Transcript of "Fourth quarter and full year results 2010 - February 3, 2011 "
ROYAL DUTCH SHELL PLC FOURTH QUARTER AND FULL YEAR 2010 RESULTSTHE HAGUEFEBRUARY 3rd, 20111 Copyright of Royal Dutch Shell plc 03/02/2011
ROYAL DUTCH SHELL PLC FOURTH QUARTER AND FULL YEAR 2010 RESULTSPETER VOSERCHIEF EXECUTIVE OFFICER2 Copyright of Royal Dutch Shell plc 03/02/2011
DEFINITIONS AND CAUTIONARY NOTEReserves: Our use of the term “reserves” in this presentation means SEC proved oil and gas reserves for all 2009 data, and includes both SEC proved oil and gas reserves and SEC proven miningreserves for 2007 and 2008 data.Resources: Our use of the term “resources” in this presentation includes quantities of oil and gas not yet classified as SEC proved oil and gas reserves or SEC proven mining reserves. Resources areconsistent with the Society of Petroleum Engineers 2P and 2C definitions.Organic: Our use of the term Organic includes SEC proved oil and gas reserves and SEC proven mining reserves (for 2007 and 2008) excluding changes resulting from acquisitions, divestments andyear-end pricing impact.To facilitate a better understanding of underlying business performance, the financial results are also presented on an estimated current cost of supplies (CCS) basis as applied for the Oil Products andChemicals segment earnings. Earnings on an estimated current cost of supplies basis provides useful information concerning the effect of changes in the cost of supplies on Royal Dutch Shell’s resultsof operations and is a measure to manage the performance of the Oil Products and Chemicals segments but is not a measure of financial performance under IFRS.The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate entities. In this presentation “Shell”, “Shell group” and “Royal Dutch Shell” are sometimes used forconvenience 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 subsidiaries in general or to thosewho work for them. These expressions are also used where no useful purpose is served by identifying the particular company or companies. ‘‘Subsidiaries’’, “Shell subsidiaries” and “Shellcompanies” as used in this presentation refer to companies in which Royal Dutch Shell either directly or indirectly has control, by having either a majority of the voting rights or the right to exercise acontrolling influence. The companies in which Shell h significant influence but not control are referred to as “associated companies” or “associates” and companies in which Shell h joint control ll fl h h h h ll has f fl b l f d d d h h h ll has lare referred to as “jointly controlled entities”. In this presentation, associates and jointly controlled entities are also referred to as “equity-accounted investments”. The term “Shell interest” is used forconvenience to indicate the direct and/or indirect (for example, through our 24% shareholding in Woodside Petroleum Ltd.) ownership interest held by Shell in a venture, partnership or company,after exclusion of all third-party interest.This presentation contains forward-looking statements concerning the financial condition, results of operations and businesses of Royal Dutch Shell. All statements other than statements of historicalfact 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 andassumptions 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 i l d among other things, statements concerning the potential exposure of RF d l ki include, h hi i h i l f Royal D h Sh ll to market risks and statements expressing management’s expectations, l Dutch Shell k ik d i ’ ibeliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of terms and phrases such as ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘estimate’’,‘‘expect’’, ‘‘intend’’, ‘‘may’’, ‘‘plan’’, ‘‘objectives’’, ‘‘outlook’’, ‘‘probably’’, ‘‘project’’, ‘‘will’’, ‘‘seek’’, ‘‘target’’, ‘‘risks’’, ‘‘goals’’, ‘‘should’’ and similar terms and phrases. There are a number offactors 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 thispresentation, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for the Shell’s products; (c) currency fluctuations; (d) drilling and productionresults; (e) reserve estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisitionproperties 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 potential litigation and regulatory measures as a result of climate changes; (k) economic and financial market conditions in various countriesand regions; (l) political risks, i l di th risks of expropriation and renegotiation of the terms of contracts with governmental entities, d l d i liti l i k including the i k f i ti d ti ti f th t f t t ith t l titi delays or advancements i th approval of projects and d l d t in the l f j t d delaysin the reimbursement for shared costs; and (m) changes in trading conditions. All forward-looking statements contained in this presentation are expressly qualified in their entirety by the cautionarystatements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Additional factors that may affect future results are contained in RoyalDutch Shell’s 20-F for the year ended 31 December, 2009 (available at www.shell.com/investor and www.sec.gov ). These factors also should be considered by the reader. Each forward-lookingstatement speaks only as of the date of this presentation, 3 February, 2011. Neither Royal Dutch Shell 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-lookingstatements contained in this presentation. There can be no assurance that dividend payments will match or exceed those set out in this presentation in the future, or that they will be made at all.The United States Securities and Exchange Commission (SEC) permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual companies SECproduction or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We use certain terms in this presentation that SECs guidelinesstrictly prohibit us from including in filings with the SEC. U.S. 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.You can also obtain these forms from the SEC by calling 1-800-SEC-0330. 3 Copyright of Royal Dutch Shell plc 03/02/2011
PERFORMANCESTRATEGY PRIORITIES 2010 RESULTS CCS EARNINGS $ BILLION 20 PERFORMANCE FOCUS 15 NEW WAVE OF PRODUCTION 10 GROWTH 5 MATURING NEXT GENERATION OF PROJECT OPTIONS 0 EARNINGS EXCLUDING IDENTIFIED ITEMS Competitive performance – Profitable growth – Sharper delivery4 Copyright of Royal Dutch Shell plc 03/02/2011
PERFORMANCE FOCUSPERFORMANCE FOCUS: NEW WAVE OF PRODUCTION GROWTHCOSTS MATURING NEXT GENERATION OF PROJECT OPTIONSUNDERLYING COSTS$ BILLION • 2010 delivery FX PENSIONS • Corporate reorganization45 PROVISIONS • U d l i costs reduction of $2 0 bl Underlying d i f $2.0 bln • -$4 bln (10%) since 200840 COST SAVINGS3530 • Continuous improvement 2009 2010EXAMPLE: STANDARDIZATION • Offshoring • Global contracting & procurementOFFSHORING TO LOW COST SHARED SERVICE CENTERS • Simplification & standardization‘000s STAFF10 8 6 4 2 0 2006 2007 2008 2009 20105 Copyright of Royal Dutch Shell plc 03/02/2011
PERFORMANCE FOCUSCONTINUOUS IMPROVEMENT: NEW WAVE OF PRODUCTION GROWTHCAPITAL EFFICIENCY MATURING NEXT GENERATION OF PROJECT OPTIONSASSET SALES PROGRESS 2010 & 2011 YTD ~$30 BILLION DIVESTMENTS – 5 YEARS $ BILLION CUMULATIVE Finland & Sweden 30 CORPORATE Statfjord UPSTREAM Harburg DOWNSTREAM Heide Refinery US retail South Texas Syria Greece GOM assets 20 El SalvadorPanama & Costa Rica Ng Nigeria 21 countries Africa 10 % Woodside Chile 10 New Zealand Divestment Deal Complete 0 06 07 08 09 106 Copyright of Royal Dutch Shell plc 03/02/2011
