ROYAL DUTCH SHELL PLC FIRST QUARTER 2020 UNAUDITED RESULTS
ROYAL DUTCH SHELL PLC 1ST QUARTER 2020 UNAUDITED RESULTS |
|
|
|
|
|
SUMMARY OF UNAUDITED RESULTS |
Quarters |
$
million |
|
Q1 2020 |
Q4 2019 |
Q1 2019 |
%¹ |
|
Reference |
(24 |
) |
965 |
|
6,001 |
|
-100 |
Income/(loss) attributable to
shareholders |
|
2,756 |
|
871 |
|
5,293 |
|
-48 |
CCS earnings attributable to
shareholders |
Note
2 |
(104 |
) |
(2,060 |
) |
(8 |
) |
|
Of which: Identified items |
A |
2,860 |
|
2,931 |
|
5,301 |
|
-46 |
CCS
earnings attributable to shareholders excluding identified
items |
|
97 |
|
125 |
|
131 |
|
|
Add:
CCS earnings attributable to non-controlling interest |
|
2,957 |
|
3,056 |
|
5,432 |
|
-46 |
CCS earnings excluding identified
items |
|
|
|
|
|
Of which: |
|
2,143 |
|
1,986 |
|
2,569 |
|
|
Integrated Gas |
|
291 |
|
709 |
|
1,648 |
|
|
Upstream |
|
1,363 |
|
1,501 |
1,448 |
|
Oil Products |
|
148 |
|
(65 |
) |
451 |
|
|
Chemicals |
|
(989 |
) |
(1,075 |
) |
(684 |
) |
|
Corporate |
|
14,851 |
|
10,267 |
|
8,630 |
|
+72 |
Cash flow from operating
activities |
|
(2,718 |
) |
(4,862 |
) |
(4,622 |
) |
|
Cash flow from investing
activities |
|
12,133 |
|
5,405 |
|
4,008 |
|
|
Free
cash flow |
G |
0.00 |
|
0.12 |
|
0.74 |
|
-100 |
Basic earnings per share ($) |
|
0.35 |
|
0.11 |
|
0.65 |
|
-46 |
Basic CCS earnings per share ($) |
B |
0.37 |
|
0.37 |
|
0.65 |
|
-43 |
Basic
CCS earnings per share excl. identified items ($) |
|
0.16 |
|
0.47 |
|
0.47 |
|
-66 |
Dividend per share ($) |
|
1. Q1 on Q1 change.
CCS earnings attributable to shareholders excluding identified
items were $2.9 billion, reflecting lower realised oil, gas and LNG
prices, weaker realised refining and chemicals margins as well as
lower sales volumes, compared with the first quarter 2019. This was
partly offset by favourable movements in deferred tax positions and
lower operating expenses.
Cash flow from operating activities excluding working capital
movements was $7.4 billion, reflecting lower earnings and higher
cost-of-sales adjustment, partly offset by higher cash inflows
related to commodity derivatives and lower tax payments, compared
with the first quarter 2019.
Total dividends distributed to shareholders in the quarter were
$3.5 billion. During the quarter, Shell completed another tranche
of the share buyback programme. Since the launch of the programme,
Shell has bought back almost $16 billion in shares for
cancellation.
Royal Dutch Shell Chief Executive
Officer Ben van Beurden commented: "Under extremely
challenging conditions, Shell is stepping up to protect our people
and support communities around the globe while delivering strong
safety and operational performance across our business. Our
Integrated Gas and Marketing businesses continued to achieve robust
results this quarter, bringing resilience to our cash flows. In
March, we took decisive actions to reduce our spending, increase
our liquidity and position our business to manage the deteriorating
macroeconomic and commodity price outlook. Our integrated business
model, the high quality of our assets and the resourcefulness of
our people have allowed us to respond swiftly.
Given the continued deterioration in the macroeconomic outlook
and the significant mid and long-term uncertainty, we are taking
further prudent steps to bolster our resilience, underpin the
strength of our balance sheet and support the long-term value
creation of Shell. Starting this quarter, the Board has decided to
reduce our quarterly dividend to 16 US cents per share."
Chair of the Board of Royal Dutch Shell
Chad Holliday commented: “Shareholder returns are a
fundamental part of Shell’s financial framework. However, given the
risk of a prolonged period of economic uncertainty, weaker
commodity prices, higher volatility and uncertain demand outlook,
the Board believes that maintaining the current level of
shareholder distributions is not prudent. Following the
announcement not to continue with the next tranche of the share
buyback programme, the Board has also decided to reduce the first
quarter 2020 dividend and reset to 16 US cents per share.
As conditions allow, the Board will continue to
evaluate our capital allocation priorities between ongoing
investment in our business, maintaining a strong balance sheet and
increasing returns to shareholders which remains our ambition"
|
ADDITIONAL PERFORMANCE
MEASURES |
Quarters |
$ million |
|
Q1 2020 |
Q4 2019 |
Q1 2019 |
%¹ |
|
Reference |
4,970 |
6,883 |
5,601 |
|
Cash
capital expenditure |
C |
3,719 |
3,763 |
3,752 |
-1 |
Total
production available for sale (thousand boe/d) |
|
46.53 |
56.60 |
57.42 |
-19 |
Global liquids realised price ($/b) |
|
4.31 |
4.42 |
5.37 |
-20 |
Global
natural gas realised price ($/thousand scf) |
|
8,618 |
10,384 |
8,917 |
-3 |
Operating expenses |
F |
8,600 |
9,993 |
8,865 |
-3 |
Underlying operating expenses |
F |
4.6 |
% |
6.7 |
% |
9.2 |
% |
|
ROACE (Net income basis) |
D |
6.1 |
% |
6.9 |
% |
8.4 |
% |
|
ROACE
(CCS basis excluding identified items) |
D |
28.9 |
% |
29.3 |
% |
26.5 |
% |
|
Gearing |
E |
1. Q1 on Q1 change.
Supplementary financial and operational disclosure for this
quarter is available at www.shell.com/investor.
FIRST QUARTER 2020 PORTFOLIO
DEVELOPMENTS
Integrated Gas
During the quarter, Shell announced that it will
not proceed with the proposed Lake Charles LNG project due to the
current market conditions. Accordingly, Energy Transfer will take
over as the project developer.
In April, Shell took the final investment
decision to develop the first phase of Arrow Energy’s (Shell
interest 50%) Surat Gas Project in Queensland, Australia, which
will bring up to 90 billion cubic feet per year of new gas to
market at peak production.
Oil Products
During the quarter, Shell completed the sale of the Martinez
refinery in the USA to PBF Energy for $1.2 billion, which includes
the refinery and inventory.
PERFORMANCE BY SEGMENT
|
INTEGRATED GAS |
Quarters |
$
million |
Q1 2020 |
Q4 2019 |
Q1 2019 |
%¹ |
|
1,812 |
|
1,897 |
|
2,795 |
|
-35 |
Segment earnings |
(331 |
) |
(89 |
) |
226 |
|
|
Of which: Identified items (Reference A) |
2,143 |
|
1,986 |
|
2,569 |
|
-17 |
Earnings excluding identified items |
3,986 |
|
3,457 |
|
4,227 |
|
-6 |
Cash
flow from operating activities |
3,352 |
|
4,017 |
|
3,715 |
|
-10 |
Cash
flow from operating activities excluding working capital movements
(Reference H) |
882 |
|
1,323 |
|
1,344 |
|
|
Cash
capital expenditure (Reference C) |
162 |
|
161 |
|
137 |
|
+19 |
Liquids production available for sale
(thousand b/d) |
4,596 |
|
4,578 |
|
4,143 |
|
+11 |
Natural gas production available for sale (million scf/d) |
955 |
|
950 |
|
851 |
|
+12 |
Total production available for sale
(thousand boe/d) |
8.88 |
|
9.21 |
|
8.74 |
|
+2 |
LNG
liquefaction volumes (million tonnes) |
19.00 |
|
20.09 |
|
17.51 |
|
+9 |
LNG
sales volumes (million tonnes) |
1. Q1 on Q1 change.
First quarter identified items primarily reflected losses of
$154 million related to the fair value accounting of commodity
derivatives and a charge of $121 million related to the impact of
the weakening Australian dollar on a deferred tax position.
