TIDMRDSA TIDMRDSB
ROYAL DUTCH SHELL PLC
2(ND) QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS
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SUMMARY OF UNAUDITED RESULTS
Quarters $ million Half year
Q1 Q2
Q2 2020 2020 2019 %(1) Reference 2020 2019 %
------- ------ ------ ---- -------------------- --------- ------- ------ ---
Income/(loss)
attributable to
(18,131) (24) 2,998 -705 shareholders (18,155) 8,999 -302
CCS earnings
attributable to
(18,377) 2,756 3,025 -707 shareholders Note 2 (15,620) 8,318 -288
------- ------ ------ ---- -------------------- --------- ------- ------ ----
638 2,860 3,462 -82 Adjusted Earnings(2) A 3,498 8,763 -60
------- ------ ------ ---- -------------------- --------- ------- ------ ----
Cash flow from
operating
2,563 14,851 11,031 -77 activities 17,415 19,661 -11
---------
Cash flow from
investing
(2,320) (2,718) (4,166) activities (5,039) (8,788)
243 12,133 6,865 Free cash flow G 12,376 10,873
------- ------ ------ ---- -------------------- ------- ------ ----
Cash capital
3,617 4,970 5,337 expenditure C 8,587 10,938
Underlying operating
7,504 8,600 9,477 -21 expenses F 16,105 18,343 -12
------- ------ ------ ---- -------------------- --------- ------- ------ ----
ROACE (Net income
(2.9)% 4.6% 8.4% basis) D (2.9)% 8.4%
ROACE (CCS basis
excluding identified
5.3% 6.1% 8.2% items) D 5.3% 8.2%
------- ------ ------ ---- -------------------- --------- ------- ------ ----
32.7% 28.9% 27.6% Gearing E 32.7% 27.6%
------- ------ ------ ---- -------------------- --------- ------- ------ ----
Total production
available for sale
3,379 3,719 3,583 -6 (thousand boe/d) 3,549 3,667 -3
------- ------ ------ ---- -------------------- --------- ------- ------ ----
Basic earnings per
(2.33) 0.00 0.37 -730 share ($) (2.33) 1.11 -310
Dividend per share
0.16 0.16 0.47 -66 ($) 0.32 0.94 -66
------- ------ ------ ---- -------------------- --------- ------- ------ ----
(1.) Q2 on Q2 change.
(2.) Adjusted Earnings is defined as income/(loss) attributable
to shareholders plus cost of supplies adjustment (see
Note 2) and excluding identified items (see Reference
A).
Income attributable to Royal Dutch Shell plc shareholders was a loss of
$18.1 billion for the second quarter 2020, which included an impairment
charge of $16.8 billion post-tax ($22.3 billion pre-tax), as a result of
revised medium- and long-term price and refining margin outlook
assumptions in response to the COVID-19 pandemic and macroeconomic
conditions as well as energy market demand and supply fundamentals.
Second quarter 2020 results reflected lower realised prices for oil, LNG
and gas, lower realised refining margins, Oil Products sales volumes and
higher well write-offs, compared with the second quarter 2019. This was
partly offset by very strong crude and oil products trading and
optimisation results as well as lower operating expenses.
Adjusted Earnings were $0.6 billion for the second quarter 2020,
reflecting lower realised prices for oil, LNG and gas, lower realised
refining margins, Oil Products sales volumes and higher well write-offs,
compared with the second quarter 2019. This was partly offset by very
strong crude and oil products trading and optimisation results as well
as lower operating expenses.
Cash flow from operating activities for the second quarter 2020 was $2.6
billion, which included negative working capital movements of $4
billion. Cash flow from investing activities for the quarter was an
outflow of $2.3 billion, driven mainly by capital expenditure, partly
offset by proceeds from divestments.
Gearing was 32.7% at the end of the second quarter 2020, compared with
28.9% at the end of the first quarter 2020, mainly driven by the impact
of impairments and pension remeasurement, due to actuarial assumption
changes mainly caused by falling credit spreads and increasing market
estimates of future inflation, as well as a net debt increase in the
quarter.
Total dividends distributed to Royal Dutch Shell plc shareholders in the
quarter were $1.2 billion.
Supplementary financial and operational disclosure and a separate press
release for this quarter are available at www.shell.com/investor(1) .
(1.) Not incorporated by reference.
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ROYAL DUTCH SHELL PLC
2(ND) QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS
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SECOND QUARTER 2020 PORTFOLIO DEVELOPMENTS
Integrated Gas
During the quarter, all conditions were met for the Final Investment
Decision (FID) and contracts were awarded on a new LNG processing unit,
known as Train 7, at Nigeria LNG (Shell interest 25.6%), which will add
8 million tonnes per annum (mtpa) of capacity to the Bonny Island
facility.
Upstream
During the quarter, Shell reached an agreement to sell its Appalachia
shale gas position for $541 million, subject to closing adjustments,
with an effective date of January 1, 2020, and expected to close in the
third quarter 2020.
Page 3
ROYAL DUTCH SHELL PLC
2(ND) QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS
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PERFORMANCE BY SEGMENT
INTEGRATED GAS
Quarters $ million Half year
Q2 Q1 Q2
2020 2020 2019 %(1) 2020 2019 %
------ ----- ----- ---- ----------------------------------------------------- ------ ----- ---
(7,959) 1,812 1,340 -694 Segment earnings (6,147) 4,134 -249
(8,321) (331) (386) Of which: Identified items (Reference A) (8,652) (160)
362 2,143 1,726 -79 Adjusted Earnings 2,506 4,294 -42
------ ----- ----- ---- ----------------------------------------------------- ------ ----- ----
2,663 3,986 3,403 -22 Cash flow from operating activities 6,649 7,630 -13
Cash flow from operating activities excluding working
2,871 3,352 2,824 +2 capital movements (Reference H) 6,224 6,540 -5
------ ----- ----- ---- ----------------------------------------------------- ------ ----- ----
736 882 738 Cash capital expenditure (Reference C) 1,618 2,081
------ ----- ----- ---- ----------------------------------------------------- ------ ----- ----
151 162 159 -5 Liquids production available for sale (thousand b/d) 157 148 +6
Natural gas production available for sale (million
4,369 4,596 4,456 -2 scf/d) 4,482 4,300 +4
------ ----- ----- ---- ----------------------------------------------------- ------ ----- ----
904 955 927 -2 Total production available for sale (thousand boe/d) 930 889 +5
8.36 8.88 8.66 -3 LNG liquefaction volumes (million tonnes) 17.23 17.39 -1
------ ----- ----- ---- ----------------------------------------------------- ------ ----- ----
16.65 19.00 17.95 -7 LNG sales volumes (million tonnes) 35.65 35.46 +1
------ ----- ----- ---- ----------------------------------------------------- ------ ----- ----
(1.) Q2 on Q2 change.
Second quarter segment earnings were a loss of $7,959 million. This
included a post-tax impairment charge of $8,151 million mainly related
to the Queensland Curtis LNG and Prelude floating LNG operations in
Australia. Also included was a net charge of $265 million due to the
fair value accounting of commodity derivatives. These net charges are
part of identified items (see Reference A).
Compared with the second quarter 2019, Integrated Gas Adjusted Earnings
of $362 million primarily reflected lower realised prices for oil, LNG
and gas, unfavourable movements in deferred tax positions and a charge
of $403 million reflecting well write-offs for the second quarter,
partly offset by lower operating expenses and higher contributions from
trading and optimisation.
Cash flow from operating activities for the quarter was $2,663 million,
primarily driven by Adjusted Earnings before non-cash expenses including
depreciation, well write-offs and deferred tax charges.
Compared with the second quarter 2019, total production decreased by 2%
mainly due to more maintenance activities in Australia and lower demand,
partly offset by the transfer of the Rashpetco operations in Egypt from
the Upstream segment. LNG liquefaction volumes decreased mainly as a
result of cargo timing.
Half year segment earnings were a loss of $6,147 million. This included
a post-tax impairment charge of $8,210 million mainly related to the
Queensland Curtis LNG and Prelude floating LNG operations in Australia.
Also included was a net charge of $419 million due to the fair value
accounting of commodity derivatives. These net charges are part of
identified items (see Reference A).
Compared with the first half 2019, Integrated Gas Adjusted Earnings of
$2,506 million primarily reflected lower realised prices for oil, LNG
and gas, higher well write-offs and higher depreciation, partly offset
by higher volumes and lower operating expenses.
Cash flow from operating activities for the first half 2020 was $6,649
million, primarily driven by Adjusted Earnings before non-cash expenses
including depreciation and well write-offs.
Compared with the first half 2019, total production increased by 5%
mainly due to less maintenance activities, new fields and field ramp-ups,
as well as the transfer of the Rashpetco operations in Egypt from the
Upstream segment. LNG liquefaction volumes decreased mainly as a result
of cargo timing and lower feedgas availability, partly offset by less
maintenance activities and new capacity.
Page 4
ROYAL DUTCH SHELL PLC
2(ND) QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS
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UPSTREAM
Quarters $ million Half year
Q2 Q1 Q2
2020 2020 2019 %(1) 2020 2019 %
------ ------ ----- ---- ----------------------------------------------------- ------ ------ ---
(6,721) (863) 1,435 -568 Segment earnings (7,584) 3,059 -348
(5,209) (1,154) 172 Of which: Identified items (Reference A) (6,364) 149
(1,512) 291 1,263 -220 Adjusted Earnings (1,220) 2,910 -142
------ ------ ----- ---- ----------------------------------------------------- ------ ------ ----
319 5,607 5,478 -94 Cash flow from operating activities 5,926 10,756 -45
Cash flow from operating activities excluding working
548 3,718 5,251 -90 capital movements (Reference H) 4,265 10,515 -59
1,876 2,521 2,321 Cash capital expenditure (Reference C) 4,397 4,812
1,609 1,730 1,636 -2 Liquids production available for sale (thousand b/d) 1,670 1,651 +1
4,673 5,680 5,640 -17 Natural gas production available for sale (million 5,176 6,249 -17
scf/d)
------ ------ ----- ---- ----------------------------------------------------- ------ ------ ----
2,415 2,710 2,609 -7 Total production available for sale (thousand boe/d) 2,562 2,729 -6
------ ------ ----- ---- ----------------------------------------------------- ------ ------ ----
(1.) Q2 on Q2 change.
