ROYAL DUTCH SHELL PLC 2ND QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS

 

 
 
 
ROYAL DUTCH SHELL PLC2ND QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS

 

 
                           
       
SUMMARY OF UNAUDITED RESULTS  
Quarters $ million   Half year
Q2 2020   Q1 2020   Q2 2019     Reference 2020   2019   %
(18,131 ) (24 ) 2,998   -705 Income/(loss) attributable to shareholders   (18,155 ) 8,999   -302
(18,377 ) 2,756   3,025   -707 CCS earnings attributable to shareholders Note 2 (15,620 ) 8,318   -288
638   2,860   3,462   -82 Adjusted Earnings² A 3,498   8,763   -60
2,563   14,851   11,031   -77 Cash flow from operating activities   17,415   19,661   -11
(2,320 ) (2,718 ) (4,166 )   Cash flow from investing activities   (5,039 ) (8,788 )  
243   12,133   6,865     Free cash flow G 12,376   10,873    
3,617   4,970   5,337     Cash capital expenditure C 8,587   10,938    
7,504   8,600   9,477   -21 Underlying operating expenses F 16,105   18,343   -12
(2.9)%   4.6%   8.4%     ROACE (Net income basis) D (2.9)%   8.4%    
5.3%   6.1%   8.2%     ROACE (CCS basis excluding identified items) D 5.3%   8.2%    
32.7%   28.9%   27.6%     Gearing E 32.7%   27.6%    
3,379   3,719   3,583   -6 Total production available for sale (thousand boe/d)   3,549   3,667   -3
(2.33 ) 0.00   0.37   -730 Basic earnings per share ($)   (2.33 ) 1.11   -310
0.16   0.16   0.47   -66 Dividend per share ($)   0.32   0.94   -66

 

   
1.   Q2 on Q2 change.

 

   
2. Adjusted Earnings is defined as income/(loss) attributable to shareholders plus cost of supplies adjustment (see Note 2) and excluding identified items (see Reference A).

 Income attributable to Royal Dutch Shell plc shareholders was a loss of $18.1 billion for the second quarter 2020, which included an impairment charge of $16.8 billion post-tax ($22.3 billion pre-tax), as a result of revised medium- and long-term price and refining margin outlook assumptions in response to the COVID-19 pandemic and macroeconomic conditions as well as energy market demand and supply fundamentals. Second quarter 2020 results reflected lower realised prices for oil, LNG and gas, lower realised refining margins, Oil Products sales volumes and higher well write-offs, compared with the second quarter 2019. This was partly offset by very strong crude and oil products trading and optimisation results as well as lower operating expenses.  Adjusted Earnings were $0.6 billion for the second quarter 2020, reflecting lower realised prices for oil, LNG and gas, lower realised refining margins, Oil Products sales volumes and higher well write-offs, compared with the second quarter 2019. This was partly offset by very strong crude and oil products trading and optimisation results as well as lower operating expenses.  Cash flow from operating activities for the second quarter 2020 was $2.6 billion, which included negative working capital movements of $4 billion. Cash flow from investing activities for the quarter was an outflow of $2.3 billion, driven mainly by capital expenditure, partly offset by proceeds from divestments.  Gearing was 32.7% at the end of the second quarter 2020, compared with 28.9% at the end of the first quarter 2020, mainly driven by the impact of impairments and pension remeasurement, due to actuarial assumption changes mainly caused by falling credit spreads and increasing market estimates of future inflation, as well as a net debt increase in the quarter.  Total dividends distributed to Royal Dutch Shell plc shareholders in the quarter were $1.2 billion. Supplementary financial and operational disclosure and a separate press release for this quarter are available at www.shell.com/investor1.      1. Not incorporated by reference. Page 2   

 
 
 
ROYAL DUTCH SHELL PLC2ND QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS

 SECOND QUARTER 2020 PORTFOLIO DEVELOPMENTS Integrated GasDuring the quarter, all conditions were met for the Final Investment Decision (FID) and contracts were awarded on a new LNG processing unit, known as Train 7, at Nigeria LNG (Shell interest 25.6%), which will add 8 million tonnes per annum (mtpa) of capacity to the Bonny Island facility.  Upstream During the quarter, Shell reached an agreement to sell its Appalachia shale gas position for $541 million, subject to closing adjustments, with an effective date of January 1, 2020, and expected to close in the third quarter 2020.  Page 3   

 
 
 
ROYAL DUTCH SHELL PLC2ND QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS

 PERFORMANCE BY SEGMENT 

 
                         
       
INTEGRATED GAS      
Quarters $ million Half year
Q2 2020   Q1 2020   Q2 2019     2020   2019   %
(7,959 ) 1,812   1,340   -694 Segment earnings (6,147 ) 4,134   -249
(8,321 ) (331 ) (386 )   Of which: Identified items (Reference A) (8,652 ) (160 )  
362   2,143   1,726   -79 Adjusted Earnings 2,506   4,294   -42
2,663   3,986   3,403   -22 Cash flow from operating activities 6,649   7,630   -13
2,871   3,352   2,824   +2 Cash flow from operating activities excluding working capital movements (Reference H) 6,224   6,540   -5
736   882   738     Cash capital expenditure (Reference C) 1,618   2,081    
151   162   159   -5 Liquids production available for sale (thousand b/d) 157   148   +6
4,369   4,596   4,456   -2 Natural gas production available for sale (million scf/d) 4,482   4,300   +4
904   955   927   -2 Total production available for sale (thousand boe/d) 930   889   +5
8.36   8.88   8.66   -3 LNG liquefaction volumes (million tonnes) 17.23   17.39   -1
16.65   19.00   17.95   -7 LNG sales volumes (million tonnes) 35.65   35.46   +1

 

   
1.   Q2 on Q2 change.

 Second quarter segment earnings were a loss of $7,959 million. This included a post-tax impairment charge of $8,151 million mainly related to the Queensland Curtis LNG and Prelude floating LNG operations in Australia. Also included was a net charge of $265 million due to the fair value accounting of commodity derivatives. These net charges are part of identified items (see Reference A). Compared with the second quarter 2019, Integrated Gas Adjusted Earnings of $362 million primarily reflected lower realised prices for oil, LNG and gas, unfavourable movements in deferred tax positions and a charge of $403 million reflecting well write-offs for the second quarter, partly offset by lower operating expenses and higher contributions from trading and optimisation.  Cash flow from operating activities for the quarter was $2,663 million, primarily driven by Adjusted Earnings before non-cash expenses including depreciation, well write-offs and deferred tax charges.  Compared with the second quarter 2019, total production decreased by 2% mainly due to more maintenance activities in Australia and lower demand, partly offset by the transfer of the Rashpetco operations in Egypt from the Upstream segment. LNG liquefaction volumes decreased mainly as a result of cargo timing.  Half year segment earnings were a loss of $6,147 million. This included a post-tax impairment charge of $8,210 million mainly related to the Queensland Curtis LNG and Prelude floating LNG operations in Australia. Also included was a net charge of $419 million due to the fair value accounting of commodity derivatives. These net charges are part of identified items (see Reference A). Compared with the first half 2019, Integrated Gas Adjusted Earnings of $2,506 million primarily reflected lower realised prices for oil, LNG and gas, higher well write-offs and higher depreciation, partly offset by higher volumes and lower operating expenses.  Cash flow from operating activities for the first half 2020 was $6,649 million, primarily driven by Adjusted Earnings before non-cash expenses including depreciation and well write-offs.  Compared with the first half 2019, total production increased by 5% mainly due to less maintenance activities, new fields and field ramp-ups, as well as the transfer of the Rashpetco operations in Egypt from the Upstream segment. LNG liquefaction volumes decreased mainly as a result of cargo timing and lower feedgas availability, partly offset by less maintenance activities and new capacity. Page 4   