Compared with the first quarter 2019, Integrated Gas earnings
excluding identified items primarily reflected lower realised LNG,
oil and gas prices as well as lower contributions from trading and
optimisation and higher depreciation, partly offset by favourable
movements in deferred tax positions and higher LNG sales
volumes.
Compared with the first quarter 2019, total production increased
by 12% mainly due to lower maintenance activities and field
ramp-ups in Trinidad and Tobago and Australia. LNG liquefaction
volumes increased mainly as a result of lower maintenance
activities and new LNG capacity, partly offset by lower feedgas
availability compared with the first quarter 2019.
Compared with the first quarter 2019, cash flow from operating
activities excluding working capital movements mainly reflected
lower cash earnings, partly offset by higher cash inflows related
to commodity derivatives.
|
UPSTREAM |
Quarters |
$
million |
Q1 2020 |
Q4 2019 |
Q1 2019 |
%¹ |
|
(863 |
) |
(855 |
) |
1,624 |
|
-153 |
Segment earnings |
(1,154 |
) |
(1,564 |
) |
(23 |
) |
|
Of which: Identified items (Reference A) |
291 |
|
709 |
|
1,648 |
|
-82 |
Earnings excluding identified items |
5,607 |
|
3,995 |
|
5,278 |
|
6 |
Cash
flow from operating activities |
3,718 |
|
4,834 |
|
5,263 |
|
-29 |
Cash
flow from operating activities excluding working capital movements
(Reference H) |
2,521 |
|
2,768 |
|
2,491 |
|
|
Cash
capital expenditure (Reference C) |
1,730 |
|
1,716 |
|
1,667 |
|
+4 |
Liquids production available for sale
(thousand b/d) |
5,680 |
|
6,027 |
|
6,864 |
|
-17 |
Natural gas production available for sale (million scf/d) |
2,710 |
|
2,755 |
|
2,850 |
|
-5 |
Total
production available for sale (thousand boe/d) |
1. Q1 on Q1 change.
First quarter identified items primarily reflected a charge of
$776 million related to the impact of the weakening Brazilian real
on a deferred tax position and a charge of $416 million related to
impairments, mainly in Brazil and the USA.
Compared with the first quarter 2019, Upstream earnings
excluding identified items reflected lower realised oil and gas
prices as well as lower total production volumes. Earnings were
also negatively impacted by lower sales volumes associated with the
timing of liftings.
Compared with the first quarter 2019, total production was 5%
lower, mainly due to divestments, field decline and lower
production in the NAM joint venture, partly offset by field
ramp-ups in the Santos Basin, Gulf of Mexico and Permian. Excluding
portfolio impacts, production was in line with the same quarter a
year ago.
Compared with the first quarter 2019, cash flow from operating
activities excluding working capital movements mainly reflected
lower cash earnings, partly offset by lower tax payments.
|
OIL PRODUCTS |
Quarters |
$
million |
Q1 2020 |
Q4 2019 |
Q1 2019 |
%¹ |
|
2,211 |
|
1,183 |
|
1,224 |
|
+81 |
Segment earnings² |
849 |
|
(318 |
) |
(225 |
) |
|
Of which: Identified items (Reference A) |
1,363 |
|
1,501 |
|
1,448 |
|
-6 |
Earnings excluding identified
items² |
|
|
|
|
Of which: |
158 |
|
531 |
|
420 |
|
-62 |
Refining & Trading |
1,205 |
|
971 |
|
1,029 |
|
+17 |
Marketing |
4,878 |
|
2,538 |
|
(598 |
) |
+915 |
Cash flow from operating activities |
353 |
|
3,120 |
|
2,589 |
|
-86 |
Cash
flow from operating activities excluding working capital movements
(Reference H) |
580 |
|
1,628 |
|
853 |
|
|
Cash
capital expenditure (Reference C) |
2,397 |
|
2,438 |
|
2,666 |
|
-10 |
Refinery processing intake (thousand b/d) |
5,278 |
³ |
6,435 |
|
6,467 |
|
-18 |
Oil
Products sales volumes (thousand b/d) |
1. Q1 on Q1 change. 2.
Earnings are presented on a CCS basis (See Note 2).3.
With effect from the first quarter 2020, the reporting of Oil
Products sales volumes has changed (See Note 2). Sales volumes
would be 5,937 thousand b/d in the first quarter 2020 on a
comparable basis with 2019.
First quarter identified items primarily reflected gains of $966
million related to the fair value accounting of commodity
derivatives.
Compared with the first quarter 2019, Oil Products earnings
excluding identified items reflected weaker realised refining
margins and lower contributions from crude oil trading and
optimisation as well as unfavourable movements in deferred tax
positions. This was partly offset by higher realised marketing
margins and lower operating expenses.
Cash flow from operating activities excluding working capital
movements reflected lower earnings and higher cost-of-sales
adjustment, partly offset by increased cash inflows from commodity
derivatives, compared with the first quarter 2019.
The COVID-19 outbreak had a relatively minor impact on Marketing
volumes in the first two months of the first quarter 2020. The
estimated impact in March is a decrease of approximately 15% in
Marketing volumes. The expected impact in the second quarter 2020
is reflected in the outlook section.
With effect from the first quarter 2020, Oil Products sales
volumes reporting has changed. Excluding this impact, Oil Products
sales volumes decreased due to lower refining, trading and
marketing sales volumes compared with the first quarter 2019.
- Refining & Trading earnings excluding
identified items reflected lower realised refining margins and
lower contributions from crude oil trading and optimisation, partly
offset by lower operating expenses, compared with the first quarter
2019.
With effect from the first quarter 2020, Shell discloses
utilisation instead of availability to improve transparency on
refinery production volumes. Utilisation is defined as the actual
usage of the plants as a percentage of the rated capacity. Refinery
utilisation was 81% compared with 79% in the first quarter 2019,
mainly due to lower planned downtime.
- Marketing earnings excluding identified items
reflected higher realised global commercial and retail margins as
well as lower operating expenses, partly offset by lower retail and
aviation sales volumes, compared with the first quarter 2019.
|
CHEMICALS |
Quarters |
$ million |
Q1 2020 |
Q4 2019 |
Q1 2019 |
%¹ |
|
146 |
|
(78 |
) |
452 |
|
-68 |
Segment earnings² |
(2 |
) |
(13 |
) |
2 |
|
|
Of which: Identified items (Reference A) |
148 |
|
(65 |
) |
451 |
|
-67 |
Earnings excluding identified items² |
(178 |
) |
(44 |
) |
(11 |
) |
(1,474) |
Cash
flow from operating activities |
189 |
|
338 |
|
528 |
|
|
Cash
flow from operating activities excluding working capital movements
(Reference H) |
846 |
|
1,023 |
|
828 |
|
|
Cash
capital expenditure (Reference C) |
3,871 |
|
3,454 |
|
4,137 |
|
-6 |
Chemicals sales volumes (thousand tonnes) |
1. Q1 on Q1 change. 2.
Earnings are presented on a CCS basis (See Note 2).
Compared with the first quarter 2019, Chemicals earnings
excluding identified items reflected weaker realised base chemicals
and intermediates margins as well as higher operating expenses.
Cash flow from operating activities excluding working capital
movements reflected lower earnings and higher cost-of-sales
adjustment, partly offset by higher dividends received compared
with the first quarter 2019.
With effect from the first quarter 2020, Shell discloses
utilisation instead of availability to improve transparency on
chemicals production volumes. Utilisation is defined as the actual
usage of the plants as a percentage of the rated capacity.
Chemicals manufacturing plant utilisation was 84%, at a similar
level as in the first quarter 2019.
|
CORPORATE |
Quarters |
$
million |
Q1 2020 |
Q4 2019 |
Q1 2019 |
|
(453 |
) |
(1,151 |
) |
(671 |
) |
Segment earnings |
535 |
|
(76 |
) |
13 |
|
Of which: Identified items (Reference A) |
(989 |
) |
(1,075 |
) |
(684 |
) |
Earnings excluding identified items |
559 |
|
321 |
|
(266 |
) |
Cash flow from operating activities |
(239 |
) |
(9 |
) |
17 |
|
Cash flow from operating activities excluding working capital
movements (Reference H) |
First quarter identified items primarily reflected a gain
related to the impact of the weakening Brazilian real on financing
positions.