Second quarter segment earnings were a loss of $6,721 million. This
included a post-tax impairment charge of $4,658 million mainly related
to unconventional assets in North America, assets offshore in Brazil and
Europe, a project in Nigeria (OPL245), and an asset in the US Gulf of
Mexico. Also included were a net charge of $187 million mainly related
to a reduction in discount rate used for provisions, as well as
redundancy and restructuring costs of $183 million. These net charges
are part of identified items (see Reference A).
Compared with the second quarter 2019, Upstream Adjusted Earnings were a
loss of $1,512 million primarily reflecting lower realised oil and gas
prices.
Cash flow from operating activities for the second quarter 2020 was $319
million, primarily driven by Adjusted Earnings before non-cash expenses
including depreciation, as well as the cash impact of the settlement for
the Lula unitisation in Brazil and cash effect of tax.
Compared with the second quarter 2019, total production decreased by 7%,
mainly due to the challenging macroeconomic environment (which included
OPEC+ restrictions and COVID-19-related restrictions), the impact of
divestments and lower production in the NAM joint venture. Field
ramp-ups in the Santos Basin, Brazil, the US Gulf of Mexico and Permian,
USA more than offset field decline. Lower production volumes were offset
by favourable timing of entitlement liftings.
Half year segment earnings were a loss of $7,584 million. This included
a post-tax impairment charge of $5,074 million mainly related to
unconventional assets in North America, assets offshore in Brazil and
Europe, a project in Nigeria (OPL245), and an asset in the US Gulf of
Mexico. Also included were a net charge of $916 million related to the
impact of the weakening Brazilian real on a deferred tax position, and
redundancy and restructuring costs of $191 million. These net charges
are part of identified items (see Reference A).
Compared with the first half 2019, Upstream Adjusted Earnings were a
loss of $1,220 million primarily reflecting lower realised oil and gas
prices and lower gas volumes.
Cash flow from operating activities for the first half 2020 was $5,926
million, primarily driven by Adjusted Earnings before non-cash expenses
including depreciation, as well as positive working capital movements,
cash effect of tax and the settlement for the Lula unitisation in
Brazil.
Compared with the first half 2019, total production decreased by 6%,
mainly due to the impact of divestments, lower production in the NAM
joint venture and the challenging macroeconomic environment (which
included OPEC+ restrictions and COVID-19-related restrictions). Field
ramp-ups in the Santos Basin, Brazil, the US Gulf of Mexico and Permian,
USA, more than offset field decline.
Page 5
ROYAL DUTCH SHELL PLC
2(ND) QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS
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OIL PRODUCTS
Quarters $ million Half year
Q2 Q1 Q2
2020 2020 2019 %(1) 2020 2019 %
------ --- ----- --- ----- ------ ----------------------------------------------------- ------ --- ----- ---
(3,023) 2,211 1,299 -333 Segment earnings(2) (811) 2,523 -132
(5,433) 849 20 Of which: Identified items (Reference A) (4,585) (205)
2,411 1,363 1,278 +89 Adjusted Earnings(2) 3,774 2,727 +38
Of which:
1,500 158 52 +2,763 Refining & Trading 1,658 473 +251
911 1,205 1,225 -26 Marketing 2,116 2,254 -6
(362) 4,878 1,268 -129 Cash flow from operating activities 4,516 670 +574
Cash flow from operating activities excluding working
2,430 353 2,081 +17 capital movements (Reference H) 2,783 4,670 -40
------ --- ----- --- ----- ------ ----------------------------------------------------- ------ --- ----- ----
606 580 1,118 Cash capital expenditure (Reference C) 1,186 1,971
------ --- ----- --- ----- ------ ----------------------------------------------------- ------ --- ----- ----
1,944 2,397 2,632 -26 Refinery processing intake (thousand b/d) 2,170 2,649 -18
------ --- ----- --- ----- ------ ----------------------------------------------------- ------ --- ----- ----
4,041 (3) 5,278 (3) 6,608 -39 Oil Products sales volumes (thousand b/d) 4,659 (3) 6,538 -29
------ --- ----- --- ----- ------ ----------------------------------------------------- ------ --- ----- ----
(1.) Q2 on Q2 change.
(2.) Earnings are presented on a CCS basis (See Note 2).
(3.) With effect from the first quarter 2020, the reporting
of Oil Products sales volumes has changed (See Note
2). Sales volumes would be 4,742 thousand b/d in the
second quarter 2020 on a comparable basis with 2019.
Second quarter segment earnings were a loss of $3,023 million. This
included a post-tax impairment charge of $4,027 million, as a result of
revised medium- and long-term price outlook assumptions in response to
the energy market demand and supply fundamentals as well as the COVID-19
pandemic and macroeconomic conditions. Also included were a net charge
of $1,257 million due to the fair value accounting of commodity
derivatives, and redundancy and restructuring costs of $118 million.
These net charges are part of identified items (see Reference A).
Compared with the second quarter 2019, Oil Products Adjusted Earnings of
$2,411 million for the quarter reflected very strong contributions from
crude and oil products trading and optimisation as well as lower
operating expenses. This was partly offset by lower realised refining
margins and lower marketing sales volumes due to the weak macroeconomic
environment and COVID-19 pandemic.
Cash flow from operating activities for the second quarter 2020 was an
outflow of $362 million, primarily driven by Adjusted Earnings before
depreciation, as well as negative working capital movements and cash
outflows from commodity derivatives.
With effect from the first quarter 2020, certain Oil Products contracts
are no longer included in sales volumes (see Note 2). Excluding this
impact, Oil Products sales volumes decreased due to lower refining &
trading and marketing sales volumes, compared with the second quarter
2019.
-- Refining & Trading Adjusted Earnings reflected very
strong contributions from crude and oil products trading
and optimisation as well as lower operating expenses.
This was partly offset by lower realised refining
margins, compared with the second quarter 2019.
With effect from the first quarter 2020, Shell discloses utilisation
instead of availability to improve transparency on refinery production
volumes. Utilisation is defined as the actual usage of the plants as a
percentage of the rated capacity. Refinery utilisation was 70% compared
with 76% in the second quarter 2019, mainly due to lower demand and
economic optimisation.
-- Marketing Adjusted Earnings reflected lower sales
volumes, partly offset by lower operating expenses,
compared with the second quarter 2019.
Half year segment earnings were a loss of $811 million. This included a
post-tax impairment charge of $4,088 million, as a result of revised
medium- and long-term price outlook assumptions in response to the
energy market demand and supply fundamentals as well as the COVID-19
pandemic and macroeconomic conditions. Also included were a net charge
of $291 million due to the fair value accounting of commodity
derivatives, and redundancy and restructuring costs of $117 million.
These net charges are part of identified items (see Reference A).
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ROYAL DUTCH SHELL PLC
2(ND) QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS
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Compared with the first half 2019, Oil Products Adjusted Earnings of
$3,774 million reflected very strong contributions from crude and oil
products trading and optimisation as well as lower operating expenses.
This was partly offset by lower realised refining margins and lower
marketing sales volumes due to the weak macroeconomic environment and
COVID-19 pandemic.
Cash flow from operating activities for the first half 2020 was $4,516
million, primarily driven by Adjusted Earnings before depreciation, and
positive working capital movements. This was partly offset by
cost-of-sales adjustments for the first half 2020.
With effect from the first quarter 2020, certain Oil Products contracts
are no longer included in sales volumes (see Note 2). Excluding this
impact, Oil Products sales volumes decreased due to lower refining &
trading and marketing sales volumes, compared with the first half 2019.
-- Refining & Trading Adjusted Earnings reflected very
strong contributions from crude and oil products trading
and optimisation as well as lower operating expenses.
This was partly offset by lower realised refining
margins, compared with the first half 2019.
With effect from the first quarter 2020, Shell discloses utilisation
instead of availability to improve transparency on refinery production
volumes. Utilisation is defined as the actual usage of the plants as a
percentage of the rated capacity. Refinery utilisation was 75% compared
with 78% in the first half 2019, mainly due to lower demand and economic
optimisation.
-- Marketing Adjusted Earnings reflected lower sales
volumes, partly offset by lower operating expenses
and higher realised global commercial and retail margins,
compared with the first half 2019.
Page 7
ROYAL DUTCH SHELL PLC
2(ND) QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS
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CHEMICALS
Quarters $ million Half year
---------------------------------- ----------------------------------------------------- -----------------------
Q2 Q1 Q2
2020 2020 2019 %(1) 2020 2019 %
----- ----- ----- ---- ----------------------------------------------------- ----- -----
164 146 (107) +253 Segment earnings(2) 311 345 -10
(41) (2) (239) Of which: Identified items (Reference A) (43) (237)
206 148 132 +56 Adjusted Earnings(2) 354 582 -39
----- ----- ----- ---- ----------------------------------------------------- ----- ----- ---
734 (178) 1,268 -42 Cash flow from operating activities 556 1,257 -56
Cash flow from operating activities excluding working
304 189 508 -40 capital movements (Reference H) 492 1,037 -52
----- ----- ----- ---- ----------------------------------------------------- ----- ----- ---
369 846 1,079 Cash capital expenditure (Reference C) 1,215 1,907
----- ----- ----- ---- ----------------------------------------------------- ----- ----- ---
3,623 3,871 3,787 -4 Chemicals sales volumes (thousand tonnes) 7,494 7,924 -5
----- ----- ----- ---- ----------------------------------------------------- ----- ----- ---
(1.) Q2 on Q2 change.
(2.) Earnings are presented on a CCS basis (See Note 2).
Second quarter segment earnings were $164 million. This included
redundancy and restructuring costs of $30 million, which are part of
identified items (see Reference A).
Compared with the second quarter 2019, Chemicals Adjusted Earnings of
$206 million reflected lower operating expenses, partly offset by lower
realised margins due to chemicals downcycle conditions compounded by
COVID-19 pandemic.
