ROYAL DUTCH SHELL PLC 3RD QUARTER 2020 UNAUDITED RESULTS
SHELL SETS OUT A COMPELLING INVESTMENT CASE
The Hague, October 29, 2020 - Shell today announced
a cash allocation framework that will enable it to reduce debt,
increase distributions to shareholders, and allow for disciplined
growth as it reshapes its business for the future of energy.
Ongoing work to reshape Shell’s portfolio is expected to deliver
continued cash generation to grow its low-carbon businesses as well
as to increase shareholder distributions, making a compelling
investment case.In confirming its progressive dividend policy,
Shell announces a dividend per share growth by around 4% to 16.65
US cents for the third quarter 2020 and annually thereafter,
subject to Board approval.The cash allocation framework includes a
target to reduce net debt to $65 billion (from $73.5 billion as of
September 30, 2020) – and, on achieving this milestone, a target to
distribute a total of 20-30% of cash flow from operations to
shareholders. Increased shareholder distributions will be achieved
through a combination of Shell’s progressive dividend and share
buybacks. Remaining cash will be allocated to disciplined and
measured capex growth and further debt reduction, targeting AA
credit metrics through the cycle.Shell’s decisive steps this year
have significantly strengthened its financial resilience, allowing
the acceleration of strategic plans and providing clarity on cash
priorities. These actions support Shell's ambition to become a
net-zero energy emissions business by 2050 or sooner, in step with
society and its customers."Our sector-leading cash flows will
enable us to grow our businesses of the future while increasing
shareholder distributions, making us a compelling investment case,"
said Royal Dutch Shell Chief Executive Officer, Ben van Beurden."We
must continue to strengthen the financial resilience of our
portfolio as we make the transition to become a net-zero emissions
energy business. Our decisive actions taken earlier in the year
have solidified our operational and cash delivery. The strength of
our performance gives us the confidence to lay out our strategic
direction, resume dividend growth and to provide clarity on the
cash allocation framework, with clear parameters to increase
shareholder distributions."Chair of the Board of Royal Dutch Shell,
Chad Holliday commented: "The Board has reviewed Shell’s recent
performance and its plans to grow its businesses of the future, and
we are confident that Shell can sustainably grow its shareholder
distributions as well as invest for growth.As a result, the Board
has decided to increase the dividend per share to 16.65 US cents
for the third quarter 2020. The Board has additionally approved a
cash allocation framework for Shell which, on reducing its net debt
to $65 billion, will target total shareholder distributions of
20-30% of cash flow from operations."Shell will continue with its
strong capital discipline, including annual Cash capex of between
$19 and $22 billion in the near term and a focus on reducing net
debt. Shell will continue its relentless high grading of the
portfolio with expected divestment proceeds of $4 billion a year on
average.LEADING ENERGY TRANSITION STRATEGY AND A STRONG
PORTFOLIOShell will reshape its portfolio of assets and products to
meet the cleaner energy needs of its customers in the coming
decades. The key elements of Shell’s strategic direction
include:▪Ambition to be a net-zero emissions energy business
by 2050 or sooner, in step with society and its
customers.▪Grow its leading marketing business, further
develop the integrated power business and commercialise hydrogen
and biofuels to support customers’ efforts to achieve net-zero
emissions.▪Transform the Refining portfolio from the current
fourteen sites into six high-value energy and chemicals parks,
integrated with Chemicals. Growth in Chemicals will pivot to more
performance chemicals and recycled feedstocks.▪Extend
leadership in liquefied natural gas (LNG) to enable decarbonisation
of key markets and sectors.▪Focus on value over volume by
simplifying Upstream to nine significant core positions, generating
more than 80% of Upstream cash flow from
operations.▪Enhanced value delivery through Trading and
Optimisation.
A comprehensive strategy update, with details on the future
shape of the Shell portfolio, actions to deliver the net-zero
ambition, and a full financial outlook will be presented on
February 11, 2021.
Page 1
NOTES TO EDITOR▪Our nine core Upstream positions
are: Brazil, Brunei, Gulf of Mexico (US/Mexico GoM), Kazakhstan,
Malaysia, Nigeria, Oman, Permian and UK North Sea.▪The six
sites expected to form our energy and chemicals parks include: Deer
Park (US), Norco (US), Pernis (NL), Pulau Bukom (Singapore),
Rheinland (Germany) and Scotford (Canada).▪The
chemicals-only production sites, which sit alongside the energy and
chemicals parks are: CSPC (China- JV with CNOOC), Fife Ethylene
Plant (Scotland - JV with Exxon), Geismar (US), Jurong Island
(Singapore), Moerdijk (NL), and Pennsylvania Chemicals (US - under
construction). Page
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ROYAL DUTCH SHELL PLC3RD QUARTER 2020 UNAUDITED RESULTS |
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| SUMMARY OF
UNAUDITED RESULTS |
|
Quarters |
$ million |
|
Nine Months |
|
Q3 2020 |
Q2 2020 |
Q3 2019 |
%¹ |
|
Reference |
2020 |
2019 |
% |
|
489 |
|
(18,131) |
|
5,879 |
|
-92 |
Income/(loss) attributable to shareholders |
|
(17,666) |
|
14,878 |
|
-219 |
|
177 |
|
(18,377) |
|
6,081 |
|
-97 |
CCS earnings
attributable to shareholders |
Note 2 |
(15,443) |
|
14,399 |
|
-207 |
|
955 |
|
638 |
|
4,767 |
|
-80 |
Adjusted
Earnings² |
A |
4,453 |
|
13,530 |
|
-67 |
|
10,403 |
|
2,563 |
|
12,252 |
|
-15 |
Cash flow
from operating activities |
|
27,818 |
|
31,913 |
|
-13 |
|
(2,833) |
|
(2,320) |
|
(2,130) |
|
|
Cash flow
from investing activities |
|
(7,871) |
|
(10,918) |
|
|
|
7,571 |
|
243 |
|
10,122 |
|
|
Free cash
flow |
G |
19,947 |
|
20,995 |
|
|
|
3,737 |
|
3,617 |
|
6,098 |
|
|
Cash
capital expenditure |
C |
12,324 |
|
17,036 |
|
|
|
7,854 |
|
7,504 |
|
8,657 |
|
-9 |
Underlying
operating expenses |
F |
23,958 |
|
27,000 |
|
-11 |
|
(4.9)% |
(2.9)% |
8.6% |
|
ROACE (Net
income basis) |
D |
(4.9)% |
8.6% |
|
|
3.9% |
5.3% |
8.1% |
|
ROACE (CCS basis
excluding identified items) |
D |
3.9% |
8.1% |
|
|
31.4% |
32.7% |
27.9% |
|
Gearing |
E |
31.4% |
27.9% |
|
|
3,081 |
|
3,379 |
|
3,563 |
|
-14 |
Total
production available for sale (thousand boe/d) |
|
3,392 |
|
3,632 |
|
-7 |
|
0.06 |
|
(2.33) |
|
0.73 |
|
-92 |
Basic
earnings per share ($) |
|
(2.27) |
|
1.84 |
|
-223 |
|
0.1665 |
|
0.16 |
|
0.47 |
|
-65 |
Dividend per share ($) |
|
0.4865 |
|
1.41 |
|
-65 |
1. Q3 on Q3
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
$0.5 billion for the third quarter 2020, which reflected lower
realised prices for oil and LNG as well as lower realised refining
margins and production volumes compared with the third quarter
2019. This was partly offset by lower operating expenses, well
write-offs, depreciation and strong marketing margins. Income
attributable to Royal Dutch Shell plc shareholders included an
impairment charge of $1.1 billion, partly offset by gains on
fair value accounting of commodity derivatives of $0.5 billion.
Cost of supplies adjustment attributable to Royal Dutch Shell
plc shareholders for the third quarter 2020 was negative $0.3
billion.
Adjusted Earnings were $1.0 billion for the third quarter 2020,
reflecting lower realised prices for oil and LNG as well as lower
realised refining margins and production volumes compared with the
third quarter 2019. This was partly offset by lower operating
expenses, well write-offs, depreciation and strong marketing
margins.
Cash flow from operating activities for the third quarter 2020
was $10.4 billion, which included positive working capital
movements of $1.4 billion. Cash flow from investing activities
for the quarter was an outflow of $2.8 billion, driven mainly by
capital expenditure, partly offset by proceeds from
divestments.
Gearing was 31.4% at the end of the third quarter 2020, compared
with 32.7% at the end of the second quarter 2020, mainly driven by
strong cash flow generation in the quarter.
Total dividends distributed to Royal Dutch Shell plc
shareholders in the quarter were $1.2 billion.
Shell announces a dividend per share growth by around 4% to
16.65 US cents for the third quarter 2020 and annually thereafter,
subject to Board approval.
Supplementary financial and operational disclosure and a
separate press release for this quarter are available at
www.shell.com/investor1.