Compared with the first quarter 2019, Corporate earnings
excluding identified items reflected adverse currency exchange rate
effects, partly offset by higher tax credits.
OUTLOOK FOR THE SECOND QUARTER 2020
As a result of COVID-19, there is significant uncertainty in the
expected macroeconomic conditions with an expected negative impact
on demand for oil, gas and related products. Furthermore, recent
global developments and uncertainty in oil supply have caused
further volatility in commodity markets. The second quarter 2020
outlook provides ranges for operational and financial metrics based
on current expectations, but these are subject to change in the
light of current evolving market conditions. Due to demand or
regulatory requirements and/or constraints in infrastructure, Shell
may need to take measures to curtail or reduce oil and/or gas
production, LNG liquefaction as well as utilisation of refining and
chemicals plants and similarly sales volumes could be impacted.
These measures would likely have negative impacts on Shell's
operational and financial metrics.
Integrated Gas production is expected to be approximately 840 -
890 thousand boe/d. LNG liquefaction volumes are expected to be
approximately 7.4 - 8.2 million tonnes. More than 90% of the term
contracts for LNG sales are oil price linked with a price lag of
typically 3 - 6 months.
Upstream production is expected to be approximately 1,750 -
2,250 thousand boe/d.
Refinery utilisation is expected to be approximately 60% -
70%.
Oil Products sales volumes are expected to be approximately
3,000 - 4,000 thousand b/d.
Chemicals manufacturing plant utilisation is expected to be
approximately 70% - 80%.
Chemicals sales volumes are expected to be approximately 3,500 -
4,100 thousand tonnes.
Corporate segment earnings excluding identified items are
expected to be a net expense of approximately $800 - 875 million in
the second quarter 2020 and a net expense of approximately $3,200 -
3,500 million for the full year 2020. This excludes the impact of
currency exchange rate effects.
Shell announced a series of operational and financial
initiatives that are expected to result in reduction of underlying
operating expenses by $3-4 billion per annum over the next 12
months compared with 2019 levels; reduction of cash capital
expenditure to $20 billion or below for 2020 from a planned level
of around $25 billion; and material reductions in working capital.
In addition, Shell has decided not to continue with the next
tranche of the share buyback programme following the completion of
the most recent tranche.
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
|
CONSOLIDATED STATEMENT
OF INCOME |
Quarters |
$
million |
Q1 2020 |
Q4 2019 |
Q1 2019 |
|
60,029 |
|
84,006 |
|
83,735 |
|
Revenue¹ |
854 |
|
719 |
|
1,484 |
|
Share of profit of joint ventures and
associates |
76 |
|
340 |
|
443 |
|
Interest and other income |
60,959 |
|
85,066 |
|
85,662 |
|
Total revenue and other income |
43,213 |
|
60,570 |
|
59,923 |
|
Purchases |
5,982 |
|
7,247 |
|
6,354 |
|
Production and manufacturing
expenses |
2,393 |
|
2,831 |
|
2,352 |
|
Selling, distribution and
administrative expenses |
243 |
|
306 |
|
212 |
|
Research and development |
294 |
|
965 |
|
306 |
|
Exploration |
7,093 |
|
9,238 |
|
5,950 |
|
Depreciation, depletion and
amortisation² |
1,118 |
|
1,118 |
|
1,159 |
|
Interest expense |
60,336 |
|
82,275 |
|
76,256 |
|
Total expenditure |
623 |
|
2,791 |
|
9,406 |
|
Income/(loss) before taxation |
646 |
|
1,702 |
|
3,248 |
|
Taxation charge/(credit) |
(23 |
) |
1,089 |
|
6,157 |
|
Income/(loss) for the period¹ |
1 |
|
124 |
|
156 |
|
Income/(loss) attributable to
non-controlling interest |
(24 |
) |
965 |
|
6,001 |
|
Income/(loss) attributable to Royal Dutch Shell plc
shareholders |
0.00 |
|
0.12 |
|
0.74 |
|
Basic earnings per share ($)³ |
0.00 |
|
0.12 |
|
0.73 |
|
Diluted earnings per share ($)³ |
1. See Note 2 “Segment
information”.2. Includes impairment charges of $749
million (Q4 2019: $2,941 million; Q1 2019: $33 million) mainly due
to changes to oil price outlook for 2020. See Note 1.3.
See Note 3 “Earnings per share”.
|
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME |
Quarters |
$
million |
Q1 2020 |
Q4 2019 |
Q1 2019 |
|
(23 |
) |
1,089 |
|
6,157 |
|
Income/(loss) for the period |
|
|
|
Other comprehensive income/(loss) net
of tax: |
|
|
|
Items that may be reclassified to income in later periods: |
(3,935 |
) |
1,467 |
|
176 |
|
- Currency translation differences |
(28 |
) |
(2 |
) |
11 |
|
- Debt instruments remeasurements |
(152 |
) |
(135 |
) |
(446 |
) |
- Cash flow and net investment hedging gains/(losses) |
101 |
|
(45 |
) |
26 |
|
- Deferred cost of hedging |
(60 |
) |
24 |
|
(55 |
) |
- Share of other comprehensive income/(loss) of joint
ventures and associates |
(4,074 |
) |
1,310 |
|
(288 |
) |
Total |
|
|
|
Items that are not reclassified to income in later periods: |
1,756 |
|
2,553 |
|
(1,474 |
) |
- Retirement benefits remeasurements |
(137 |
) |
(5 |
) |
103 |
|
- Equity instruments remeasurements |
48 |
|
6 |
|
1 |
|
- Share of other comprehensive income/(loss) of joint
ventures and associates |
1,667 |
|
2,554 |
|
(1,370 |
) |
Total |
(2,407 |
) |
3,863 |
|
(1,658 |
) |
Other
comprehensive income/(loss) for the period |
(2,430 |
) |
4,952 |
|
4,500 |
|
Comprehensive income/(loss) for the
period |
(123 |
) |
143 |
|
177 |
|
Comprehensive income/(loss) attributable to non-controlling
interest |
(2,307 |
) |
4,809 |
|
4,322 |
|
Comprehensive income/(loss) attributable to Royal Dutch Shell plc
shareholders |
|
CONDENSED CONSOLIDATED
BALANCE SHEET |
$ million |
|
|
|
March 31, 2020 |
December 31, 2019 |
Assets |
|
|
Non-current assets |
|
|
Intangible assets |
23,218 |
|
23,486 |
|
Property, plant and equipment |
232,099 |
|
238,349 |
|
Joint ventures and associates |
22,646 |
|
22,808 |
|
Investments in securities |
2,884 |
|
2,989 |
|
Deferred tax |
10,706 |
|
10,524 |
|
Retirement benefits |
8,352 |
|
4,717 |
|
Trade and other receivables |
7,871 |
|
8,085 |
|
Derivative financial instruments¹ |
1,212 |
|
689 |
|
|
308,988 |
|
311,647 |
|
Current assets |
|
|
Inventories² |
13,897 |
|
24,071 |
|
Trade and other receivables |
36,798 |
|
43,414 |
|
Derivative financial instruments¹ |
12,467 |
|
7,149 |
|
Cash and cash equivalents |
21,811 |
|
18,055 |
|
|
84,973 |
|
92,689 |
|
Total assets |
393,961 |
|
404,336 |
|
Liabilities |
|
|
Non-current liabilities |
|
|
Debt |
79,298 |
|
81,360 |
|
Trade and other payables |
2,705 |
|
2,342 |
|
Derivative financial instruments¹ |
1,807 |
|
1,209 |
|
Deferred tax |
15,084 |
|
14,522 |
|
Retirement benefits |
13,884 |
|
13,017 |
|
Decommissioning and other provisions |
21,562 |
|
21,799 |
|
|
134,339 |
|
134,249 |
|
Current liabilities |
|
|
Debt |
15,767 |
|
15,064 |
|
Trade and other payables |
39,441 |
|
49,208 |
|
Derivative financial instruments¹ |
10,785 |
|
5,429 |
|
Taxes payable |
7,079 |
|
6,693 |
|
Retirement benefits |
402 |
|
419 |
|
Decommissioning and other provisions |
2,769 |
|
2,811 |
|
|
76,243 |
|
79,624 |
|
Total liabilities |
210,582 |
|
213,873 |
|
Equity attributable to Royal Dutch Shell plc shareholders |
179,639 |
|
186,476 |
|
Non-controlling interest |
3,740 |
|
3,987 |
|
Total equity |
183,379 |
|
190,463 |
|
Total liabilities and equity |
393,961 |
|
404,336 |
|
1. See Note 6 “Derivative financial
instruments and debt excluding lease liabilities”.2.