Cash flow from operating activities for the quarter was $734 million,
primarily driven by Adjusted Earnings before depreciation, as well as
positive working capital movements due to positive movements in
receivables and payables. This was partly offset by higher cost-of-sales
adjustments for the quarter.
With effect from the first quarter 2020, Shell discloses utilisation
instead of availability to improve transparency on chemicals production
volumes. Utilisation is defined as the actual usage of the plants as a
percentage of the rated capacity. Chemicals manufacturing plant
utilisation was 78% compared with 73% in the second quarter 2019, mainly
due to higher maintenance activities in Asia and Europe in 2019, as well
as the impact of strike actions in the Netherlands last year.
Half year segment earnings were $311 million. This included redundancy
and restructuring costs of $31 million, which are part of identified
items (see Reference A).
Compared with the first half 2019, Chemicals Adjusted Earnings of $354
million reflected lower realised margins due to chemicals downcycle
conditions compounded by COVID-19.
Cash flow from operating activities was an inflow of $556 million,
primarily driven by Adjusted Earnings before depreciation. This is
partly offset by cost-of-sales adjustments for the first half 2020.
With effect from the first quarter 2020, Shell discloses utilisation
instead of availability to improve transparency on chemicals production
volumes. Utilisation is defined as the actual usage of the plants as a
percentage of the rated capacity. Chemicals manufacturing plant
utilisation was 81% compared with 78% in the first half 2019, mainly due
to higher maintenance activities in Asia and Europe in 2019, including
the impact of strike actions in the Netherlands last year.
Page 8
ROYAL DUTCH SHELL PLC
2(ND) QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS
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CORPORATE
Quarters $ million Half year
Q2 Q1 Q2
2020 2020 2019 2020 2019
---- ---- ---- ------------------------------------------------------- ------ ------
(805) (453) (789) Segment earnings (1,258) (1,460)
(9) 535 18 Of which: Identified items (Reference A) 526 31
(796) (989) (806) Adjusted Earnings (1,784) (1,490)
------
(791) 559 (385) Cash flow from operating activities (232) (651)
390 (239 ) (202 ) Cash flow from operating activities excluding working 151 (185 )
capital movements (Reference H)
---- ---- ---- ------------------------------------------------------- ------ ------
Second quarter segment earnings were an expense of $805 million. This
included a post-tax impairment charge of $5 million, as a result of
macroeconomic conditions. This net charge is part of identified items
(see Reference A).
Adjusted Earnings were an expense of $796 million, reflecting lower net
interest expense, largely offset by adverse currency exchange rate
effects and reduced tax credits, compared with the second quarter 2019.
Half year segment earnings were an expense of $1,258 million. This
included a gain of $530 million from the impact of the weakening
Brazilian real on financing positions, which is part of identified items
(see Reference A).
Adjusted Earnings were an expense of $1,784 million, reflecting adverse
currency exchange rate effects, compared with the first half 2019.
OUTLOOK FOR THE THIRD QUARTER 2020
As a result of COVID-19, there continues to be significant uncertainty
in the macroeconomic conditions with an expected negative impact on
demand for oil, gas and related products. Furthermore, recent global
developments and uncertainty in oil supply have caused further
volatility in commodity markets. The third quarter 2020 outlook provides
ranges for operational and financial metrics based on current
expectations, but these are subject to change in the light of current
evolving market conditions. Due to demand or regulatory requirements
and/or constraints in infrastructure, Shell may need to take measures to
curtail or reduce oil and/or gas production, LNG liquefaction as well as
utilisation of refining and chemicals plants and similarly sales volumes
could be impacted. Such measures will likely have a variety of impacts
on our operational and financial metrics.
Integrated Gas production is expected to be approximately 820 - 880
thousand boe/d. LNG liquefaction volumes are expected to be
approximately 7.6 - 8.2 million tonnes. Due to price-lag in oil-linked
LNG term contracts, the impact of low oil prices is expected to become
more significant in the third quarter.
Upstream production is expected to be approximately 2,100 - 2,400
thousand boe/d.
Refinery utilisation is expected to be approximately 68% - 76%.
Oil Products sales volumes are expected to be approximately 4,000 -
5,000 thousand b/d.
Chemicals manufacturing plant utilisation is expected to be
approximately 78% - 88%.
Chemicals sales volumes are expected to be approximately 3,600 - 3,900
thousand tonnes.
Corporate Adjusted Earnings are expected to be a net expense of
approximately $800 - 875 million in the third quarter 2020 and a net
expense of approximately $3,200 - 3,500 million for the full year 2020.
This excludes the impact of currency exchange rate effects.
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ROYAL DUTCH SHELL PLC
2(ND) QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS
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UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME
Quarters $ million Half year
Q1 Q2
Q2 2020 2020 2019 2020 2019
------- ------ ------ --------------------------------------------------- ------- -------
32,504 60,029 90,544 Revenue(1) 92,533 174,278
(161) 854 632 Share of profit of joint ventures and associates 693 2,116
148 76 662 Interest and other income 224 1,105
32,491 60,959 91,838 Total revenue and other income 93,450 177,499
------- ------ ------ --------------------------------------------------- ------- -------
18,093 43,213 68,590 Purchases 61,306 128,513
5,822 5,982 6,835 Production and manufacturing expenses 11,803 13,189
2,370 2,393 2,881 Selling, distribution and administrative expenses 4,763 5,233
232 243 225 Research and development 475 437
723 294 439 Exploration 1,018 745
28,089 7,093 6,699 Depreciation, depletion and amortisation(2) 35,182 12,649
1,070 1,118 1,252 Interest expense 2,188 2,411
56,398 60,336 86,920 Total expenditure 116,735 163,176
------- ------ ------ --------------------------------------------------- ------- -------
(23,907) 623 4,917 Income/(loss) before taxation (23,284) 14,323
(5,806) 646 1,755 Taxation charge/(credit) (5,160) 5,003
------- ------ ------ --------------------------------------------------- ------- -------
(18,101) (23) 3,162 Income/(loss) for the period(1) (18,124) 9,319
Income/(loss) attributable to non-controlling
30 1 164 interest 31 320
Income/(loss) attributable to Royal Dutch Shell plc
(18,131) (24) 2,998 shareholders (18,155) 8,999
------- ------ ------ --------------------------------------------------- ------- -------
(2.33) 0.00 0.37 Basic earnings per share ($)(3) (2.33) 1.11
(2.33) 0.00 0.37 Diluted earnings per share ($)(3) (2.33) 1.10
------- ------ ------ --------------------------------------------------- ------- -------
(1.) See Note 2 "Segment information".
(2.) Includes impairment charges of $21,780 million (Q1
2020: $749 million; half year 2020: $22,529 million)
mainly triggered by revision of Shell's mid- and long-term
commodity price and refining margin outlook. See Notes
1 and 7.
(3.) See Note 3 "Earnings per share".
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Quarters $ million Half year
Q1 Q2
Q2 2020 2020 2019 2020 2019
------- ------ ------ ----------------------------------------------------------- ------- ------
(18,101) (23) 3,162 Income/(loss) for the period (18,124) 9,319
Other comprehensive income/(loss) net of tax:
Items that may be reclassified to income in later
periods:
1,588 (3,935) 215 -- Currency translation differences (2,347) 391
43 (28) 18 -- Debt instruments remeasurements 15 29
(137) (152) 109 -- Cash flow hedging gains/(losses) (289) (348)
(99) -- (8) -- Net investment hedging gains/(losses) (99) 2
55 101 79 -- Deferred cost of hedging 156 105
-- Share of other comprehensive income/(loss) of joint
30 (60) (1) ventures and associates (30) (56)
------- ------ ------ ----------------------------------------------------------- ------- ------
1,481 (4,074) 413 Total (2,593) 125
Items that are not reclassified to income in later
periods:
(4,924) 1,756 (1,172) -- Retirement benefits remeasurements (3,167) (2,646)
77 (137) (73) -- Equity instruments remeasurements (60) 30
-- Share of other comprehensive income/(loss) of joint
19 48 (6) ventures and associates 67 (5)
------- ------ ------ ----------------------------------------------------------- ------- ------
(4,828) 1,667 (1,251) Total (3,160) (2,621)
------- ------ ------ ----------------------------------------------------------- ------- ------
(3,347 ) (2,407 ) (839 ) Other comprehensive income/(loss) for the period (5,753 ) (2,496 )
------- ------ ------ ----------------------------------------------------------- ------- ------
(21,448 ) (2,430 ) 2,323 Comprehensive income/(loss) for the period (23,877 ) 6,823
43 (123 ) 180 Comprehensive income/(loss) attributable to non-controlling (80 ) 358
interest
------- ------ ------ ----------------------------------------------------------- ------- ------
(21,490 ) (2,307 ) 2,143 Comprehensive income/(loss) attributable to Royal (23,797 ) 6,465
Dutch Shell plc shareholders
------- ------ ------ ----------------------------------------------------------- ------- ------
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ROYAL DUTCH SHELL PLC
2(ND) QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS
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CONDENSED CONSOLIDATED BALANCE SHEET
$ million
June 30, 2020 December 31, 2019
---------------------------------------- ------------- -----------------
Assets
Non-current assets
Intangible assets 23,163 23,486
Property, plant and equipment 213,100 238,349
Joint ventures and associates 21,771 22,808
Investments in securities 3,144 2,989
Deferred tax 15,573 10,524
Retirement benefits(1) 3,135 4,717
Trade and other receivables 7,681 8,085
Derivative financial instruments(2) 1,331 689
288,898 311,647
---------------------------------------- ------------- -----------------
Current assets
Inventories 17,726 24,071
Trade and other receivables 32,375 43,414
Derivative financial instruments(2) 8,161 7,149
Cash and cash equivalents 27,939 18,055
86,201 92,689
Total assets 375,098 404,336
---------------------------------------- ------------- -----------------
Liabilities
Non-current liabilities
Debt 87,460 81,360
Trade and other payables 2,731 2,342
Derivative financial instruments(2) 1,452 1,209
Deferred tax 11,743 14,522
Retirement benefits(1) 15,881 13,017
Decommissioning and other provisions(3) 25,993 21,799
145,260 134,249
---------------------------------------- ------------- -----------------
Current liabilities
Debt 17,530 15,064
Trade and other payables 34,615 49,208
Derivative financial instruments(2) 7,217 5,429
Taxes payable 6,479 6,693
Retirement benefits 391 419
Decommissioning and other provisions 3,160 2,811
69,393 79,624
Total liabilities 214,653 213,873
---------------------------------------- ------------- -----------------
Equity attributable to Royal Dutch Shell
plc shareholders 157,156 186,476
Non-controlling interest 3,289 3,987
Total equity 160,445 190,463
Total liabilities and equity 375,098 404,336
---------------------------------------- ------------- -----------------
(1.) The change is mainly driven by a decrease in the weighted
average discount rate applied caused by falling credit
spreads and increasing market estimates of future
inflation. See Note 1.