 
 
 
ROYAL DUTCH SHELL PLC2ND QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS

 

 
                         
       
UPSTREAM        
Quarters $ million Half year
Q2 2020   Q1 2020   Q2 2019     2020   2019   %
(6,721 ) (863 ) 1,435   -568 Segment earnings (7,584 ) 3,059   -348
(5,209 ) (1,154 ) 172     Of which: Identified items (Reference A) (6,364 ) 149    
(1,512 ) 291   1,263   -220 Adjusted Earnings (1,220 ) 2,910   -142
319   5,607   5,478   -94 Cash flow from operating activities 5,926   10,756   -45
548   3,718   5,251   -90 Cash flow from operating activities excluding working capital movements (Reference H) 4,265   10,515   -59
1,876   2,521   2,321     Cash capital expenditure (Reference C) 4,397   4,812    
1,609   1,730   1,636   -2 Liquids production available for sale (thousand b/d) 1,670   1,651   +1
4,673   5,680   5,640   -17 Natural gas production available for sale (million scf/d) 5,176   6,249   -17
2,415   2,710   2,609   -7 Total production available for sale (thousand boe/d) 2,562   2,729   -6

 

   
1.  Q2 on Q2 change.

 Second quarter segment earnings were a loss of $6,721 million. This included a post-tax impairment charge of $4,658 million mainly related to unconventional assets in North America, assets offshore in Brazil and Europe, a project in Nigeria (OPL245), and an asset in the US Gulf of Mexico. Also included were a net charge of $187 million mainly related to a reduction in discount rate used for provisions, as well as redundancy and restructuring costs of $183 million. These net charges are part of identified items (see Reference A).Compared with the second quarter 2019, Upstream Adjusted Earnings were a loss of $1,512 million primarily reflecting lower realised oil and gas prices.  Cash flow from operating activities for the second quarter 2020 was $319 million, primarily driven by Adjusted Earnings before non-cash expenses including depreciation, as well as the cash impact of the settlement for the Lula unitisation in Brazil and cash effect of tax.  Compared with the second quarter 2019, total production decreased by 7%, mainly due to the challenging macroeconomic environment (which included OPEC+ restrictions and COVID-19-related restrictions), the impact of divestments and lower production in the NAM joint venture. Field ramp-ups in the Santos Basin, Brazil, the US Gulf of Mexico and Permian, USA more than offset field decline. Lower production volumes were offset by favourable timing of entitlement liftings.  Half year segment earnings were a loss of $7,584 million. This included a post-tax impairment charge of $5,074 million mainly related to unconventional assets in North America, assets offshore in Brazil and Europe, a project in Nigeria (OPL245), and an asset in the US Gulf of Mexico. Also included were a net charge of $916 million related to the impact of the weakening Brazilian real on a deferred tax position, and redundancy and restructuring costs of $191 million. These net charges are part of identified items (see Reference A).Compared with the first half 2019, Upstream Adjusted Earnings were a loss of $1,220 million primarily reflecting lower realised oil and gas prices and lower gas volumes.  Cash flow from operating activities for the first half 2020 was $5,926 million, primarily driven by Adjusted Earnings before non-cash expenses including depreciation, as well as positive working capital movements, cash effect of tax and the settlement for the Lula unitisation in Brazil.  Compared with the first half 2019, total production decreased by 6%, mainly due to the impact of divestments, lower production in the NAM joint venture and the challenging macroeconomic environment (which included OPEC+ restrictions and COVID-19-related restrictions). Field ramp-ups in the Santos Basin, Brazil, the US Gulf of Mexico and Permian, USA, more than offset field decline.  Page 5   

 
 
 
ROYAL DUTCH SHELL PLC2ND QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS

 

 
                         
       
OIL PRODUCTS      
Quarters $ million Half year
Q2 2020   Q1 2020   Q2 2019   %¹   2020   2019   %
(3,023 ) 2,211   1,299   -333 Segment earnings² (811 ) 2,523   -132
(5,433 ) 849   20     Of which: Identified items (Reference A) (4,585 ) (205 )  
2,411   1,363   1,278   +89 Adjusted Earnings² 3,774   2,727   +38
        Of which:      
1,500   158   52   +2,763 Refining & Trading 1,658   473   +251
911   1,205   1,225   -26 Marketing 2,116   2,254   -6
(362 ) 4,878   1,268   -129 Cash flow from operating activities 4,516   670   +574
2,430   353   2,081   +17 Cash flow from operating activities excluding working capital movements (Reference H) 2,783   4,670   -40
606   580   1,118     Cash capital expenditure (Reference C) 1,186   1,971    
1,944   2,397   2,632   -26 Refinery processing intake (thousand b/d) 2,170   2,649   -18
4,041 ³ 5,278 ³ 6,608   -39 Oil Products sales volumes (thousand b/d) 4,659 ³ 6,538   -29

 

   
1.  Q2 on Q2 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 4,742 thousand b/d in the second quarter 2020 on a comparable basis with 2019.

 Second quarter segment earnings were a loss of $3,023 million. This included a post-tax impairment charge of $4,027 million, as a result of revised medium- and long-term price outlook assumptions in response to the energy market demand and supply fundamentals as well as the COVID-19 pandemic and macroeconomic conditions. Also included were a net charge of $1,257 million due to the fair value accounting of commodity derivatives, and redundancy and restructuring costs of $118 million. These net charges are part of identified items (see Reference A). Compared with the second quarter 2019, Oil Products Adjusted Earnings of $2,411 million for the quarter reflected very strong contributions from crude and oil products trading and optimisation as well as lower operating expenses. This was partly offset by lower realised refining margins and lower marketing sales volumes due to the weak macroeconomic environment and COVID-19 pandemic.  Cash flow from operating activities for the second quarter 2020 was an outflow of $362 million, primarily driven by Adjusted Earnings before depreciation, as well as negative working capital movements and cash outflows from commodity derivatives.  With effect from the first quarter 2020, certain Oil Products contracts are no longer included in sales volumes (see Note 2). Excluding this impact, Oil Products sales volumes decreased due to lower refining & trading and marketing sales volumes, compared with the second quarter 2019.  

   
Refining & Trading Adjusted Earnings reflected very strong contributions from crude and oil products trading and optimisation as well as lower operating expenses. This was partly offset by lower realised refining margins, compared with the second 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 70% compared with 76% in the second quarter 2019, mainly due to lower demand and economic optimisation.  

   
Marketing Adjusted Earnings reflected lower sales volumes, partly offset by lower operating expenses, compared with the second quarter 2019.

 Half year segment earnings were a loss of $811 million. This included a post-tax impairment charge of $4,088 million, as a result of revised medium- and long-term price outlook assumptions in response to the energy market demand and supply fundamentals as well as the COVID-19 pandemic and macroeconomic conditions. Also included were a net charge of $291 million due to the fair value accounting of commodity derivatives, and redundancy and restructuring costs of $117 million. These net charges are part of identified items (see Reference A).  Page 6  

 
 
 
ROYAL DUTCH SHELL PLC2ND QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS

 Compared with the first half 2019, Oil Products Adjusted Earnings of $3,774 million reflected very strong contributions from crude and oil products trading and optimisation as well as lower operating expenses. This was partly offset by lower realised refining margins and lower marketing sales volumes due to the weak macroeconomic environment and COVID-19 pandemic.  Cash flow from operating activities for the first half 2020 was $4,516 million, primarily driven by Adjusted Earnings before depreciation, and positive working capital movements. This was partly offset by cost-of-sales adjustments for the first half 2020.  With effect from the first quarter 2020, certain Oil Products contracts are no longer included in sales volumes (see Note 2). Excluding this impact, Oil Products sales volumes decreased due to lower refining & trading and marketing sales volumes, compared with the first half 2019.  

