Royal Dutch Shell plc second quarter 2014 results analyst webcast presentation
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Ben van Beurden, CEO of Royal Dutch Shell plc, and Simon Henry, CFO of Royal Dutch Shell plc, presented the Royal Dutch Shell plc second quarter 2014 results on July 31, 2014.

Ben van Beurden, CEO of Royal Dutch Shell plc, and Simon Henry, CFO of Royal Dutch Shell plc, presented the Royal Dutch Shell plc second quarter 2014 results on July 31, 2014.

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

  • 1. Copyright of Royal Dutch Shell plc 31 July, 2014 1 BALANCING GROWTH & RETURNS SECOND QUARTER 2014 RESULTS 31 JULY 2014 ROYAL DUTCH SHELL PLC
  • 2. Copyright of Royal Dutch Shell plc 31 July, 2014 2 BEN VAN BEURDEN CHIEF EXECUTIVE OFFICER ROYAL DUTCH SHELL PLC
  • 3. Copyright of Royal Dutch Shell plc 31 July, 2014 3 DEFINITIONS & CAUTIONARY NOTE Reserves: Our use of the term “reserves” in this presentation means SEC proved oil and gas reserves. 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. Resources are consistent with the Society of Petroleum Engineers 2P and 2C definitions. Organic: Our use of the term Organic includes SEC proved oil and gas reserves excluding changes resulting from acquisitions, divestments and year-average pricing impact. Resources plays: our use of the term ‘resources plays’ refers to tight, shale and coal bed methane oil and gas acreage. 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 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, 31 July, 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.
  • 4. Copyright of Royal Dutch Shell plc 31 July, 2014 4 2014 PRIORITIES  Returns and cash flow  Competitive returns for shareholders  Take hard choices on new options  Increase asset sales  Reduce pace of growth investment  Major deep-water start-ups in 2014  Integrate 2013 acquisitions Deliver new projects Enhance our capital efficiency Improve our financial performance
  • 5. Copyright of Royal Dutch Shell plc 31 July, 2014 5 DRIVING PERFORMANCE IN SHELL Policy from 1.1.2015  Performance units New shareholding requirements  Drive bottom line focus  Credible, competitive and affordable plans  Drives decisions on spending + divestment  Individual performance management  Stronger accountability for outcomes  New shareholding requirements for senior executives CEO 7 x base pay CFO 4 x base pay Top 200 executives below Executive Committee: 1.5 x base pay Senior Executives
  • 6. Copyright of Royal Dutch Shell plc 31 July, 2014 6 Cash flow IMPROVE FINANCIAL PERFORMANCE H1 2014 OUTCOME Earnings + ROACE $ billion $ billion CCS earnings + ROACE excluding identified items Upstream Downstream Corporate/Other CFFO CFFI % ROACE (RHS) $ billion Free cash flow (RHS) Dividend + buy-back $ billion Dividend declared Buy-back  Balancing returns + growth  Competitive shareholder returns  Expecting >$30 billion distributions to shareholders 2014-15
  • 7. Copyright of Royal Dutch Shell plc 31 July, 2014 7 IMPROVE FINANCIAL PERFORMANCE OIL PRODUCTS ROACE: CCS earnings excluding identified items Resilience Attractiveness Addressing underperforming portfolio Downstream CFFO + ROACE $ billion % Exit:  Italy   Norway  Australia  Denmark  others Fix:  Motiva  Singapore fuels  Pernis + Rheinland  others Selective Growth: Chemicals China  LNG for transport  Premium fuels + lubes  Refinery crude flexibility  others : completed  Announced divestments 2014 year to date:  180,000 b/d refinery capacity  300,000 b/d marketing  US mid-stream MLP proposal CFFO ROACE (RHS)
