ROYAL DUTCH SHELL PLC SECOND QUARTER 2020 PRESS RELEASE
The Hague July 30, 2020 “Shell
has delivered resilient cash flow in a remarkably challenging
environment. We continue to focus on safe and reliable operations
and our decisive cash preservation measures will underpin the
strengthening of our balance sheet. Our high-quality integrated
portfolio, disciplined execution and forward-looking strategy
enable sustained competitive free cash flow generation.” Royal
Dutch Shell Chief Executive Officer, Ben van Beurden
|
DECISIVE ACTIONS AND STRONG PERFORMANCE DELIVER CASH
- Robust operational delivery across the portfolio. Very strong
crude and oil products trading and optimisation results and
resilient Marketing performance.
- On track to deliver cost reduction targets:
- Underlying opex reduced by $1.1 billion compared with Q1 2020;
delivering reduction target of $3 - $4 billion.
- Cash capex reduced by $1.4 billion compared with Q1 2020;
manage cash capex to $20 billion or lower in 2020.
- Impairments of $16.8 billion post-tax (6.1% of average capital
employed), reflecting revised price and margin assumptions.
$ billion |
IFRS earnings1 |
Adjusted earnings |
CFFO ex WC |
Cash capex |
Organic FCF |
Integrated Gas |
(8.0) |
0.4 |
2.9 |
0.7 |
1.9 |
Upstream |
(6.7) |
(1.5) |
0.5 |
1.9 |
(0.7) |
Oil Products |
(3.0) |
2.4 |
2.4 |
0.6 |
(1.0) |
Refining & Trading |
(3.9) |
1.5 |
|
|
|
Marketing |
0.9 |
0.9 |
|
|
|
Chemicals |
0.2 |
0.2 |
0.3 |
0.4 |
0.4 |
Corporate |
(0.8) |
(0.8) |
0.4 |
— |
(0.8) |
Non-controlling interest |
— |
— |
|
|
|
RDS |
Q2 2020 |
(18.1) |
0.6 |
6.5 |
3.6 |
(0.3) |
Q2 2019 |
3.0 |
3.5 |
10.5 |
5.3 |
6.2 |
1 Income/(loss) attributable to shareholders. See reconciliation
of Alternative performance (non-GAAP) measures on
www.shell.com/investor
|
Q2 2020 |
Q1 2020 |
Q2 2019 |
|
ROACE |
5.3% |
6.1% |
8.2% |
- Gearing increase includes 2.8% impact from impairments and
pension remeasurement.
- Net debt increase includes additional leases of $0.8
billion.
- Gearing and Net debt impacted by negative working capital
movements of $4.0 billion.
|
Dividends |
$1.2 billion |
$3.5 billion |
$3.8 billion |
Gearing |
32.7% |
28.9% |
27.6% |
Net debt |
$77.8 billion |
$74.4 billion |
$74.9 billion |
Q2 2020
FINANCIAL PERFORMANCE DRIVERS
INTEGRATED GAS AND NEW ENERGIES
- COVID-19 pandemic-related demand decline led to lower LNG and
gas-to-liquids revenues, mostly due to lower realised prices.
- LNG trading and optimisation results marginally below
average.
- Additional well write-offs and deferred tax charges had a
negative impact of $0.6 billion on Adjusted earnings, but no cash
impact.
|
OUTLOOK FOR Q3 2020 Production: 820 - 880
thousand boe/d. Liquefaction: 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
- Weak macroeconomic environment driving lower Upstream Adjusted
earnings.
- Despite strong Upstream operational performance, production 7%
lower compared with Q2 2019 due to divestments and OPEC+
curtailments.
- Upstream sales volumes up due to timing of liftings mainly in
Brazil.
|
OUTLOOK FOR Q3 2020 Production: 2,100 -
2,400 thousand boe/d.Outlook reflects expected OPEC+ and economic
curtailments for entire quarter. |
OIL PRODUCTS
- Earnings underpinned by very strong crude and oil products
trading and optimisation as well as lower opex spend.
- Lower Oil Products and Marketing sales volumes when compared
with Q2 2019 due to weak macro and COVID-19, some recovery in
June.
- Oil Products sales volumes ~39% lower. Largest declines in
Aviation, Retail and Refining & Trading.
|
OUTLOOK FOR Q3 2020 Sales volumes: 4,000 -
5,000 thousand b/d.Refinery utilisation: 68% - 76%. |
CHEMICALS
- Chemicals downcycle conditions compounded by COVID-19 driving
overall lower volumes and margins.