PERFORMANCE FOCUSDELIVERING NEW GROWTH NEW WAVE OF PRODUCTION GROWTH MATURING NEXT GENERATION OF PROJECT OPTIONS6 NEW START-UPS IN 2010 ON TRACK FOR STRATEGIC TARGETS On track for strategic targets • Production growth • +11% oil & gas production 2009-12 11% il d i 2009 12 • 3.5 mln boe/d 2012; ~3.7 mln boe/d 2014 • Cashflow growth Tight gas, North America Perdido, USA • + 50-80% 2009 – 12* START-UP PERFORMANCE Example: Gbaran Ubie (100%) Nigeria (100%), kboe/d Singapore Chemicals AOSP Jackpine mine, Canada ACTUAL 100 PLAN 50 GJOA PLACEHOLDER 0 MAY JUN JUL AUG SEP OCT NOV DEC Gbaran Ubie, Nigeria Gjoa, Norway 2010 *$60-$80 OIL PRICE SCENARIO, 2012 ASSUMES NORMALIZED DOWNSTREAM AND NATURAL GAS ENVIRONMENT7 Copyright of Royal Dutch Shell plc 03/02/2011
PERFORMANCE FOCUSQATAR: PROJECTS ON TRACK NEW WAVE OF PRODUCTION GROWTHMAJOR START-UPS 2011 MATURING NEXT GENERATION OF PROJECT OPTIONSPEARL GTL: MAJOR CONSTRUCTION COMPLETE Air separation unit •Commissioning underway; ~12 months start-up •Sequential start-up of two trains •2012 f ll GTL capacity achieved full it hi d •1.6 bcf/d wet gas •120 kboe/d NGL/ethane Sales products •140 kboe/d GTL products •Shell 100% i partnership with Q Sh ll in hi i h Qatar P Petroleum lQATARGAS 4: STARTING UP LNG train •First gas into plant – Jan 2011 •LNG ramp-up H1 2011 •7-8 mtpa + 70 kboe/d condensate •Shell 30% Shell First steam from boilers8 Copyright of Royal Dutch Shell plc 03/02/2011
PERFORMANCE FOCUSEXPLORATION TO PRODUCTION NEW WAVE OF PRODUCTION GROWTH2010 PERFORMANCE MATURING NEXT GENERATION OF PROJECT OPTIONS DISCOVERY APPRAISAL FID 2010 FIDs • MARS B, Gulf of Mexico •~100,000 boe/d TLP capacity (Shell 72%) •BC-10 Phase 2, Brazil •~30,000 boe/d (Shell 50%) GULF OF MEXICO • 3 discoveries & 1 appraisal success •~450 mln boe resources (Shell) • Appomattox (Shell 80%), Cardamom Deep (Shell 100%), South Deimos (Shell 72%) • Vito appraisal (Shell 55%) BRAZIL • BC-10 Massa (Shell 50%) • Oil discovery, Campos Basin • Potential for BC-10 Phase 3 • Gato do Mato, BMS-54 (Shell 80%) , ( ) • Oil discovery, Santos Basin • New wells planned to assess commerciality AUSTRALIA • 2 offshore gas discoveries • Acme (Shell 33%), Brederode (Shell 50%) • Clio-3 appraisal ( h ll 33%) l l (Shell )BC-10 FPSOMars-B TLP MARS-B TLP9 Copyright of Royal Dutch Shell plc 03/02/2011
PERFORMANCE FOCUSMATURING NEW PROJECT OPTIONS NEW WAVE OF PRODUCTION GROWTHBUSINESS DEVELOPMENT: 2010 PERFORMANCE MATURING NEXT GENERATION OF PROJECT OPTIONS2010 PROGRESS CHINA TIGHT GAS • JinQiu PSC: 4,000 km2 tight gas • Fushun JAA: 4,000 km2 shale gas • North Shiloh CBM, Ordos basin • Drilling in all 3 licenses Sugar cane harvesting, Brazil EAST RESOURCES ARROW ENERGY • Marcellus shale • PetroChina and Shell • 70 wells drilled since acquisition • 7-8 mtpa CBM-LNG potential Drill pad in JinQiu, China SHELL/COSAN JV IRAQ MAJNOON OIL FIELD • 50/50, ~4500 Retail Stations • DPSC signed Shell 45% signed, • Biofuels in Brazil • Targeting 175 kboe/d ~ 2012 • Shell 2nd generation biofuels tech • Current production: 65 kboe/d •JV start-up planned April 1st EAGLE FORD GREENLAND OFFSHORE • Condensate rich shale • Block “Anu”, Shell 41% • 6 wells drilled since acquisition • Block “Napu”, Shell 46% Napu • 20,000 km2, Shell operated NEW EXPLORATION/RESOURCES ENTRY10 Copyright of Royal Dutch Shell plc 03/02/2011
OPERATIONAL EXCELLENCEOIL & GAS PRODUCTION RELIABILITY LNG RELIABILITY100% 100% 90% 90% 80% 80% 70% 70% 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010DOWNSTREAM AVAILABILITY SAFETY PERFORMANCEREFINING - % OF EQUIVALENT DISTILLATION CAPACITY INJURIES - TRCF PER MILLION WORKING HOURSCHEMICALS - % OF MAXIMUM CAPACITY 4 96% CHEMICALS 3 94% 2 92% REFINING 90% 1 2006 2007 2008 2009 2010 99 00 01 02 03 04 05 06 07 08 09 10 EMPLOYEES AND CONTRACTORS PER MILLION WORKING HOURS; SHELL OPERATED FACILITIES11 Copyright of Royal Dutch Shell plc 03/02/2011