   
Refining & Trading Adjusted Earnings reflected very strong contributions from crude and oil products trading and optimisation as well as lower operating expenses. This was partly offset by lower realised refining margins, compared with the first half 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 75% compared with 78% in the first half 2019, mainly due to lower demand and economic optimisation.  

   
Marketing Adjusted Earnings reflected lower sales volumes, partly offset by lower operating expenses and higher realised global commercial and retail margins, compared with the first half 2019.

  Page 7   

 
 
 
ROYAL DUTCH SHELL PLC2ND QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS

 

 
                         
       
CHEMICALS      
Quarters $ million Half year
Q2 2020   Q1 2020   Q2 2019     2020   2019   %
164   146   (107 ) +253 Segment earnings² 311   345   -10
(41 ) (2 ) (239 )   Of which: Identified items (Reference A) (43 ) (237 )  
206   148   132   +56 Adjusted Earnings² 354   582   -39
734   (178 ) 1,268   -42 Cash flow from operating activities 556   1,257   -56
304   189   508   -40 Cash flow from operating activities excluding working capital movements (Reference H) 492   1,037   -52
369   846   1,079     Cash capital expenditure (Reference C) 1,215   1,907    
3,623   3,871   3,787   -4 Chemicals sales volumes (thousand tonnes) 7,494   7,924   -5

 

   
1.  Q2 on Q2 change.

 

   
2.  Earnings are presented on a CCS basis (See Note 2).

 Second quarter segment earnings were $164 million. This included redundancy and restructuring costs of $30 million, which are part of identified items (see Reference A). Compared with the second quarter 2019, Chemicals Adjusted Earnings of $206 million reflected lower operating expenses, partly offset by lower realised margins due to chemicals downcycle conditions compounded by COVID-19 pandemic. Cash flow from operating activities for the quarter was $734 million, primarily driven by Adjusted Earnings before depreciation, as well as positive working capital movements due to positive movements in receivables and payables. This was partly offset by higher cost-of-sales adjustments for the quarter.  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 78% compared with 73% in the second quarter 2019, mainly due to higher maintenance activities in Asia and Europe in 2019, as well as the impact of strike actions in the Netherlands last year.  Half year segment earnings were $311 million. This included redundancy and restructuring costs of $31 million, which are part of identified items (see Reference A). Compared with the first half 2019, Chemicals Adjusted Earnings of $354 million reflected lower realised margins due to chemicals downcycle conditions compounded by COVID-19.  Cash flow from operating activities was an inflow of $556 million, primarily driven by Adjusted Earnings before depreciation. This is partly offset by cost-of-sales adjustments for the first half 2020. 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 81% compared with 78% in the first half 2019, mainly due to higher maintenance activities in Asia and Europe in 2019, including the impact of strike actions in the Netherlands last year.  Page 8   

 
 
 
ROYAL DUTCH SHELL PLC2ND QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS

 

 
                     
     
CORPORATE    
Quarters $ million Half year
Q2 2020   Q1 2020   Q2 2019     2020   2019  
(805 ) (453 ) (789 ) Segment earnings (1,258 ) (1,460 )
(9 ) 535   18   Of which: Identified items (Reference A) 526   31  
(796 ) (989 ) (806 ) Adjusted Earnings (1,784 ) (1,490 )
(791 ) 559   (385 ) Cash flow from operating activities (232 ) (651 )
390   (239 ) (202 ) Cash flow from operating activities excluding working capital movements (Reference H) 151   (185 )

Second quarter segment earnings were an expense of $805 million. This included a post-tax impairment charge of $5 million, as a result of macroeconomic conditions. This net charge is part of identified items (see Reference A). Adjusted Earnings were an expense of $796 million, reflecting lower net interest expense, largely offset by adverse currency exchange rate effects and reduced tax credits, compared with the second quarter 2019.  Half year segment earnings were an expense of $1,258 million. This included a gain of $530 million from the impact of the weakening Brazilian real on financing positions, which is part of identified items (see Reference A). Adjusted Earnings were an expense of $1,784 million, reflecting adverse currency exchange rate effects, compared with the first half 2019. OUTLOOK FOR THE THIRD QUARTER 2020 As a result of COVID-19, there continues to be significant uncertainty in the 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 third 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. Such measures will likely have a variety of impacts on our operational and financial metrics.  Integrated Gas production is expected to be approximately 820 - 880 thousand boe/d. LNG liquefaction volumes are expected to be approximately 7.6 - 8.2 million tonnes. Due to price-lag in oil-linked LNG term contracts, the impact of low oil prices is expected to become more significant in the third quarter.  Upstream production is expected to be approximately 2,100 - 2,400 thousand boe/d.  Refinery utilisation is expected to be approximately 68% - 76%. Oil Products sales volumes are expected to be approximately 4,000 - 5,000 thousand b/d.  Chemicals manufacturing plant utilisation is expected to be approximately 78% - 88%. Chemicals sales volumes are expected to be approximately 3,600 - 3,900 thousand tonnes.  Corporate Adjusted Earnings are expected to be a net expense of approximately $800 - 875 million in the third 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.  Page 9   

 
 
 
ROYAL DUTCH SHELL PLC2ND QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS

 UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 

 
                     
     
CONSOLIDATED STATEMENT OF INCOME    
Quarters $ million Half year
Q2 2020   Q1 2020   Q2 2019     2020   2019  
32,504   60,029   90,544   Revenue¹ 92,533   174,278  
(161 ) 854   632   Share of profit of joint ventures and associates 693   2,116  
148   76   662   Interest and other income 224   1,105  
32,491   60,959   91,838   Total revenue and other income 93,450   177,499  
18,093   43,213   68,590   Purchases 61,306   128,513  
5,822   5,982   6,835   Production and manufacturing expenses 11,803   13,189  
2,370   2,393   2,881   Selling, distribution and administrative expenses 4,763   5,233  
232   243   225   Research and development 475   437  
723   294   439   Exploration 1,018   745  
28,089   7,093   6,699   Depreciation, depletion and amortisation² 35,182   12,649  
1,070   1,118   1,252   Interest expense 2,188   2,411  
56,398   60,336   86,920   Total expenditure 116,735   163,176  
(23,907 ) 623   4,917   Income/(loss) before taxation (23,284 ) 14,323  
(5,806 ) 646   1,755   Taxation charge/(credit) (5,160 ) 5,003  
(18,101 ) (23 ) 3,162   Income/(loss) for the period¹ (18,124 ) 9,319  
30   1   164   Income/(loss) attributable to non-controlling interest 31   320  
(18,131 ) (24 ) 2,998   Income/(loss) attributable to Royal Dutch Shell plc shareholders (18,155 ) 8,999  
(2.33 ) 0.00   0.37   Basic earnings per share ($)³ (2.33 ) 1.11  
(2.33 ) 0.00   0.37   Diluted earnings per share ($)³ (2.33 ) 1.10  

 

   
1.  See Note 2 “Segment information”.

 

   
2.  Includes impairment charges of $21,780 million (Q1 2020: $749 million; half year 2020: $22,529 million) mainly triggered by revision of Shell's mid- and long-term commodity price and refining margin outlook. See Notes 1 and 7.

