THE HAGUE, October 29, 2015 /PRNewswire/ —
SUMMARY OF UNAUDITED RESULTS Quarters $ million Nine months Q3 2015 Q2 2015 Q3 2014 %[1] 2015 2014 % Income/(loss) attributable to Royal Dutch Shell plc (7,416) 3,986 4,463 -266 shareholders 1,000 14,279 -93 Current cost of supplies (CCS) adjustment for 1,296 (625) 803 Downstream 1,002 599 (6,120) 3,361 5,266 -216 CCS earnings 2,002 14,878 -87 (7,890) (474) (581) Identified items[2] (6,849) (4,422) CCS earnings excluding 1,770 3,835 5,847 -70 identified items 8,851 19,300 -54 Of which: (425) 1,037 4,343 Upstream 1,287 14,775 2,617 2,961 1,793 Downstream 8,224 4,715 Corporate and (422) (163) (289) Non-controlling interest (660) (190) Cash flow from operating 11,231 6,050 12,811 -12 activities 24,387 35,436 -31 Basic CCS earnings per (0.97) 0.53 0.83 -217 share ($) 0.32 2.36 -86 Basic CCS earnings per ADS (1.94) 1.06 1.66 ($) 0.64 4.72 Basic CCS earnings per share excl. identified 0.28 0.61 0.92 -70 items ($) 1.40 3.06 -54 Basic CCS earnings per ADS 0.56 1.22 1.84 excl. identified items ($) 2.80 6.12 0.47 0.47 0.47 - Dividend per share ($) 1.41 1.41 - 0.94 0.94 0.94 Dividend per ADS ($) 2.82 2.82 [1] Q3 on Q3 change [2] See page 5
Royal Dutch Shell Chief Executive Officer Ben van Beurden commented:
“Shell’s integrated business and our performance drive are helping to mitigate the impact of low oil prices on the bottom line, in what is a difficult environment for the industry today.
We continue to improve the operational performance of our assets, and production volumes are up. Costs are falling across the company and Shell’s performance drive is delivering at the bottom line.
Our financial framework is highly competitive, with balance sheet gearing at 12.7%, similar to year ago levels, despite a halving of oil prices. Both net investments and dividends have been covered by operating cash flow over the last year, when oil prices have averaged $60 per barrel.
While our cash flow and our operating performance in the quarter were strong, the headline numbers we’re reporting today include substantial charges. These charges reflect both a lower oil and gas price outlook and the firm steps we are taking to review and reduce Shell’s longer-term option set.
We have halted exploration activities offshore Alaska, and stopped the construction of the Carmon Creek in-situ oil project in Canada.
These are difficult, but impactful decisions. I am determined that Shell will become a more focused and competitive company as a result.
The BG deal, which remains on track for completion in early 2016, is a springboard to focus Shell into fewer and more profitable themes, especially deep water and integrated gas.”
THIRD QUARTER 2015 PORTFOLIO DEVELOPMENTS
Upstream
In Canada, Shell announced that it will not continue construction of the 80 thousand barrels of oil equivalent per day (“boe/d”) Carmon Creek thermal in-situ project (Shell interest 100%). Shell originally sanctioned the project in October 2013 and announced in March 2015 that the project would be re-phased to take advantage of the market downturn to optimise design and retender certain contracts. After careful review of the potential design options, updated costs, and the company’s capital priorities, Shell’s view is that this project does not rank in its portfolio at this time. The project SEC Proved Reserves estimated at 418 million barrels bitumen at end 2014 will be de-booked and the project estimated recoverable petroleum resources will be classified as Contingent Resources.
In Malaysia, Shell announced that with the expiry of the Malaysia LNG Dua production-sharing contract (“PSC”) on August 21, 2015, Shell has handed over its operatorship and 50% interest to PETRONAS. In 2014, Shell share of gas production from fields under the Malaysia LNG Dua PSC was 62 thousand boe/d.
In the United States, Shell completed the sale of its 49% equity interest in Elba Liquefaction Company, LLC, owner of the Elba Liquefaction Project, to Kinder Morgan, Inc. Once operational, Shell will retain 100% of the off-take capacity of the project, which is proposed to be constructed and operated at the existing Elba Island LNG terminal.
