Management Day 2019: Shell,
strongly positioned for the future of energy, provides strategy
update and financial outlook to 2025
- Shell refreshes strategy for the energy future as it builds on
strong foundation
- The company is on track to deliver on its 2020 commitments; now
increases organic free cash flow outlook to around $35 billion for 2025 at $60 per barrel (real terms, 2016)
- Shell’s expected cash delivery creates the potential to
distribute $125 billion or more to
shareholders (dividends and share buybacks) over the five-year
period of 2021-2025
LONDON, June 4, 2019 - Royal
Dutch Shell plc (Shell) today updates investors on the
company’s strategy, setting out a compelling financial outlook to
2025 and building on a strong foundation that will enable it to
thrive through the transition to a lower-carbon energy system.
“We have reshaped our company with a focus on value and have
demonstrated a clear track record of delivering on our ambitious
promises made at our Management Day in November 2017,” said
Royal Dutch Shell plc Chief
Executive Officer, Ben van
Beurden. “It is the success of our strategy and
strength of our delivery today that gives us confidence for the
future.”
Van Beurden summed up the key
points of the company’s update: “Increased organic free cash flow
outlook, greater potential distributions to shareholders and
confidence in our world class investment case given our high-margin
portfolio, improving returns and a globally recognised brand.”
Shell highlighted its delivery on commitments since the last
Management Day in 2017:
- achieved $10 billion additional
cash flow from operations from new projects started up since
2014;
- demonstrated capital discipline within committed capital
range;
- delivered $30 billion of
divestments from 2016-2018;
- cancelled the scrip dividend; and
- started the $25 billion share
buyback programme.
Financial outlook
By the end of next year, Shell plans to complete its
$25 billion share buyback programme
(subject to further progress with debt reduction and oil price
conditions) in combination with reaching a gearing level of 25%
(20% pre-IFRS16) and delivering $28-33 billion of organic free cash flow
($25-30 billion pre-IFRS16) at
$60 per barrel (real terms,
2016).
Looking further ahead to 2025, van Beurden set out a robust
financial outlook that included the potential to make distributions
to shareholders of $125 billion or
more in the form of dividends and share buybacks in the period of
2021-2025. This is in comparison to around $52 billion in shareholder distributions in the
period of 2011-2015 and expected shareholder distributions of
around $90 billion in the period of
2016-2020. Shell expects to increase the dividend per share when
there is line of sight to the completion of the $25 billion share buyback programme.
Shell also plans to:
- fully sustain the Upstream business through the next decades,
and grow the company’s market-facing businesses;
- increase organic free cash flow to around $35 billion in 2025 at $60 per barrel (real terms, 2016);
- achieve a return on average capital employed of more than 12%
in 2025;
- maintain gearing of 15-25% through the cycle; and
- invest, on average, $30 billion
of cash capex a year over 2021-2025 (excluding major inorganic
opportunities, but including minor acquisition spend of up to
$1 billion), with a ceiling of
$32 billion a year.
Strategy updates
Shell presents a refreshed strategy that reflects the next step
in delivering the world class investment case and thriving through
the energy transition. Its strategic themes are re-focused into
three categories to shape the portfolio and drive capital
allocation for value growth and resiliency: Core Upstream, Leading
Transition and Emerging Power.
Deep Water, Shales and Conventional Oil and Gas form the Core
Upstream themes.
The market-facing businesses of Integrated Gas, Chemicals and
Oil Products will be the cornerstone of Shell leading through the
energy transition and form the Leading Transition
themes.
The Emerging Power theme will focus on creating
business models to meet evolving customer demands as society
transitions to much greater levels of electrification.
Shell reaffirms the role each of its businesses play in
delivering the company’s performance and building on its foundation
for the future:
Upstream continues to focus on delivery and financial
performance and is expected to continue generating robust cash flow
for decades to come. It has a strong development funnel of projects
that offers long-life, resilient growth opportunities.
The Integrated Gas business is expected to attract
investment to maintain and grow its positions through competitive
options for future development. Natural gas and liquefied natural
gas are expected to continue to experience strong demand as the
world tackles climate change, poor air quality and population
growth.
Downstream continues to deliver strong financial
performance due to highly integrated refining, trading and
marketing operations, premium products, as well as competitive
growth in the Chemicals business. Strong brand and customer reach
will continue to be a differentiator for Shell and underpin growth
in its Downstream businesses.
Shell continues to develop its Power business. The
company plans to seek new opportunities to grow this business as
the role of electricity increases in the global energy system and
consumers’ needs evolve. The returns Shell achieves will drive the
pace of growth in Power.
Ben van Beurden said, “All this
adds up to a forward-looking strategy that ensures Shell is
well-placed to continue to deliver a world class investment case
and thrive in the energy transition.”
Royal Dutch
Shell plc
The
Hague, June 4, 2019
Enquiries:
Investor Relations
Europe:
+ 31 70 377 4540
North America:
+1 832 337 2034
Media Relations
International:
+44 207 934 5550
Americas:
+1 832 337 4355
CAUTIONARY NOTE
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. This announcement contains
forward-looking statements (within the meaning of the U.S. 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; and (m) 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, 2018 (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, June 4, 2019. 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. 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. 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.
This announcement contains inside information.
June 4, 2019
Contacts:
- Linda Szymanski, Company
Secretary
LEI number of Royal Dutch Shell
plc: 21380068P1DRHMJ8KU70
Classification: Inside Information