 

   
3.  See Note 3 “Earnings per share”.

 

 
                     
     
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME    
Quarters $ million Half year
Q2 2020   Q1 2020   Q2 2019     2020   2019  
(18,101 ) (23 ) 3,162   Income/(loss) for the period (18,124 ) 9,319  
      Other comprehensive income/(loss) net of tax:        
      Items that may be reclassified to income in later periods:        
1,588   (3,935 ) 215   – Currency translation differences (2,347 ) 391  
43   (28 ) 18   – Debt instruments remeasurements 15   29  
(137 ) (152 ) 109   – Cash flow hedging gains/(losses) (289 ) (348 )
(99 )   (8 ) – Net investment hedging gains/(losses) (99 ) 2  
55   101   79   – Deferred cost of hedging 156   105  
30   (60 ) (1 ) – Share of other comprehensive income/(loss) of joint ventures and associates (30 ) (56 )
1,481   (4,074 ) 413   Total (2,593 ) 125  
      Items that are not reclassified to income in later periods:        
(4,924 ) 1,756   (1,172 ) – Retirement benefits remeasurements (3,167 ) (2,646 )
77   (137 ) (73 ) – Equity instruments remeasurements (60 ) 30  
19   48   (6 ) – Share of other comprehensive income/(loss) of joint ventures and associates 67   (5 )
(4,828 ) 1,667   (1,251 ) Total (3,160 ) (2,621 )
(3,347 ) (2,407 ) (839 ) Other comprehensive income/(loss) for the period (5,753 ) (2,496 )
(21,448 ) (2,430 ) 2,323   Comprehensive income/(loss) for the period (23,877 ) 6,823  
43   (123 ) 180   Comprehensive income/(loss) attributable to non-controlling interest (80 ) 358  
(21,490 ) (2,307 ) 2,143   Comprehensive income/(loss) attributable to Royal Dutch Shell plc shareholders (23,797 ) 6,465  

 Page 10   

 
 
 
ROYAL DUTCH SHELL PLC2ND QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS

 

 
         
 
CONDENSED CONSOLIDATED BALANCE SHEET
$ million    
  June 30, 2020   December 31, 2019  
Assets    
Non-current assets    
Intangible assets 23,163   23,486  
Property, plant and equipment 213,100   238,349  
Joint ventures and associates 21,771   22,808  
Investments in securities 3,144   2,989  
Deferred tax 15,573   10,524  
Retirement benefits¹ 3,135   4,717  
Trade and other receivables 7,681   8,085  
Derivative financial instruments² 1,331   689  
  288,898   311,647  
Current assets    
Inventories 17,726   24,071  
Trade and other receivables 32,375   43,414  
Derivative financial instruments² 8,161   7,149  
Cash and cash equivalents 27,939   18,055  
  86,201   92,689  
Total assets 375,098   404,336  
Liabilities    
Non-current liabilities    
Debt 87,460   81,360  
Trade and other payables 2,731   2,342  
Derivative financial instruments² 1,452   1,209  
Deferred tax 11,743   14,522  
Retirement benefits¹ 15,881   13,017  
Decommissioning and other provisions³ 25,993   21,799  
  145,260   134,249  
Current liabilities    
Debt 17,530   15,064  
Trade and other payables 34,615   49,208  
Derivative financial instruments² 7,217   5,429  
Taxes payable 6,479   6,693  
Retirement benefits 391   419  
Decommissioning and other provisions 3,160   2,811  
  69,393   79,624  
Total liabilities 214,653   213,873  
Equity attributable to Royal Dutch Shell plc shareholders 157,156   186,476  
Non-controlling interest⁴ 3,289   3,987  
Total equity 160,445   190,463  
Total liabilities and equity 375,098   404,336  

 

   
1.  The change is mainly driven by a decrease in the weighted average discount rate applied caused by falling credit spreads and increasing market estimates of future inflation. See Note 1.

 

   
2.  See Note 6 “Derivative financial instruments and debt excluding lease liabilities”.

 

   
3.  The discount rate applied at June 30, 2020 was 1.75% (December 31, 2019: 3.0%). Compared with December 31, 2019, non-current decommissioning and restoration provisions increased by $3,999 million as a result of the change in the discount rate, to $25,993 million at June 30, 2020.

 

   
4.  The change is mainly related to the non-controlling interest in Shell Midstream Partners, L.P. (“SHLX”) following the completion of the sale of Shell's 79% interest in the Mattox Pipeline Company LLC and certain logistics assets at the Shell Norco Manufacturing Complex to SHLX.

   Page 11   

 
 
 
ROYAL DUTCH SHELL PLC2ND QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS

 

 
                             
 
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     (5,642 ) (18,155 ) (23,797 ) (80 ) (23,877 )
Transfer from other comprehensive income     17   (17 )      
Dividends³       (4,718 ) (4,718 ) (178 ) (4,896 )
Repurchases of shares (6 )   6   (1,214 ) (1,214 )   (1,214 )
Share-based compensation   539   (324 ) (231 ) (16 )   (16 )
Other changes in non-controlling interest       426   426   (440 ) (14 )
At June 30, 2020 651   (524 ) 8,508   148,521   157,156   3,289   160,445  
At January 1, 2019 685   (1,260 ) 16,615   182,610   198,650   3,888   202,538  
Comprehensive income/(loss) for the period     (2,534 ) 8,999   6,465   358   6,823  
Transfer from other comprehensive income     (102 ) 102        
Dividends       (7,699 ) (7,699 ) (270 ) (7,969 )
Repurchases of shares (12 )   12   (5,021 ) (5,021 )   (5,021 )
Share-based compensation   842   (276 ) (683 ) (118 )   (118 )
Other changes in non-controlling interest       1   1   1   2  
At June 30, 2019 674   (419 ) 13,715   178,308   192,278   3,977   196,254  

 

   
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.  

 Page 12   

 
 
 
ROYAL DUTCH SHELL PLC2ND QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS

 

 
                     