Includes write-downs of $3,726 million to net realisable value at
March 31, 2020. See Note 1.
|
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY |
|
Equity attributable to Royal Dutch Shell plc
shareholders |
|
|
$ million |
Share capital¹ |
Shares held in trust |
Other reserves² |
Retained earnings |
Total |
Non-controlling interest |
Total equity |
At January 1, 2020 |
657 |
|
(1,063 |
) |
14,451 |
|
172,431 |
|
186,476 |
|
3,987 |
|
190,463 |
|
Comprehensive income/(loss) for the period |
— |
|
— |
|
(2,283 |
) |
(24 |
) |
(2,307 |
) |
(123 |
) |
(2,430 |
) |
Transfer from other comprehensive income |
— |
|
— |
|
(6 |
) |
6 |
|
— |
|
— |
|
— |
|
Dividends³ |
— |
|
— |
|
— |
|
(3,482 |
) |
(3,482 |
) |
(110 |
) |
(3,591 |
) |
Repurchases of shares |
(5 |
) |
— |
|
5 |
|
(1,006 |
) |
(1,006 |
) |
— |
|
(1,006 |
) |
Share-based compensation |
— |
|
585 |
|
(374 |
) |
(253 |
) |
(43 |
) |
— |
|
(43 |
) |
Other changes in non-controlling interest |
— |
|
— |
|
— |
|
1 |
|
1 |
|
(14 |
) |
(14 |
) |
At March 31, 2020 |
652 |
|
(479 |
) |
11,794 |
|
167,672 |
|
179,639 |
|
3,740 |
|
183,379 |
|
At January 1, 2019 |
685 |
|
(1,260 |
) |
16,615 |
|
182,610 |
|
198,650 |
|
3,888 |
|
202,538 |
|
Comprehensive income/(loss) for the period |
— |
|
— |
|
(1,679 |
) |
6,001 |
|
4,322 |
|
177 |
|
4,499 |
|
Transfer from other comprehensive income |
— |
|
— |
|
(89 |
) |
89 |
|
— |
|
— |
|
— |
|
Dividends |
— |
|
— |
|
— |
|
(3,875 |
) |
(3,875 |
) |
(119 |
) |
(3,994 |
) |
Repurchases of shares |
(6 |
) |
— |
|
6 |
|
(2,513 |
) |
(2,513 |
) |
— |
|
(2,513 |
) |
Share-based compensation |
— |
|
849 |
|
(384 |
) |
(724 |
) |
(259 |
) |
— |
|
(259 |
) |
Other changes in non-controlling interest |
— |
|
— |
|
— |
|
— |
|
— |
|
(16 |
) |
(16 |
) |
At March 31, 2019 |
680 |
|
(411 |
) |
14,468 |
|
181,588 |
|
196,325 |
|
3,931 |
|
200,256 |
|
1. See Note 4 “Share capital”.2.
See Note 5 “Other reserves”.3. The amount charged to
retained earnings is based on prevailing exchange rates on payment
date.
|
CONSOLIDATED STATEMENT
OF CASH FLOWS |
Quarters |
$
million |
Q1 2020 |
Q4 2019 |
Q1 2019 |
|
623 |
|
2,791 |
|
9,406 |
|
Income before
taxation for the period |
|
|
|
Adjustment
for: |
897 |
|
859 |
|
896 |
|
- Interest
expense (net) |
7,093 |
|
9,238 |
|
5,950 |
|
-
Depreciation, depletion and amortisation |
83 |
|
496 |
|
119 |
|
- Exploration
well write-offs |
106 |
|
(36 |
) |
(65 |
) |
- Net (gains)/losses on sale and
revaluation of non-current assets and businesses |
(854 |
) |
(719 |
) |
(1,484 |
) |
- Share of
(profit)/loss of joint ventures and associates |
531 |
|
1,318 |
|
744 |
|
- Dividends
received from joint ventures and associates |
9,594 |
|
(546 |
) |
(2,841 |
) |
-
(Increase)/decrease in inventories |
6,314 |
|
(2,448 |
) |
(1,425 |
) |
-
(Increase)/decrease in current receivables |
(8,430 |
) |
961 |
|
783 |
|
-
Increase/(decrease) in current payables |
(171 |
) |
254 |
|
(1,109 |
) |
- Derivative
financial instruments |
(91 |
) |
217 |
|
22 |
|
- Retirement
benefits |
(102 |
) |
(141 |
) |
(302 |
) |
-
Decommissioning and other provisions |
579 |
|
(82 |
) |
26 |
|
- Other |
(1,321 |
) |
(1,894 |
) |
(2,089 |
) |
Tax paid |
14,851 |
|
10,267 |
|
8,630 |
|
Cash flow from operating activities |
(4,263 |
) |
(6,707 |
) |
(5,121 |
) |
Capital
expenditure |
(559 |
) |
(112 |
) |
(441 |
) |
Investments in
joint ventures and associates |
(147 |
) |
(65 |
) |
(39 |
) |
Investments in
equity securities |
1,613 |
|
1,049 |
|
178 |
|
Proceeds from
sale of property, plant and equipment and businesses |
547 |
|
1,032 |
|
544 |
|
Proceeds from
sale of joint ventures and associates |
73 |
|
55 |
|
271 |
|
Proceeds from
sale of equity securities |
192 |
|
224 |
|
237 |
|
Interest
received |
855 |
|
918 |
|
680 |
|
Other
investing cash inflows |
(1,028 |
) |
(1,255 |
) |
(931 |
) |
Other
investing cash outflows |
(2,718 |
) |
(4,862 |
) |
(4,622 |
) |
Cash flow from investing activities |
321 |
|
(406 |
) |
(91 |
) |
Net
increase/(decrease) in debt with maturity period within three
months |
|
|
|
Other
debt: |
1,003 |
|
8,758 |
|
140 |
|
- New
borrowings |
(2,723 |
) |
(2,731 |
) |
(1,533 |
) |
-
Repayments |
(1,033 |
) |
(1,232 |
) |
(1,115 |
) |
Interest
paid |
(81 |
) |
(124 |
) |
(45 |
) |
Derivative
financial instruments |
(8 |
) |
2 |
|
(2 |
) |
Change in
non-controlling interest |
|
|
|
Cash dividends
paid to: |
(3,483 |
) |
(3,725 |
) |
(3,875 |
) |
- Royal Dutch
Shell plc shareholders |
(110 |
) |
(133 |
) |
(68 |
) |
-
Non-controlling interest |
(1,486 |
) |
(2,848 |
) |
(2,255 |
) |
Repurchases of
shares |
(182 |
) |
(618 |
) |
(456 |
) |
Shares held in
trust: net sales/(purchases) and dividends received |
(7,781 |
) |
(3,057 |
) |
(9,300 |
) |
Cash flow from financing activities |
(595 |
) |
289 |
|
21 |
|
Currency
translation differences relating to cash and cash equivalents |
3,756 |
|
2,637 |
|
(5,271 |
) |
Increase/(decrease) in cash and cash equivalents |
18,055 |
|
15,417 |
|
26,741 |
|
Cash and cash equivalents at beginning of period |
21,811 |
|
18,055 |
|
21,470 |
|
Cash and cash equivalents at end of period |
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
1. Basis of preparation
These unaudited Condensed Consolidated Interim Financial
Statements ("Interim Statements") of Royal Dutch Shell plc (“the
Company”) and its subsidiaries (collectively referred to as
“Shell”) have been prepared in accordance with IAS 34 Interim
Financial Reporting as issued by the International Accounting
Standards Board (IASB) and as adopted by the European Union, and on
the basis of the same accounting principles as those used in the
Annual Report and Accounts (pages 190 to 238) and Form 20-F (pages
142 to 189) for the year ended December 31, 2019 as filed with
the Registrar for Companies for England and Wales and the US
Securities and Exchange Commission, respectively, and should be
read in conjunction with these filings.
