ROYAL DUTCH SHELL PLC THIRD QUARTER 2020 PRESS RELEASE
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
PORTFOLIO
Shell 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.
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).
The presentation slides and a "video of results presentation"
for the quarter pre-recorded by Ben van Beurden (CEO, Royal Dutch
Shell plc) and Jessica Uhl (CFO, Royal Dutch Shell plc) will be
published at around 10.00 am CET/ 09.00 am GMT / 05.00 am EDT,
available on our website: https://www.shell.com/investors.
RESILIENT Q3 2020 RESULTS
- Resilient earnings in a challenging macroeconomic
environment.
- Record Marketing earnings driven by increased sales mix of
high-margin premium products and higher non-fuel sales from our
convenience retail stores.
- Strong cash flow performance proving the resilience of our
integrated business model and strong cost discipline.
- Further strengthening of the balance sheet with net debt
reducing by $4.4 billion to $73.5 billion.
$ million |
IFRS earnings1 |
Adjusted Earnings |
CFFO |
CFFO ex WC |
Cash capex |
Organic FCF |
Integrated Gas |
(151) |
768 |
2,323 |
2,396 |
1,020 |
1,352 |
Upstream |
(1,110) |
(884) |
2,101 |
2,629 |
1,245 |
821 |
Oil Products |
2,092 |
1,680 |
5,131 |
3,476 |
832 |
4,296 |
Refining & Trading |
498 |
55 |
|
|
|
|
Marketing |
1,594 |
1,626 |
|
|
|
|
Chemicals |
131 |
227 |
335 |
488 |
595 |
(260) |
Corporate |
(739) |
(792) |
514 |
(33) |
45 |
505 |
Non-controlling
interest |
45 |
45 |
|
|
|
|
RDS |
Q3 2020 |
489 |
955 |
10,403 |
8,955 |
3,737 |
6,713 |
Q3 2019 |
5,879 |
4,767 |
12,252 |
12,083 |
6,098 |
6,630 |
1Income/(loss) for Q3 2020. Oil Products and Chemicals presented
on a current cost of supplies basis. See reconciliation of non-GAAP
measures on www.shell.com/investors.
|
Q3 2020 |
Q2 2020 |
Q3 2019 |
ROACE |
3.9% |
5.3% |
8.1% |
Dividends |
$1.2 billion |
$1.4 billion |
$3.8 billion |
Gearing |
31.4% |
32.7% |
27.9% |
Net
debt |
$73.5
billion |
$77.8 billion |
$74.7 billion |
Q3 2020 FINANCIAL PERFORMANCE DRIVERS
INTEGRATED GAS AND NEW ENERGIES
- Low realised LNG prices due to price lag in oil-linked term
contracts.
- LNG trading and optimisation results below average.
- Volumes negatively impacted by LNG maintenance activities.
OUTLOOK FOR Q4 2020Production: 830 - 870 thousand
boe/dLiquefaction volumes: 7.9 - 8.5 million tonnes
UPSTREAM
- Lower demand and lower oil and gas prices driving lower
Adjusted Earnings.
- Production 14% lower compared with Q3 2019 due to OPEC+
curtailments, lower gas demand and hurricanes in US Gulf of
Mexico.
- Realised liquid prices 10% below Brent, in line with historical
averages; offset by low effective tax rate while in a loss
position.
OUTLOOK FOR Q4 2020Production: 2,300 - 2,500 thousand boe/d
OIL PRODUCTS
- Record Marketing performance in the quarter driven by higher
margins and volume recovery in Retail, Lubricants and B2B
businesses.
- Continued weakness in refining margins and lower utilisation
mainly due to lower demand and economic optimisation of the
plants.
- Lower opex as a result of underlying structural cost reduction
and lower maintenance cost and Marketing spend driven by lower
activity.
- Trading and optimisation results below average.
OUTLOOK FOR Q4 2020Sales volumes: 4,000 - 5,000 thousand
b/dRefinery utilisation: 69% - 77%
CHEMICALS
- Lower Intermediate margins due to lower demand in most segments
offset by relative strength in Solvents (used for cleaning and
disinfectants) and Polyols (used in products such as furniture and
insulation).
- Tax credit due to recognition of a deferred tax asset.
OUTLOOK FOR Q4 2020Sales volumes: 3,500 - 3,900 thousand
tonnesManufacturing plant utilisation: 77% - 85%
CORPORATE
- Net debt decreased by $4.4 billion to $73.5 billion. Helped by
higher free cash flow, including a working capital inflow.
- Gearing decreased by 1.3% to 31.4% driven by net debt
reduction.
- Long-term debt issuance was $3.9 billion.
OUTLOOK FOR 2020Adjusted earnings: net expense of $3,200 -
$3,500 million for the full year 2020. This excludes the impact of
currency exchange rate effects.
Q3 2020 PORTFOLIO DEVELOPMENTS
- 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.
- During 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.
UPCOMING EVENTS
- Fourth quarter 2020 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 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.
- Shell Strategy Day is scheduled to take place on February 11,
2021.
USEFUL LINKS
Unaudited Results Q3 2020
Third 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
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.
It is important to note that at October 29, 2020, Shell’s
operating plans and budgets do not reflect Shell’s Net-Zero
Emissions ambition. Shell’s aim is that, in the future, its
operating plans and budgets will change to reflect this movement
towards its new Net-Zero Emissions ambition. However, these plans
and budgets need to be in step with the movement towards a Net-Zero
Emissions economy within society and among Shell’s customers.
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.
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 third quarter 2020 and nine months unaudited
results available on www.shell.com/investors.
CONTACTS
Media: International +44 207 934 5550; USA +1 832 337 4355
Definitions are provided in the notes section of the quarterly
unaudited results, available at www.shell.com/investors