Page 3
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ROYAL DUTCH SHELL PLC3RD QUARTER 2020 UNAUDITED
RESULTS |
1. Not incorporated by reference.
Page 4
THIRD QUARTER 2020 PORTFOLIO DEVELOPMENTS
Integrated Gas
During the quarter, the CrossWind consortium, a joint venture
between Shell (79.9% interest) and Eneco (20.1% interest), was
awarded the tender for the subsidy-free offshore wind farm
Hollandse Kust (noord) in the Netherlands. The wind farm has a
planned installed capacity of 759 MW and is expected to help meet
the objectives of the Dutch Climate Accord and the EU’s Green Deal.
Both companies have already taken their final investment decisions
on the project. This investment is part of Shell's ambition for a
new wind-to-hydrogen value chain.
UpstreamDuring the quarter, Shell completed the sale of
its Appalachia shale gas position in the USA for $541 million paid
fully in cash, less closing adjustments. The transaction has an
effective date of January 1, 2020.
In August, Shell took the final investment decision to contract
the Mero-3 floating production, storage and offloading (FPSO)
vessel to be deployed at the Mero field within the offshore Santos
Basin in Brazil. This production system has a daily operational
capacity rate of 180,000 barrels of oil equivalent, with production
coming online over the next four years.
Page 5
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ROYAL DUTCH SHELL PLC3RD QUARTER 2020 UNAUDITED
RESULTS |
PERFORMANCE BY SEGMENT
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| INTEGRATED
GAS |
|
|
|
|
Quarters |
$ million |
Nine Months |
|
Q3 2020 |
Q2 2020 |
Q3 2019 |
%¹ |
|
2020 |
2019 |
% |
|
(151) |
|
(7,959) |
|
2,597 |
|
-106 |
Segment
earnings |
(6,298) |
|
6,731 |
|
-194 |
|
(920) |
|
(8,321) |
|
(77) |
|
|
Of which: Identified items (Reference A) |
(9,572) |
|
(237) |
|
|
|
768 |
|
362 |
|
2,674 |
|
-71 |
Adjusted
Earnings |
3,274 |
|
6,968 |
|
-53 |
|
2,323 |
|
2,663 |
|
4,224 |
|
-45 |
Cash flow
from operating activities |
8,972 |
|
11,854 |
|
-24 |
|
2,396 |
|
2,871 |
|
4,271 |
|
-44 |
Cash flow from
operating activities excluding working capital movements (Reference
H) |
8,619 |
|
10,811 |
|
-20 |
|
1,020 |
|
736 |
|
894 |
|
|
Cash
capital expenditure (Reference C) |
2,638 |
|
2,976 |
|
|
|
143 |
|
151 |
|
166 |
|
-14 |
Liquids
production available for sale (thousand b/d) |
152 |
|
154 |
|
-1 |
|
4,067 |
|
4,369 |
|
4,586 |
|
-11 |
Natural gas
production available for sale (million scf/d) |
4,343 |
|
4,397 |
|
-1 |
|
844 |
|
904 |
|
957 |
|
-12 |
Total
production available for sale (thousand boe/d) |
901 |
|
912 |
|
-1 |
|
7.80 |
|
8.36 |
|
8.95 |
|
-13 |
LNG liquefaction
volumes (million tonnes) |
25.03 |
|
26.34 |
|
-5 |
|
17.13 |
|
16.65 |
|
18.90 |
|
-9 |
LNG sales volumes (million tonnes) |
52.78 |
|
54.36 |
|
-3 |
1. Q3 on Q3 change.
Third quarter segment earnings were a loss of $151 million.
This included an impairment charge of $924 million mainly
related to the Prelude floating LNG operations in Australia. Also
included were a divestment gain of $118 million related to a lease
liability remeasurement and a charge of $126 million related to
provisions for an onerous contract. These charges are part of
identified items (see Reference A).Compared with the third quarter
2019, Integrated Gas Adjusted Earnings of $768 million primarily
reflected lower realised prices for LNG, oil and gas and lower
contributions from trading and optimisation, partly offset by lower
operating expenses.
Cash flow from operating activities for the quarter was $2,323
million, primarily driven by Adjusted Earnings before non-cash
expenses including depreciation, as well as cash inflows from
commodity derivatives.
Compared with the third quarter 2019, total production decreased
by 12% mainly due to more maintenance activities and lower well
performance, partly offset by the transfer in the first quarter
2020 of the Rashpetco operations in Egypt from the Upstream
segment. LNG liquefaction volumes decreased mainly as a result of
more maintenance activities in Australia.
Nine Months segment earnings were a loss of $6,298 million.
This included an impairment charge of $9,135 million mainly
related to the Queensland Curtis LNG and Prelude floating LNG
operations in Australia. Also included was a net charge of $450
million due to the fair value accounting of commodity derivatives.
These charges are part of identified items (see Reference
A).Compared with the first nine months of 2019, Integrated Gas
Adjusted Earnings of $3,274 million primarily reflected lower
realised prices for LNG, oil and gas, lower contributions from
trading and optimisation, higher well write-offs and unfavourable
deferred tax movements, partly offset by lower operating
expenses.
Cash flow from operating activities for the first nine months of
2020 was $8,972 million, primarily driven by Adjusted Earnings
before non-cash expenses including depreciation and well
write-offs.
Compared with the first nine months of 2019, total production
decreased by 1% mainly due to more maintenance activities and lower
well performance, partly offset by the transfer in the first
quarter 2020 of the Rashpetco operations in Egypt from the Upstream
segment. LNG liquefaction volumes decreased mainly as a result of
feedgas availability, cargo timing and more maintenance
activities. Page
6
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ROYAL DUTCH SHELL PLC3RD QUARTER 2020 UNAUDITED
RESULTS |
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UPSTREAM |
|
|
|
|
|
Quarters |
$ million |
Nine Months |
|
Q3 2020 |
Q2 2020 |
Q3 2019 |
%¹ |
|
2020 |
2019 |
% |
|
(1,110) |
|
(6,721) |
|
1,651 |
|
-167 |
Segment
earnings |
(8,694) |
|
4,709 |
|
-285 |
|
(226) |
|
(5,209) |
|
818 |
|
|
Of which: Identified items (Reference A) |
(6,590) |
|
966 |
|
|
|
(884) |
|
(1,512) |
|
833 |
|
-206 |
Adjusted
Earnings |
(2,104) |
|
3,743 |
|
-156 |
|
2,101 |
|
319 |
|
4,334 |
|
-52 |
Cash flow
from operating activities |
8,026 |
|
15,090 |
|
-47 |
|
2,629 |
|
548 |
|
4,597 |
|
-43 |
Cash flow from
operating activities excluding working capital movements (Reference
H) |
6,894 |
|
15,112 |
|
-54 |
|
1,245 |
|
1,876 |
|
2,625 |
|
|
Cash
capital expenditure (Reference C) |
5,642 |
|
7,437 |
|
|
|
1,520 |
|
1,609 |
|
1,652 |
|
-8 |
Liquids production
available for sale (thousand b/d) |
1,619 |
|
1,652 |
|
-2 |
|
3,960 |
|
4,673 |
|
5,224 |
|
-24 |
Natural gas
production available for sale (million scf/d) |
4,768 |
|
5,904 |
|
-19 |
|
2,203 |
|
2,415 |
|
2,553 |
|
-14 |
Total production available for sale (thousand boe/d) |
2,441 |
|
2,669 |
|
-9 |
1. Q3 on Q3 change.
Third quarter segment earnings amounted to a loss of $1,110
million, which reflected lower prices as a result of unfavourable
macroeconomic conditions, as well as lower production volumes
mainly driven by OPEC+ restrictions and severe weather conditions
affecting US Gulf of Mexico production compared with the third
quarter 2019. This was partly offset by comparatively lower well
write-offs. Segment earnings included impairment charges of $101
million and divestment losses of $100 million. These charges
are part of identified items (see Reference A).Compared with the
third quarter 2019, Upstream Adjusted Earnings were a loss of $884
million, reflecting lower oil and gas prices as a result of
unfavourable macroeconomic conditions, as well as lower production
volumes mainly driven by OPEC+ restrictions and severe weather
conditions affecting US Gulf of Mexico production. This was partly
offset by comparatively lower well write-offs.
Cash flow from operating activities for the quarter was $2,101
million, primarily driven by Adjusted Earnings before non-cash
expenses including depreciation.
Compared with the third quarter 2019, total production decreased
by 14%, mainly due to the impact of OPEC+ restrictions, lower
production in the NAM joint venture and severe weather conditions
in the US Gulf of Mexico. Divestments and field declines were
largely offset by new fields and ramp-ups.
Nine Months segment earnings amounted to a loss of $8,694
million. This included an impairment charge of $5,175 million
mainly related to unconventional assets in North America, offshore
assets 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
$985 million related to the impact of the weakening Brazilian
real on a deferred tax position, and redundancy and restructuring
costs of $170 million. These net charges are part of
identified items (see Reference A).Compared with the first nine
months of 2019, Upstream Adjusted Earnings amounted to a loss of
$2,104 million, primarily reflecting lower realised oil and gas
prices.