     
CONSOLIDATED STATEMENT OF CASH FLOWS    
Quarters $ million Half year
Q2 2020   Q1 2020   Q2 2019     2020   2019  
(23,907 ) 623   4,917   Income before taxation for the period (23,284 ) 14,323  
      Adjustment for:        
889   897   1,030   - Interest expense (net) 1,786   1,926  
28,089   7,093   6,699   - Depreciation, depletion and amortisation 35,182   12,649  
518   83   202   - Exploration well write-offs 601   321  
(128 ) 106   (379 ) - Net (gains)/losses on sale and revaluation of non-current assets and businesses (21 ) (444 )
161   (854 ) (632 ) - Share of (profit)/loss of joint ventures and associates (693 ) (2,116 )
610   531   1,217   - Dividends received from joint ventures and associates 1,141   1,961  
(3,713 ) 9,594   (61 ) - (Increase)/decrease in inventories 5,881   (2,902 )
3,959   6,314   308   - (Increase)/decrease in current receivables 10,273   (1,117 )
(4,226 ) (8,430 ) 321   - Increase/(decrease) in current payables (12,655 ) 1,104  
837   (171 ) (480 ) - Derivative financial instruments 665   (1,589 )
293   (91 ) 30   - Retirement benefits 203   52  
392   (102 ) 8   - Decommissioning and other provisions 290   (294 )
(480 ) 579   (39 ) - Other 98   (13 )
(730 ) (1,321 ) (2,110 ) Tax paid (2,051 ) (4,199 )
2,563   14,851   11,031   Cash flow from operating activities 17,415   19,661  
(3,436 ) (4,263 ) (5,150 ) Capital expenditure (7,699 ) (10,272 )
(161 ) (559 ) (160 ) Investments in joint ventures and associates (720 ) (601 )
(20 ) (147 ) (26 ) Investments in equity securities (167 ) (65 )
211   1,613   644   Proceeds from sale of property, plant and equipment and businesses 1,824   822  
423   547   102   Proceeds from sale of joint ventures and associates 970   646  
62   73   17   Proceeds from sale of equity securities 135   288  
118   192   220   Interest received 310   457  
1,174   855   592   Other investing cash inflows 2,029   1,272  
(691 ) (1,028 ) (404 ) Other investing cash outflows (1,719 ) (1,335 )
(2,320 ) (2,718 ) (4,166 ) Cash flow from investing activities (5,039 ) (8,788 )
90   321   145   Net increase/(decrease) in debt with maturity period within three months 412   55  
      Other debt:        
15,238   1,003   180   - New borrowings 16,241   320  
(7,113 ) (2,723 ) (2,848 ) - Repayments (9,836 ) (4,381 )
(1,088 ) (1,033 ) (1,214 ) Interest paid (2,121 ) (2,329 )
324   (81 ) 45   Derivative financial instruments 243    
(32 ) (8 )   Change in non-controlling interest (40 ) (2 )
      Cash dividends paid to:        
(1,397 ) (3,483 ) (3,825 ) – Royal Dutch Shell plc shareholders¹ (4,880 ) (7,700 )
(68 ) (110 ) (203 ) – Non-controlling interest (178 ) (271 )
(216 ) (1,486 ) (2,142 ) Repurchases of shares (1,702 ) (4,396 )
(18 ) (182 ) (7 ) Shares held in trust: net sales/(purchases) and dividends received (199 ) (463 )
5,721   (7,781 ) (9,868 ) Cash flow from financing activities (2,060 ) (19,168 )
164   (595 ) 4   Currency translation differences relating to cash and cash equivalents (431 ) 24  
6,128   3,756   (3,000 ) Increase/(decrease) in cash and cash equivalents 9,884   (8,271 )
21,811   18,055   21,470   Cash and cash equivalents at beginning of period 18,055   26,741  
27,939   21,811   18,470   Cash and cash equivalents at end of period 27,939   18,470  

 

   
1. Cash dividends paid represents the payment of net dividends (after deduction of withholding taxes where applicable) and payment of withholding taxes on dividends paid in the previous quarter. Cash dividends paid during the second quarter 2020 is the total of the net dividend paid relating to the first quarter 2020 gross dividend and withholding taxes paid in relation to the fourth quarter 2019 gross dividend.

 Page 13   

 
 
 
ROYAL DUTCH SHELL PLC2ND QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS

 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. Going concern  These unaudited Interim Statements have been prepared on the going concern basis of accounting. In assessing the appropriateness of the going concern assumption, management have stressed Shell’s most recent financial projections to incorporate a range of potential future outcomes by considering Shell’s principal risks, further potential downside pressures on commodity prices and cash preservation measures, including reduced future operating costs, capital expenditure and dividend distributions. This assessment confirmed that Shell has adequate resources to continue its operations for at least 12 months from the approval of the unaudited Condensed Consolidated Interim Financial Statements. Therefore, the Directors consider it appropriate to continue to adopt the going concern basis of accounting in preparing these unaudited Condensed Consolidated Interim Financial Statements. 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. Significant estimatesFuture commodity price assumptions and management's view on the future development of refining margins represent a significant estimate and both were subject to change in the second quarter 2020, resulting in the recognition of impairments. The tax impact of impairments in the second quarter 2020 has been fully recognised in deferred tax positions as of June 30, 2020. See Note 7. After finalisation of the operating plan later in 2020 the overall deferred tax position will be reviewed. The retirement benefits remeasurements, recognised in the Consolidated Statement of Comprehensive Income, reflect the decrease in the weighted average discount rate applied caused by falling credit spreads and increasing market estimates of future inflation.  The discount rate applied to provisions is reviewed on a regular basis. Following the significant decrease in capital markets rates in 2020 the discount rate was reviewed and adjusted in the second quarter 2020. See footnote 3 to the Condensed Consolidated Balance Sheet.  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.  Page 14  

 
 
 
ROYAL DUTCH SHELL PLC2ND QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS

 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 second quarter 2020 is a reduction of $8,028 million (Q1 2020: $16,313 million).

 
                     
     
INFORMATION BY SEGMENT    
Quarters $ million Half year
Q2 2020   Q1 2020   Q2 2019     2020   2019  
      Third-party revenue        
7,436   10,157   8,942   Integrated Gas 17,593   20,582  
1,177   2,344   2,346   Upstream 3,521   4,647  
21,596   44,297   75,837   Oil Products 65,893   141,888  
2,283   3,221   3,406   Chemicals 5,504   7,138  
12   11   13   Corporate 22   24  
32,504   60,029   90,544   Total third-party revenue¹ 92,533   174,278  
      Inter-segment revenue²        
558   891   1,045   Integrated Gas 1,449   2,137  
4,117   6,476   8,827   Upstream 10,592   18,359  
1,082   1,851   1,950   Oil Products 2,933   4,130  
475   875   1,088   Chemicals 1,350   2,054  
      Corporate    
      CCS earnings        
(7,959 ) 1,812   1,340   Integrated Gas (6,147 ) 4,134  
(6,721 ) (863 ) 1,435   Upstream (7,584 ) 3,059  
(3,023 ) 2,211   1,299   Oil Products (811 ) 2,523  
164   146   (107 ) Chemicals 311   345  
(805 ) (453 ) (789 ) Corporate (1,258 ) (1,460 )
(18,343 ) 2,854   3,177   Total (15,490 ) 8,601  

 

   
1.  Includes revenue from sources other than from contracts with customers, which mainly comprises the impact of fair value accounting of commodity derivatives. Second quarter 2020 included income of $1,405 million (Q1 2020: $6,686 million income; half year 2020: $8,091 million income). This amount includes both the reversal of prior gains of $686 million (Q1 2020: $317 million) related to sales contracts and prior losses of $507 million (Q1 2020: $76 million) related to purchase contracts that were previously recognised and where physical settlement has taken place in the second quarter 2020.

 

   
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 half year 2019 has been revised from $1,989 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 Half year
Q2 2020   Q1 2020   Q2 2019     2020   2019  
(18,131 ) (24 ) 2,998   Income/(loss) attributable to Royal Dutch Shell plc shareholders (18,155 ) 8,999  
30   1   164   Income/(loss) attributable to non-controlling interest 31   320  
(18,101 ) (23 ) 3,162   Income/(loss) for the period (18,124 ) 9,319  
      Current cost of supplies adjustment:        
(432 ) 3,774   30   Purchases 3,342   (955 )
98   (916 ) 1   Taxation (819 ) 237  
92   19   (16 ) Share of profit/(loss) of joint ventures and associates 111    
(242 ) 2,876   15   Current cost of supplies adjustment 2,634   (719 )
      of which:    
(246 ) 2,780   27   Attributable to Royal Dutch Shell plc shareholders 2,535   (681)  
4   96   (12)   Attributable to non-controlling interest 100   (38)  
(18,343 ) 2,854   3,177   CCS earnings (15,490 ) 8,601  
      of which:        
(18,377 ) 2,756   3,025   CCS earnings attributable to Royal Dutch Shell plc shareholders (15,620 ) 8,318  
34   97   152   CCS earnings attributable to non-controlling interest 131   282  

  Page 15  

 
 
 
ROYAL DUTCH SHELL PLC2ND QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS

   3. Earnings per share

 
                     
