ___________ ___________ ___________
(1,888) (2,802) (3,281) Cash flow used in (5,241) (15,054)
investing activities
___________ ___________ ___________ ___________ ___________
CASH FLOW PROVIDED BY/
(USED IN) FINANCING
ACTIVITIES:
(448) 306 (1,869) Net increase/(decrease) (551) (1,644)
in long-term debt
1,366 (445) 2,894 Net increase/(decrease) (2,050) 9,861
in short-term debt
(1,109) (465) 10 Change in minority (1,562) 415
interests
(2,469) (3,779) (3,172) Dividends paid to: (6,248) (6,961)
Parent Companies
(93) (108) (30) Minority interests (244) (174)
___________ ___________ ___________ ___________ ___________
(2,753) (4,491) (2,167) Cash flow provided by/ (10,655) 1,497
(used in) financing
activities
___________ ___________ ___________ ___________ ___________
Parent Companies'
shares: net
(14) (253) 29 sales/(purchases) and (582) (875)
dividends received
Currency translation
differences relating
8 67 (8) to cash and cash 99 113
equivalents
___________ ___________ ___________ ___________ ___________
530 (2,054) 177 INCREASE/(DECREASE) IN 911 (2,352)
CASH AND CASH
EQUIVALENTS
___________ ___________ ___________ ___________ ___________
Operational data
QUARTERS NINE MONTHS
Q3 Q2 Q3
2003 2003 2002 %* 2003 2002 %
thousand b/d CRUDE OIL PRODUCTION thousand b/d
633 665 710 Europe 679 682
1,201 1,132 1,196 Other Eastern Hemisphere 1,149 1,134
389 423 463 USA 424 440
178 141 105 Other Western Hemisphere 138 107
___________ ___________ ___________ _________ _________
2,401 2,361 2,474 -3 2,390 2,363 +1
___________ ___________ ___________ _________ _________
million scf/d ** NATURAL GAS PRODUCTION million scf/d **
AVAILABLE FOR SALE
2,139 2,649 2,537 Europe 3,328 3,310
3,260 3,350 3,518 Other Eastern Hemisphere 3,247 3,455
1,455 1,627 1,780 USA 1,571 1,671
612 645 688 Other Western Hemisphere 634 678
___________ ___________ ___________ _________ _________
7,466 8,271 8,523 -12 8,780 9,114 -4
___________ ___________ ___________ _________ _________
million scm/d *** million scm/d ***
61 75 72 Europe 94 94
92 95 100 Other Eastern Hemisphere 92 98
41 46 50 USA 44 47
17 18 19 Other Western Hemisphere 18 19
___________ ___________ ___________ _________ _________
211 234 241 -12 248 258 -4
___________ ___________ ___________ _________ _________
million tonnes LIQUEFIED NATURAL GAS million tonnes
(LNG)
2.31 2.22 2.35 -2 Equity LNG sales volume 6.86 6.55 +5
$/bbl Realised Oil Prices $/bbl
27.54 25.03 25.18 WOUSA 27.52 22.90
26.94 25.23 24.84 USA 27.13 22.11
27.46 25.06 25.13 Global 27.46 22.77
$/thousand scf Realised Gas Prices $/thousand scf
2.73 2.69 1.97 WOUSA 2.70 2.05
5.15 5.63 3.23 USA 5.91 3.04
3.31 3.36 2.28 Global 3.38 2.26
* Q3 on Q3 change
** scf/d = standard cubic feet per day
*** scm/d = standard cubic metres per day
Operational data (continued)
QUARTERS NINE MONTHS
Q3 Q2 Q3
2003 2003 2002 %* 2003 2002 %
thousand b/d thousand b/d
REFINERY PROCESSING INTAKE
1,732 1,736 1,792 Europe 1,761 1,744
952 960 925 Other Eastern Hemisphere 959 925
1,063 1,097 1,056 USA 1,066 1,075
366 334 357 Other Western Hemisphere 349 307
_________ _________ _________ _________ _________
4,113 4,127 4,130 - 4,135 4,051 +2
_________ _________ _________ _________ _________
OIL SALES
2,778 2,820 2,770 Gasolines 2,758 2,785
844 745 861 Kerosines 799 775
2,290 2,302 2,418 Gas/Diesel oils 2,285 2,303
762 849 652 Fuel oil 825 738
734 758 766 Other products 740 763
_________ _________ _________ _________ _________
7,408 7,474 7,467 -1 Total oil products** 7,407 7,364 +1
4,614 4,621 5,038 Crude oil 4,746 5,045
_________ _________ _________ _________ _________
12,022 12,095 12,505 -4 Total oil sales 12,153 12,409 -2
_________ _________ _________ _________ _________
**comprising
2,123 2,115 2,240 Europe 2,099 2,192
1,289 1,286 1,281 Other Eastern Hemisphere 1,283 1,280
2,400 2,503 2,067 USA 2,373 2,138
772 735 788 Other Western Hemisphere 740 774
824 835 1,091 Export sales 912 980
$ million CHEMICAL SALES - NET $ million
PROCEEDS***
1,263 1,490 1,100 Europe 4,272 2,920
790 711 628 Other Eastern Hemisphere 2,258 1,540
1,326 1,390 1,228 USA 4,178 3,469
191 185 158 Other Western Hemisphere 559 355
_________ _________ _________ _________ _________
3,570 3,776 3,114 +15 11,267 8,284 +36