Cash flow from operating activities for the first nine months of
2020 was $8,026 million, primarily driven by Adjusted Earnings
before non-cash expenses including depreciation.
Compared with the first nine months of 2019, total production
decreased by 9%, mainly due to the impact of lower production in
the NAM joint venture and OPEC+ restrictions. Divestments and field
declines were largely offset by new fields and ramp-ups mainly in
Brazil.
Page 7
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ROYAL DUTCH SHELL PLC3RD QUARTER 2020 UNAUDITED
RESULTS |
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| OIL
PRODUCTS |
|
|
|
|
Quarters |
$ million |
Nine Months |
|
Q3 2020 |
Q2 2020 |
Q3 2019 |
%¹ |
|
2020 |
2019 |
% |
|
2,092 |
|
(3,023) |
|
2,433 |
|
-14 |
Segment
earnings² |
1,281 |
|
4,956 |
|
-74 |
|
411 |
|
(5,433) |
|
430 |
|
|
Of which: Identified items (Reference A) |
(4,174) |
|
226 |
|
|
|
1,680 |
|
2,411 |
|
2,003 |
|
-16 |
Adjusted
Earnings² |
5,454 |
|
4,730 |
|
+15 |
| |
|
|
|
Of which: |
|
|
|
|
55 |
|
1,500 |
|
522 |
|
-90 |
Refining & Trading |
1,713 |
|
995 |
|
+72 |
|
1,626 |
|
911 |
|
1,481 |
|
+10 |
Marketing |
3,742 |
|
3,735 |
|
— |
|
5,131 |
|
(362) |
|
3,137 |
|
+64 |
Cash flow
from operating activities |
9,647 |
|
3,807 |
|
+153 |
|
3,476 |
|
2,430 |
|
2,948 |
|
+18 |
Cash flow from
operating activities excluding working capital movements (Reference
H) |
6,259 |
|
7,618 |
|
-18 |
|
832 |
|
606 |
|
1,308 |
|
|
Cash
capital expenditure (Reference C) |
2,019 |
|
3,279 |
|
|
|
1,972 |
|
1,944 |
|
2,522 |
|
-22 |
Refinery
processing intake (thousand b/d) |
2,104 |
|
2,606 |
|
-19 |
|
4,740 |
³ |
4,041 |
³ |
6,731 |
|
-30 |
Oil Products sales volumes (thousand b/d) |
4,686 |
³ |
6,603 |
|
-29 |
1. Q3 on Q3
change.2. Earnings are presented on a CCS
basis (see Note 2).3. With effect from
January 1, 2020, the reporting of Oil Products sales volumes has
changed (see Note 2). Sales volumes would be 5,413 thousand b/d in
the third quarter 2020 on a comparable basis with 2019.
Third quarter segment earnings were $2,092 million, which
reflected lower realised refining margins and lower marketing sales
volumes due to a weak macroeconomic environment and the COVID-19
pandemic compared with the third quarter 2019. This was partly
offset by lower operating expenses, strong marketing margins and
favourable deferred tax movements. Segment earnings included a gain
of $542 million due to the fair value accounting of commodity
derivatives and impairment charges of $117 million. These net gains
are part of identified items (see Reference A).Compared with the
third quarter 2019, Oil Products Adjusted Earnings of $1,680
million for the quarter reflected lower realised refining margins
and lower marketing sales volumes due to a weak macroeconomic
environment and the COVID-19 pandemic. This was partly offset by
lower operating expenses, strong marketing margins and favourable
deferred tax movements.
Cash flow from operating activities for the third quarter 2020
was $5,131 million, primarily driven by Adjusted Earnings before
depreciation, as well as positive working capital movements and
cash inflows from commodity derivatives.
With effect from January 1, 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 third quarter 2019.
For the third quarter 2020, Refining & Trading contributed
3% of Adjusted Earnings, and Marketing contributed 97% of Adjusted
Earnings.
▪Refining & Trading Adjusted Earnings reflected lower
realised refining margins. This was partly offset by lower
operating expenses and favourable deferred tax movements, compared
with the third quarter 2019.▪Marketing Adjusted Earnings
reflected strong retail and global commercial margins, lower
operating expenses and favourable deferred tax movements, despite
lower marketing sales volumes, compared with the third quarter
2019.With effect from January 1, 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 65% compared with 78% in the third quarter 2019,
mainly due to lower demand and economic optimisation of the
plants.
Nine Months segment earnings were $1,281 million. This
included an impairment charge of $4,205 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 gain of $251 million due to the fair value accounting of
commodity derivatives and redundancy and restructuring costs of
$133 million. These net charges are part of identified items (see
Reference A). Page
8
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ROYAL DUTCH SHELL PLC3RD QUARTER 2020 UNAUDITED
RESULTS |
Compared with the first nine months of 2019, Oil Products Adjusted
Earnings of $5,454 million reflected lower operating expenses,
strong marketing margins and very strong contributions from crude
and oil products trading and optimisation. This was partly offset
by lower realised refining margins and lower marketing sales
volumes due to the weak macroeconomic environment and the COVID-19
pandemic.
Cash flow from operating activities for the first nine months of
2020 was $9,647 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 nine
months of 2020.
With effect from January 1, 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 nine months of 2019.
For the first nine months of 2020, Refining & Trading
contributed 31% of Adjusted Earnings, and Marketing contributed 69%
of Adjusted Earnings.
▪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
nine months of 2019.
▪Marketing Adjusted Earnings reflected strong retail and
global commercial margins and lower operating expenses, despite
lower marketing sales volumes, compared with the first nine months
of 2019.
With effect from January 1, 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 72% compared with 78% in the first nine months of
2019, mainly due to lower demand and economic optimisation of the
plants. Page 9
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ROYAL DUTCH SHELL PLC3RD QUARTER 2020 UNAUDITED
RESULTS |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
CHEMICALS |
|
|
|
|
Quarters |
$ million |
Nine Months |
|
Q3 2020 |
Q2 2020 |
Q3 2019 |
%¹ |
|
2020 |
2019 |
% |
|
131 |
|
164 |
|
211 |
|
-38 |
Segment
earnings² |
441 |
|
556 |
|
-21 |
|
(96) |
|
(41) |
|
(13) |
|
|
Of which: Identified items (Reference A) |
(140) |
|
(250) |
|
|
|
227 |
|
206 |
|
224 |
|
+1 |
Adjusted
Earnings² |
581 |
|
806 |
|
-28 |
|
335 |
|
734 |
|
181 |
|
+85 |
Cash flow
from operating activities |
891 |
|
1,438 |
|
-38 |
|
488 |
|
304 |
|
346 |
|
+41 |
Cash flow from
operating activities excluding working capital movements (Reference
H) |
981 |
|
1,383 |
|
-29 |
|
595 |
|
369 |
|
1,160 |
|
|
Cash
capital expenditure (Reference C) |
1,810 |
|
3,067 |
|
|
|
3,823 |
|
3,623 |
|
3,845 |
|
-1 |
Chemicals sales volumes (thousand tonnes) |
11,318 |
|
11,769 |
|
-4 |
1. Q3 on Q3
change.2. Earnings are presented on a CCS
basis (see Note 2).
Third quarter segment earnings were $131 million,
which reflected lower realised margins due to a weak price
environment compounded by the COVID-19 pandemic compared with the
third quarter 2019. This was offset by favourable deferred tax
movements. Segment earnings included a charge of $104 million
mainly due to a legal provision, which is part of identified items
(see Reference A).Compared with the third quarter 2019, Chemicals
Adjusted Earnings of $227 million reflected lower realised margins
due to a weak price environment compounded by the COVID-19
pandemic. This was offset by favourable deferred tax movements.Cash
flow from operating activities for the quarter was $335 million,
primarily driven by Adjusted Earnings before depreciation and
partly offset by negative working capital movements.
With effect from January 1, 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 80% compared with 78% in the
third quarter 2019, mainly due to a higher level of maintenance
activities in 2019.
Nine Months segment earnings were $441 million,
which reflected lower realised margins due to a weak price
environment compounded by the COVID-19 pandemic compared with the
first nine months of 2019. Segment earnings included a charge of
$104 million due to a legal provision and redundancy and
restructuring costs of $28 million. These net charges are part of
identified items (see Reference A).
Compared with the first nine months of 2019, Chemicals Adjusted
Earnings of $581 million reflected lower realised margins due to a
weak price environment compounded by the COVID-19 pandemic.
Cash flow from operating activities for the first nine months of
2020 was an inflow of $891 million, primarily driven by Adjusted
Earnings before depreciation. This was partly offset by
cost-of-sales adjustments for the first nine months of 2020.