     
EARNINGS PER SHARE    
Quarters   Half year
Q2 2020   Q1 2020   Q2 2019     2020   2019  
(18,131 ) (24 ) 2,998   Income/(loss) attributable to Royal Dutch Shell plc shareholders ($ million) (18,155 ) 8,999  
      Weighted average number of shares used as the basis for determining:        
7,789.8   7,819.8   8,100.8   Basic earnings per share (million) 7,804.8   8,126.3  
7,789.8   7,819.8   8,153.7   Diluted earnings per share (million) 7,804.8   8,182.1  

 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 (50,548,018)   (23,223,271)   (4) (2) (6)
At June 30, 2020 4,101,239,499   3,706,183,836   345 306 651
At January 1, 2019 4,471,889,296   3,745,486,731   376 309 685
Repurchases of shares (139,414,447)     (12) (12)
At June 30, 2019 4,332,474,849   3,745,486,731   365 309 674

 

   
1.  Share capital at June 30, 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 19, 2020 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 €182.7 million (representing 2,611 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 19, 2021, and the end of the Annual General Meeting to be held in 2021, 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         (5,642 ) (5,642 )
Transfer from other comprehensive income         17   17  
Repurchases of shares     6       6  
Share-based compensation       (324 )   (324 )
At June 30, 2020 37,298   154   129   725   (29,798 ) 8,508  
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         (2,534 ) (2,534 )
Transfer from other comprehensive income         (102 ) (102 )
Repurchases of shares     12       12  
Share-based compensation       (276 )   (276 )
At June 30, 2019 37,298   154   107   821   (24,664 ) 13,715  

 Page 16  

 
 
 
ROYAL DUTCH SHELL PLC2ND QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS

 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 June 30, 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 June 30, 2020   December 31, 2019  
Carrying amount 75,918   65,887  
Fair value¹ 82,369   71,163  

 

   
1.  Mainly determined from the prices quoted for these securities.

 Page 17   

 
 
 
ROYAL DUTCH SHELL PLC2ND QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS

 7. Impairments  The impairment loss in the second quarter 2020 was mainly triggered by revision of Shell's mid- and long-term commodity price and refining margin outlook reflecting the expected effects of the COVID-19 pandemic and related macroeconomic as well as energy market demand and supply fundamentals. Impairments losses of $16,842 million post-tax ($22,332 million pre-tax, of which $21,780 million recognised in depreciation, depletion and amortisation and $552 million recognised in share of profit of joint ventures and associates) mainly related to Integrated Gas for $8,151 million post-tax ($11,191 million pre-tax), mainly relating to the QGC Integrated Gas asset and Prelude floating LNG both in Australia, to Upstream for $4,658 million post-tax ($6,281 million pre-tax) mainly related to two unconventional assets in North America, a project in Nigeria (OPL245), two offshore projects in Brazil, four offshore projects in Europe and an asset in the US Gulf of Mexico, to Oil Products for $4,027 million post-tax ($4,851 million pre-tax) mainly relating to three refineries in Europe and North America, and to Corporate for $5 million post-tax ($9 million pre-tax).  For impairment testing purposes, the respective carrying amounts of property, plant and equipment and intangible assets were compared with their value in use. Cash flow projections used in the determination of value in use were made using management’s forecasts of commodity prices, market supply and demand, potential costs associated with operational GHG emissions, product margins including forecast refining margins and expected production volumes. These cash flows were adjusted for the risks specific to the assets, and therefore these risks were not included in the determination of the discount rate applied. The nominal pre-tax rate applied in the second quarter 2020 was 6% (2019: 6%).  Oil and gas price assumptions applied for impairment testing in Integrated Gas and Upstream are reviewed and, where necessary, adjusted on a periodic basis. Reviews include comparison with available market data and forecasts that reflect developments in demand such as global economic growth, technology efficiency, policy measures. Factors impacting supply include consideration of investment and resource potential, cost of development of new supply, and behaviour of major resource holders. The near-term commodity price assumptions applied in impairment testing in the second quarter 2020 were as follows:

 
                 
     
Commodity price assumptions [A] 2020   2021   2022   2023  
Brent crude oil ($/b) 35   40   50   60  
Henry Hub natural gas ($/MMBtu) 1.75   2.50   2.50   2.75  

[A] Money of the day. The long-term price assumptions applied were $60 per barrel (/b) for Brent crude oil and $3.00 per million British thermal units (/MMBtu) for Henry Hub natural gas, both at real term 2020.  Until 2019 management’s estimate of longer-term refining margins in Oil Products was based on the reversion to mean methodology, unless a fundamental shift in markets had been identified, over the life of the refineries. Under this approach, it is assumed that refining margins would revert to historical averages over time. As from second quarter 2020, a different price methodology has been applied, based on Shell management's understanding and interpretation of demand and supply fundamentals in the near term and taking into account various other factors such as industry rationalisation and energy transition in the long term. This resulted in a downward revision of average long-term refining margins by around 30% from previous assumptions applied. Approximately 50% of the combined “Property, Plant and Equipment, Joint Ventures and Associates as well as Intangible Assets” carrying amount was tested for impairment in the second quarter 2020. The main sensitivity in the impairment test is the long term Brent price assumption. For sensitivity purposes, a decrease from 2024 of the long-term Brent price assumption to $55/b (real term 2020), would ceteris paribus result in some additional $6 - $7 billion pre-tax impairment at June 30, 2020.  Page 18   

 
 
 
ROYAL DUTCH SHELL PLC2ND QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS

 ALTERNATIVE PERFORMANCE (NON-GAAP) MEASURES

   
A. Adjusted Earnings

The “Adjusted Earnings” measure aims to facilitate a comparative understanding of Shell’s financial performance from period to period by removing the effects of oil price changes on inventory carrying amounts and removing the effects of identified items. These items are in some cases driven by external factors and may, either individually or collectively, hinder the comparative understanding of Shell’s financial results from period to period. This measure excludes earnings attributable to non-controlling interest. This measure was previously referred to as “CCS earnings attributable to shareholders excluding identified items” and was renamed for simplicity with effect from the second quarter 2020.

 
                     
     
ADJUSTED EARNINGS    
Quarters $ million Half year
Q2 2020   Q1 2020   Q2 2019     2020   2019  
(18,131 ) (24 ) 2,998   Income/(loss) attributable to Royal Dutch Shell plc shareholders (18,155 ) 8,999  
(246 ) 2,780   27   Add: Current cost of supplies adjustment attributable to Royal Dutch Shell plc shareholders (Note 2) 2,535   (681 )
(19,015 ) (104 ) (437 ) Less: Identified items attributable to Royal Dutch Shell plc shareholders (19,118 ) (445 )
638   2,860   3,462   Adjusted Earnings 3,498   8,763  

 Identified itemsIdentified 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.