  • 8. Copyright of Royal Dutch Shell plc 31 July, 2014 8 IMPROVE FINANCIAL PERFORMANCE NORTH AMERICA RESOURCES PLAYS * 2014 H1: 12 month rolling Haynesville Elba LNG LNG Canada Groundbirch Deep Basin/Kaybob Foothills/Pembina Pinedale Gas-to-chemicals Appalachia Liquids rich shales (LRS) Gas monetization options Permian Dry gas Gas/LRS Resilience Attractiveness $ billion LRS Dry gas Divestments Acquisitions -50% -20% North Americas capital investment  Dry gas:  LNG growth options in Canada  Lower 48: low holding cost production + appraisal drilling  Liquid rich shales:  Major divestments completed  Appraisal in Western Canada + Permian  Q214 impairments $1.9 billion Redefining growth + reducing cost Exit:  Eagle Ford   Mississippi Lime   Rockies LRS   Deep Basin (North)  Foothills (Burnt Timber) Hold or Divest:  Lower 48 gas Maintain / Grow:  W. Canada gas + integration plays  W. Canada LRS  Permian LRS completed LRS Plays
  • 9. Copyright of Royal Dutch Shell plc 31 July, 2014 9 ENHANCE CAPITAL EFFICIENCY Take hard choices on new options  More selectivity: FIDs > $500 million require CEO approval at FEED  Maturing new projects: LNG, deep-water Increase asset sales  $8 billion completed H114  US midstream MLP proposal Reduce pace of growth investment  2014 organic spending ~$35 billion  Scrip cancellation reflects improving FCF : completed 2014+ Asset sales / license expiry  Wheatstone LNG   BC-10 dilution   North America LRS   Italy Downstream   ADCO license expiry   Woodside market sell down   Australia/Denmark/ Norway Downstream  Nigeria onshore  Late life UKCS  Others  270,000 boed upstream  180,000 b/d refining  300,000 b/d marketing
  • 10. Copyright of Royal Dutch Shell plc 31 July, 2014 10 DELIVER NEW PROJECTS 2014 START-UPS Mars B – February 2014 start-up Mars B production ramp-up progress Cardamom: H2 2014 start-up Gumusut-Kakap: H2 2014 start-up Shell 72%, 100 kboe/d Shell 100%, 50 kboe/d Shell 33%, 135 kboe/d kboed
  • 11. Copyright of Royal Dutch Shell plc 31 July, 2014 11 Heartland CONVENTIONAL EXPLORATION PORTFOLIO + THEMES Prospect size: potential Conventional Exploration spend 2014 Arctic/Frontier Near field exploration Prospect Size (million boe) Time to development (years) 15+ 10+ 3+ <3 5-50 50-250 >250 >500 Arctic Frontier Under explored basins Heartlands New plays in Shell producing basins Near field High value  Balancing exploration risk ~ $ 4 billion
  • 12. Copyright of Royal Dutch Shell plc 31 July, 2014 12 CONVENTIONAL EXPLORATION PROGRESS DELIVERY H1 2014: EXAMPLES  Rosmari gas discovery  ~110 million boe  Shell 85%  4 near field gas discoveries in 2014 (100% success rate)  Adding gas to Malaysia heartland  Shell 30%  Deep-water oil discovery 16 km south of Appomattox  ~100 million boe  Shell 57.2%  3rd Norphlet discovery Malaysia, Block SK318 Malaysia, Block SK408 GOM, Rydberg Deep Doo Sung rig Gorek-1 3D Noble Globetrotter 1
  • 13. Copyright of Royal Dutch Shell plc 31 July, 2014 13 SIMON HENRY CHIEF FINANCIAL OFFICER ROYAL DUTCH SHELL PLC
  • 14. Copyright of Royal Dutch Shell plc 31 July, 2014 14 Q2 2014 FINANCIAL HIGHLIGHTS Earnings CCS basis, excluding identified items, ROACE excluding identified items Earnings Q2 2013 to Q2 2014 $ billion Earnings Q2 2013 to Q2 2014 Q2 2013 Q2 2014 $ billion UPSTREAM 3.5 4.7 DOWNSTREAM (CCS) 1.2 1.3 CORPORATE & MINORITIES -0.1 0.1 CCS NET EARNINGS 4.6 6.1 CCS EARNINGS, $ PER SHARE 0.73 0.97 CASH FROM OPERATIONS 12.4 8.6 ROACE (%) 11.8 9.4 SHARE BUY BACKS 1.9 0.3 DIVIDENDS 2.8 3.0 DIVIDEND, $ PER SHARE 0.45 0.47 Environment Choice