_________ _________ _________ _________ _________
* Q3 on Q3 change
*** Excluding proceeds from chemical trading activities
Capital investment
QUARTERS $ million NINE MONTHS
Q3 Q2 Q3
2003 2003 2002 2003 2002
Capital expenditure:
Exploration and
Production:
1,865 1,807 1,794 World outside USA 4,859 9,555
342 396 501 USA 1,035 1,329
___________ ___________ ___________ ___________ ___________
2,207 2,203 2,295 5,894 10,884
___________ ___________ ___________ ___________ ___________
Gas & Power:
245 222 184 World outside USA 679 283
10 12 1 USA 23 6
___________ ___________ ___________ ___________ ___________
255 234 185 702 289
___________ ___________ ___________ ___________ ___________
Oil Products:
Refining:
100 93 1,103 World outside USA 259 1,298
95 90 218 USA 312 1,628
___________ ___________ ___________ ___________ ___________
195 183 1,321 571 2,926
___________ ___________ ___________ ___________ ___________
Marketing:
236 246 753 World outside USA 597 1,214
52 48 36 USA 139 649
___________ ___________ ___________ ___________ ___________
288 294 789 736 1,863
___________ ___________ ___________ ___________ ___________
Chemicals:
30 32 65 World outside USA 86 186
83 82 103 USA 231 289
___________ ___________ ___________ ___________ ___________
113 114 168 317 475
___________ ___________ ___________ ___________ ___________
66 53 111 Other segments 160 331
___________ ___________ ___________ ___________ ___________
3,124 3,081 4,869 TOTAL CAPITAL 8,380 16,768
EXPENDITURE
___________ ___________ ___________ ___________ ___________
Exploration expense:
151 116 132 World outside USA 406 484
24 37 28 USA 145 154
___________ ___________ ___________ ___________ ___________
175 153 160 551 638
___________ ___________ ___________ ___________ ___________
New equity investments in associated
companies:
57 1 56 World outside USA 177 131
248 9 17 USA 281 220
___________ ___________ ___________ ___________ ___________
305 10 73 458 351
___________ ___________ ___________ ___________ ___________
34 158 246 New loans to associated 388 539
companies
___________ ___________ ___________ ___________ ___________
3,638 3,402 5,348 TOTAL CAPITAL INVESTMENT 9,777 18,296
*
___________ ___________ ___________ ___________ ___________
*comprising
2,389 2,356 2,457 Exploration and 6,452 11,529
Production
470 247 199 Gas & Power 1,006 346
483 473 2,126 Oil Products 1,311 5,015
146 114 208 Chemicals 409 535
116 54 112 Other segments 211 332
34 158 246 New loans to associated 388 539
companies
___________ ___________ ___________ ___________ ___________
3,638 3,402 5,348 9,777 18,296
___________ ___________ ___________ ___________ ___________
Special items (Note 3)
QUARTERS $ million NINE MONTHS
Q3 Q2 Q3
2003 2003 2002 credits/(charges) 2003 2002
Exploration and
Production:
World outside USA
- - - Restructuring and - (68)
redundancy
- - 15 Asset disposals/ - 47
impairment
USA
- - - Asset disposals/ - 101
impairment
___________ ___________ ___________ ___________ ___________
- - 15 - 80
___________ ___________ ___________ ___________ ___________
Gas & Power:
World outside USA
- - 84 Asset disposals/ 1,036 84
impairment
- - - Other - (21)
USA
- - (15) Asset disposals/ - 23
impairment
________ ________ ________ ________ ________
- - 69 1,036 86
___________ ___________ ___________ ___________ ___________
Oil Products:
World outside USA
- - - Restructuring and - (31)
redundancy
- - - Asset disposals/ - (26)
impairment
USA
- - 92 Asset disposals/ - 92
impairment
- - (36) Other - (80)
___________ ___________ ___________ ___________ ___________
- - 56 - (45)
___________ ___________ ___________ ___________ ___________
Chemicals:
USA
- - - Other - (10)
___________ ___________ ___________ ___________ ___________
- - - - (10)
___________ ___________ ___________ ___________ ___________
Other industry
segments:
- - 38 Asset disposals/ - 38
impairment
___________ ___________ ___________ ___________ ___________
- - 38 - 38
___________ ___________ ___________ ___________ ___________
Minority interests:
- - - Asset disposals/ - 11
impairment
___________ ___________ ___________ ___________ ___________
- - - - 11
___________ ___________ ___________ ___________ ___________
___________ ___________ ___________ ___________ ___________
- - 178 SPECIAL ITEMS 1,036 160