With effect from January 1, 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 nine months of 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 10
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ROYAL DUTCH SHELL PLC3RD QUARTER 2020 UNAUDITED
RESULTS |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
CORPORATE |
|
|
|
Quarters |
$ million |
Nine Months |
|
Q3 2020 |
Q2 2020 |
Q3 2019 |
|
2020 |
2019 |
|
(739) |
|
(805) |
|
(663) |
|
Segment earnings |
(1,998) |
|
(2,122) |
|
|
52 |
|
(9) |
|
154 |
|
Of which: Identified items (Reference A) |
578 |
|
185 |
|
|
(792) |
|
(796) |
|
(817) |
|
Adjusted Earnings |
(2,576) |
|
(2,307) |
|
|
514 |
|
(791) |
|
375 |
|
Cash flow from operating activities |
282 |
|
(276) |
|
|
(33) |
|
390 |
|
(80) |
|
Cash flow from operating activities excluding working capital
movements (Reference H) |
118 |
|
(265) |
|
Third quarter segment earnings were an expense of $739
million. This included a gain of $48 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 $792 million, reflecting higher operating expenses,
largely offset by favourable currency exchange rate effects and
higher tax credits, compared with the third quarter 2019.
Nine Months segment earnings were an expense of $1,998
million. This included a gain of $578 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 $2,576 million, reflecting adverse currency exchange
rate effects and lower interest expenses, compared with the first
nine months of 2019.
OUTLOOK FOR THE FOURTH QUARTER 2020As 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, global developments
and uncertainty in oil supply have caused volatility in 2020 in
commodity markets. The fourth 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 830 -
870 thousand boe/d. LNG liquefaction volumes are expected to be
approximately 7.9 - 8.5 million tonnes.
Upstream production is expected to be approximately 2,300 -
2,500 thousand boe/d.
Refinery utilisation is expected to be approximately 69% -
77%.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 77% - 85%.Chemicals sales volumes are expected to be
approximately 3,500 - 3,900 thousand tonnes.
Corporate Adjusted Earnings are expected to be a net expense of
approximately $800 - $875 million in the fourth 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
11
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|
ROYAL DUTCH SHELL PLC3RD QUARTER 2020 UNAUDITED
RESULTS |
FORTHCOMING EVENTS
Fourth quarter 2020 and full year results and dividends are
scheduled to be announced on February 4, 2021. First quarter 2021
results and dividends are scheduled to be announced on April 29,
2021. Second quarter 2021 and half year results and dividends are
scheduled to be announced on July 29, 2021. Third quarter 2021
results and dividends are scheduled to be announced on October 28,
2021.The Shell Strategy Day is scheduled to take place on February
11, 2021.
Page 12
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|
|
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|
ROYAL DUTCH SHELL PLC3RD QUARTER 2020 UNAUDITED
RESULTS |
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| CONSOLIDATED
STATEMENT OF INCOME |
|
|
|
Quarters |
$ million |
Nine Months |
|
Q3 2020 |
Q2 2020 |
Q3 2019 |
|
2020 |
2019 |
|
44,021 |
|
32,504 |
|
86,592 |
|
Revenue¹ |
136,554 |
|
260,871 |
|
|
461 |
|
(161) |
|
769 |
|
Share of profit of
joint ventures and associates |
1,154 |
|
2,885 |
|
|
234 |
|
148 |
|
2,180 |
|
Interest and other
income |
458 |
|
3,285 |
|
|
44,717 |
|
32,491 |
|
89,541 |
|
Total
revenue and other income |
138,167 |
|
267,041 |
|
|
27,276 |
|
18,093 |
|
63,900 |
|
Purchases |
88,582 |
|
192,413 |
|
|
5,496 |
|
5,822 |
|
6,002 |
|
Production and
manufacturing expenses |
17,299 |
|
19,191 |
|
|
2,366 |
|
2,370 |
|
2,429 |
|
Selling,
distribution and administrative expenses |
7,130 |
|
7,662 |
|
|
233 |
|
232 |
|
219 |
|
Research and
development |
708 |
|
656 |
|
|
222 |
|
723 |
|
644 |
|
Exploration |
1,239 |
|
1,389 |
|
|
7,689 |
|
28,089 |
|
6,815 |
|
Depreciation,
depletion and amortisation² |
42,871 |
|
19,464 |
|
|
992 |
|
1,070 |
|
1,161 |
|
Interest
expense |
3,181 |
|
3,572 |
|
|
44,275 |
|
56,398 |
|
81,169 |
|
Total
expenditure |
161,009 |
|
244,346 |
|
|
442 |
|
(23,907) |
|
8,372 |
|
Income/(loss) before taxation |
(22,842) |
|
22,695 |
|
|
(104) |
|
(5,806) |
|
2,348 |
|
Taxation
charge/(credit) |
(5,265) |
|
7,351 |
|
|
546 |
|
(18,101) |
|
6,024 |
|
Income/(loss) for the period¹ |
(17,578) |
|
15,344 |
|
|
57 |
|
30 |
|
145 |
|
Income/(loss)
attributable to non-controlling interest |
88 |
|
466 |
|
|
489 |
|
(18,131) |
|
5,879 |
|
Income/(loss) attributable to Royal Dutch Shell plc
shareholders |
(17,666) |
|
14,878 |
|
|
0.06 |
|
(2.33) |
|
0.73 |
|
Basic
earnings per share ($)³ |
(2.27) |
|
1.84 |
|
|
0.06 |
|
(2.33) |
|
0.73 |
|
Diluted
earnings per share ($)³ |
(2.27) |
|
1.83 |
|
1. See Note 2 “Segment
information”.2. See Note 7 "Other notes to
the Condensed Consolidated Interim Financial
Statements".3. See Note 3 “Earnings per
share”.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| CONSOLIDATED
STATEMENT OF COMPREHENSIVE INCOME |
|
|
|
Quarters |
$ million |
Nine Months |
|
Q3 2020 |
Q2 2020 |
Q3 2019 |
|
2020 |
2019 |
|
546 |
|
(18,101) |
|
6,024 |
|
Income/(loss) for the period |
(17,578) |
|
15,344 |
|
| |
|
|
Other
comprehensive income/(loss) net of tax: |
|
|
| |
|
|
Items that may be reclassified to income in later periods: |
|
|
|
1,246 |
|
1,588 |
|
(1,514) |
|
– Currency translation differences |
(1,101) |
|
(1,123) |
|
|
5 |
|
43 |
|
2 |
|
– Debt instruments remeasurements |
20 |
|
31 |
|
|
75 |
|
(137) |
|
192 |
|
– Cash flow hedging gains/(losses) |
(214) |
|
(156) |
|
|
(153) |
|
(99) |
|
22 |
|
– Net investment hedging gains/(losses) |
(253) |
|
24 |
|
|
(59) |
|
55 |
|
5 |
|
– Deferred cost of hedging |
97 |
|
111 |
|
|
(51) |
|
30 |
|
(45) |
|
– Share of other comprehensive income/(loss) of joint ventures and
associates |
(80) |
|
(101) |
|
|
1,063 |
|
1,481 |
|
(1,339) |
|
Total |
(1,530) |
|
(1,214) |
|
| |
|
|
Items that are not reclassified to income in later periods: |
|
|
|
(580) |
|
(4,924) |
|
(2,010) |
|
– Retirement benefits remeasurements |
(3,747) |
|
(4,655) |
|
|
36 |
|
77 |
|
(53) |
|
– Equity instruments remeasurements |
(24) |
|
(23) |
|
|
45 |
|
19 |
|
1 |
|
– Share of other comprehensive income/(loss) of joint ventures and
associates |
112 |
|
(4) |
|
|
(499) |
|
(4,828) |
|
(2,062) |
|
Total |
(3,659) |
|
(4,683) |
|
|
564 |
|
(3,347) |
|
(3,401) |
|
Other
comprehensive income/(loss) for the period |
(5,189) |
|
(5,897) |
|
|
1,111 |
|
(21,448) |
|
2,624 |
|
Comprehensive income/(loss) for the period |
(22,767) |
|
9,447 |
|
|
82 |
|
43 |
|
124 |
|
Comprehensive
income/(loss) attributable to non-controlling interest |
2 |
|
482 |
|
|
1,029 |
|
(21,490) |
|
2,499 |
|
Comprehensive income/(loss) attributable to Royal Dutch Shell plc
shareholders |
(22,768) |
|
8,965 |
|
Page 13
| |
|
|
| |
|
ROYAL DUTCH SHELL PLC3RD QUARTER 2020 UNAUDITED
RESULTS |
| |
|
|
|
|
|
|
|
|
| |
| CONDENSED
CONSOLIDATED BALANCE SHEET |
|
$ million |
|
|
| |
September 30, 2020 |
December 31, 2019 |
|
Assets |
|
|
| Non-current
assets |
|
|
| Intangible
assets |
22,536 |
|
23,486 |
|
| Property, plant
and equipment |
211,976 |
|
238,349 |
|
| Joint ventures and
associates |
22,008 |
|
22,808 |
|
| Investments in
securities |
3,090 |
|
2,989 |
|
| Deferred tax |
15,713 |
|
10,524 |
|
| Retirement
benefits¹ |
2,191 |
|
4,717 |
|
| Trade and other
receivables |
7,551 |
|
8,085 |
|
| Derivative
financial instruments² |
1,874 |
|
689 |
|
| |
286,939 |
|
311,647 |
|
| Current
assets |
|
|
| Inventories |
17,306 |
|
24,071 |
|
| Trade and other
receivables |
33,033 |
|
43,414 |
|
| Derivative
financial instruments² |
6,258 |
|
7,149 |
|
| Cash and cash
equivalents |
35,714 |
|
18,055 |
|
| |
92,311 |
|
92,689 |
|
| Total
assets |
379,250 |
|
404,336 |
|
|
Liabilities |
|
|
| Non-current
liabilities |
|
|
| Debt |
91,245 |
|
81,360 |
|
| Trade and other
payables |
2,831 |
|
2,342 |
|
| Derivative
financial instruments² |
843 |
|
1,209 |
|
| Deferred tax |
10,707 |
|
14,522 |
|
| Retirement
benefits¹ |
16,201 |
|
13,017 |
|
| Decommissioning
and other provisions¹ |
26,541 |
|
21,799 |
|
| |
148,369 |
|
134,249 |
|
| Current
liabilities |
|
|
| Debt |
17,811 |
|
15,064 |
|
| Trade and other
payables |
36,546 |
|
49,208 |
|
| Derivative
financial instruments² |
5,499 |
|
5,429 |
|
| Taxes payable |
6,874 |
|
6,693 |
|
| Retirement
benefits¹ |
380 |
|
419 |
|
| Decommissioning
and other provisions¹ |
3,431 |
|
2,811 |
|
| |
70,541 |
|
79,624 |
|
| Total
liabilities |
218,909 |
|
213,873 |
|
| Equity
attributable to Royal Dutch Shell plc shareholders |
157,168 |
|
186,476 |
|
| Non-controlling
interest¹ |
3,173 |
|
3,987 |
|
| Total
equity |
160,341 |
|
190,463 |
|
|
Total liabilities and equity |
379,250 |
|
404,336 |
|
1. See Note 7 "Other notes to the
Condensed Consolidated Interim Financial
Statements".2. See Note 6 “Derivative
financial instruments and debt excluding lease liabilities”.