The financial information presented in the unaudited Interim
Statements does not constitute statutory accounts within the
meaning of section 434(3) of the Companies Act 2006 (“the Act”).
Statutory accounts for the year ended December 31, 2019 were
published in Shell’s Annual Report and Accounts, a copy of which
was delivered to the Registrar of Companies for England and Wales,
and in Shell's Form 20-F. The auditor’s report on those accounts
was unqualified, did not include a reference to any matters to
which the auditor drew attention by way of emphasis without
qualifying the report and did not contain a statement under
sections 498(2) or 498(3) of the Act.
Key accounting considerations related to COVID-19 and
the macroeconomic environment
Impairment
As a result of COVID-19 and the significant oil price drop in
the first quarter 2020, oil and gas price assumptions applied for
impairment testing were reviewed. On that basis, Shell has lowered
its short-term price outlook for the remainder of 2020, which was
the basis for impairment in the first quarter 2020.
Because of COVID-19 and OPEC+ actions there remains significant
demand and supply uncertainties and accordingly, the medium and
long-term price outlook also remain uncertain. As per normal
process outlined in the 2019 Annual Report and Accounts and Form
20-F, these price assumptions are subject to review later this
year.
For the impairments in the first quarter 2020, see footnote 2 on
the Consolidated Statement of Income on page 8.
Inventories
As per accounting policies disclosed in Shell's 2019 Annual
Report and Accounts and Form 20-F, inventories are stated at cost
or net realisable value (‘NRV’), whichever is lower.
For the write-downs to NRV at March 31, 2020 see footnote 2 on
the Condensed Consolidated Balance Sheet on page 9.
2. Segment information
With effect from 2020, Shell's reporting segments consist of
Integrated Gas, Upstream, Oil Products, Chemicals and Corporate,
reflecting the way Shell reviews and assesses its performance. Oil
Products and Chemicals businesses were previously reported under
the Downstream segment. Oil sands mining activities, previously
included in the Upstream segment, are reported under Oil Products.
Comparative information has been reclassified.
Segment earnings are presented on a current cost of supplies
basis (CCS earnings), which is the earnings measure used by the
Chief Executive Officer for the purposes of making decisions about
allocating resources and assessing performance. On this basis, the
purchase price of volumes sold during the period is based on the
current cost of supplies during the same period after making
allowance for the tax effect. CCS earnings therefore exclude the
effect of changes in the oil price on inventory carrying amounts.
Sales between segments are based on prices generally equivalent to
commercially available prices.
With effect from January 1, 2020, additional contracts are
classified as held for trading purposes and consequently revenue is
reported on a net rather than gross basis. The effect on revenue
for the first quarter 2020 is a reduction of $16,313 million.
|
INFORMATION BY SEGMENT |
Quarters |
$
million |
Q1 2020 |
Q4 2019 |
Q1 2019 |
|
|
|
|
Third-party revenue |
10,157 |
|
11,006 |
|
11,639 |
|
Integrated Gas |
2,344 |
|
2,604 |
|
2,301 |
|
Upstream |
44,297 |
|
67,354 |
|
66,051 |
|
Oil Products |
3,221 |
|
3,033 |
|
3,733 |
|
Chemicals |
11 |
|
9 |
|
11 |
|
Corporate |
60,029 |
|
84,006 |
|
83,735 |
|
Total third-party revenue¹ |
|
|
|
Inter-segment revenue² |
891 |
|
1,117 |
|
1,092 |
|
Integrated Gas |
6,476 |
|
9,416 |
|
9,532 |
|
Upstream |
1,851 |
|
1,629 |
|
2,180 |
|
Oil Products |
875 |
|
854 |
|
966 |
|
Chemicals |
— |
|
— |
|
— |
|
Corporate |
|
|
|
CCS earnings |
1,812 |
|
1,897 |
|
2,795 |
|
Integrated Gas |
(863 |
) |
(855 |
) |
1,624 |
|
Upstream |
2,211 |
|
1,183 |
|
1,224 |
|
Oil Products |
146 |
|
(78 |
) |
452 |
|
Chemicals |
(453 |
) |
(1,151 |
) |
(671 |
) |
Corporate |
2,854 |
|
996 |
|
5,424 |
|
Total |
1. Includes revenue from sources other than
from contracts with customers, which mainly comprises the impact of
fair value accounting of commodity derivatives. First quarter 2020
included income of $6,686 million (Q4 2019: $594 million income; Q1
2019: $737 million income). This amount includes both the reversal
of prior gains of $317 million related to sales contracts and prior
losses of $76 million related to purchase contracts that were
previously recognised and where physical settlement has taken place
in the first quarter 2020. This disclosure reflects the application
of IFRIC agenda decision ‘Physical settlement of contracts to buy
or sell a non-financial item (IFRS 9)’. 2. Comparative
information for inter-segment revenue for Upstream, Oil Products
and Chemicals has been revised to conform with reporting segment
changes applicable from 2020. Inter-segment revenue for Integrated
Gas for the first quarter 2019 has been revised from $984 million
to amend for certain intra-segment transactions previously reported
as inter-segment revenue.
|
RECONCILIATION OF INCOME FOR THE PERIOD TO CCS EARNINGS |
Quarters |
$
million |
Q1 2020 |
Q4 2019 |
Q1 2019 |
|
(24 |
) |
965 |
|
6,001 |
|
Income/(loss) attributable to Royal
Dutch Shell plc shareholders |
1 |
|
124 |
|
156 |
|
Income/(loss) attributable to non-controlling interest |
(23 |
) |
1,089 |
|
6,157 |
|
Income/(loss) for the
period |
|
|
|
Current cost of supplies
adjustment: |
3,774 |
|
(69 |
) |
(985 |
) |
Purchases |
(916 |
) |
13 |
|
236 |
|
Taxation |
19 |
|
(37 |
) |
16 |
|
Share
of profit/(loss) of joint ventures and associates |
2,876 |
|
(93 |
) |
(733 |
) |
Current cost of supplies adjustment¹ |
2,854 |
|
996 |
|
5,424 |
|
CCS earnings |
|
|
|
of which: |
2,756 |
|
871 |
|
5,293 |
|
CCS earnings attributable to Royal
Dutch Shell plc shareholders |
97 |
|
125 |
|
131 |
|
CCS
earnings attributable to non-controlling interest |
1. The adjustment attributable to Royal Dutch
Shell plc shareholders is a positive $2,780 million in the first
quarter 2020 (Q4 2019: negative $94 million; Q1 2019: negative $708
million)
3. Earnings per share
|
EARNINGS PER
SHARE |
Quarters |
|
Q1 2020 |
Q4 2019 |
Q1 2019 |
|
(24 |
) |
965 |
|
6,001 |
|
Income/(loss) attributable to Royal
Dutch Shell plc shareholders ($ million) |
|
|
|
Weighted average number of shares used
as the basis for determining: |
7,819.8 |
|
7,907.2 |
|
8,152.2 |
|
Basic earnings per share (million) |
7,819.8 |
|
7,962.5 |
|
8,210.7 |
|
Diluted earnings per share (million) |
4. Share capital
|
ISSUED AND FULLY PAID
ORDINARY SHARES OF €0.07 EACH1 |
|
Number of shares |
Nominal value ($ million) |
|
A |
B |
A |
B |
Total |
At January 1, 2020 |
4,151,787,517 |
|
3,729,407,107 |
|
349 |
308 |
657 |
Repurchases of shares |
(46,143,892) |
(15,422,859) |
(4) |
(1) |
(5) |
At March 31, 2020 |
4,105,643,625 |
|
3,713,984,248 |
|
345 |
307 |
652 |
At January 1, 2019 |
4,471,889,296 |
|
3,745,486,731 |
|
376 |
309 |
685 |
Repurchases of shares |
(72,531,119) |
— |
|
(6) |
— |
(6) |
At March 31, 2019 |
4,399,358,177 |
|
3,745,486,731 |
|
371 |
309 |
680 |
1. Share capital at March 31, 2020 also
included 50,000 issued and fully paid sterling deferred shares of
£1 each.
