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Royal Dutch Shell plc first quarter 2014 results analyst webcast presentation

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Simon Henry, CFO of Royal Dutch Shell plc, presented the Royal Dutch Shell plc first quarter 2014 results on April 30, 2014.

Simon Henry, CFO of Royal Dutch Shell plc, presented the Royal Dutch Shell plc first quarter 2014 results on April 30, 2014.

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Royal Dutch Shell plc first quarter 2014 results analyst webcast presentation Royal Dutch Shell plc first quarter 2014 results analyst webcast presentation Presentation Transcript

  • 1Copyright of Royal Dutch Shell plc 30 April, 2014 BALANCING GROWTH & RETURNS FIRST QUARTER 2014 RESULTS 30 APRIL 2014 ROYAL DUTCH SHELL PLC
  • 2Copyright of Royal Dutch Shell plc 30 April, 2014 SIMON HENRY CHIEF FINANCIAL OFFICER ROYAL DUTCH SHELL PLC
  • 3Copyright of Royal Dutch Shell plc 30 April, 2014 DEFINITIONS & CAUTIONARY NOTE 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 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 subsidiaries in general or to those who 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 “Shell companies” 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 a controlling influence. The companies in which Shell has significant influence but not control are referred to as “associated companies” or “associates” and companies in which Shell has joint control are 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 for convenience to indicate the direct and/or indirect (for example, through our 23% 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 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 ‘‘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 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 presentation, 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 potential litigation and regulatory measures as a result of climate changes; (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; and (m) changes in trading conditions. All forward-looking statements contained in this presentation 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 factors that may affect future results are contained in Royal Dutch Shell’s 20-F for the year ended 31 December, 2013 (available at www.shell.com/investor and www.sec.gov ). These factors also should be considered by the reader. Each forward-looking statement speaks only as of the date of this presentation, 30 April, 2014. 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- looking statements 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. We use certain terms in this presentation, such as discovery potential, that the United States Securities and Exchange Commission (SEC) guidelines strictly 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 this form from the SEC by calling 1-800-SEC-0330.
  • 4Copyright of Royal Dutch Shell plc 30 April, 2014 2014 PRIORITIES Q1 2014 DELIVERY Earnings excluding identified items Deliver new projects Enhance our capital efficiency Improve our financial performance  CCS earnings $7.3 billion  Cash flow from operations $14 billion  Increasing our dividend: Q1 2014 $0.47 per share, +4.4%  Taking hard choices on portfolio  $4.5 billion asset sales announced year-to-date  Mars B start-up  Majnoon ramp-up  Repsol LNG integration  Maturing new options: LNG, deep-water