Page 14
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|
|
| |
|
ROYAL DUTCH SHELL PLC3RD QUARTER 2020 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 |
— |
|
— |
|
(5,102) |
|
(17,666) |
|
(22,768) |
|
2 |
|
(22,767) |
|
| Transfer from
other comprehensive income |
— |
|
— |
|
185 |
|
(185) |
|
— |
|
— |
|
— |
|
| Dividends³ |
— |
|
— |
|
— |
|
(5,956) |
|
(5,956) |
|
(242) |
|
(6,198) |
|
| Repurchases of
shares |
(6) |
|
— |
|
6 |
|
(1,214) |
|
(1,214) |
|
— |
|
(1,214) |
|
| Share-based
compensation |
— |
|
539 |
|
(237) |
|
(230) |
|
73 |
|
— |
|
73 |
|
| Other changes in
non-controlling interest |
— |
|
— |
|
— |
|
557 |
|
557 |
|
(573) |
|
(16) |
|
| At
September 30, 2020 |
651 |
|
(523) |
|
9,303 |
|
147,737 |
|
157,168 |
|
3,173 |
|
160,341 |
|
| At
January 1, 2019 |
685 |
|
(1,260) |
|
16,615 |
|
182,610 |
|
198,650 |
|
3,888 |
|
202,538 |
|
| Comprehensive
income/(loss) for the period |
— |
|
— |
|
(5,913) |
|
14,878 |
|
8,965 |
|
482 |
|
9,447 |
|
| Transfer from
other comprehensive income |
— |
|
— |
|
(56) |
|
56 |
|
— |
|
— |
|
— |
|
| Dividends |
— |
|
— |
|
— |
|
(11,472) |
|
(11,472) |
|
(403) |
|
(11,875) |
|
| Repurchases of
shares |
(20) |
|
— |
|
20 |
|
(7,526) |
|
(7,526) |
|
— |
|
(7,526) |
|
| Share-based
compensation |
— |
|
749 |
|
(131) |
|
(619) |
|
(1) |
|
— |
|
(1) |
|
| Other changes in
non-controlling interest |
— |
|
— |
|
— |
|
— |
|
— |
|
(3) |
|
(3) |
|
|
At September 30, 2019 |
666 |
|
(511) |
|
10,535 |
|
177,927 |
|
188,617 |
|
3,964 |
|
192,580 |
|
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 15
| |
|
|
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|
ROYAL DUTCH SHELL PLC3RD QUARTER 2020 UNAUDITED
RESULTS |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| CONSOLIDATED
STATEMENT OF CASH FLOWS |
|
|
|
Quarters |
$ million |
Nine Months |
|
Q3 2020 |
Q2 2020 |
Q3 2019 |
|
2020 |
2019 |
|
442 |
|
(23,907) |
|
8,372 |
|
Income
before taxation for the period |
(22,842) |
|
22,695 |
|
| |
|
|
Adjustment
for: |
|
|
|
814 |
|
889 |
|
921 |
|
– Interest expense (net) |
2,600 |
|
2,846 |
|
|
7,689 |
|
28,089 |
|
6,815 |
|
– Depreciation, depletion and amortisation |
42,871 |
|
19,464 |
|
|
14 |
|
518 |
|
402 |
|
– Exploration well write-offs |
615 |
|
722 |
|
|
(103) |
|
(128) |
|
(2,039) |
|
– Net (gains)/losses on sale and revaluation of non-current assets
and businesses |
(124) |
|
(2,483) |
|
|
(461) |
|
161 |
|
(769) |
|
– Share of (profit)/loss of joint ventures and associates |
(1,154) |
|
(2,885) |
|
|
468 |
|
610 |
|
859 |
|
– Dividends received from joint ventures and associates |
1,609 |
|
2,820 |
|
|
405 |
|
(3,713) |
|
813 |
|
– (Increase)/decrease in inventories |
6,286 |
|
(2,089) |
|
|
(540) |
|
3,959 |
|
2,644 |
|
– (Increase)/decrease in current receivables |
9,733 |
|
1,527 |
|
|
1,583 |
|
(4,226) |
|
(3,289) |
|
– Increase/(decrease) in current payables |
(11,073) |
|
(2,184) |
|
|
233 |
|
837 |
|
(149) |
|
– Derivative financial instruments |
899 |
|
(1,738) |
|
|
152 |
|
293 |
|
(634) |
|
– Retirement benefits |
355 |
|
(582) |
|
|
43 |
|
392 |
|
(250) |
|
– Decommissioning and other provisions |
333 |
|
(544) |
|
|
265 |
|
(480) |
|
67 |
|
– Other |
363 |
|
54 |
|
|
(601) |
|
(730) |
|
(1,511) |
|
Tax paid |
(2,653) |
|
(5,710) |
|
|
10,403 |
|
2,563 |
|
12,252 |
|
Cash
flow from operating activities |
27,818 |
|
31,913 |
|
|
(3,679) |
|
(3,436) |
|
(5,992) |
|
Capital
expenditure |
(11,379) |
|
(16,264) |
|
|
(34) |
|
(161) |
|
(30) |
|
Investments in
joint ventures and associates |
(754) |
|
(631) |
|
|
(23) |
|
(20) |
|
(76) |
|
Investments in
equity securities |
(190) |
|
(141) |
|
|
571 |
|
211 |
|
2,932 |
|
Proceeds from sale
of property, plant and equipment and businesses |
2,395 |
|
3,754 |
|
|
159 |
|
423 |
|
922 |
|
Proceeds from sale
of joint ventures and associates |
1,129 |
|
1,567 |
|
|
139 |
|
62 |
|
126 |
|
Proceeds from sale
of equity securities |
274 |
|
414 |
|
|
112 |
|
118 |
|
229 |
|
Interest
received |
422 |
|
686 |
|
|
588 |
|
1,174 |
|
732 |
|
Other investing
cash inflows |
2,617 |
|
2,004 |
|
|
(665) |
|
(691) |
|
(973) |
|
Other investing
cash outflows |
(2,384) |
|
(2,308) |
|
|
(2,833) |
|
(2,320) |
|
(2,130) |
|
Cash
flow from investing activities |
(7,871) |
|
(10,918) |
|
|
(176) |
|
90 |
|
44 |
|
Net
increase/(decrease) in debt with maturity period within three
months |
236 |
|
98 |
|
| |
|
|
Other debt: |
|
|
|
4,745 |
|
15,238 |
|
2,107 |
|
– New borrowings |
20,986 |
|
2,427 |
|
|
(2,688) |
|
(7,113) |
|
(7,180) |
|
– Repayments |
(12,523) |
|
(11,561) |
|
|
(831) |
|
(1,088) |
|
(1,088) |
|
Interest paid |
(2,952) |
|
(3,417) |
|
|
419 |
|
324 |
|
76 |
|
Derivative
financial instruments |
662 |
|
76 |
|
|
— |
|
(32) |
|
— |
|
Change in
non-controlling interest |
(40) |
|
(2) |
|
| |
|
|
Cash dividends
paid to: |
|
|
|
(1,236) |
|
(1,397) |
|
(3,773) |
|
– Royal Dutch Shell plc shareholders¹ |
(6,117) |
|
(11,473) |
|
|
(65) |
|
(68) |
|
(133) |
|
– Non-controlling interest |
(242) |
|
(404) |
|
|
— |
|
(216) |
|
(2,944) |
|
Repurchases of
shares |
(1,702) |
|
(7,340) |
|
|
1 |
|
(18) |
|
(94) |
|
Shares held in
trust: net sales/(purchases) and dividends received |
(198) |
|
(557) |
|
|
169 |
|
5,721 |
|
(12,985) |
|
Cash
flow from financing activities |
(1,892) |
|
(32,153) |
|
|
36 |
|
164 |
|
(190) |
|
Currency
translation differences relating to cash and cash equivalents |
(395) |
|
(166) |
|
|
7,775 |
|
6,128 |
|
(3,054) |
|
Increase/(decrease) in cash and cash equivalents |
17,659 |
|
(11,324) |
|
|
27,939 |
|
21,811 |
|
18,470 |
|
Cash
and cash equivalents at beginning of period |
18,055 |
|
26,741 |
|
|
35,714 |
|
27,939 |
|
15,417 |
|
Cash and cash equivalents at end of period |
35,714 |
|
15,417 |
|
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.