At Royal Dutch Shell plc’s Annual General Meeting on May 21,
2019, the Board was authorised to allot ordinary shares in Royal
Dutch Shell plc, and to grant rights to subscribe for, or to
convert, any security into ordinary shares in Royal Dutch Shell
plc, up to an aggregate nominal amount of €190 million
(representing 2,720 million ordinary shares of €0.07 each), and to
list such shares or rights on any stock exchange. This authority
expires at the earlier of the close of business on August 21, 2020,
and the end of the Annual General Meeting to be held in 2020,
unless previously renewed, revoked or varied by Royal Dutch Shell
plc in a general meeting.
5. Other reserves
|
OTHER RESERVES |
$ million |
Merger reserve |
Share premium reserve |
Capital redemption reserve |
Share plan reserve |
Accumulated other comprehensive income |
Total |
At January 1, 2020 |
37,298 |
|
154 |
|
123 |
|
1,049 |
|
(24,173 |
) |
14,451 |
|
Other comprehensive income/(loss)
attributable to Royal Dutch Shell plc shareholders |
— |
|
— |
|
— |
|
— |
|
(2,283 |
) |
(2,283 |
) |
Transfer from other comprehensive
income |
— |
|
— |
|
— |
|
— |
|
(6 |
) |
(6 |
) |
Repurchases of shares |
— |
|
— |
|
5 |
|
— |
|
— |
|
5 |
|
Share-based compensation |
— |
|
— |
|
— |
|
(374 |
) |
— |
|
(374 |
) |
At March 31, 2020 |
37,298 |
|
154 |
|
128 |
|
675 |
|
(26,462 |
) |
11,794 |
|
At January 1, 2019 |
37,298 |
|
154 |
|
95 |
|
1,098 |
|
(22,030 |
) |
16,615 |
|
Other comprehensive income/(loss)
attributable to Royal Dutch Shell plc shareholders |
— |
|
— |
|
— |
|
— |
|
(1,679 |
) |
(1,679 |
) |
Transfer from other comprehensive
income |
— |
|
— |
|
— |
|
— |
|
(89 |
) |
(89 |
) |
Repurchases of shares |
— |
|
— |
|
6 |
|
— |
|
— |
|
6 |
|
Share-based compensation |
— |
|
— |
|
— |
|
(384 |
) |
— |
|
(384 |
) |
At March 31, 2019 |
37,298 |
|
154 |
|
101 |
|
713 |
|
(23,797 |
) |
14,468 |
|
The merger reserve and share premium reserve were established as
a consequence of Royal Dutch Shell plc becoming the single parent
company of Royal Dutch Petroleum Company and The “Shell” Transport
and Trading Company, p.l.c., now The Shell Transport and Trading
Company Limited, in 2005. The merger reserve increased in 2016
following the issuance of shares for the acquisition of BG Group
plc. The capital redemption reserve was established in connection
with repurchases of shares of Royal Dutch Shell plc. The share plan
reserve is in respect of equity-settled share-based compensation
plans.
6. Derivative financial instruments and debt
excluding lease liabilities
As disclosed in the Consolidated Financial Statements for the
year ended December 31, 2019, presented in the Annual Report
and Accounts and Form 20-F for that year, Shell is exposed to the
risks of changes in fair value of its financial assets and
liabilities. The fair values of the financial assets and
liabilities are defined as the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. Methods and
assumptions used to estimate the fair values at March 31, 2020, are
consistent with those used in the year ended December 31,
2019, though the carrying amounts of derivative financial
instruments measured using predominantly unobservable inputs have
changed since that date.
The table below provides the comparison of the fair value with
the carrying amount of debt excluding lease liabilities, disclosed
in accordance with IFRS 7 Financial Instruments: Disclosures.
|
DEBT EXCLUDING LEASE
LIABILITIES |
$ million |
March 31, 2020 |
December 31, 2019 |
Carrying amount |
65,775 |
|
65,887 |
|
Fair
value¹ |
68,770 |
|
71,163 |
|
1. Mainly determined from the prices quoted
for these securities.
ALTERNATIVE PERFORMANCE (NON-GAAP)
MEASURES
- Identified items
Identified items comprise: divestment gains and losses,
impairments, fair value accounting of commodity derivatives and
certain gas contracts, redundancy and restructuring, the impact of
exchange rate movements on certain deferred tax balances, and other
items. These items, either individually or collectively, can cause
volatility to net income, in some cases driven by external factors,
which may hinder the comparative understanding of Shell’s financial
results from period to period. The impact of identified items on
Shell’s CCS earnings is as follows:
|
IDENTIFIED ITEMS |
Quarters |
$
million |
Q1 2020 |
Q4 2019 |
Q1 2019 |
|
|
|
|
Identified items before tax |
(76 |
) |
128 |
|
65 |
|
Divestment gains/(losses) |
(749 |
) |
(2,941 |
) |
(33 |
) |
Impairments |
968 |
|
616 |
|
(72 |
) |
Fair value accounting of commodity
derivatives and certain gas contracts |
(18 |
) |
(59 |
) |
(53 |
) |
Redundancy and restructuring |
— |
|
(333 |
) |
— |
|
Other |
125 |
|
(2,589 |
) |
(93 |
) |
Total identified items before tax |
|
|
|
Tax impact |
44 |
|
(16 |
) |
(19 |
) |
Divestment gains/(losses) |
213 |
|
700 |
|
(12 |
) |
Impairments |
(131 |
) |
(90 |
) |
104 |
|
Fair value accounting of commodity
derivatives and certain gas contracts |
11 |
|
13 |
|
20 |
|
Redundancy and restructuring |
(366 |
) |
29 |
|
(8 |
) |
Impact of exchange rate movements on
tax balances |
— |
|
(108 |
) |
— |
|
Other |
(228 |
) |
529 |
|
86 |
|
Total tax impact |
|
|
|
Identified items after tax |
(32 |
) |
111 |
|
46 |
|
Divestment gains/(losses) |
(536 |
) |
(2,240 |
) |
(45 |
) |
Impairments |
838 |
|
526 |
|
32 |
|
Fair value accounting of commodity
derivatives and certain gas contracts |
(7 |
) |
(46 |
) |
(33 |
) |
Redundancy and restructuring |
(366 |
) |
29 |
|
(8 |
) |
Impact of exchange rate movements on
tax balances |
— |
|
(441 |
) |
— |
|
Other |
(104 |
) |
(2,060 |
) |
(8 |
) |
Impact on CCS earnings |
|
|
|
Of which: |
(331 |
) |
(89 |
) |
226 |
|
Integrated Gas |
(1,154 |
) |
(1,564 |
) |
(23 |
) |
Upstream |
849 |
|
(318 |
) |
(225 |
) |
Oil Products |
(2 |
) |
(13 |
) |
2 |
|
Chemicals |
535 |
|
(76 |
) |
13 |
|
Corporate |
— |
|
— |
|
— |
|
Impact on
CCS earnings attributable to non-controlling interest |
(104 |
) |
(2,060 |
) |
(8 |
) |
Impact on CCS earnings attributable to shareholders |
The reconciliation from income attributable to RDS plc
shareholders to CCS earnings attributable to RDS plc shareholders
excluding identified items is shown on page 1.