  • 5Copyright of Royal Dutch Shell plc 30 April, 2014 PRICES & MARGINS Shell oil & gas realisations $/barrel Industry refining margins $/barrel Industry chemicals margins $/tonne$/mscf 5 6 7 8 80 90 100 110 Q113 Q213 Q313 Q413 Q114 -3 0 3 6 9 12 Q113 Q213 Q313 Q413 Q114 0 200 400 600 800 1000 Q113 Q213 Q313 Q413 Q114 Oil Gas (RHS) US West Coast US Gulf Coast coking Rotterdam complex Singapore US ethane Western Europe naphtha NE/SE Asia naphtha
  • 6Copyright of Royal Dutch Shell plc 30 April, 2014 Q1 2014 FINANCIAL HIGHLIGHTS Earnings CCS basis, excluding identified items, ROACE reported FIFO Earnings Q1 2013 to Q1 2014 $ billion Earnings Q1 2013 to Q1 2014 7.5 7.3 0.1 (0.3) (0.0) 0 2 4 6 8 Q1 2013 Q1 2014 $ billion UPSTREAM 5.7 5.7 DOWNSTREAM (CCS) 1.8 1.6 CORPORATE & MINORITIES 0.0 0.0 CCS NET EARNINGS 7.5 7.3 CCS EARNINGS, $ PER SHARE 1.19 1.17 CASH FROM OPERATIONS 11.6 14.0 ROACE (%) 13.0 6.1 SHARE BUY BACKS 0.5 1.2 DIVIDENDS 2.7 2.8 DIVIDEND, $ PER SHARE 0.45 0.47
  • 7Copyright of Royal Dutch Shell plc 30 April, 2014 7.5 7.3 0.4 0.1 0.1(0.3) (0.1) (0.2) (0.2) (0.1) 4 6 8 Q1 2014 FINANCIAL DRIVERS Earnings CCS basis, Earnings excluding identified items Group earnings Q1 2013 to Q1 2014 $ billion Environment Choice  Underlying EPS -2%  Broadly similar environment Q1 – Q1
  • 8Copyright of Royal Dutch Shell plc 30 April, 2014 INTEGRATED GAS PERFORMANCE Earnings excluding identified items  Record earnings Q1 14  High operational availability + strong trading contribution  Repsol LNG business successfully integrated Global LNG portfolio availability % Financial performance $ billion LNG Peru Altamira Baja Nigeria Hazira NWS Pluto QG-4 Elba Spain Prelude Gorgon Atlantic LNG Oman Sakhalin Malaysia Brunei Cove Point LNG supply Under construction Regasification Trading flows Shell’s LNG portfolio 85% 90% 95% 100% 2010 2011 2012 2013 Q114 0% 10% 20% 30% 0 5 10 15 2010 2011 2012 2013 Q114 rolling Earnings CFFO ROACE (RHS)Availability
  • 9Copyright of Royal Dutch Shell plc 30 April, 2014 -2 2 6 10 -2 2 6 Q113 Q213 Q313 Q413 Q114 0 1 2 Q113 Q213 Q313 Q413 Q114 0 3,5 7 0 2 4 Q113 Q213 Q313 Q413 Q114 UPSTREAM PERFORMANCE Q1 2014 Earnings CCS basis, excluding identified items Earnings + cash flow $ billion Exploration expense $ billion (pre-tax) Oil and gas production Million boe/day Upstream International Upstream Americas Upstream International Upstream Americas Gas Oil LNG Sales volumes (RHS) Q2 – Q2 OUTLOOK:  Production impact:  LNG sales volumes uplift Atlantic + Peru LNG  ADCO licence expiry ~155 kboe/d  Lower maintenance +25 kboe/d  Nigeria operating challenges  Increased exploration costs + DD&A Million tonnes Cash flow from operations (RHS)
  • 10Copyright of Royal Dutch Shell plc 30 April, 2014  Updated view on macro:  Growth in LRS  Industry gasoline surplus  Industry refinery overbuild  ~ $2.6 billion Q1 2014 impairment mainly on refinery portfolio  14% of refining asset base impaired  Announced divestments 2014 year to date:  Norway  Italy  Australia  Denmark 181,000 b/d refining capacity 300,000 b/d marketing DOWNSTREAM – RESTRUCTURING OUR PORTFOLIO CCS earnings excluding identified items Resilience Attractiveness Keep and grow Fix or divest Exit Addressing underperforming portfolio 0 5 10 0 6 12 2009 2010 2011 2012 2013 Q114 rolling CFFO + ROACE $ billion CFFO ROACE (RHS) %
  • 11Copyright of Royal Dutch Shell plc 30 April, 2014 -4 -2 0 2 4 Q113 Q213 Q313 Q413 Q114 3 4 5 6 7 80 85 90 95 100 Q113 Q213 Q313 Q413 Q114 0 1 2 Q113 Q213 Q313 Q413 Q114 DOWNSTREAM PERFORMANCE Q1 2014 Earnings CCS basis, excluding identified items Earnings $ billion Cash flow Sales volume Oil Products Chemicals Refinery availability Chemicals availability Oil product (million bbls/d) Chemicals (million tonnes) Q2 – Q2 OUTLOOK:  Reduced refinery availability  Higher chemicals availability  Refining margin outlook remains bearish Availability and sales volumes % $ billion CFFO excl w/c movements Working capital movements CFFO