  • 15. Copyright of Royal Dutch Shell plc 31 July, 2014 15 UPSTREAM PERFORMANCE Q2 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) Million tonnes Cash flow from operations (RHS) Q3 – Q3 OUTLOOK:  Production impact:  Abu Dhabi license expiry ~170 kboe/d  Divestment impact ~75 kboe/d  Uplift from lower maintenance  Q214 LNG dividend phasing to Q314
  • 16. Copyright of Royal Dutch Shell plc 31 July, 2014 16 DOWNSTREAM PERFORMANCE Q2 2014 Earnings CCS basis, excluding identified items Earnings $ billion Cash flow Sales volume Oil Products Chemicals Refinery availability Chemicals availability Oil products (million bbls/d) (RHS) Chemicals (million tonnes) (RHS) Availability and sales volumes % $ billion CFFO excl w/c movements Working capital movements CFFO Q3 – Q3 OUTLOOK:  Similar refinery availability  Lower chemicals availability  Refining margin outlook remains bearish
  • 17. Copyright of Royal Dutch Shell plc 31 July, 2014 17 UP STREAM DOWN STREAM CASH FLOW AND PAY-OUT Cash generation $ billion, Q214 4Q rolling Gearing + balance sheet $ billion Cash flow from operations Net cash used in investing activities Dividend and buy back Gearing range Net debt Gearing (RHS) 12 months rolling Dividends declared 12 months rolling Dividend track record $ billion  Scrip dividend cancelled from Q2 2014  Buy back $7-8 billion 2014-15 combined  ~$1.6 billion H1 2014
  • 18. Copyright of Royal Dutch Shell plc 31 July, 2014 18 FINANCIAL FRAMEWORK – KEY DRIVERS Organic free cash flow : cash flow from operations less cash used in investing activities adjusted for major acquisitions and divestments Dividend declared: weighted average outstanding shares x dividend per share ($) A+D supports portfolio growth $ billion (cash basis) Organic free cash flow drives dividend $ billion (cash basis) Divestments Acquisitions Cumulative cash surplus (deficit) of divestments over acquisitions Organic free cash flow Dividend declared Cumulative organic FCF surplus (deficit) over dividend declared
  • 19. Copyright of Royal Dutch Shell plc 31 July, 2014 19 FINANCIAL FRAMEWORK – TRACK RECORD Free cash flow: cash flow from operations less cash used in investing activities Balancing financial framework over time $ billion Free cash flow Cash dividend and buybacks Cumulative surplus (deficit) of free cash flow over dividend and buybacks
  • 20. Copyright of Royal Dutch Shell plc 31 July, 2014 20 COMPETITIVE PERFORMANCE: BALANCING GROWTH AND RETURNS 4Q ROLLING Q2 2014 Free cash flow: cash flow from operations less cash used in investing activities; ROACE underlying: European companies: CCS basis excluding identified items. US companies: reported earnings excluding special non-operating items. Cash flow from operations $ billion Free cash flow $ billion ROACE – underlying % Shell Peer group  Tracking Shell’s competitive performance Q2 2014 2 014 2 014
  • 21. Copyright of Royal Dutch Shell plc 31 July, 2014 21 BEN VAN BEURDEN CHIEF EXECUTIVE OFFICER ROYAL DUTCH SHELL PLC
  • 22. Copyright of Royal Dutch Shell plc 31 July, 2014 22 2014 PRIORITIES Q2 2014 DELIVERY Earnings excluding identified items Deliver new projects Enhance our capital efficiency Improve our financial performance  Q214 CCS earnings $6.1 billion; CFFO 8.6 billion  Restructuring in Oil Products + North America resources plays  Expecting > $30 billion distributions to shareholders 2014-15  More selectivity on new projects  $8 billion asset sales delivered  US mid-stream MLP proposal  Continued Mars B growth  Gumusut-Kakap + Cardamom deep-water start-up H214  Exploration
  • 23. Copyright of Royal Dutch Shell plc 31 July, 2014 23 QUESTIONS & ANSWERS SECOND QUARTER 2014 RESULTS
  • 24. Copyright of Royal Dutch Shell plc 31 July, 2014 24 BALANCING GROWTH & RETURNS SECOND QUARTER 2014 RESULTS 31 JULY 2014 ROYAL DUTCH SHELL PLC