(2.) See Note 6 "Derivative financial instruments and debt
excluding lease liabilities".
(3.) The discount rate applied at June 30, 2020 was 1.75%
(December 31, 2019: 3.0%). Compared with December
31, 2019, non-current decommissioning and restoration
provisions increased by $3,999 million as a result
of the change in the discount rate, to $25,993 million
at June 30, 2020.
(4.) The change is mainly related to the non-controlling
interest in Shell Midstream Partners, L.P. ("SHLX")
following the completion of the sale of Shell's 79%
interest in the Mattox Pipeline Company LLC and certain
logistics assets at the Shell Norco Manufacturing
Complex to SHLX.
Page 11
ROYAL DUTCH SHELL PLC
2(ND) QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS
---------------------------------------------------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Equity attributable to Royal Dutch Shell plc
shareholders
--------------------------------------------------------
Shares
Share held in Other Retained Non-controlling Total
$ million capital(1) trust reserves(2) earnings Total interest equity
---------------- ------------ ------- ------------- -------- -------- ----------------- ----------
At January 1,
2020 657 (1,063) 14,451 172,431 186,476 3,987 190,463
Comprehensive
income/(loss)
for the period -- -- (5,642) (18,155) (23,797) (80) (23,877)
Transfer from
other
comprehensive
income -- -- 17 (17) -- -- --
Dividends(3) -- -- -- (4,718) (4,718) (178) (4,896)
Repurchases of
shares (6) -- 6 (1,214) (1,214) -- (1,214)
Share-based
compensation -- 539 (324) (231) (16) -- (16)
Other changes in
non-controlling
interest -- -- -- 426 426 (440) (14)
At June 30, 2020 651 (524) 8,508 148,521 157,156 3,289 160,445
---------------- ------ ---- ------ --------- ------- ------- ---------- ----- -------
At January 1,
2019 685 (1,260) 16,615 182,610 198,650 3,888 202,538
Comprehensive
income/(loss)
for the period -- -- (2,534) 8,999 6,465 358 6,823
Transfer from
other
comprehensive
income -- -- (102) 102 -- -- --
Dividends -- -- -- (7,699) (7,699) (270) (7,969)
Repurchases of
shares (12) -- 12 (5,021) (5,021) -- (5,021)
Share-based
compensation -- 842 (276) (683) (118) -- (118)
Other changes in
non-controlling
interest -- -- -- 1 1 1 2
At June 30, 2019 674 (419) 13,715 178,308 192,278 3,977 196,254
---------------- ------ ---- ------ --------- ------- ------- ---------- ----- -------
(1.) See Note 4 "Share capital".
(2.) See Note 5 "Other reserves".
(3.) The amount charged to retained earnings is based on
prevailing exchange rates on payment date.
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2(ND) QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS
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CONSOLIDATED STATEMENT OF CASH FLOWS
Quarters $ million Half year
Q1 Q2
Q2 2020 2020 2019 2020 2019
------- ------ ------ --------------------------------------------------------------- ------- -------
(23,907) 623 4,917 Income before taxation for the period (23,284) 14,323
Adjustment for:
889 897 1,030 - Interest expense (net) 1,786 1,926
28,089 7,093 6,699 - Depreciation, depletion and amortisation 35,182 12,649
518 83 202 - Exploration well write-offs 601 321
- Net (gains)/losses on sale and revaluation of non-current
(128) 106 (379) assets and businesses (21) (444)
161 (854) (632) - Share of (profit)/loss of joint ventures and associates (693) (2,116)
610 531 1,217 - Dividends received from joint ventures and associates 1,141 1,961
(3,713) 9,594 (61) - (Increase)/decrease in inventories 5,881 (2,902)
3,959 6,314 308 - (Increase)/decrease in current receivables 10,273 (1,117)
(4,226) (8,430) 321 - Increase/(decrease) in current payables (12,655) 1,104
837 (171) (480) - Derivative financial instruments 665 (1,589)
293 (91) 30 - Retirement benefits 203 52
392 (102) 8 - Decommissioning and other provisions 290 (294)
(480) 579 (39) - Other 98 (13)
(730) (1,321) (2,110) Tax paid (2,051) (4,199)
2,563 14,851 11,031 Cash flow from operating activities 17,415 19,661
------- ------ ------ --------------------------------------------------------------- ------- -------
(3,436) (4,263) (5,150) Capital expenditure (7,699) (10,272)
(161) (559) (160) Investments in joint ventures and associates (720) (601)
(20) (147) (26) Investments in equity securities (167) (65)
Proceeds from sale of property, plant and equipment
211 1,613 644 and businesses 1,824 822
423 547 102 Proceeds from sale of joint ventures and associates 970 646
62 73 17 Proceeds from sale of equity securities 135 288
118 192 220 Interest received 310 457
1,174 855 592 Other investing cash inflows 2,029 1,272
(691) (1,028) (404) Other investing cash outflows (1,719) (1,335)
(2,320) (2,718) (4,166) Cash flow from investing activities (5,039) (8,788)
------- ------ ------ --------------------------------------------------------------- ------- -------
Net increase/(decrease) in debt with maturity period
90 321 145 within three months 412 55
Other debt:
15,238 1,003 180 - New borrowings 16,241 320
(7,113) (2,723) (2,848) - Repayments (9,836) (4,381)
(1,088) (1,033) (1,214) Interest paid (2,121) (2,329)
324 (81) 45 Derivative financial instruments 243 --
(32) (8) -- Change in non-controlling interest (40) (2)
Cash dividends paid to:
(1,397) (3,483) (3,825) -- Royal Dutch Shell plc shareholders(1) (4,880) (7,700)
(68) (110) (203) -- Non-controlling interest (178) (271)
(216) (1,486) (2,142) Repurchases of shares (1,702) (4,396)
Shares held in trust: net sales/(purchases) and dividends
(18) (182) (7) received (199) (463)
5,721 (7,781) (9,868) Cash flow from financing activities (2,060) (19,168)
------- ------ ------ --------------------------------------------------------------- ------- -------
164 (595 ) 4 Currency translation differences relating to cash (431 ) 24
and cash equivalents
6,128 3,756 (3,000 ) Increase/(decrease) in cash and cash equivalents 9,884 (8,271 )
21,811 18,055 21,470 Cash and cash equivalents at beginning of period 18,055 26,741
27,939 21,811 18,470 Cash and cash equivalents at end of period 27,939 18,470
------- ------ ------ --------------------------------------------------------------- ------- -------
(1.) Cash dividends paid represents the payment of net
dividends (after deduction of withholding taxes where
applicable) and payment of withholding taxes on dividends
paid in the previous quarter. Cash dividends paid
during the second quarter 2020 is the total of the
net dividend paid relating to the first quarter 2020
gross dividend and withholding taxes paid in relation
to the fourth quarter 2019 gross dividend.
Page 13
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2(ND) QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS
---------------------------------------------------
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
1. Basis of preparation
These unaudited Condensed Consolidated Interim Financial Statements
("Interim Statements") of Royal Dutch Shell plc ("the Company") and its
subsidiaries (collectively referred to as "Shell") have been prepared in
accordance with IAS 34 Interim Financial Reporting as issued by the
International Accounting Standards Board (IASB) and as adopted by the
European Union, and on the basis of the same accounting principles as
those used in the Annual Report and Accounts (pages 190 to 238) and Form
20-F (pages 142 to 189) for the year ended December 31, 2019 as filed
with the Registrar for Companies for England and Wales and the US
Securities and Exchange Commission, respectively, and should be read in
conjunction with these filings.
Going concern
These unaudited Interim Statements have been prepared on the going
concern basis of accounting. In assessing the appropriateness of the
going concern assumption, management have stressed Shell's most recent
financial projections to incorporate a range of potential future
outcomes by considering Shell's principal risks, further potential
downside pressures on commodity prices and cash preservation measures,
including reduced future operating costs, capital expenditure and
dividend distributions. This assessment confirmed that Shell has
adequate resources to continue its operations for at least 12 months
from the approval of the unaudited Condensed Consolidated Interim
Financial Statements. Therefore, the Directors consider it appropriate
to continue to adopt the going concern basis of accounting in preparing
these unaudited Condensed Consolidated Interim Financial Statements.
The financial information presented in the unaudited Interim Statements
does not constitute statutory accounts within the meaning of section
434(3) of the Companies Act 2006 ("the Act"). Statutory accounts for the
year ended December 31, 2019 were published in Shell's Annual Report and
Accounts, a copy of which was delivered to the Registrar of Companies
for England and Wales, and in Shell's Form 20-F. The auditor's report on
those accounts was unqualified, did not include a reference to any
matters to which the auditor drew attention by way of emphasis without
qualifying the report and did not contain a statement under sections
498(2) or 498(3) of the Act.
Key accounting considerations related to COVID-19 and the macroeconomic
environment.
Significant estimates
Future commodity price assumptions and management's view on the future
development of refining margins represent a significant estimate and
both were subject to change in the second quarter 2020, resulting in the
recognition of impairments. The tax impact of impairments in the second
quarter 2020 has been fully recognised in deferred tax positions as of
June 30, 2020. See Note 7.
After finalisation of the operating plan later in 2020 the overall
deferred tax position will be reviewed.
The retirement benefits remeasurements, recognised in the Consolidated
Statement of Comprehensive Income, reflect the decrease in the weighted
average discount rate applied caused by falling credit spreads and
increasing market estimates of future inflation.
The discount rate applied to provisions is reviewed on a regular basis.