Page 16
| |
|
|
| |
|
ROYAL DUTCH SHELL PLC3RD QUARTER 2020 UNAUDITED
RESULTS |
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
1. Basis of preparationThese 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 of 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, significant judgements and 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 in the second quarter
2020. These assumptions continue to apply for impairment testing
purposes in the third quarter 2020. The tax impact of impairments
in the second and third quarter 2020 has been fully recognised in
deferred tax positions as of September 30, 2020.
After the finalisation of the operating plan in the fourth
quarter 2020, the overall deferred tax position will be
reviewed.
The finalisation of the operating plan in the fourth quarter
2020 may lead to identification of impairment triggers for certain
assets.
The refining portfolio is expected to be transformed during the
energy transition from fifteen sites into six high-value energy and
chemical parks integrated with Chemicals. This is expected to be
followed by further evaluation and decisions on assets that could
result in the recognition of significant provisions and charges to
earnings, some as early as in the fourth quarter 2020.
2. Segment informationWith effect from
January 1, 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 third quarter 2020 is a reduction of $11,478 million (Q2
2020: $8,028 million, nine months 2020: $35,819
million). Page
17
| |
|
|
| |
|
ROYAL DUTCH SHELL PLC3RD QUARTER 2020 UNAUDITED
RESULTS |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| INFORMATION BY
SEGMENT |
|
|
|
Quarters |
$ million |
Nine Months |
|
Q3 2020 |
Q2 2020 |
Q3 2019 |
|
2020 |
2019 |
| |
|
|
Third-party revenue |
|
|
|
7,684 |
|
7,436 |
|
9,735 |
|
Integrated Gas |
25,277 |
|
30,316 |
|
|
1,670 |
|
1,177 |
|
2,231 |
|
Upstream |
5,191 |
|
6,878 |
|
|
31,823 |
|
21,596 |
|
71,218 |
|
Oil Products |
97,716 |
|
213,106 |
|
|
2,831 |
|
2,283 |
|
3,397 |
|
Chemicals |
8,335 |
|
10,535 |
|
|
13 |
|
12 |
|
12 |
|
Corporate |
35 |
|
36 |
|
|
44,021 |
|
32,504 |
|
86,592 |
|
Total
third-party revenue¹ |
136,554 |
|
260,871 |
|
| |
|
|
Inter-segment revenue² |
|
|
|
864 |
|
558 |
|
1,025 |
|
Integrated Gas |
2,313 |
|
3,162 |
|
|
5,111 |
|
4,117 |
|
7,960 |
|
Upstream |
15,704 |
|
26,319 |
|
|
1,547 |
|
1,082 |
|
2,059 |
|
Oil Products |
4,480 |
|
6,190 |
|
|
715 |
|
475 |
|
1,009 |
|
Chemicals |
2,065 |
|
3,062 |
|
|
— |
|
— |
|
— |
|
Corporate |
— |
|
— |
|
| |
|
|
CCS
earnings |
|
|
|
(151) |
|
(7,959) |
|
2,597 |
|
Integrated Gas |
(6,298) |
|
6,731 |
|
|
(1,110) |
|
(6,721) |
|
1,651 |
|
Upstream |
(8,694) |
|
4,709 |
|
|
2,092 |
|
(3,023) |
|
2,433 |
|
Oil Products |
1,281 |
|
4,956 |
|
|
131 |
|
164 |
|
211 |
|
Chemicals |
441 |
|
556 |
|
|
(739) |
|
(805) |
|
(663) |
|
Corporate |
(1,998) |
|
(2,122) |
|
|
222 |
|
(18,343) |
|
6,230 |
|
Total CCS earnings |
(15,268) |
|
14,831 |
|
1. Includes revenue from sources other
than from contracts with customers, which mainly comprises the
impact of fair value accounting of commodity derivatives. Third
quarter 2020 included income of $1,803 million (Q2 2020: $1,405
million income; nine months 2020: $9,894 million income). This
amount includes both the reversal of prior losses of $15 million
(Q2 2020: $686 million gains) related to sales contracts and prior
gains of $22 million (Q2 2020: $507 million losses) related to
purchase contracts that were previously recognised and where
physical settlement has taken place in the third 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 January 1, 2020.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| RECONCILIATION
OF INCOME FOR THE PERIOD TO CCS EARNINGS |
|
|
|
Quarters |
$ million |
Nine Months |
|
Q3 2020 |
Q2 2020 |
Q3 2019 |
|
2020 |
2019 |
|
489 |
|
(18,131) |
|
5,879 |
|
Income/(loss) attributable to Royal Dutch Shell plc
shareholders |
(17,666) |
|
14,878 |
|
|
57 |
|
30 |
|
145 |
|
Income/(loss)
attributable to non-controlling interest |
88 |
|
466 |
|
|
546 |
|
(18,101) |
|
6,024 |
|
Income/(loss) for the period |
(17,578) |
|
15,344 |
|
| |
|
|
Current cost of
supplies adjustment: |
|
|
|
(395) |
|
(432) |
|
240 |
|
Purchases |
2,947 |
|
(715) |
|
|
100 |
|
98 |
|
(56) |
|
Taxation |
(719) |
|
181 |
|
|
(29) |
|
92 |
|
22 |
|
Share of
profit/(loss) of joint ventures and associates |
82 |
|
21 |
|
|
(324) |
|
(242) |
|
206 |
|
Current
cost of supplies adjustment |
2,310 |
|
(513) |
|
| |
|
|
of which: |
|
|
|
(312) |
|
(246) |
|
202 |
|
Attributable to
Royal Dutch Shell plc shareholders |
2,222 |
|
(479) |
|
(12) |
|
4 |
|
4 |
Attributable to
non-controlling interest |
88 |
|
(34) |
|
222 |
|
(18,343) |
|
6,230 |
|
CCS
earnings |
(15,268) |
|
14,831 |
|
| |
|
|
of which: |
|
|
|
177 |
|
(18,377) |
|
6,081 |
|
CCS earnings
attributable to Royal Dutch Shell plc shareholders |
(15,443) |
|
14,399 |
|
|
45 |
|
34 |
|
149 |
|
CCS
earnings attributable to non-controlling interest |
176 |
|
432 |
|
Page 18
| |
|
|
| |
|
ROYAL DUTCH SHELL PLC3RD QUARTER 2020 UNAUDITED
RESULTS |
3. Earnings per share
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| EARNINGS PER
SHARE |
|
Quarters |
|
Nine Months |
|
Q3 2020 |
Q2 2020 |
Q3 2019 |
|
2020 |
2019 |
|
489 |
|
(18,131) |
|
5,879 |
|
Income/(loss) attributable to Royal Dutch Shell plc shareholders ($
million) |
(17,666) |
|
14,878 |
|
| |
|
|
Weighted average
number of shares used as the basis for determining: |
|
|
|
7,788.7 |
|
7,789.8 |
|
8,017.5 |
|
Basic earnings per share (million) |
7,799.4 |
|
8,097.6 |
|
|
7,823.6 |
|
7,789.8 |
|
8,067.6 |
|
Diluted earnings per share (million) |
7,799.4 |
|
8,151.4 |
|
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
September 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 |
(227,226,527) |
|
(11,488,283) |
|
(19) |
(1) |
(20) |
|
At September 30, 2019 |
4,244,662,769 |
|
3,733,998,448 |
|
357 |
308 |
665 |
1. Share capital at September 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 |
— |
|
— |
|
— |
|
— |
|
(5,102) |
|
(5,102) |
|
| Transfer from
other comprehensive income |
— |
|
— |
|
— |
|
— |
|
185 |
|
185 |
|
| Repurchases of
shares |
— |
|
— |
|
6 |
|
— |
|
— |
|
6 |
|
| Share-based
compensation |
— |
|
— |
|
— |
|
(237) |
|
— |
|
(237) |
|
| At
September 30, 2020 |
37,298 |
|
154 |
|
129 |
|
812 |
|
(29,091) |
|
9,303 |
|
| 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 |
— |
|
— |
|
— |
|
— |
|
(5,913) |
|
(5,913) |
|
| Transfer from
other comprehensive income |
— |
|
— |
|
— |
|
— |
|
(56) |
|
(56) |
|
| Repurchases of
shares |
— |
|
— |
|
20 |
|
— |
|
— |
|
20 |
|
| Share-based
compensation |
— |
|
— |
|
— |
|
(131) |
|
— |
|
(131) |
|
|
At September 30, 2019 |
37,298 |
|
154 |
|
116 |
|
966 |
|
(27,998) |
|
10,535 |
|
Page 19
| |
|
|
| |
|
ROYAL DUTCH SHELL PLC3RD QUARTER 2020 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 liabilitiesAs 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 September 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 |
September 30, 2020 |
December 31, 2019 |
| Carrying
amount |
80,126 |
|
65,887 |
|
| Fair
value¹ |
87,127 |
