Shell fourth quarter 2020 update note
Shell fourth quarter 2020 update note
The Hague, December 21, 2020 − This is an update to the
fourth quarter 2020 outlook provided in the third quarter results
announcement on October 29, 2020. The impacts presented here may
vary from the actual results and are subject to finalisation of the
fourth quarter 2020 results.
This update note is presented based on prevailing commodity
prices and forward curves, further movements and volatility till
the end of the year are likely to impact earnings and CFFO.
Unless otherwise indicated, presented impacts relate to Adjusted
Earnings on a post-tax basis.
- Production is expected to be between 900 and 940 thousand
barrels of oil equivalent per day. Despite increased production
compared with the third quarter 2020, earnings impact is limited
due to PSC effects.
- LNG liquefaction volumes are expected to be between 8.0 and 8.6
- Trading and optimisation results are expected to be below
- Approximately 80% of our term sales of LNG in 2020 have been
oil price linked with a price-lag of up to 6 months.
- Significant margining outflows have impacted CFFO in the fourth
quarter so far, compared with margining related inflows at the end
of the third quarter 2020. The full quarter impact is subject to
movements in commodity prices and forward curves up until the last
day of the quarter.
- Adjusted Earnings are expected to show a loss in the current
- Production is expected to be between 2,275 and 2,350 thousand
barrels of oil equivalent per day, reflecting hurricane impacts in
the US Gulf of Mexico (between 60 and 70 thousand barrels of oil
equivalent per day) and the effect of mild weather in Northern
Europe in the first half of the fourth quarter.
- Realised Upstream gas prices are expected to trend in line with
- Depreciation is expected to be $100 to $200 million higher
compared with the third quarter 2020.
- Tax charge in the range of $600 million and $900 million is
expected to negatively impact Adjusted Earnings in the fourth
quarter. This includes unfavourable movements in deferred tax
- Despite the expected earnings loss, CFFO is not expected to
reflect a comparable cash tax effect due to the build-up of
deferred tax positions in a number of countries.
- CFFO is expected to be negatively impacted by the settlement of
previously booked provisions in the range of $400 to $500
- Refinery utilisation is expected to be between 72% and
- Realised gross refining margins are expected to be slightly
improved compared with the third quarter 2020.
- Sales volumes are expected to be between 4,000 and 5,000
thousand barrels per day.
- Marketing results are expected to be in line with the fourth
quarter 2019 while significantly lower compared with the record
third quarter 2020 due to lower volumes driven by seasonal
- Trading and optimisation results are expected to be
significantly lower compared with the third quarter 2020.
- Significant derivatives related outflows have impacted CFFO in
the fourth quarter so far, compared with derivatives related
inflows at the end of the third quarter 2020. The full quarter
impact is subject to movements in commodity prices and forward
curves up until the last day of the quarter.
- Working capital movements are typically impacted by movements
between the quarter opening and closing price of crude along with
changes in inventory volume.
- Chemicals manufacturing plant utilisation is expected to be
between 77% and 81%.
- Chemicals sales volumes are expected to between 3,600 and 3,900
- Chemicals base and intermediate margins are expected to improve
compared with the third quarter 2020.
- Corporate segment Adjusted Earnings are expected to be a net
expense of $900 to $975 million for the fourth quarter, impacted by
unfavourable movements in deferred tax positions. This excludes the
impact of currency exchange effects.
- Higher underlying operating expenses due to increased activity
compared to the third quarter 2020 are expected to impact Adjusted
Earnings across the businesses.
- As per previous disclosures, CFFO price sensitivity at Shell
Group level is estimated to be $6 billion per annum for each $10
per barrel Brent price movement.
- Note that this price sensitivity is indicative and is most
applicable to smaller price changes than those in the current
environment and in relation to the full-year results. This excludes
the short-term impacts from working capital movements and
- Post-tax charges, in aggregate, between $3.5 to $4.5 billion in
relation to impairments, asset restructuring and onerous contracts
are expected in the fourth quarter. These expected charges,
reported as identified items, relate to Upstream (including partial
impairment of Appomattox asset in the US Gulf of Mexico due to
subsurface updates), Oil Products (including charges related to
announced transformation of the refinery portfolio) and Integrated
Gas (onerous contracts). As per accounting standards, charges
linked to Reshape organisational restructuring are expected
to be recognised in 2021.
- Shell will provide a strategy update on 11 February 2021.
The consensus collection for quarterly Adjusted Earnings and
CFFO excluding working capital movements, managed by VARA research,
is scheduled to be opened for submission on 13 January 2021, closed
on 27 January 2021, and made public on 28 January 2021.
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entities. In this announcement “Shell”, “Shell Group” and “Royal
Dutch Shell” are sometimes used for convenience where references
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the following forward-looking Non-GAAP measure: Adjusted Earnings.
We are unable to provide a reconciliation of the above
forward-looking Non-GAAP measures to the most comparable GAAP
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the above Non-GAAP measure to the most comparable GAAP financial
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developments including regulatory measures addressing climate
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governmental entities, delays or advancements in the approval of
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(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
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or revise any forward-looking statement as a result of new
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disclosure in our Form 20-F, File No 1-32575, available on the SEC
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