Following the significant decrease in capital markets rates in 2020 the
discount rate was reviewed and adjusted in the second quarter 2020. See
footnote 3 to the Condensed Consolidated Balance Sheet.
2. Segment information
With effect from 2020, Shell's reporting segments consist of Integrated
Gas, Upstream, Oil Products, Chemicals and Corporate, reflecting the way
Shell reviews and assesses its performance. Oil Products and Chemicals
businesses were previously reported under the Downstream segment. Oil
sands mining activities, previously included in the Upstream segment,
are reported under Oil Products. Comparative information has been
reclassified.
Segment earnings are presented on a current cost of supplies basis (CCS
earnings), which is the earnings measure used by the Chief Executive
Officer for the purposes of making decisions about allocating resources
and assessing performance. On this basis, the purchase price of volumes
sold during the period is based on the current cost of supplies during
the same period after making allowance for the tax effect. CCS earnings
therefore exclude the effect of changes in the oil price on inventory
carrying amounts. Sales between segments are based on prices generally
equivalent to commercially available prices.
Page 14
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With effect from January 1, 2020, additional contracts are classified as
held for trading purposes and consequently revenue is reported on a net
rather than gross basis. The effect on revenue for the second quarter
2020 is a reduction of $8,028 million (Q1 2020: $16,313 million).
INFORMATION BY SEGMENT
Quarters $ million Half year
Q2 2020 Q1 2020 Q2 2019 2020 2019
------- ------- ------- ------------------ ------- -------
Third-party
revenue
7,436 10,157 8,942 Integrated Gas 17,593 20,582
1,177 2,344 2,346 Upstream 3,521 4,647
21,596 44,297 75,837 Oil Products 65,893 141,888
2,283 3,221 3,406 Chemicals 5,504 7,138
12 11 13 Corporate 22 24
Total third-party
32,504 60,029 90,544 revenue(1) 92,533 174,278
------- ------- ------- ------------------ ------- -------
Inter-segment
revenue(2)
558 891 1,045 Integrated Gas 1,449 2,137
4,117 6,476 8,827 Upstream 10,592 18,359
1,082 1,851 1,950 Oil Products 2,933 4,130
475 875 1,088 Chemicals 1,350 2,054
-- -- -- Corporate -- --
------- ------- ------- ------------------ ------- -------
CCS earnings
(7,959) 1,812 1,340 Integrated Gas (6,147) 4,134
(6,721) (863) 1,435 Upstream (7,584) 3,059
(3,023) 2,211 1,299 Oil Products (811) 2,523
164 146 (107) Chemicals 311 345
(805) (453) (789) Corporate (1,258) (1,460)
(18,343) 2,854 3,177 Total (15,490) 8,601
------- ------- ------- ------------------ ------- -------
(1.) Includes revenue from sources other than from contracts
with customers, which mainly comprises the impact
of fair value accounting of commodity derivatives.
Second quarter 2020 included income of $1,405 million
(Q1 2020: $6,686 million income; half year 2020: $8,091
million income). This amount includes both the reversal
of prior gains of $686 million (Q1 2020: $317 million)
related to sales contracts and prior losses of $507
million (Q1 2020: $76 million) related to purchase
contracts that were previously recognised and where
physical settlement has taken place in the second
quarter 2020.
(2.) Comparative information for inter-segment revenue
for Upstream, Oil Products and Chemicals has been
revised to conform with reporting segment changes
applicable from 2020. Inter-segment revenue for Integrated
Gas for the half year 2019 has been revised from $1,989
million to amend for certain intra-segment transactions
previously reported as inter-segment revenue.
RECONCILIATION OF INCOME FOR THE PERIOD TO CCS EARNINGS
Quarters $ million Half year
Q1 Q2
Q2 2020 2020 2019 2020 2019
------- ----- ----- --------------------------------------------------- ------- -----
Income/(loss) attributable to Royal Dutch Shell plc
(18,131) (24) 2,998 shareholders (18,155) 8,999
Income/(loss) attributable to non-controlling
30 1 164 interest 31 320
------- ----- ----- --------------------------------------------------- ------- -----
(18,101) (23) 3,162 Income/(loss) for the period (18,124) 9,319
Current cost of supplies adjustment:
(432) 3,774 30 Purchases 3,342 (955)
98 (916) 1 Taxation (819) 237
Share of profit/(loss) of joint ventures and
92 19 (16) associates 111 --
------- ----- --------------------------------------------------- ------- -----
(242) 2,876 15 Current cost of supplies adjustment 2,634 (719)
of which:
(246) 2,780 27 Attributable to Royal Dutch Shell plc shareholders 2,535 (681)
4 96 (12) Attributable to non-controlling interest 100 (38)
------- ----- ----- --------------------------------------------------- ------- -----
(18,343) 2,854 3,177 CCS earnings (15,490) 8,601
of which:
(18,377 ) 2,756 3,025 CCS earnings attributable to Royal Dutch Shell plc (15,620 ) 8,318
shareholders
34 97 152 CCS earnings attributable to non-controlling 131 282
interest
------- ----- ----- --------------------------------------------------- ------- -----
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ROYAL DUTCH SHELL PLC
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---------------------------------------------------
3. Earnings per share
EARNINGS PER SHARE
Quarters Half year
Q2 2020 Q1 2020 Q2 2019 2020 2019
------- ------- ------- --------------------------------------------------- ------- -------
Income/(loss) attributable to Royal Dutch Shell plc
(18,131) (24) 2,998 shareholders ($ million) (18,155) 8,999
Weighted average number of shares used as the basis
for determining:
7,789.8 7,819.8 8,100.8 Basic earnings per share (million) 7,804.8 8,126.3
7,789.8 7,819.8 8,153.7 Diluted earnings per share (million) 7,804.8 8,182.1
------- ------- ------- --------------------------------------------------- ------- -------
4. Share capital
ISSUED AND FULLY PAID ORDINARY SHARES OF EUR0.07 EACH(1)
Number of shares Nominal value ($ million)
A B A B Total
------------- ------------- ------------- --------- ------ ----------
At January 1,
2020 4,151,787,517 3,729,407,107 349 308 657
Repurchases
of shares (50,548,018) (23,223,271) (4) (2) (6)
-------------
At June 30,
2020 4,101,239,499 3,706,183,836 345 306 651
------------- ------------- ------------- --------- ------ ----------
At January 1,
2019 4,471,889,296 3,745,486,731 376 309 685
Repurchases
of shares (139,414,447) -- (12) -- (12)
At June 30,
2019 4,332,474,849 3,745,486,731 365 309 674
------------- ------------- ------------- --------- ------ ----------
(1.) Share capital at June 30, 2020 also included 50,000
issued and fully paid sterling deferred shares of
GBP1 each.
At Royal Dutch Shell plc's Annual General Meeting on May 19, 2020 the
Board was authorised to allot ordinary shares in Royal Dutch Shell plc,
and to grant rights to subscribe for, or to convert, any security into
ordinary shares in Royal Dutch Shell plc, up to an aggregate nominal
amount of EUR182.7 million (representing 2,611 million ordinary shares
of EUR0.07 each), and to list such shares or rights on any stock
exchange. This authority expires at the earlier of the close of business
on August 19, 2021, and the end of the Annual General Meeting to be held
in 2021, unless previously renewed, revoked or varied by Royal Dutch
Shell plc in a general meeting.
5. Other reserves
OTHER RESERVES
Accumulated
Share Capital Share other
Merger premium redemption plan comprehensive
$ million reserve reserve reserve reserve income Total
-------------------------------------------------- ------- ------- ---------- ------- --------------- ---------
At January 1, 2020 37,298 154 123 1,049 (24,173) 14,451
Other comprehensive income/(loss) attributable to
Royal Dutch Shell plc shareholders -- -- -- -- (5,642) (5,642)
Transfer from other comprehensive income -- -- -- -- 17 17
Repurchases of shares -- -- 6 -- -- 6
Share-based compensation -- -- -- (324) -- (324)
At June 30, 2020 37,298 154 129 725 (29,798) 8,508
-------------------------------------------------- ------- ------- ---------- ------ --------- --- ------
At January 1, 2019 37,298 154 95 1,098 (22,030) 16,615
Other comprehensive income/(loss) attributable to
Royal Dutch Shell plc shareholders -- -- -- -- (2,534) (2,534)
Transfer from other comprehensive income -- -- -- -- (102) (102)
Repurchases of shares -- -- 12 -- -- 12
Share-based compensation -- -- -- (276) -- (276)
At June 30, 2019 37,298 154 107 821 (24,664) 13,715
-------------------------------------------------- ------- ------- ---------- ------ --------- --- ------
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ROYAL DUTCH SHELL PLC
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The merger reserve and share premium reserve were established as a
consequence of Royal Dutch Shell plc becoming the single parent company
of Royal Dutch Petroleum Company and The "Shell" Transport and Trading
Company, p.l.c., now The Shell Transport and Trading Company Limited, in
2005. The merger reserve increased in 2016 following the issuance of
shares for the acquisition of BG Group plc. The capital redemption
reserve was established in connection with repurchases of shares of
Royal Dutch Shell plc. The share plan reserve is in respect of
equity-settled share-based compensation plans.
6. Derivative financial instruments and debt excluding lease liabilities
As disclosed in the Consolidated Financial Statements for the year ended
December 31, 2019, presented in the Annual Report and Accounts and Form
20-F for that year, Shell is exposed to the risks of changes in fair
value of its financial assets and liabilities. The fair values of the
financial assets and liabilities are defined as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. Methods
and assumptions used to estimate the fair values at June 30, 2020, are
consistent with those used in the year ended December 31, 2019, though
the carrying amounts of derivative financial instruments measured using
predominantly unobservable inputs have changed since that date.
The table below provides the comparison of the fair value with the
carrying amount of debt excluding lease liabilities, disclosed in
accordance with IFRS 7 Financial Instruments: Disclosures.
DEBT EXCLUDING LEASE LIABILITIES
$ million June 30, 2020 December 31, 2019
---------------- ------------- -----------------
Carrying amount 75,918 65,887
Fair value(1) 82,369 71,163
---------------- ------------- -----------------
(1.) Mainly determined from the prices quoted for these
securities.