- Most end market segments negatively impacted but increased
demand primarily in cleaning and disinfectant products.
- Lower operating expenses compared with Q2 2019 due to
structural improvements and maintenance scheduling.
|
OUTLOOK FOR Q3 2020 Sales volumes: 3,600 -
3,900 thousand tonnes.Manufacturing plant utilisation: 78% -
88%. |
CORPORATE
- Gearing increased in Q2 by 3.8%. Impairments represent 2.1% and
pension remeasurement 0.7%.
- Net debt increased in Q2 by $3.4 billion to $77.8 billion.
- Long-term debt issuance in Q2 of $9.1 billion equivalent. Shell
also signed a new $12 billion revolving credit facility in April
2020.
|
OUTLOOK FOR 2020 Adjusted earnings: net
expense of $3,200 - $3,500 million for the full year 2020. This
excludes the impact of currency exchange rate effects. |
Q2 2020 PORTFOLIO DEVELOPMENTS
- Nigeria: all conditions met for Final Investment Decision (FID)
and contracts 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.
- USA: agreement to sell Appalachia shale gas position for $541
million, with an effective date of January 1, 2020 and expected to
complete in Q3 2020.
- Impairments: $16.8 billion ($22.3 billion pre-tax), of which
Integrated Gas $8.2 billion ($11.2 billion pre-tax), mainly
relating to the QGC Integrated Gas project in Australia and Prelude
floating LNG in Australia; Upstream $4.7 billion ($6.3 billion
pre-tax), mainly relating 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; Oil Products $4.0
billion ($4.9 billion pre-tax), mainly relating to refineries in
Europe and North America; and Corporate $5 million ($9 million
pre-tax).
UPCOMING EVENTS |
|
|
Third quarter
2020 results and dividends are scheduled to be announced on October
29, 2020. Fourth quarter 2020 and full year results and
dividends are scheduled to be announced on February 4, 2021.
|
|
Shell Strategy Day
is scheduled to take place on February 11, 2021. |
Unaudited Results Q2 2020
Second quarter 2020 dividend announcement
Webcast registration
ALTERNATIVE PERFORMANCE (NON-GAAP) MEASURES
This announcement includes certain measures that are not defined
by generally accepted accounting principles (GAAP) such as IFRS,
including Adjusted earnings, CFFO excluding
working capital movements, Cash capital expenditure, Organic free
cash flow, Return on average capital employed, Underlying operating
expenses, Gearing and Net debt. This information, along with
comparable GAAP measures, is useful to investors because it
provides a basis for measuring Royal Dutch Shell plc’s operating
performance and ability to retire debt and invest in new business
opportunities. Royal Dutch Shell plc’s management uses these
financial measures, along with the most directly comparable GAAP
financial measures, in evaluating the business performance.
Alternative performance (non–GAAP) measures should not be
considered in isolation from, or as a substitute for, financial
information presented in compliance with GAAP. This announcement
does not replace (and should be read in conjunction with) Royal
Dutch Shell plc’s quarterly unaudited financial statements and
wherever appropriate and practical, reconciliations to relevant
GAAP measures are provided in the quarterly unaudited results at
www.shell.com/investors.
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
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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
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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
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convenience to indicate the direct and/or indirect ownership
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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
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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
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developments including regulatory measures addressing climate
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in various countries and regions; (l) political risks, including
the risks of expropriation and renegotiation of the terms of
contracts with governmental entities, delays or advancements in the
approval of projects and delays in the reimbursement for shared
costs; (m) risks associated with the impact of pandemics, such as
the COVID-19 (coronavirus) outbreak; and (n) changes in trading
conditions. No assurance is provided that future dividend payments
will match or exceed previous dividend payments. All
forward-looking statements contained in this announcement are
expressly qualified in their entirety by the cautionary statements
contained or referred to in this section. Readers should not place
undue reliance on forward-looking statements. Additional risk
factors that may affect future results are contained in Royal Dutch
Shell’s Form 20-F for the year ended December 31, 2019 (available
at www.shell.com/investor and www.sec.gov). These risk factors also
expressly qualify all forward-looking statements contained in this
announcement and should be considered by the reader. Each
forward-looking statement speaks only as of the date of this
announcement, 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
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risks, results could differ materially from those stated, implied
or inferred from the forward-looking statements contained in this
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references are for the readers’ convenience only. Shell is not
incorporating by reference any information posted on
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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.
The financial information presented in this announcement 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.
The information in this announcement does not constitute the
unaudited interim consolidated financial statements which are
contained in Shell’s second quarter 2020 and half year unaudited
results available on www.shell.com/investors.
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