 
                     
     
IDENTIFIED ITEMS    
Quarters $ million Half year
Q2 2020   Q1 2020   Q2 2019     2020   2019  
      Identified items before tax    
128   (76 ) 379   Divestment gains/(losses) 51   444  
(22,332 ) (749 ) (672 ) Impairments (23,082 ) (706 )
(1,884 ) 968   12   Fair value accounting of commodity derivatives and certain gas contracts (916 ) (61 )
(518 ) (18 ) (27 ) Redundancy and restructuring (536 ) (80 )
(427 )   (437 ) Other (427 ) (437 )
(25,033 ) 125   (746 ) Total identified items before tax (24,908 ) (839 )
6,018   (228 ) 331   Total tax impact of identified items 5,790   416  
      Identified items after tax    
10   (32 ) 256   Divestment gains/(losses) (22 ) 302  
(16,842 ) (536 ) (446 ) Impairments (17,378 ) (491 )
(1,540 ) 838   1   Fair value accounting of commodity derivatives and certain gas contracts (702 ) 33  
(375 ) (7 ) (13 ) Redundancy and restructuring (382 ) (46 )
(44 ) (366 ) 16   Impact of exchange rate movements on tax balances (410 ) 8  
(224 )   (229 ) Other (224 ) (229 )
(19,015 ) (104 ) (415 ) Impact on CCS earnings (19,118 ) (423 )
      Of which:    
(8,321 ) (331 ) (386 ) Integrated Gas (8,652 ) (160 )
(5,209 ) (1,154 ) 172   Upstream (6,364 ) 149  
(5,433 ) 849   20   Oil Products (4,585 ) (205 )
(41 ) (2 ) (239 ) Chemicals (43 ) (237 )
(9 ) 535   18   Corporate 526   31  
(19,015 ) (104 ) (437 ) Impact on CCS earnings attributable to shareholders (19,118 ) (445 )
    22   Impact on CCS earnings attributable to non-controlling interest   22  

 Page 19  

 
 
 
ROYAL DUTCH SHELL PLC2ND QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS

 The identified items categories above may include after-tax impacts of identified items of joint ventures and associates which are 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 that based on Shell management's assessment hinder the comparative understanding of Shell's financial results from period to period, such as the impact arising from changes in tax legislation and certain provisions for onerous contracts or litigation. The second quarter 2020 reflects the impact of a reduction in the discount rate used for provisions. 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 as well as on investments 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 Half year
Q2 2020   Q1 2020   Q2 2019     2020   2019  
3,436   4,263   5,150   Capital expenditure 7,699   10,272  
161   559   160   Investments in joint ventures and associates 720   601  
20   147   26   Investments in equity securities 167   65  
3,617   4,970   5,337   Cash capital expenditure 8,587   10,938  
      Of which:    
736   882   738   Integrated Gas 1,618   2,081  
1,876   2,521   2,321   Upstream 4,397   4,812  
606   580   1,118   Oil Products 1,186   1,971  
369   846   1,079   Chemicals 1,215   1,907  
30   141   81   Corporate 171   166  

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,  Page 20  

 
 
 
ROYAL DUTCH SHELL PLC2ND QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS

 both adjusted for after-tax interest expense. With effect from the second quarter 2020, the after-tax interest expense adjustment is calculated using an applicable blended statutory tax rate. This change is implemented to eliminate the distorting volatility effects of the effective tax rate. There is no significant impact on prior periods comparatives, which therefore have not been revised.Both measures refer to Capital employed which consists of total equity, current debt and non-current debt. ROACE on a Net income basis In 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.

 
           
 
$ million Quarters
  Q2 2020 Q1 2020   Q2 2019  
Income - current and previous three quarters (11,011) 10,252   21,006  
Interest expense after tax - current and previous three quarters 3,014 2,854   2,819  
Income before interest expense - current and previous three quarters (7,997) 13,106   23,825  
Capital employed – opening 288,900 292,797   281,711  
Capital employed – closing 265,435 278,444   288,900  
Capital employed – average 277,168 285,620   285,306  
ROACE on a Net income basis (2.9)% 4.6 % 8.4 %

ROACE on a CCS basis excluding identified items In 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.

 
             
 
$ million Quarters
  Q2 2020   Q1 2020   Q2 2019  
CCS earnings - current and previous three quarters (8,264)   13,256   21,794  
Identified items - current and previous three quarters (19,865)   (1,266 ) 1,169  
Interest expense after tax – current and previous three quarters 3,014   2,854   2,819  
CCS earnings excluding identified items before interest expense - current and previous three quarters 14,616   17,376   23,444  
Capital employed – average 277,168   285,620   285,306  
ROACE on a CCS basis excluding identified items 5.3 % 6.1 % 8.2 %

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.  Page 21  

 
 
 
ROYAL DUTCH SHELL PLC2ND QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS

 

 
             
 
$ million Quarters
  June 30, 2020   March 31, 2020   June 30, 2019  
Current debt 17,530   15,767   16,617  
Non-current debt 87,460   79,298   76,029  
Total debt¹ 104,990   95,065   92,646  
Add: Debt-related derivative financial instruments: net liability/(asset) 525   1,218   634  
Add: Collateral on debt-related derivatives: net liability/(asset) 266   (58)   78  
Less: Cash and cash equivalents (27,939)   (21,811)   (18,470)  
Net debt 77,843   74,413   74,887  
Add: Total equity 160,445   183,379   196,254  
Total capital 238,288   257,792   271,142  
Gearing 32.7 % 28.9 % 27.6 %

 

   
1.  Includes lease liabilities of $29,073 million at June 30, 2020 and $29,290 million at March 31, 2020, and $30,758 million at June 30, 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 is a measure aimed at facilitating a comparative understanding of performance from period to period by removing the effects of identified items, which either individually or collectively, can cause volatility, in some cases driven by external factors.

 
                     
     
Quarters $ million Half year
Q2 2020   Q1 2020   Q2 2019     2020   2019  
5,822   5,982   6,835   Production and manufacturing expenses 11,803   13,189  
2,370   2,393   2,881   Selling, distribution and administrative expenses 4,763   5,233  
232   243   225   Research and development 475   437  
8,423   8,618   9,941   Operating expenses 17,042   18,859  
      Of which identified items:    
(508 ) (18 ) (27 ) Redundancy and restructuring (charges)/reversal (526 ) (79 )
(411 )   (306 ) (Provisions)/reversal (411 ) (306 )
    (131 ) Other   (131 )
(919 ) (18 ) (464 )   (937 ) (516 )
7,504   8,600   9,477   Underlying operating expenses 16,105   18,343  

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.  Page 22  

 
 
 
ROYAL DUTCH SHELL PLC2ND QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS

 

 
                     
     
Quarters $ million Half year
Q2 2020   Q1 2020   Q2 2019     2020   2019  
2,563   14,851   11,031   Cash flow from operating activities 17,415   19,661  
(2,320 ) (2,718 ) (4,166 ) Cash flow from investing activities (5,039 ) (8,788 )
243   12,133   6,865   Free cash flow 12,376   10,873  
696   2,233   763   Less: Divestment proceeds (Reference I) 2,929   1,756  
    77   Add: Tax paid on divestments (reported under "Other investing cash outflows")   77  
199   404   7   Add: Cash outflows related to inorganic capital expenditure1 602   365  
(254 ) 10,304   6,186   Organic free cash flow2 10,050   9,559  

 

   
1.  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.

 

   
2.  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 Half year
Q2 2020   Q1 2020   Q2 2019     2020   2019  
2,563   14,851   11,031   Cash flow from operating activities 17,415   19,661  
(3,713 ) 9,594   (61 ) (Increase)/decrease in inventories 5,881   (2,902 )
3,959   6,314   308   (Increase)/decrease in current receivables 10,273   (1,117 )
(4,226 ) (8,430 ) 321   Increase/(decrease) in current payables (12,655 ) 1,104  
(3,980 ) 7,478   569   (Increase)/decrease in working capital 3,499   (2,914 )
6,543   7,373   10,462   Cash flow from operating activities excluding working capital movements 13,916   22,575  
      Of which:    
2,871   3,352   2,824   Integrated Gas 6,224   6,540  
548   3,718   5,251   Upstream 4,265   10,515  
2,430   353   2,081   Oil Products 2,783   4,670  
304   189   508   Chemicals 492   1,037  
390   (239 ) (202 ) Corporate 151   (185 )

I.    Divestment proceedsDivestment 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 Half year
Q2 2020   Q1 2020 Q2 2019   2020 2019
211   1,613 644 Proceeds from sale of property, plant and equipment and businesses 1,824 822
423   547 102 Proceeds from sale of joint ventures and associates 970 646
62   73 17 Proceeds from sale of equity securities 135 288
696   2,233 763 Divestment proceeds 2,929 1,756

  Page 23   

 
 
 
ROYAL DUTCH SHELL PLC2ND QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS

 PRINCIPAL RISKS AND UNCERTAINTIES The principal risks and uncertainties affecting Shell are described in the Risk Factors section of the Annual Report and Accounts (pages 27 to 36) and Form 20-F (pages 11 to 15) for the year ended December 31, 2019 and are summarised below. There are no material changes in those Risk Factors for the remaining 6 months of the financial year.