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7. Impairments
The impairment loss in the second quarter 2020 was mainly triggered by
revision of Shell's mid- and long-term commodity price and refining
margin outlook reflecting the expected effects of the COVID-19 pandemic
and related macroeconomic as well as energy market demand and supply
fundamentals.
Impairments losses of $16,842 million post-tax ($22,332 million pre-tax,
of which $21,780 million recognised in depreciation, depletion and
amortisation and $552 million recognised in share of profit of joint
ventures and associates) mainly related to Integrated Gas for $8,151
million post-tax ($11,191 million pre-tax), mainly relating to the QGC
Integrated Gas asset and Prelude floating LNG both in Australia, to
Upstream for $4,658 million post-tax ($6,281 million pre-tax) mainly
related to two unconventional assets in North America, a project in
Nigeria (OPL245), two offshore projects in Brazil, four offshore
projects in Europe and an asset in the US Gulf of Mexico, to Oil
Products for $4,027 million post-tax ($4,851 million pre-tax) mainly
relating to three refineries in Europe and North America, and to
Corporate for $5 million post-tax ($9 million pre-tax).
For impairment testing purposes, the respective carrying amounts of
property, plant and equipment and intangible assets were compared with
their value in use. Cash flow projections used in the determination of
value in use were made using management's forecasts of commodity prices,
market supply and demand, potential costs associated with operational
GHG emissions, product margins including forecast refining margins and
expected production volumes. These cash flows were adjusted for the
risks specific to the assets, and therefore these risks were not
included in the determination of the discount rate applied. The nominal
pre-tax rate applied in the second quarter 2020 was 6% (2019: 6%).
Oil and gas price assumptions applied for impairment testing in
Integrated Gas and Upstream are reviewed and, where necessary, adjusted
on a periodic basis. Reviews include comparison with available market
data and forecasts that reflect developments in demand such as global
economic growth, technology efficiency, policy measures. Factors
impacting supply include consideration of investment and resource
potential, cost of development of new supply, and behaviour of major
resource holders. The near-term commodity price assumptions applied in
impairment testing in the second quarter 2020 were as follows:
Commodity price assumptions [A] 2020 2021 2022 2023
-------------------------------- ---- ---- ---- ----
Brent crude oil ($/b) 35 40 50 60
Henry Hub natural gas ($/MMBtu) 1.75 2.50 2.50 2.75
-------------------------------- ---- ---- ---- ----
[A] Money of the day.
The long-term price assumptions applied were $60 per barrel (/b) for
Brent crude oil and $3.00 per million British thermal units (/MMBtu) for
Henry Hub natural gas, both at real term 2020.
Until 2019 management's estimate of longer-term refining margins in Oil
Products was based on the reversion to mean methodology, unless a
fundamental shift in markets had been identified, over the life of the
refineries. Under this approach, it is assumed that refining margins
would revert to historical averages over time. As from second quarter
2020, a different price methodology has been applied, based on Shell
management's understanding and interpretation of demand and supply
fundamentals in the near term and taking into account various other
factors such as industry rationalisation and energy transition in the
long term. This resulted in a downward revision of average long-term
refining margins by around 30% from previous assumptions applied.
Approximately 50% of the combined "Property, Plant and Equipment, Joint
Ventures and Associates as well as Intangible Assets" carrying amount
was tested for impairment in the second quarter 2020. The main
sensitivity in the impairment test is the long term Brent price
assumption. For sensitivity purposes, a decrease from 2024 of the
long-term Brent price assumption to $55/b (real term 2020), would
ceteris paribus result in some additional $6 - $7 billion pre-tax
impairment at June 30, 2020.
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ALTERNATIVE PERFORMANCE (NON-GAAP) MEASURES
A. Adjusted Earnings
The "Adjusted Earnings" measure aims to facilitate a comparative
understanding of Shell's financial performance from period to period by
removing the effects of oil price changes on inventory carrying amounts
and removing the effects of identified items. These items are in some
cases driven by external factors and may, either individually or
collectively, hinder the comparative understanding of Shell's financial
results from period to period. This measure excludes earnings
attributable to non-controlling interest. This measure was previously
referred to as "CCS earnings attributable to shareholders excluding
identified items" and was renamed for simplicity with effect from the
second quarter 2020.
ADJUSTED EARNINGS
Quarters $ million Half year
Q1 Q2
Q2 2020 2020 2019 2020 2019
------- ----- ----- ----------------------------------------------------- ------- -----
Income/(loss) attributable to Royal Dutch Shell plc
(18,131) (24) 2,998 shareholders (18,155) 8,999
Add: Current cost of supplies adjustment attributable
(246) 2,780 27 to Royal Dutch Shell plc shareholders (Note 2) 2,535 (681)
Less: Identified items attributable to Royal Dutch
(19,015) (104) (437) Shell plc shareholders (19,118) (445)
638 2,860 3,462 Adjusted Earnings 3,498 8,763
------- ----- ----- ----------------------------------------------------- ------- -----
Identified items
Identified items comprise: divestment gains and losses, impairments,
fair value accounting of commodity derivatives and certain gas contracts,
redundancy and restructuring, the impact of exchange rate movements on
certain deferred tax balances, and other items.
IDENTIFIED ITEMS
Quarters $ million Half year
-------------------
Q1 Q2
Q2 2020 2020 2019 2020 2019
------- ------ ---- ------------------------------------------------------ ------- ----
Identified items before tax
128 (76) 379 Divestment gains/(losses) 51 444
(22,332) (749) (672) Impairments (23,082) (706)
Fair value accounting of commodity derivatives and
(1,884) 968 12 certain gas contracts (916) (61)
(518) (18) (27) Redundancy and restructuring (536) (80)
(427) -- (437) Other (427) (437)
------------------------------------------------------
(25,033) 125 (746) Total identified items before tax (24,908) (839)
------- ------ ---- ------------------------------------------------------ ------- ----
6,018 (228) 331 Total tax impact of identified items 5,790 416
------- ------ ---- ------------------------------------------------------ ------- ----
Identified items after tax
10 (32) 256 Divestment gains/(losses) (22) 302
(16,842) (536) (446) Impairments (17,378) (491)
Fair value accounting of commodity derivatives and
(1,540) 838 1 certain gas contracts (702) 33
(375) (7) (13) Redundancy and restructuring (382) (46)
(44) (366) 16 Impact of exchange rate movements on tax balances (410) 8
(224) -- (229) Other (224) (229)
(19,015) (104) (415) Impact on CCS earnings (19,118) (423)
------- ------ ---- ------------------------------------------------------ ------- ----
Of which:
(8,321) (331) (386) Integrated Gas (8,652) (160)
(5,209) (1,154) 172 Upstream (6,364) 149
(5,433) 849 20 Oil Products (4,585) (205)
(41) (2) (239) Chemicals (43) (237)
(9) 535 18 Corporate 526 31
-------
(19,015 ) (104 ) (437 ) Impact on CCS earnings attributable to shareholders (19,118 ) (445 )
------- ------ ---- ------------------------------------------------------ ------- ----
-- -- 22 Impact on CCS earnings attributable to non-controlling -- 22
interest
------- ------ ---- ------------------------------------------------------ ------- ----
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The identified items categories above may include after-tax impacts of
identified items of joint ventures and associates which are fully
reported within "Share of profit of joint ventures and associates" in
the Consolidated Statement of Income, and fully reported as identified
items before tax in the table above. Identified items related to
subsidiaries are consolidated and reported across appropriate lines of
the Consolidated Statement of Income. Only pre-tax identified items
reported by subsidiaries are taken into account in the calculation of
underlying operating expenses (Reference F).
Fair value accounting of commodity derivatives and certain gas
contracts: In the ordinary course of business, Shell enters into
contracts to supply or purchase oil and gas products, as well as power
and environmental products. Shell also enters into contracts for tolling,
pipeline and storage capacity. Derivative contracts are entered into for
mitigation of resulting economic exposures (generally price exposure)
and these derivative contracts are carried at period-end market price
(fair value), with movements in fair value recognised in income for the
period. Supply and purchase contracts entered into for operational
purposes, as well as contracts for tolling, pipeline and storage
capacity, are, by contrast, recognised when the transaction occurs;
furthermore, inventory is carried at historical cost or net realisable
value, whichever is lower. As a consequence, accounting mismatches occur
because: (a) the supply or purchase transaction is recognised in a
different period, or (b) the inventory is measured on a different basis.
In addition, certain contracts are, due to pricing or delivery
conditions, deemed to contain embedded derivatives or written options
and are also required to be carried at fair value even though they are
entered into for operational purposes. The accounting impacts are
reported as identified items.
Impacts of exchange rate movements on tax balances represent the impact
on tax balances of exchange rate movements arising on (a) the conversion
to dollars of the local currency tax base of non-monetary assets and
liabilities, as well as losses (this primarily impacts the Upstream and
Integrated Gas segments) and (b) the conversion of dollar-denominated
inter-segment loans to local currency, leading to taxable exchange rate
gains or losses (this primarily impacts the Corporate segment).
Other identified items represent other credits or charges that based on
Shell management's assessment hinder the comparative understanding of
Shell's financial results from period to period, such as the impact
arising from changes in tax legislation and certain provisions for
onerous contracts or litigation. The second quarter 2020 reflects the
impact of a reduction in the discount rate used for provisions.
B. Basic CCS earnings per share
Basic CCS earnings per share is calculated as CCS earnings attributable
to Royal Dutch Shell plc shareholders (see Note 2), divided by the
weighted average number of shares used as the basis for basic earnings
per share (see Note 3).
C. Cash capital expenditure
Cash capital expenditure represents cash spent on maintaining and
developing assets as well as on investments in the period. Management
regularly monitors this measure as a key lever to delivering sustainable
cash flows. Cash capital expenditure is the sum of the following lines
from the Consolidated Statement of Cash flows: Capital expenditure,
Investments in joint ventures and associates and Investments in equity
securities.
With effect from the first quarter 2020, "Capital investment" is no
longer presented in this announcement since Cash capital expenditure is
considered to be more closely aligned with management's focus on free
cash flow generation.