The categories above represent the nature of the items
identified irrespective of whether the items relate to Shell
subsidiaries or joint ventures and associates. The after-tax impact
of identified items of joint ventures and associates is fully
reported within “Share of profit of joint ventures and associates”
in the Consolidated Statement of Income, and fully reported as
“identified items before tax” in the table above. Identified items
related to subsidiaries are consolidated and reported across
appropriate lines of the Consolidated Statement of Income. Only
pre-tax identified items reported by subsidiaries are taken into
account in the calculation of “underlying operating expenses”
(Reference F).
Fair value accounting of commodity derivatives and
certain gas contracts: In the ordinary course of business,
Shell enters into contracts to supply or purchase oil and gas
products, as well as power and environmental products. Shell also
enters into contracts for tolling, pipeline and storage capacity.
Derivative contracts are entered into for mitigation of resulting
economic exposures (generally price exposure) and these derivative
contracts are carried at period-end market price (fair value), with
movements in fair value recognised in income for the period. Supply
and purchase contracts entered into for operational purposes, as
well as contracts for tolling, pipeline and storage capacity, are,
by contrast, recognised when the transaction occurs; furthermore,
inventory is carried at historical cost or net realisable value,
whichever is lower. As a consequence, accounting mismatches occur
because: (a) the supply or purchase transaction is recognised in a
different period, or (b) the inventory is measured on a different
basis. In addition, certain contracts are, due to pricing or
delivery conditions, deemed to contain embedded derivatives or
written options and are also required to be carried at fair value
even though they are entered into for operational purposes. The
accounting impacts are reported as identified items.
Impacts of exchange rate movements on tax
balances represent the impact on tax balances of exchange
rate movements arising on (a) the conversion to dollars of the
local currency tax base of non-monetary assets and liabilities, as
well as losses (this primarily impacts the Upstream and Integrated
Gas segments) and (b) the conversion of dollar-denominated
inter-segment loans to local currency, leading to taxable exchange
rate gains or losses (this primarily impacts the Corporate
segment).
Other identified items represent other credits
or charges Shell’s management assesses should be excluded to
provide additional insight, such as the impact arising from changes
in tax legislation and certain provisions for onerous contracts or
litigation.
B.
Basic CCS earnings per share
Basic CCS earnings per share is calculated as CCS earnings
attributable to Royal Dutch Shell plc shareholders (see Note 2),
divided by the weighted average number of shares used as the basis
for basic earnings per share (see Note 3).
C.
Cash capital expenditure
Cash capital expenditure represents cash spent on maintaining
and developing assets in the period. Management regularly monitors
this measure as a key lever to delivering sustainable cash flows.
Cash capital expenditure is the sum of the following lines from the
Consolidated Statement of Cash flows: Capital expenditure,
Investments in joint ventures and associates and Investments in
equity securities.
With effect from the first quarter 2020, “Capital investment” is
no longer presented in this announcement since Cash capital
expenditure is considered to be more closely aligned with
management’s focus on free cash flow generation.
|
Quarters |
$
million |
Q1 2020 |
Q4 2019 |
Q1 2019 |
|
4,263 |
|
6,707 |
|
5,121 |
|
Capital expenditure |
559 |
|
112 |
|
441 |
|
Investments in joint ventures and
associates |
147 |
|
65 |
|
39 |
|
Investments in equity securities |
4,970 |
|
6,883 |
|
5,601 |
|
Cash capital expenditure |
|
|
|
Of which: |
882 |
|
1,323 |
|
1,344 |
|
Integrated Gas |
2,521 |
|
2,768 |
|
2,491 |
|
Upstream |
580 |
|
1,628 |
|
853 |
|
Oil Products |
846 |
|
1,023 |
|
828 |
|
Chemicals |
141 |
|
141 |
|
86 |
|
Corporate |
D.
Return on average capital employed
Return on average capital employed (ROACE) measures the
efficiency of Shell’s utilisation of the capital that it employs.
Shell uses two ROACE measures: ROACE on a Net income basis and
ROACE on a CCS basis excluding identified items.
Both measures refer to Capital employed which consists of total
equity, current debt and non-current debt.
ROACE on a Net income basisIn this calculation,
the sum of income for the current and previous three quarters,
adjusted for after-tax interest expense, is expressed as a
percentage of the average capital employed for the same period. The
after-tax interest expense is calculated using the effective tax
rate for the same period.
|
$
million |
Quarters |
|
Q1 2020 |
Q4 2019 |
Q1 2019 |
Income - current and previous three quarters |
10,252 |
16,432 |
24,033 |
Interest expense after tax - current and previous three
quarters |
2,854 |
3,024 |
2,601 |
Income before interest expense - current and previous three
quarters |
13,106 |
19,457 |
26,634 |
Capital employed – opening |
292,797 |
295,398 |
289,335 |
Capital employed – closing |
278,444 |
286,887 |
292,797 |
Capital employed – average |
285,620 |
291,142 |
291,066 |
ROACE on a Net income basis |
4.6 |
% |
6.7 |
% |
9.2 |
% |
|
|
|
|
|
|
|
ROACE on a CCS basis excluding identified
itemsIn this calculation, the sum of CCS earnings
excluding identified items for the current and previous three
quarters, adjusted for after-tax interest expense, is expressed as
a percentage of the average capital employed for the same period.
The after-tax interest expense is calculated using the effective
tax rate for the same period.
|
$
million |
Quarters |
|
Q1 2020 |
Q4 2019 |
Q1 2019 |
CCS earnings - current and previous three quarters |
13,256 |
15,827 |
23,964 |
Identified items - current and previous three quarters |
(1,266) |
(1,170 |
) |
2,119 |
Interest expense after tax – current and previous three
quarters |
2,854 |
3,024 |
2,601 |
CCS earnings excluding identified items before interest expense
- current and previous three quarters |
17,376 |
20,021 |
24,446 |
Capital employed – average |
285,620 |
291,142 |
291,066 |
ROACE on a CCS basis excluding identified items |
6.1 |
% |
6.9 |
% |
8.4 |
% |
|
|
|
|
|
|
|
E.
Gearing
Gearing is a key measure of Shell’s capital structure and is
defined as net debt as a percentage of total capital. Net debt is
defined as the sum of current and non-current debt, less cash and
cash equivalents, adjusted for the fair value of derivative
financial instruments used to hedge foreign exchange and interest
rate risks relating to debt, and associated collateral balances.
Management considers this adjustment useful because it reduces the
volatility of net debt caused by fluctuations in foreign exchange
and interest rates, and eliminates the potential impact of related
collateral payments or receipts. Debt-related derivative financial
instruments are a subset of the derivative financial instrument
assets and liabilities presented on the balance sheet. Collateral
balances are reported under “Trade and other receivables” or “Trade
and other payables” as appropriate.
|
$
million |
Quarters |
|
March 31, 2020 |
December 31, 2019 |
March 31, 2019 |
Current debt |
15,767 |
15,064 |
15,381 |
Non-current debt |
79,298 |
81,360 |
77,160 |
Total debt¹ |
95,065 |
96,424 |
92,541 |
Add: Debt-related derivative financial instruments: net
liability/(asset) |
1,218 |
701 |
1,158 |
Add: Collateral on debt-related derivatives: net
liability/(asset) |
(58) |
23 |
27 |
Less: Cash and cash equivalents |
(21,811) |
(18,055) |
(21,470) |
Net debt |
74,413 |
79,093 |
72,256 |
Add: Total equity |
183,379 |
190,463 |
200,256 |
Total capital |
257,792 |
269,557 |
272,512 |
Gearing |
28.9 |
% |
29.3 |
% |
26.5 |
% |
|
|
|
|
|
|
|
1. Includes lease liabilities of $29,290
million at March 31, 2020 and $30,537 million at December 31,
2019.
F.