  • 12Copyright of Royal Dutch Shell plc 30 April, 2014 0 20 40 60 0 5 10 15 0 10 20 30 40 50 Q113 Q213 Q313 Q413 Q114 0 10 20 30 0 10 20 2010 2011 2012 2013 Q114 Rolling CASH PERFORMANCE + PAYOUT FCF = Net cash from operating activities – Net cash used in investing activities CFFO 12 months rolling $ billion Group 12 months cash performance $ billion Gearing and pay out $ billion CFFO Capex Sources Uses Asset sales Acquisitions % Dividend Buy-backs Dividend Buyback Gearing (RHS) $ billion Upstream Downstream Corporate Free cashflow (RHS) Free cashflow Q114 (RHS)  Improving free cash flow  CFFO growth  2013 acquisitions impacts  $17 bn dividends distributed + buy-backs 12 months
  • 13Copyright of Royal Dutch Shell plc 30 April, 2014 (10) 0 10 20 30 40 50 60 2010 2011 2012 2013 Q114 - 10 20 30 40 50 60 2010 2011 2012 2013 Q114 -10% 0% 10% 20% 30% 2010 2011 2012 2013 Q114 0% 10% 20% 30% 2010 2011 2012 2013 Q114 COMPETITIVE PERFORMANCE: BALANCING GROWTH AND RETURNS 4Q ROLLING Cash flow from operations $ billion, 4Q rolling Free cash flow $ billion ROACE – reported % ROACE – underlying % Free cashflow: Cashflow from operations less cash used in investing activities; ROACE underlying: CCS basis, excludes indentified items, gains on asset sales Shell Peer group
  • 14Copyright of Royal Dutch Shell plc 30 April, 2014 PORTFOLIO DEVELOPMENT Q1 2014 Exploration/ option progress FID Start-ups Divestment / (Project re-framing) Engines  Norway  Italy  Australia  Denmark  ML South GrowthPriorities  LNG Canada – FEED (12 mtpa)  Lympstone gas  Rosmari-1  Pegaga gas  Repsol LNG integration  Wheatstone LNG  (Arrow LNG)  Appomatox – FEED (150 kboed)  Limbayong oil  Mars-B (100 kboe/d)  Petai (30kboe/d)  BC-10 Brazil 23% LongerTerm  Eagle Ford  Niobrara and Sandwash  Mississippi Lime   UK Peterhead CCS - FEED  Nigeria SPDC reduction 4 discoveries 3 FEEDS 1 FID 3 start-ups $4.5 billion announced ytd FUTURE OPPORTUNITIES RESOURCES PLAYS DEEP-WATER INTEGRATED GAS UPSTREAM ENGINE DOWNSTREAM ENGINE  divestment complete
  • 15Copyright of Royal Dutch Shell plc 30 April, 2014 DELIVER NEW PROJECTS: START-UPS 2014  Start-up in Q3 2013 - currently producing >200 kboe/d  Cost recovery triggered, following test run  CFFO contribution expected from Q2 2014  First oil more than 6 months ahead of schedule  Two subsea wells on-line in Q1 currently producing ~30 kboe/d  Expected 100 kboe/d by 2016 Majnoon (Shell 45%) Mars B – February 2014 start-up (Shell 71.5%) MFJ A kboed 0 10 20 30 40 kboed 0 75 150 225 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 kboed
  • 16Copyright of Royal Dutch Shell plc 30 April, 2014 2014 PRIORITIES Q1 2014 DELIVERY Earnings excluding identified items Deliver new projects Enhance our capital efficiency Improve our financial performance  CCS earnings $7.3 billion  Cash flow from operations $14 billion  Increasing our dividend: Q1 2014 $0.47 per share, +4.4%  Taking hard choices on portfolio  $4.5 billion asset sales announced year-to-date  Mars B start-up  Majnoon ramp-up  Repsol LNG integration  Maturing new options: LNG, deep-water
  • 17Copyright of Royal Dutch Shell plc 30 April, 2014 QUESTIONS & ANSWERS FIRST QUARTER 2014 RESULTS
  • 18Copyright of Royal Dutch Shell plc 30 April, 2014 BALANCING GROWTH & RETURNS FIRST QUARTER 2014 RESULTS 30 APRIL 2014 ROYAL DUTCH SHELL PLC