___________ ___________ ___________ ___________ ___________
Adjusted CCS earnings by industry segment
QUARTERS $ million NINE MONTHS
Q3 Q2 Q3
2003 2003 2002 % * 2003 2002 %
Exploration and Production:
1,303 1,374 1,158 +13 World outside USA 4,984 3,657 +36
754 649 526 +43 USA 2,138 1,291 +66
Asset retirement obligations (255)
___________ ___________ ___________ ___________ ___________
2,057 2,023 1,684 +22 6,867 4,948 +39
___________ ___________ ___________ ___________ ___________
Gas & Power:
90 356 127 -29 World outside USA 882 512 +72
(25) 96 - - USA 105 (20) -
___________ ___________ ___________ ___________ ___________
65 452 127 -49 987 492 +101
___________ ___________ ___________ ___________ ___________
Oil Products:
706 839 464 +52 World outside USA 2,474 1,225 +102
174 136 63 +176 USA 437 90 +386
___________ ___________ ___________ ___________ ___________
880 975 527 +67 2,911 1,315 +121
___________ ___________ ___________ ___________ ___________
Chemicals:
75 166 189 -60 World outside USA 437 429 +2
(63) (55) (25) USA (329) (58)
___________ ___________ ___________ ___________ ___________
12 111 164 -93 108 371 -71
___________ ___________ ___________ ___________ ___________
(160) (27) 4 Other industry segments (227) (126)
___________ ___________ ___________ ___________ ___________
2,854 3,534 2,506 +14 TOTAL OPERATING SEGMENTS 10,646 7,000 +52
___________ ___________ ___________ ___________ ___________
Corporate:
(155) (178) (268) Interest income/(expense) (592) (503)
(31) (19) (16) Currency exchange gains/ (60) 9
(losses)
45 85 70 Other - including taxation 131 (42)
___________ ___________ ___________ ___________ ___________
(141) (112) (214) (521) (536)
___________ ___________ ___________ ___________ ___________
(118) (86) (51) Minority interests (280) (28)
___________ ___________ ___________ ___________ ___________
2,595 3,336 2,241 +16 ADJUSTED CCS EARNINGS 9,845 6,436 +53
___________ ___________ ___________ ___________ ___________
* Q3 on Q3 change
Proforma earnings per share (Note 7)
QUARTERS NINE MONTHS
Q3 Q2 Q3
2003 2003 2002 2003 2002
ROYAL DUTCH
0.68 0.72 0.77 Net income per share (Euro) 2.83 2.19
0.77 0.81 0.76 Net income per share ($) 3.12 2.03
0.75 0.96 0.69 CCS earnings per share ($) 3.21 1.89
0.66 0.85 0.65 Adjusted CCS earnings per 2.56 1.99
share (Euro)
0.75 0.96 0.64 Adjusted CCS earnings per 2.84 1.84
share ($)
SHELL TRANSPORT
6.8 7.2 7.0 Net income per share (pence) 27.8 19.7
0.66 0.71 0.65 Net income per ADR ($) 2.69 1.75
0.64 0.83 0.60 CCS earnings per ADR ($) 2.76 1.63
6.7 8.5 6.0 Adjusted CCS earnings per 25.3 17.9
share (pence)
0.64 0.83 0.56 Adjusted CCS earnings per ADR 2.44 1.59
($)
Notes
NOTE 1. Accounting policies
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. At the end of the third quarter 2003, FIN 46
(Consolidation of Variable Interest Entities) was implemented with a
consequential increase in tangible fixed assets and liabilities.
Additionally in the third quarter of 2003, US accounting standard FAS 150 was
implemented requiring certain minority interests to be reclassified as debt.
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 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.
NOTE 2. 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 3. 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 4. 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 5. 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 6. 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 7. 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:
Q3 Q2 Q3 Nine Nine
Months Months
2003 2003 2002 2003 2002
Royal Dutch shares of Euro0.56 2,083.5 2,083.5 2,088.4 2,083.5 2,095.8
(millions)
Shell Transport shares of 25p 9,667.5 9,667.5 9,689.5 9,667.5 9,722.6
(millions)
Shares at the end of the following periods are:
Q3 Q2 Q3
2003 2003 2002
Royal Dutch shares of Euro0.56 2,083.5 2,083.5 2,083.7
(millions)
Shell Transport shares of 25p 9,667.5 9,667.5 9,668.5
(millions)
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.
A report by Royal Dutch Petroleum Company and The "Shell" Transport and Trading
Company, p.l.c. on the results of the Royal Dutch/Shell Group of Companies, in
which their interests are 60% and 40% respectively.
END