Offshore Alaska during the quarter, Shell drilled the Burger J well to target depth as planned. The well is considered a dry-hole, with minor oil and gas shows, and the result renders the Burger Prospect as uneconomic. This, combined with the current economic and regulatory environment, has led Shell to cease further exploration activity offshore Alaska for the foreseeable future. Shell’s leases in the Chukchi Sea do not expire until 2020 and in the Beaufort Sea until 2017 and 2019. Recently, the US Government has denied our request for a suspension of operations, which would have extended the expiration date of these leases. We are considering our options in order to protect the remaining value of our assets and leases.
Shell announced the final investment decision (“FID”) to advance the Appomattox deep-water development (Shell interest 79%) in the United States. The Appomattox platform will be Shell’s seventh 4-column host in the Gulf of Mexico. The Appomattox development will initially produce from the Appomattox and Vicksburg fields, with average peak production estimated to reach approximately 175 thousand boe/d.
In Shell’s heartlands exploration programme there were successful appraisals of the Kaikias oil discovery (Shell interest 100%) and the Powernap oil discovery (Shell interest 50%) in the United States Gulf of Mexico.
Shell had continued success with near-field exploration discoveries in Brunei, Malaysia, Oman and the United Kingdom.
In October, Shell Nigeria Exploration and Production Company Ltd announced the first production from the Bonga Phase 3 project (Shell interest 55%). Bonga Phase 3 is an expansion of the Bonga Main development, with peak production expected to be some 50 thousand boe/d. The oil will be transported through existing pipelines to the Bonga floating production, storage and offloading facility, which has the capacity to produce more than 200 thousand barrels of oil and 150 million standard cubic feet of gas per day.
Downstream
During the quarter in China, Shell announced that it has reached an agreement to sell its 75% interest in Tongyi Lubricants to Huo’s Group and The Carlyle Group. The transaction has received regulatory approval and is expected to complete in 2015.
In Japan, Shell reached an agreement with Idemitsu for the sale of 125,261,200 shares in Showa Shell Sekiyu KK, representing a 33.24% shareholding in the company, for a total consideration of JPY 169 billion (approximately $1.4 billion). Shell will retain a 1.8% holding in the company and continues to license its brand to Showa Shell for use in its retail business. The transaction is expected to complete in 2016, subject to obtaining regulatory approval.
In October, Shell completed the sale of its retail, commercial fuels, and supply and distribution logistics businesses in Norway to ST1 Nordic Oy. The Shell brand will continue to be highly visible in Norway through a retail brand licence agreement, and Shell fuels and lubricants will continue to be sold at the 404 retail sites which have transferred to ST1’s ownership. In addition, Shell has entered into a joint venture with ST1 to sell aviation fuel in Norway.
KEY FEATURES OF THE THIRD QUARTER 2015
Third quarter 2015 CCS earnings (see Note [2]) were a loss of $6,120 million, 216% lower than for the same quarter a year ago.
SUMMARY OF IDENTIFIED ITEMS
Earnings for the third quarter 2015 reflected the following items, which in aggregate amounted to a net charge of $7,890 million (compared with a net charge of $581 million for the third quarter 2014), as summarised in the table below:
– Upstream earnings included a net charge of $8,218 million, mainly related to management decisions to halt longer-term projects and a downward revision to the oil and gas price outlook. This net charge included $4,616 million related to impairments, redundancy and restructuring, and other items such as contract provisions and well write-offs associated with management’s decision to cease Alaska drilling activities for the foreseeable future and the Carmon Creek project. Charges for Alaska were $2,584 million, which included $755 million associated with well write-offs, and charges for Carmon Creek were $2,032 million. The net charge also reflected impairment charges of $3,689 million triggered by the downward revision of the long-term oil and gas price outlook. This includes $2,312 million related to North America shale gas properties. Upstream earnings for the third quarter 2014 included a net charge of $394 million.
– Downstream earnings included a net charge of $136 million, primarily reflecting a tax charge of $115 million relating to the transfer of assets to Shell Midstream Partners, L.P., impairments of $103 million and redundancy and restructuring costs of $25 million, partly offset by divestment gains of $66 million and the net impact of fair value accounting of commodity derivatives of $41 million. Downstream earnings for the third quarter 2014 included a net charge of $192 million.
– Corporate results and Non-controlling interest included a net gain of $464 million, mainly reflecting a gain on the divestment of an office building in the United Kingdom. Earnings for the third quarter 2014 included a net gain of $5 million.
SUMMARY OF IDENTIFIED ITEMS Quarters $ million Nine months Q3 2015 Q2 2015 Q3 2014 2015 2014 Segment earnings impact of identified items: (8,218) (263) (394) Upstream (6,617) (1,579) (136) (215) (192) Downstream (483) (2,848) Corporate and 464 4 5 Non-controlling interest 251 5 (7,890) (474) (581) Earnings impact (6,849) (4,422)
These identified items are shown to provide additional insight into segment earnings and income attributable to shareholders. They include the full impact on Shell’s CCS earnings of the following items:
Further items may be identified in addition to the above.