ROYAL DUTCH SHELL PLC FOURTH QUARTER AND FULL YEAR 2010 RESULTS SIMON HENRY CHIEF FINANCIAL OFFICER12 Copyright of Royal Dutch Shell plc 03/02/2011
PRICES AND MARGINSSHELL OIL & GAS REALIZATIONS INDUSTRY REFINING MARGINS INDUSTRY CHEMICALS MARGINS$/BARREL $/MSCF $/BARREL $/TONNE 7 12 600 80 10 500 8 6 400 70 6 300 4 60 5 200 2 0 100 50 4 -2 2 0 US ETHANE US WEST COAST ROTTERDAM O OIL G S (RHS) GAS ( S) WESTERN EUROPE NAPHTHA US GULF COAST SINGAPORE NE/SE ASIA NAPHTHA •Q4 2010 CHEMICAL MARGINS: BASED ON AVAILABLE PRICES/MARGINS AT THE END OF THE QUARTER13 Copyright of Royal Dutch Shell plc 03/02/2011
Q4 2010 FINANCIAL HIGHLIGHTSCCS EARNINGS ($ BILLION) CCS EARNINGS Q4 2009 TO Q4 2010 $ BILLION 5 Q4 10 Q4 09 UPSTREAM 3.4 2.8 DOWNSTREAM (CCS) 0.5 (0.4) 4 BUSINESS SEGMENTS TOTAL 3.9 2.4 CORPORATE & MINORITIES 0.2 0.4 CCS NET EARNINGS 4.1 2.8 3 CCS EARNINGS, $ PER SHARE 0.67 0.45 CASH FROM OPERATIONS 5.5 5.7 2 DIVIDENDS 2.6 2.6 1 DIVIDEND, $ PER SHARE 0.42 0.42 0EARNINGS CCS BASIS, EARNINGS AND EPS EXCLUDING IDENTIFIED ITEMS14 Copyright of Royal Dutch Shell plc 03/02/2011
UPSTREAM PERFORMANCEEARNINGS OIL & GAS PRODUCTION$ BILLION MILLION BOE/D 5 3.4 4 3.2 3 CONTROLLABLE 2 3.0 1 0 2.8 Q409 Q110 Q210 Q310 Q410 OTHER UPSTREAM INTEGRATED GASEXCLUDING IDENTIFIED ITEMS15 Copyright of Royal Dutch Shell plc 03/02/2011
CASH PERFORMANCE 12 MONTHSBUSINESSES GROUP$ BILLION $ BILLION 35 50 UPSTREAM DOWNSTREAM SOURCES USES SOURCES 30 USES 40 25 30 20 15 SOURCES 20 10 USES 10 5 0 0 CASH FLOW FROM OPERATIONS EXCL. NET ACQUISITIONS MOVEMENTS IN WORKING CAPITAL CAPEX (EXCL. ACQUISITIONS) + EQUITY ACC. INVESTMENTS ASSET SALES PAY-OUT17 Copyright of Royal Dutch Shell plc 03/02/2011
INVESTMENT AND BALANCE SHEETBALANCE SHEETGEARING % CAPITAL EMPLOYED $ BILLION RETURN % 30% 200 40% Gea g a ge Gearing range 150 20% 100 20% 10% 50 0% 0 0% Q405 Q406 Q407 Q408 Q409 Q410 2005 2006 2007 2008 2009 2010 OTHER ROACE CAPITAL IN SERVICE RETURN ON CAPITAL IN SERVICECAPITAL INVESTMENT CAPITAL INVESTMENT $ BILLION 2009 2010 2010 2011E$ Bln TARGET 30 MIDDLE EASTOrganic investment 31 ~28 24 28 AFRICA, CISAcquisitions q 1 ~7 7 1.61 20 ASIA-PACIFIC U S UPSTREAM M EUROPEDisposals (3) (>2) (7) Up to 5 AMERICAS 10Net Capital Investment 28 ~33 24 25-27 DOWNSTREAM 0 2010 2011E1 COSAN (BRAZIL DOWNSTREAM & BIOFUELS JV)18 Copyright of Royal Dutch Shell plc 03/02/2011
ROYAL DUTCH SHELL PLC FOURTH QUARTER AND FULL YEAR 2010 RESULTS PETER VOSER CHIEF EXECUTIVE OFFICER19 Copyright of Royal Dutch Shell plc 03/02/2011
SUMMARYSTRATEGY PRIORITIES 2010 DELIVERY •2010 CCS earnings $18 bln (EPS +56%) g $ ( ) PERFORMANCE FOCUS •Oil & gas volumes 3.3 mln boe/d (+ 5%) •$2 bln underlying cost savings •$7 bln asset sales •6 new start-ups 2010 NEW WAVE OF PRODUCTION GROWTH •Qatargas 4 starting up; Pearl GTL on track •Launched 2 new deep water projects p p j •$7 bln acquisitions MATURING NEXT GENERATION OF •New resource plays: Iraq oil, unconventional gas p y q , g PROJECT OPTIONS •Exploration success; 8 new discoveries •Brazil retail & biofuels joint venture Competitive performance – Profitable growth – Sharper deliveryEARNINGS CCS BASIS, EARNINGS AND EPS EXCLUDING IDENTIFIED ITEMS20 Copyright of Royal Dutch Shell plc 03/02/2011
ROYAL DUTCH SHELL PLC FOURTH QUARTER AND FULL YEAR 2010 RESULTS Q&A21 Copyright of Royal Dutch Shell plc 03/02/2011
ROYAL DUTCH SHELL PLC FOURTH QUARTER AND FULL YEAR 2010 RESULTS THE HAGUE FEBRUARY 3rd, 201122 Copyright of Royal Dutch Shell plc 03/02/2011
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