Quarters $ million Half year
-----------------
Q2 2020 Q1 2020 Q2 2019 2020 2019
------- ------- ------- -------------------------- ----- ------
3,436 4,263 5,150 Capital expenditure 7,699 10,272
Investments in joint
161 559 160 ventures and associates 720 601
Investments in equity
20 147 26 securities 167 65
------- ------- ------- -------------------------- ----- ------
3,617 4,970 5,337 Cash capital expenditure 8,587 10,938
Of which:
736 882 738 Integrated Gas 1,618 2,081
1,876 2,521 2,321 Upstream 4,397 4,812
606 580 1,118 Oil Products 1,186 1,971
369 846 1,079 Chemicals 1,215 1,907
30 141 81 Corporate 171 166
------- ------- ------- -------------------------- ----- ------
D. Return on average capital employed
Return on average capital employed (ROACE) measures the efficiency of
Shell's utilisation of the capital that it employs. Shell uses two ROACE
measures: ROACE on a Net income basis and ROACE on a CCS basis excluding
identified items,
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ROYAL DUTCH SHELL PLC
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---------------------------------------------------
both adjusted for after-tax interest expense. With effect from the
second quarter 2020, the after-tax interest expense adjustment is
calculated using an applicable blended statutory tax rate. This change
is implemented to eliminate the distorting volatility effects of the
effective tax rate. There is no significant impact on prior periods
comparatives, which therefore have not been revised.
Both measures refer to Capital employed which consists of total equity,
current debt and non-current debt.
ROACE on a Net income basis
In this calculation, the sum of income for the current and previous
three quarters, adjusted for after-tax interest expense, is expressed as
a percentage of the average capital employed for the same period.
$ million Quarters
Q2 2020 Q1 2020 Q2 2019
------------------------------------------------------ -------- ------- -------
Income - current and previous three quarters (11,011) 10,252 21,006
Interest expense after tax - current and previous
three quarters 3,014 2,854 2,819
Income before interest expense - current and previous
three quarters (7,997) 13,106 23,825
------------------------------------------------------ -------- ------- -------
Capital employed -- opening 288,900 292,797 281,711
Capital employed -- closing 265,435 278,444 288,900
Capital employed -- average 277,168 285,620 285,306
-------- -------
ROACE on a Net income basis (2.9)% 4.6% 8.4%
------------------------------------------------------ -------- ------- -------
ROACE on a CCS basis excluding identified items
In this calculation, the sum of CCS earnings excluding identified items
for the current and previous three quarters, adjusted for after-tax
interest expense, is expressed as a percentage of the average capital
employed for the same period.
$ million Quarters
Q2 2020 Q1 2020 Q2 2019
-------------------------------------------------------- -------- ------- -------
CCS earnings - current and previous three quarters (8,264) 13,256 21,794
-------------------------------------------------------- -------- ------- -------
Identified items - current and previous three quarters (19,865) (1,266) 1,169
Interest expense after tax -- current and previous
three quarters 3,014 2,854 2,819
-------------------------------------------------------- -------- ------- -------
CCS earnings excluding identified items before interest
expense - current and previous three quarters 14,616 17,376 23,444
-------------------------------------------------------- -------- ------- -------
Capital employed -- average 277,168 285,620 285,306
-------------------------------------------------------- -------- ------- -------
ROACE on a CCS basis excluding identified items 5.3% 6.1% 8.2%
-------------------------------------------------------- -------- ------- -------
E. Gearing
Gearing is a key measure of Shell's capital structure and is defined as
net debt as a percentage of total capital. Net debt is defined as the
sum of current and non-current debt, less cash and cash equivalents,
adjusted for the fair value of derivative financial instruments used to
hedge foreign exchange and interest rate risks relating to debt, and
associated collateral balances. Management considers this adjustment
useful because it reduces the volatility of net debt caused by
fluctuations in foreign exchange and interest rates, and eliminates the
potential impact of related collateral payments or receipts.
Debt-related derivative financial instruments are a subset of the
derivative financial instrument assets and liabilities presented on the
balance sheet. Collateral balances are reported under "Trade and other
receivables" or "Trade and other payables" as appropriate.
Page 21
ROYAL DUTCH SHELL PLC
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---------------------------------------------------
$ million Quarters
March
June 30, 31, June 30,
2020 2020 2019
Current debt 17,530 15,767 16,617
Non-current debt 87,460 79,298 76,029
---------------------------------------------------- -------- -------- --------
Total debt(1) 104,990 95,065 92,646
---------------------------------------------------- -------- -------- --------
Add: Debt-related derivative financial instruments:
net liability/(asset) 525 1,218 634
---------------------------------------------------- -------- -------- --------
Add: Collateral on debt-related derivatives: net
liability/(asset) 266 (58) 78
---------------------------------------------------- -------- -------- --------
Less: Cash and cash equivalents (27,939) (21,811) (18,470)
---------------------------------------------------- -------- -------- --------
Net debt 77,843 74,413 74,887
---------------------------------------------------- -------- -------- --------
Add: Total equity 160,445 183,379 196,254
---------------------------------------------------- -------- -------- --------
Total capital 238,288 257,792 271,142
---------------------------------------------------- -------- -------- --------
Gearing 32.7% 28.9% 27.6%
---------------------------------------------------- -------- -------- --------
(1.) Includes lease liabilities of $29,073 million at June
30, 2020 and $29,290 million at March 31, 2020, and
$30,758 million at June 30, 2019.
F. Operating expenses
Operating expenses is a measure of Shell's cost management performance,
comprising the following items from the Consolidated Statement of
Income: production and manufacturing expenses; selling, distribution and
administrative expenses; and research and development expenses.
Underlying operating expenses is a measure aimed at facilitating a
comparative understanding of performance from period to period by
removing the effects of identified items, which either individually or
collectively, can cause volatility, in some cases driven by external
factors.
Quarters $ million Half year
--------------------
Q2 Q1 Q2
2020 2020 2019 2020 2019
----- ----- ----- --------------------------- ------ ------
Production and
5,822 5,982 6,835 manufacturing expenses 11,803 13,189
Selling, distribution and
2,370 2,393 2,881 administrative expenses 4,763 5,233
232 243 225 Research and development 475 437
8,423 8,618 9,941 Operating expenses 17,042 18,859
----- ----- ----- --------------------------- ------ ------
Of which identified
items:
Redundancy and
restructuring
(508) (18) (27) (charges)/reversal (526) (79)
(411) -- (306) (Provisions)/reversal (411) (306)
-- -- (131) Other -- (131)
(919) (18) (464) (937) (516)
Underlying operating
7,504 8,600 9,477 expenses 16,105 18,343
----- ----- ----- --------------------------- ------ ------
G. Free cash flow
Free cash flow is used to evaluate cash available for financing
activities, including dividend payments and debt servicing, after
investment in maintaining and growing the business. It is defined as the
sum of "Cash flow from operating activities" and "Cash flow from
investing activities".
Cash flows from acquisition and divestment activities are removed from
Free cash flow to arrive at the Organic free cash flow, a measure used
by management to evaluate the generation of free cash flow without these
activities.
Page 22
ROYAL DUTCH SHELL PLC
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Quarters $ million Half year
--------------------
Q2 Q1 Q2
2020 2020 2019 2020 2019
------ ------ ------ --------------------------------------------------- ------ ------
2,563 14,851 11,031 Cash flow from operating activities 17,415 19,661
(2,320) (2,718) (4,166) Cash flow from investing activities (5,039) (8,788)
243 12,133 6,865 Free cash flow 12,376 10,873
------ ------ ------ --------------------------------------------------- ------ ------
696 2,233 763 Less: Divestment proceeds (Reference I) 2,929 1,756
------ ------ ------ --------------------------------------------------- ------ ------
Add: Tax paid on divestments (reported under "Other
-- -- 77 investing cash outflows") -- 77
------ ------ ------ --------------------------------------------------- ------ ------
Add: Cash outflows related to inorganic capital
199 404 7 expenditure(1) 602 365
------ ------ ------ --------------------------------------------------- ------ ------
(254) 10,304 6,186 Organic free cash flow(2) 10,050 9,559
------ ------ ------ --------------------------------------------------- ------ ------
(1.) Cash outflows related to inorganic capital expenditure
includes portfolio actions which expand Shell's activities
through acquisitions and restructuring activities
as reported in capital expenditure lines in the Consolidated
Statement of Cash Flows.
(2.) Free cash flow less divestment proceeds, adding back
outflows related to inorganic expenditure.
H. Cash flow from operating activities excluding working capital
movements
Working capital movements are defined as the sum of the following items
in the Consolidated Statement of Cash Flows: (i) (increase)/decrease in
inventories, (ii) (increase)/decrease in current receivables, and (iii)
increase/(decrease) in current payables.
Cash flow from operating activities excluding working capital movements
is a measure used by Shell to analyse its operating cash generation over
time excluding the timing effects of changes in inventories and
operating receivables and payables from period to period.
Quarters $ million Half year
---------------------
Q2 Q1 Q2
2020 2020 2019 2020 2019
------ ------ ------ ----------------------------------------------------- ------- ------
2,563 14,851 11,031 Cash flow from operating activities 17,415 19,661
------ ------ ------ ----------------------------------------------------- ------- ------
(3,713) 9,594 (61) (Increase)/decrease in inventories 5,881 (2,902)
3,959 6,314 308 (Increase)/decrease in current receivables 10,273 (1,117)
(4,226) (8,430) 321 Increase/(decrease) in current payables (12,655) 1,104
------ ------ ------ ----------------------------------------------------- ------- ------
(3,980) 7,478 569 (Increase)/decrease in working capital 3,499 (2,914)
------ ------ ------ ----------------------------------------------------- ------- ------
Cash flow from operating activities excluding working
6,543 7,373 10,462 capital movements 13,916 22,575
------ ------ ------ ----------------------------------------------------- ------- ------
Of which:
2,871 3,352 2,824 Integrated Gas 6,224 6,540
548 3,718 5,251 Upstream 4,265 10,515
2,430 353 2,081 Oil Products 2,783 4,670
304 189 508 Chemicals 492 1,037
390 (239) (202) Corporate 151 (185)
------ ------ ------ ----------------------------------------------------- ------- ------
I. Divestment proceeds
Divestment proceeds represent cash received from divestment activities
in the period. Management regularly monitors this measure as a key lever
to deliver sustainable cash flow.