   
We are exposed to macroeconomic risks including fluctuating prices of crude oil, natural gas, oil products and chemicals.

 

   
Our ability to deliver competitive returns and pursue commercial opportunities depends in part on the accuracy of our price assumptions.

 

   
Our ability to achieve strategic objectives depends on how we react to competitive forces.

 

   
We seek to execute divestments in the pursuit of our strategy. We may not be able to successfully divest these assets in line with our strategy.

 

   
Our future hydrocarbon production depends on the delivery of large and integrated projects, as well as on our ability to replace proved oil and gas reserves.

 

   
The estimation of proved oil and gas reserves involves subjective judgements based on available information and the application of complex rules; therefore, subsequent downward adjustments are possible.

 

   
Rising climate change concerns have led and could lead to additional legal and/or regulatory measures which could result in project delays or cancellations, a decrease in demand for fossil fuels, potential litigation and additional compliance obligations.

 

   
Our business exposes us to risks of social instability, criminality, civil unrest, terrorism, piracy, cyber-disruption, acts of war and pandemic diseases, such as the COVID-19 (coronavirus) outbreak, that could have a material adverse effect on our operations.

 

   
We operate in more than 70 countries that have differing degrees of political, legal and fiscal stability. This exposes us to a wide range of political developments that could result in changes to contractual terms, laws and regulations. In addition, we and our joint arrangements and associates face the risk of litigation and disputes worldwide.

 

   
The nature of our operations exposes us, and the communities in which we work, to a wide range of health, safety, security and environment risks.

 

   
A further erosion of the business and operating environment in Nigeria could have a material adverse effect on us.

 

   
Production from the Groningen field in the Netherlands causes earthquakes that affect local communities.

 

   
Our future performance depends on the successful development and deployment of new technologies and new products.

 

   
We are exposed to treasury and trading risks, including liquidity risk, interest rate risk, foreign exchange risk and credit risk. We are affected by the global macroeconomic environment as well as financial and commodity market conditions.

 

   
We are exposed to commodity trading risks, including market and operational risks.

 

   
We have substantial pension commitments, funding of which is subject to capital market risks and other factors.

 

   
We mainly self-insure our risk exposure. We could incur significant losses from different types of risks that are not covered by insurance from third-party insurers.

 

   
An erosion of our business reputation could have a material adverse effect on our brand, our ability to secure new resources or access capital markets, and on our licence to operate.

 

   
Many of our major projects and operations are conducted in joint arrangements or associates. This could reduce our degree of control, as well as our ability to identify and manage risks.

 

   
We rely heavily on information technology systems for our operations.

 

   
Violations of antitrust and competition laws carry fines and expose us and/or our employees to criminal sanctions and civil suits.

 

   
Violations of anti-bribery, tax evasion and anti-money laundering laws carry fines and expose us and/or our employees to criminal sanctions, civil suits and ancillary consequences (such as debarment and the revocation of licences).

 

   
Violations of data protection laws carry fines and expose us and/or our employees to criminal sanctions and civil suits.

 

   
Violations of trade compliance laws and regulations, including sanctions, carry fines and expose us and our employees to criminal sanctions and civil suits.

 

   
The Company’s Articles of Association determine the jurisdiction for shareholder disputes. This could limit shareholder remedies.

 Page 24   

 
 
 
ROYAL DUTCH SHELL PLC2ND QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS

 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. RESPONSIBILITY STATEMENTIt is confirmed that to the best of our knowledge: (a) the Condensed Consolidated Interim Financial Statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union; (b) the interim management report includes a fair review of the information required by Disclosure Guidance and Transparency Rule (DTR) 4.2.7R (indication of important events during the first six months of the financial year, and their impact on the Condensed Consolidated Interim Financial Statements, and description of principal risks and uncertainties for the remaining six months of the financial year); and (c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties transactions and changes thereto).The Directors of Royal Dutch Shell plc are shown on pages 104-110 in the Annual Report and Accounts and on pages 68 to 73 in the Form 20-F for the year ended December 31, 2019 save for the following changes: Dick Boer: appointed Non-executive Director with effect from May 20, 2020.Martina Hund-Mejean: appointed Non-executive Director with effect from May 20, 2020.Gerard Kleisterlee: stepped down with effect from May 19, 2020.Roberto Setubal: stepped down with effect from May 19, 2020.Linda G. Stuntz: stepped down with effect from May 19, 2020.  On behalf of the Board        

 
         
Ben van Beurden   Jessica Uhl    
Chief Executive Officer   Chief Financial Officer    
July 30, 2020   July 30, 2020    

  Page 25   

 
 
 
ROYAL DUTCH SHELL PLC2ND QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS

 INDEPENDENT REVIEW REPORT TO ROYAL DUTCH SHELL PLCIntroductionWe have been engaged by Royal Dutch Shell plc to review the Condensed Consolidated Interim Financial Statements in the half-yearly financial report for the six months ended June 30, 2020, which comprise the Consolidated Statement of Income, the Consolidated Statement of Comprehensive Income, the Condensed Consolidated Balance Sheet, the Consolidated Statement of Changes in Equity, the Condensed Consolidated Statement of Cash Flows and Notes 1 to 7. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.This report is made solely to Royal Dutch Shell plc in accordance with guidance contained in the International Standard on Review Engagements 2410 (UK and Ireland) “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than Royal Dutch Shell plc, for our work, for this report, or for the conclusions we have formed.Directors’ responsibilitiesThe half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom’s Financial Conduct Authority.The annual Consolidated Financial Statements of Royal Dutch Shell plc and its subsidiaries are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB) and as adopted by the European Union (EU). The condensed set of financial statements included in the half-yearly financial report has been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting, as issued by the IASB and as adopted by the EU.Our responsibilityOur responsibility is to express to Royal Dutch Shell plc a conclusion on the Condensed Consolidated Interim Financial Statements in the half-yearly financial report based on our review. Scope of reviewWe conducted our review in accordance with International Standard on Review Engagements 2410 (UK and Ireland), “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.ConclusionBased on our review, nothing has come to our attention that causes us to believe that the Condensed Consolidated Interim Financial Statements in the half-yearly financial report for the six months ended June 30, 2020 are not prepared, in all material respects, in accordance with International Accounting Standard 34 as issued by the IASB and as adopted by the EU and the Disclosure Guidance and Transparency Rules of the United Kingdom’s Financial Conduct Authority. Ernst & Young LLPLondonJuly 30, 2020  Page 26  

 
 
 
ROYAL DUTCH SHELL PLC2ND QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS

 The maintenance and integrity of the Royal Dutch Shell plc website (www.shell.com) are the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the Condensed Consolidated Interim Financial Statements since they were initially presented on the website.Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Page 27   

 
 
 
ROYAL DUTCH SHELL PLC2ND QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS

 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 Annual Report and Accounts and 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, July 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. July 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 - Media: International +44 (0) 207 934 5550; USA +1 832 337 4355  LEI number of Royal Dutch Shell plc: 21380068P1DRHMJ8KU70 Classification: Inside Information  Page 28  

 

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