|
71,163 |
|
1. Mainly determined from the prices
quoted for these securities.7. Other notes to the Condensed
Consolidated Interim Financial StatementsConsolidated Statement of
IncomeDepreciation, depletion and amortisation
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Quarters |
$ million |
Nine Months |
|
Q3 2020 |
Q2 2020 |
Q3 2019 |
|
2020 |
2019 |
|
7,689 |
|
28,089 |
|
6,815 |
|
Depreciation, depletion and amortisation |
42,871 |
|
19,464 |
|
Impairment losses of $1,636 million, of which $1,615 million
recognised in depreciation, depletion and amortisation and $21
million recognised in share of profit of joint ventures and
associates (Q2 2020: $22,332 million, of which $21,780 million
recognised in depreciation, depletion and amortisation and $552
million recognised in share of profit of joint ventures and
associates; nine months: $24,718 million, of which $24,145 million
recognised in depreciation, depletion and amortisation and $573
million recognised in share of profit of joint ventures and
associates), mainly relate to Prelude floating LNG in Australia
($1,327 million pre-tax and $929 million post-tax). This impairment
reflects Q3 2020 updates to the production plan including a revised
outlook on near to medium-term availability as well as an updated
view on backfill opportunities. The commodity price assumptions and
the discount rate applied remained unchanged from those disclosed
in the notes to the Condensed Consolidated Interim Financial
Statements for the period ended June 30, 2020. For further
information regarding the impairments recognised in the second
quarter 2020, see notes 1 and 7 to the Condensed Consolidated
Interim Financial Statements for the period ended June 30,
2020.
Page 20
| |
|
|
| |
|
ROYAL DUTCH SHELL PLC3RD QUARTER 2020 UNAUDITED
RESULTS |
Condensed Consolidated Balance SheetRetirement benefits
| |
|
|
|
|
|
|
|
|
| |
|
$ million |
|
|
| |
September 30, 2020 |
December 31, 2019 |
|
Non-current assets |
|
|
| Retirement
benefits |
2,191 |
|
4,717 |
|
|
Non-current liabilities |
|
|
| Retirement
benefits |
16,201 |
|
13,017 |
|
| Current
liabilities |
|
|
| Retirement
benefits |
380 |
|
419 |
|
|
Net liability |
14,390 |
|
8,719 |
|
The increase in the net retirement benefit liability is mainly
driven by a decrease of the market yield on high-quality corporate
bonds.Decommissioning and other provisions
| |
|
|
|
|
|
|
|
|
| |
|
$ million |
|
|
| |
September 30, 2020 |
December 31, 2019 |
|
Non-current liabilities |
|
|
|
Decommissioning and other provisions |
26,541 |
|
21,799 |
|
| Current
liabilities |
|
|
|
Decommissioning and other provisions |
3,431 |
|
2,811 |
|
The discount rate applied at September 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 at June 30, 2020 as a result of the change in the
discount rate as at that date.Non-controlling interest
| |
|
|
|
|
|
|
|
|
| |
|
$ million |
|
|
| |
September 30, 2020 |
December 31, 2019 |
|
Non-controlling interest |
3,173 |
|
3,987 |
|
The change in the non-controlling interest 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 in the
second quarter 2020.
Page 21
| |
|
|
| |
|
ROYAL DUTCH SHELL PLC3RD QUARTER 2020 UNAUDITED
RESULTS |
ALTERNATIVE PERFORMANCE (NON-GAAP) MEASURESA.Adjusted
EarningsThe “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 |
Nine Months |
|
Q3 2020 |
Q2 2020 |
Q3 2019 |
|
2020 |
2019 |
|
489 |
|
(18,131) |
|
5,879 |
|
Income/(loss) attributable to Royal Dutch Shell plc
shareholders |
(17,666) |
|
14,878 |
|
|
(312) |
|
(246) |
|
202 |
|
Add: Current cost
of supplies adjustment attributable to Royal Dutch Shell plc
shareholders (Note 2) |
2,222 |
|
(479) |
|
|
(778) |
|
(19,015) |
|
1,313 |
|
Less: Identified
items attributable to Royal Dutch Shell plc shareholders |
(19,897) |
|
868 |
|
|
955 |
|
638 |
|
4,767 |
|
Adjusted Earnings |
4,453 |
|
13,530 |
|
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 |
Nine Months |
|
Q3 2020 |
Q2 2020 |
Q3 2019 |
|
2020 |
2019 |
| |
|
|
Identified items before tax |
|
|
|
103 |
|
128 |
|
2,039 |
|
Divestment gains/(losses) |
154 |
|
2,483 |
|
|
(1,636) |
|
(22,332) |
|
(509) |
|
Impairments |
(24,718) |
|
(1,214) |
|
|
721 |
|
(1,884) |
|
47 |
|
Fair value accounting of commodity derivatives and certain gas
contracts |
(195) |
|
(14) |
|
|
25 |
|
(518) |
|
6 |
|
Redundancy and restructuring |
(511) |
|
(74) |
|
|
(267) |
|
(427) |
|
— |
|
Other |
(694) |
|
(437) |
|
|
(1,055) |
|
(25,033) |
|
1,584 |
|
Total
identified items before tax |
(25,963) |
|
744 |
|
|
276 |
|
6,018 |
|
(271) |
|
Total
tax impact of identified items |
6,066 |
|
146 |
|
| |
|
|
Identified items after tax |
|
|
|
46 |
|
10 |
|
1,756 |
|
Divestment gains/(losses) |
24 |
|
2,058 |
|
|
(1,143) |
|
(16,842) |
|
(430) |
|
Impairments |
(18,521) |
|
(921) |
|
|
532 |
|
(1,540) |
|
91 |
|
Fair value accounting of commodity derivatives and certain gas
contracts |
(171) |
|
124 |
|
|
4 |
|
(375) |
|
2 |
|
Redundancy and restructuring |
(378) |
|
(43) |
|
|
13 |
|
(44) |
|
(106) |
|
Impact of exchange rate movements on tax balances |
(397) |
|
(98) |
|
|
(230) |
|
(224) |
|
— |
|
Other |
(454) |
|
(229) |
|
|
(778) |
|
(19,015) |
|
1,313 |
|
Impact
on CCS earnings |
(19,897) |
|
890 |
|
| |
|
|
Of which: |
|
|
|
(920) |
|
(8,321) |
|
(77) |
|
Integrated Gas |
(9,572) |
|
(237) |
|
|
(226) |
|
(5,209) |
|
818 |
|
Upstream |
(6,590) |
|
966 |
|
|
411 |
|
(5,433) |
|
430 |
|
Oil Products |
(4,174) |
|
226 |
|
|
(96) |
|
(41) |
|
(13) |
|
Chemicals |
(140) |
|
(250) |
|
|
52 |
|
(9) |
|
154 |
|
Corporate |
578 |
|
185 |
|
|
(778) |
|
(19,015) |
|
1,313 |
|
Impact on
CCS earnings attributable to shareholders |
(19,897) |
|
868 |
|
|
— |
|
— |
|
— |
|
Impact on CCS earnings attributable to non-controlling
interest |
— |
|
22 |
|
Page 22
| |
|
|
| |
|
ROYAL DUTCH SHELL PLC3RD QUARTER 2020 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. The third quarter 2020 reflects the impacts of a
provision for an onerous contract in Integrated Gas and provisions
for litigation in Chemicals.B. Basic CCS
earnings per shareBasic 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 expenditureCash 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 |
Nine Months |
|
Q3 2020 |
Q2 2020 |
Q3 2019 |
|
2020 |
2019 |
|
3,679 |
|
3,436 |
|
5,992 |
|
Capital
expenditure |
11,379 |
|
16,264 |
|
|
34 |
|
161 |
|
30 |
|
Investments in
joint ventures and associates |
754 |
|
631 |
|
|
23 |
|
20 |
|
76 |
|
Investments in
equity securities |
190 |
|
141 |
|
|
3,737 |
|
3,617 |
|
6,098 |
|
Cash
capital expenditure |
12,324 |
|
17,036 |
|
| |
|
|
Of which: |
|
|
|
1,020 |
|
736 |
|
894 |
|
Integrated Gas |
2,638 |
|
2,976 |
|
|
1,245 |
|
1,876 |
|
2,625 |
|
Upstream |
5,642 |
|
7,437 |
|
|
832 |
|
606 |
|
1,308 |
|
Oil Products |
2,019 |
|
3,279 |
|
|
595 |
|
369 |
|
1,160 |
|
Chemicals |
1,810 |
|
3,067 |
|
|
45 |
|
30 |
|
111 |
|
Corporate |
215 |
|
277 |
|
Page 23
| |
|
|
| |
|
ROYAL DUTCH SHELL PLC3RD QUARTER 2020 UNAUDITED
RESULTS |
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 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 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.