Quarters $ million Half year
------------
Q2 Q1 Q2
2020 2020 2019 2020 2019
---- ----- ---- --------------------------------------------------- ----- -----
Proceeds from sale of property, plant and equipment
211 1,613 644 and businesses 1,824 822
423 547 102 Proceeds from sale of joint ventures and associates 970 646
62 73 17 Proceeds from sale of equity securities 135 288
---- ---------------------------------------------------
696 2,233 763 Divestment proceeds 2,929 1,756
---- ----- ---- --------------------------------------------------- ----- -----
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PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties affecting Shell are described in
the Risk Factors section of the Annual Report and Accounts (pages 27 to
36) and Form 20-F (pages 11 to 15) for the year ended December 31, 2019
and are summarised below. There are no material changes in those Risk
Factors for the remaining 6 months of the financial year.
-- We are exposed to macroeconomic risks including fluctuating
prices of crude oil, natural gas, oil products and
chemicals.
-- Our ability to deliver competitive returns and pursue
commercial opportunities depends in part on the accuracy
of our price assumptions.
-- Our ability to achieve strategic objectives depends
on how we react to competitive forces.
-- We seek to execute divestments in the pursuit of our
strategy. We may not be able to successfully divest
these assets in line with our strategy.
-- Our future hydrocarbon production depends on the delivery
of large and integrated projects, as well as on our
ability to replace proved oil and gas reserves.
-- The estimation of proved oil and gas reserves involves
subjective judgements based on available information
and the application of complex rules; therefore, subsequent
downward adjustments are possible.
-- Rising climate change concerns have led and could
lead to additional legal and/or regulatory measures
which could result in project delays or cancellations,
a decrease in demand for fossil fuels, potential litigation
and additional compliance obligations.
-- Our business exposes us to risks of social instability,
criminality, civil unrest, terrorism, piracy, cyber-disruption,
acts of war and pandemic diseases, such as the COVID-19
(coronavirus) outbreak, that could have a material
adverse effect on our operations.
-- We operate in more than 70 countries that have differing
degrees of political, legal and fiscal stability.
This exposes us to a wide range of political developments
that could result in changes to contractual terms,
laws and regulations. In addition, we and our joint
arrangements and associates face the risk of litigation
and disputes worldwide.
-- The nature of our operations exposes us, and the communities
in which we work, to a wide range of health, safety,
security and environment risks.
-- A further erosion of the business and operating environment
in Nigeria could have a material adverse effect on
us.
-- Production from the Groningen field in the Netherlands
causes earthquakes that affect local communities.
-- Our future performance depends on the successful development
and deployment of new technologies and new products.
-- We are exposed to treasury and trading risks, including
liquidity risk, interest rate risk, foreign exchange
risk and credit risk. We are affected by the global
macroeconomic environment as well as financial and
commodity market conditions.
-- We are exposed to commodity trading risks, including
market and operational risks.
-- We have substantial pension commitments, funding of
which is subject to capital market risks and other
factors.
-- We mainly self-insure our risk exposure. We could
incur significant losses from different types of risks
that are not covered by insurance from third-party
insurers.
-- An erosion of our business reputation could have a
material adverse effect on our brand, our ability
to secure new resources or access capital markets,
and on our licence to operate.
-- Many of our major projects and operations are conducted
in joint arrangements or associates. This could reduce
our degree of control, as well as our ability to identify
and manage risks.
-- We rely heavily on information technology systems
for our operations.
-- Violations of antitrust and competition laws carry
fines and expose us and/or our employees to criminal
sanctions and civil suits.
-- Violations of anti-bribery, tax evasion and anti-money
laundering laws carry fines and expose us and/or our
employees to criminal sanctions, civil suits and ancillary
consequences (such as debarment and the revocation
of licences).
-- Violations of data protection laws carry fines and
expose us and/or our employees to criminal sanctions
and civil suits.
-- Violations of trade compliance laws and regulations,
including sanctions, carry fines and expose us and
our employees to criminal sanctions and civil suits.
-- The Company's Articles of Association determine the
jurisdiction for shareholder disputes. This could
limit shareholder remedies.
Page 24
ROYAL DUTCH SHELL PLC
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FIRST QUARTER 2020 PORTFOLIO DEVELOPMENTS
Integrated Gas
During the quarter, Shell announced that it will not proceed with the
proposed Lake Charles LNG project due to the current market conditions.
Accordingly, Energy Transfer will take over as the project developer.
In April, Shell took the Final Investment Decision to develop the first
phase of Arrow Energy's (Shell interest 50%) Surat Gas Project in
Queensland, Australia, which will bring up to 90 billion cubic feet per
year of new gas to market at peak production.
Oil Products
During the quarter, Shell completed the sale of the Martinez refinery in
the USA to PBF Energy for $1.2 billion, which includes the refinery and
inventory.
RESPONSIBILITY STATEMENT
It is confirmed that to the best of our knowledge: (a) the Condensed
Consolidated Interim Financial Statements have been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted by the
European Union; (b) the interim management report includes a fair review
of the information required by Disclosure Guidance and Transparency Rule
(DTR) 4.2.7R (indication of important events during the first six months
of the financial year, and their impact on the Condensed Consolidated
Interim Financial Statements, and description of principal risks and
uncertainties for the remaining six months of the financial year); and
(c) the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties
transactions and changes thereto).
The Directors of Royal Dutch Shell plc are shown on pages 104-110 in the
Annual Report and Accounts and on pages 68 to 73 in the Form 20-F for
the year ended December 31, 2019 save for the following changes:
Dick Boer: appointed Non-executive Director with effect from May 20,
2020.
Martina Hund-Mejean: appointed Non-executive Director with effect from
May 20, 2020.
Gerard Kleisterlee: stepped down with effect from May 19, 2020.
Roberto Setubal: stepped down with effect from May 19, 2020.
Linda G. Stuntz: stepped down with effect from May 19, 2020.
On behalf of the Board
Ben van Beurden Jessica Uhl
Chief Executive Officer Chief Financial Officer
July 30, 2020 July 30, 2020
Page 25
ROYAL DUTCH SHELL PLC
2(ND) QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS
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INDEPENT REVIEW REPORT TO ROYAL DUTCH SHELL PLC
Introduction
We have been engaged by Royal Dutch Shell plc to review the Condensed
Consolidated Interim Financial Statements in the half-yearly financial
report for the six months ended June 30, 2020, which comprise the
Consolidated Statement of Income, the Consolidated Statement of
Comprehensive Income, the Condensed Consolidated Balance Sheet, the
Consolidated Statement of Changes in Equity, the Condensed Consolidated
Statement of Cash Flows and Notes 1 to 7. We have read the other
information contained in the half-yearly financial report and considered
whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial
statements.
This report is made solely to Royal Dutch Shell plc in accordance with
guidance contained in the International Standard on Review Engagements
2410 (UK and Ireland) "Review of Interim Financial Information Performed
by the Independent Auditor of the Entity" issued by the Auditing
Practices Board. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than Royal Dutch Shell
plc, for our work, for this report, or for the conclusions we have
formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for preparing
the half-yearly financial report in accordance with the Disclosure
Guidance and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
The annual Consolidated Financial Statements of Royal Dutch Shell plc
and its subsidiaries are prepared in accordance with International
Financial Reporting Standards as issued by the International Accounting
Standards Board (IASB) and as adopted by the European Union (EU). The
condensed set of financial statements included in the half-yearly
financial report has been prepared in accordance with International
Accounting Standard 34 Interim Financial Reporting, as issued by the
IASB and as adopted by the EU.
Our responsibility
Our responsibility is to express to Royal Dutch Shell plc a conclusion
on the Condensed Consolidated Interim Financial Statements in the
half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on
Review Engagements 2410 (UK and Ireland), "Review of Interim Financial
Information Performed by the Independent Auditor of the Entity" issued
by the Auditing Practices Board for use in the United Kingdom. A review
of interim financial information consists of making enquiries, primarily
of persons responsible for financial and accounting matters, and
applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not
enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the Condensed Consolidated Interim Financial Statements in
the half-yearly financial report for the six months ended June 30, 2020
are not prepared, in all material respects, in accordance with
International Accounting Standard 34 as issued by the IASB and as
adopted by the EU and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
July 30, 2020
Page 26
ROYAL DUTCH SHELL PLC
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The maintenance and integrity of the Royal Dutch Shell plc website
(www.shell.com) are the responsibility of the Directors; the work
carried out by the auditors does not involve consideration of these
matters and, accordingly, the auditors accept no responsibility for any
changes that may have occurred to the Condensed Consolidated Interim
Financial Statements since they were initially presented on the website.
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in
other jurisdictions.
Page 27
ROYAL DUTCH SHELL PLC
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CAUTIONARY STATEMENT
All amounts shown throughout this announcement are unaudited. All peak
production figures in Portfolio Developments are quoted at 100% expected
production. The numbers presented throughout this announcement may not
sum precisely to the totals provided and percentages may not precisely
reflect the absolute figures, due to rounding.
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 US 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; (m) risks
associated with the impact of pandemics, such as the COVID-19
(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 Annual Report and Accounts and 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 announcement and should be
considered by the reader. Each forward-looking statement speaks only as
of the date of this announcement, July 30, 2020. 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.
This announcement contains references to Shell's website. These
references are for the readers' convenience only. Shell is not
incorporating by reference any information posted on www.shell.com.
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. 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.
July 30, 2020
The information in this announcement reflects the
unaudited consolidated financial position and results
of Royal Dutch Shell plc. Company No. 4366849, Registered
Office: Shell Centre, London, SE1 7NA, England, UK.
----------------------------------------------------------
Contacts:
- Linda M. Coulter, Company Secretary
- Media: International +44 (0) 207 934 5550; USA +1 832 337 4355
LEI number of Royal Dutch Shell plc: 21380068P1DRHMJ8KU70
Classification: Inside Information
Page 28
(END) Dow Jones Newswires
July 30, 2020 02:00 ET (06:00 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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