Operating expenses
Operating expenses is a measure of Shell’s cost management
performance, comprising the following items from the Consolidated
Statement of Income: production and manufacturing expenses;
selling, distribution and administrative expenses; and research and
development expenses. Underlying operating expenses measures
Shell’s total operating expenses performance excluding identified
items.
|
Quarters |
$
million |
Q1 2020 |
Q4 2019 |
Q1 2019 |
|
5,982 |
|
7,247 |
|
6,354 |
|
Production and manufacturing
expenses |
2,393 |
|
2,831 |
|
2,352 |
|
Selling, distribution and
administrative expenses |
243 |
|
306 |
|
212 |
|
Research and development |
8,618 |
|
10,384 |
|
8,917 |
|
Operating expenses |
|
|
|
Of which identified items: |
(18 |
) |
(58 |
) |
(52 |
) |
(Redundancy and restructuring charges)/reversal |
— |
|
(333 |
) |
— |
|
(Provisions)/reversal |
— |
|
— |
|
— |
|
Other |
(18 |
) |
(391 |
) |
(52 |
) |
|
8,600 |
|
9,993 |
|
8,865 |
|
Underlying operating expenses |
G.
Free cash flow
Free cash flow is used to evaluate cash available for financing
activities, including dividend payments and debt servicing, after
investment in maintaining and growing the business. It is defined
as the sum of “Cash flow from operating activities” and “Cash flow
from investing activities”.
Cash flows from acquisition and divestment activities are
removed from Free cash flow to arrive at the Organic free cash
flow, a measure used by management to evaluate the generation of
free cash flow without these activities.
|
Quarters |
$
million |
Q1 2020 |
Q4 2019 |
Q1 2019 |
|
14,851 |
|
10,267 |
|
8,630 |
|
Cash flow from operating
activities |
(2,718 |
) |
(4,862 |
) |
(4,622 |
) |
Cash flow from investing
activities |
12,133 |
|
5,405 |
|
4,008 |
|
Free cash flow |
2,233 |
|
2,135 |
|
993 |
|
Less:
Divestment proceeds (Reference I) |
— |
|
106 |
|
— |
|
Add:
Tax paid on divestments (reported under "Other investing cash
outflows") |
404 |
|
551 |
|
358 |
|
Add:
Cash outflows related to inorganic capital expenditure1 |
10,304 |
|
3,928 |
|
3,373 |
|
Organic free cash flow2 |
|
|
- Cash outflows related to inorganic capital expenditure includes
portfolio actions which expand Shell's activities through
acquisitions and restructuring activities as reported in capital
expenditure lines in the Consolidated Statement of Cash Flows.
- Free cash flow less divestment proceeds, adding back outflows
related to inorganic expenditure.
H.
Cash flow from operating activities excluding working
capital movements
Working capital movements are defined as the sum of the
following items in the Consolidated Statement of Cash Flows:
(i) (increase)/decrease in inventories, (ii) (increase)/decrease in
current receivables, and (iii) increase/(decrease) in current
payables.
Cash flow from operating activities excluding working capital
movements is a measure used by Shell to analyse its operating cash
generation over time excluding the timing effects of changes in
inventories and operating receivables and payables from period to
period.
|
Quarters |
$
million |
Q1 2020 |
Q4 2019 |
Q1 2019 |
|
14,851 |
|
10,267 |
|
8,630 |
|
Cash flow from operating activities |
|
|
|
Of which: |
3,986 |
|
3,457 |
|
4,227 |
|
Integrated Gas |
5,607 |
|
3,995 |
|
5,278 |
|
Upstream |
4,878 |
|
2,538 |
|
(598 |
) |
Oil Products |
(178 |
) |
(44 |
) |
(11) |
Chemicals |
559 |
|
321 |
|
(266 |
) |
Corporate |
9,594 |
|
(546 |
) |
(2,841 |
) |
(Increase)/decrease in inventories |
6,314 |
|
(2,448 |
) |
(1,425 |
) |
(Increase)/decrease in current
receivables |
(8,430 |
) |
961 |
|
783 |
|
Increase/(decrease) in current payables |
7,478 |
|
(2,033 |
) |
(3,483 |
) |
(Increase)/decrease in working capital |
7,373 |
|
12,300 |
|
12,113 |
|
Cash flow from operating activities excluding working
capital movements |
|
|
|
Of which: |
3,352 |
|
4,017 |
|
3,715 |
|
Integrated Gas |
3,718 |
|
4,834 |
|
5,263 |
|
Upstream |
353 |
|
3,120 |
|
2,589 |
|
Oil Products |
189 |
|
338 |
|
528 |
|
Chemicals |
(239 |
) |
(9 |
) |
17 |
|
Corporate |
I.
Divestment proceeds
Divestment proceeds represent cash received from divestment
activities in the period. Management regularly monitors this
measure as a key lever to deliver sustainable cash flow.
|
Quarters |
$
million |
Q1 2020 |
Q4 2019 |
Q1 2019 |
|
1,613 |
|
1,049 |
178 |
Proceeds from sale of property, plant
and equipment and businesses |
547 |
|
1,032 |
544 |
Proceeds from sale of joint ventures
and associates |
73 |
|
55 |
271 |
Proceeds from sale of equity securities |
2,233 |
|
2,135 |
993 |
Divestment proceeds |
CAUTIONARY STATEMENT
All amounts shown throughout this announcement are unaudited.
All peak production figures in Portfolio Developments are quoted at
100% expected production. The numbers presented throughout this
announcement may not sum precisely to the totals provided and
percentages may not precisely reflect the absolute figures, due to
rounding.
The companies in which Royal Dutch Shell plc directly and
indirectly owns investments are separate legal entities. In this
announcement “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 Royal Dutch
Shell plc and its subsidiaries in general or to those who work for
them. These terms are also used where no useful purpose is served
by identifying the particular entity or entities. “Subsidiaries”,
“Shell subsidiaries” and “Shell companies” as used in this
announcement refer to entities over which Royal Dutch Shell plc
either directly or indirectly has control. Entities and
unincorporated arrangements over which Shell has joint control are
generally referred to as “joint ventures” and “joint operations”,
respectively. Entities over which Shell has significant
influence but neither control nor joint control are referred to as
“associates”. The term “Shell interest” is used for convenience to
indicate the direct and/or indirect ownership interest held by
Shell in an entity or unincorporated joint arrangement, after
exclusion of all third-party interest.
This announcement contains forward-looking statements (within
the meaning of the US Private Securities Litigation Reform Act of
1995) 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 “aim”,
“ambition”, “anticipate”, “believe”, “could”, “estimate”, “expect”,
“goals”, “intend”, “may”, “objectives”, “outlook”, “plan”,
“probably”, “project”, “risks”, “schedule”, “seek”, “should”,
“target”, “will” 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
announcement, including (without limitation):
(a) price fluctuations in crude oil and natural gas; (b) changes in
demand for Shell’s products; (c) currency fluctuations;
(d) drilling and
production results; (e) reserves 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 regulatory measures addressing climate
change; (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; (m)
risks associated with the impact of pandemics, such as the COVID-19
(coronavirus) outbreak; and (n) changes in trading conditions. No
assurance is provided that future dividend payments will match or
exceed previous dividend payments. All forward-looking statements
contained in this announcement 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 risk factors that may affect
future results are contained in Royal Dutch Shell’s Form 20-F for
the year ended December 31, 2019 (available at
www.shell.com/investor and www.sec.gov). These risk factors also
expressly qualify all forward-looking statements contained in this
announcement and should be considered by the reader. Each
forward-looking statement speaks only as of the date of this
announcement, April 30, 2020. Neither Royal Dutch Shell plc 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
announcement.This announcement contains references to Shell’s
website. These references are for the readers’ convenience only.
Shell is not incorporating by reference any information posted on
www.shell.com.
We may have used certain terms, such as resources, in this
announcement that the United States Securities and Exchange
Commission (SEC) strictly prohibits us from including in our
filings with the SEC. 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.
This announcement contains inside information.
April 30, 2020
The information in this announcement reflects the unaudited
consolidated financial position and results of Royal Dutch Shell
plc. Company No. 4366849, Registered Office: Shell Centre, London,
SE1 7NA, England, UK. |
Contacts:
- Linda M. Coulter, Company Secretary- Investor Relations:
International + 31 (0) 70 377 4540; North America +1 832 337 2034-
Media: International +44 (0) 207 934 5550; USA +1 832 337 4355
LEI number of Royal Dutch Shell plc:
21380068P1DRHMJ8KU70Classification: Inside Information