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
$ million |
Quarters |
| |
Q3 2020 |
Q2 2020 |
Q3 2019 |
| Income -
current and previous three quarters |
(16,489) |
(11,011) |
20,989 |
| Interest expense
after tax - current and previous three quarters |
2,933 |
3,014 |
3,115 |
| Income
before interest expense - current and previous three
quarters |
(13,556) |
(7,997) |
24,105 |
| Capital
employed – opening |
281,505 |
288,900 |
279,864 |
| Capital employed –
closing |
269,397 |
265,435 |
281,505 |
| Capital
employed – average |
275,451 |
277,168 |
280,684 |
|
ROACE on a Net income basis |
(4.9)% |
(2.9)% |
8.6% |
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.
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
$ million |
Quarters |
| |
Q3 2020 |
Q2 2020 |
Q3 2019 |
| CCS
earnings - current and previous three quarters |
(14,272) |
(8,264) |
22,284 |
| Identified
items - current and previous three quarters |
(21,957) |
(19,865) |
2,536 |
| Interest expense
after tax – current and previous three quarters |
2,933 |
3,014 |
3,115 |
| CCS
earnings excluding identified items before interest expense -
current and previous three quarters |
10,618 |
14,616 |
22,864 |
| Capital
employed – average |
275,451 |
277,168 |
280,684 |
|
ROACE on a CCS basis excluding identified items |
3.9% |
5.3% |
8.1% |
E. GearingGearing 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 24
| |
|
|
| |
|
ROYAL DUTCH SHELL PLC3RD QUARTER 2020 UNAUDITED
RESULTS |
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
$ million |
Quarters |
| |
September 30, 2020 |
June 30, 2020 |
September 30, 2019 |
| Current
debt |
17,811 |
17,530 |
12,812 |
| Non-current
debt |
91,245 |
87,460 |
76,112 |
| Total
debt¹ |
109,056 |
104,990 |
88,924 |
| Add:
Debt-related derivative financial instruments: net
liability/(asset) |
(564) |
525 |
1,013 |
| Add:
Collateral on debt-related derivatives: net liability/(asset) |
686 |
266 |
148 |
| Less: Cash
and cash equivalents |
(35,714) |
(27,939) |
(15,417) |
| Net
debt |
73,463 |
77,843 |
74,668 |
| Add: Total
equity |
160,341 |
160,445 |
192,580 |
| Total
capital |
233,804 |
238,288 |
267,249 |
|
Gearing |
31.4 |
% |
32.7 |
% |
27.9 |
% |
1. Includes lease liabilities of $28,930
million at September 30, 2020 and $29,073 million at June 30, 2020,
and $31,085 million at September 30,
2019.F. Operating expensesOperating 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 |
Nine Months |
|
Q3 2020 |
Q2 2020 |
Q3 2019 |
|
2020 |
2019 |
|
5,496 |
|
5,822 |
|
6,002 |
|
Production
and manufacturing expenses |
17,299 |
|
19,191 |
|
|
2,366 |
|
2,370 |
|
2,429 |
|
Selling,
distribution and administrative expenses |
7,130 |
|
7,662 |
|
|
233 |
|
232 |
|
219 |
|
Research and
development |
708 |
|
656 |
|
|
8,095 |
|
8,423 |
|
8,650 |
|
Operating expenses |
25,137 |
|
27,509 |
|
| |
|
|
Of which
identified items: |
|
|
|
25 |
|
(508) |
|
7 |
|
Redundancy and restructuring (charges)/reversal |
(501) |
|
(72) |
|
|
(267) |
|
(411) |
|
— |
|
(Provisions)/reversal |
(678) |
|
(306) |
|
|
— |
|
— |
|
— |
|
Other |
— |
|
(131) |
|
|
(242) |
|
(919) |
|
7 |
|
|
(1,179) |
|
(509) |
|
|
7,854 |
|
7,504 |
|
8,657 |
|
Underlying operating expenses |
23,958 |
|
27,000 |
|
G. Free cash flowFree 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 25
| |
|
|
| |
|
ROYAL DUTCH SHELL PLC3RD QUARTER 2020 UNAUDITED
RESULTS |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Quarters |
$ million |
Nine Months |
|
Q3 2020 |
Q2 2020 |
Q3 2019 |
|
2020 |
2019 |
|
10,403 |
|
2,563 |
|
12,252 |
|
Cash flow
from operating activities |
27,818 |
|
31,913 |
|
|
(2,833) |
|
(2,320) |
|
(2,130) |
|
Cash flow from
investing activities |
(7,871) |
|
(10,918) |
|
|
7,571 |
|
243 |
|
10,122 |
|
Free
cash flow |
19,947 |
|
20,995 |
|
|
869 |
|
696 |
|
3,979 |
|
Less:
Divestment proceeds (Reference I) |
3,798 |
|
5,736 |
|
|
— |
|
— |
|
4 |
|
Add: Tax
paid on divestments (reported under "Other investing cash
outflows") |
— |
|
80 |
|
|
12 |
|
199 |
|
484 |
|
Add: Cash
outflows related to inorganic capital expenditure1 |
614 |
|
849 |
|
|
6,713 |
|
(254) |
|
6,630 |
|
Organic free cash flow2 |
16,763 |
|
16,189 |
|
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 movementsWorking 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 |
Nine Months |
|
Q3 2020 |
Q2 2020 |
Q3 2019 |
|
2020 |
2019 |
|
10,403 |
|
2,563 |
|
12,252 |
|
Cash
flow from operating activities |
27,818 |
|
31,913 |
|
|
405 |
|
(3,713) |
|
813 |
|
(Increase)/decrease in inventories |
6,286 |
|
(2,089) |
|
|
(540) |
|
3,959 |
|
2,644 |
|
(Increase)/decrease in current receivables |
9,733 |
|
1,527 |
|
|
1,583 |
|
(4,226) |
|
(3,289) |
|
Increase/(decrease) in current payables |
(11,073) |
|
(2,184) |
|
|
1,448 |
|
(3,980) |
|
168 |
|
(Increase)/decrease in working capital |
4,947 |
|
(2,746) |
|
|
8,955 |
|
6,543 |
|
12,083 |
|
Cash
flow from operating activities excluding working capital
movements |
22,871 |
|
34,658 |
|
| |
|
|
Of
which: |
|
|
|
2,396 |
|
2,871 |
|
4,271 |
|
Integrated Gas |
8,619 |
|
10,811 |
|
|
2,629 |
|
548 |
|
4,597 |
|
Upstream |
6,894 |
|
15,112 |
|
|
3,476 |
|
2,430 |
|
2,948 |
|
Oil Products |
6,259 |
|
7,618 |
|
|
488 |
|
304 |
|
346 |
|
Chemicals |
981 |
|
1,383 |
|
|
(33) |
|
390 |
|
(80) |
|
Corporate |
118 |
|
(265) |
|
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 |
Nine Months |
|
Q3 2020 |
Q2 2020 |
Q3 2019 |
|
2020 |
2019 |
|
571 |
|
211 |
2,932 |
Proceeds
from sale of property, plant and equipment and businesses |
2,395 |
3,754 |
|
159 |
|
423 |
922 |
Proceeds from sale
of joint ventures and associates |
1,129 |
1,567 |
|
139 |
|
62 |
126 |
Proceeds from sale
of equity securities |
274 |
414 |
|
869 |
|
696 |
3,979 |
Divestment proceeds |
3,798 |
5,736 |
Page 26
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|
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|
ROYAL DUTCH SHELL PLC3RD QUARTER 2020 UNAUDITED
RESULTS |
CAUTIONARY STATEMENTAll 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, October 29, 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.October 29, 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:
21380068P1DRHMJ8KU70Classification: Inside Information
Page 27