EARNINGS BY BUSINESS SEGMENT
UPSTREAM Quarters $ million Nine months Q3 2015 Q2 2015 Q3 2014 %[1] 2015 2014 % Upstream earnings excluding identified (425) 1,037 4,343 -110 items 1,287 14,775 -91 (8,643) 774 3,949 -319 Upstream earnings (5,330) 13,196 -140 Upstream cash flow from 4,044 2,092 8,854 -54 operating activities 10,265 26,848 -62 Upstream capital 5,848 5,916 7,023 -17 investment 17,707 23,782 -26 Liquids production available for sale 1,528 1,432 1,429 +7 (thousand b/d) 1,501 1,469 +2 Natural gas production available for sale 7,837 7,534 7,892 -1 (million scf/d) 8,258 9,082 -9 Total production available for sale 2,880 2,731 2,790 +3 (thousand boe/d) 2,925 3,035 -4 Equity sales of LNG 5.31 5.46 5.68 -7 (million tonnes) 16.94 17.77 -5 [1] Q3 on Q3 change
Third quarter Upstream earnings excluding identified items were a loss of $425 million compared with a gain of $4,343 million a year ago. Identified items were a net charge of $8,218 million, compared with a net charge of $394 million for the third quarter 2014 (see page 5).
Compared with the third quarter 2014, earnings excluding identified items were impacted by the significant decline in oil and gas prices, increased taxation and higher well write-offs. Earnings benefited from lower costs including favourable exchange rate effects and divestments, and increased production volumes primarily from new deep-water projects and improved operational performance.
Compared with the third quarter 2014, the weakening of the Australian dollar and Brazilian real reduced earnings by some $101 million and $133 million respectively. The impact of these items in the third quarter 2015 was some $761 million after tax, compared with an impact of some $527 million after tax in the same period a year ago.
Upstream Americas excluding identified items incurred a loss.
Global liquids realisations were 51% lower than for the third quarter 2014. Global natural gas realisations were 18% lower than for the same quarter a year ago, with a 41% decrease in the Americas and a 14% decrease outside the Americas.
Third quarter 2015 production was 2,880 thousand boe/d compared with 2,790 thousand boe/d a year ago. Liquids production increased by 7% and natural gas production decreased by 1% compared with the third quarter 2014. Excluding the impact of divestments, curtailment and underground storage reinjection at NAM in the Netherlands, a Malaysia PSC expiry, PSC price effects, and security impacts in Nigeria, third quarter 2015 production was 9% higher than for the same period last year. Underlying production was driven by increased liquids production in the Americas, and improved operational performance, particularly Pearl GTL and Malaysia.
New field start-ups and the continuing ramp-up of existing fields, in particular Cardamom and Mars B in the Americas and Bonga NW in Nigeria, contributed some 116 thousand boe/d to production for the third quarter 2015, which more than offset the impact of field declines.
Equity LNG sales volumes of 5.31 million tonnes decreased by 7% compared with the same quarter a year ago, mainly reflecting the expiry of the Malaysia LNG Dua JVA.
DOWNSTREAM Quarters $ million Nine months Q3 2015 Q2 2015 Q3 2014 %[1] 2015 2014 % Downstream CCS earnings excluding identified 2,617 2,961 1,793 +46 items 8,224 4,715 +74 2,481 2,746 1,601 +55 Downstream CCS earnings 7,741 1,867 +315 Downstream cash flow from 6,605 3,816 3,187 +107 operating activities 11,975 6,594 +82 Downstream capital 1,211 1,085 1,426 -15 investment 3,145 3,812 -17 Refinery processing 2,776 2,944 2,896 -4 intake (thousand b/d) 2,863 2,965 -3 Oil products sales 6,586 6,531 6,295 +5 volumes (thousand b/d) 6,478 6,355 +2 Chemicals sales volumes 4,452 4,326 4,441 - (thousand tonnes) 12,970 13,113 -1 [1] Q3 on Q3 change
Third quarter Downstream earnings excluding identified items were $2,617 million compared with $1,793 million for the third quarter 2014. Identified items were a net charge of $136 million, compared with a net charge of $192 million for the third quarter 2014 (see page 5).
Compared with the third quarter 2014, Downstream earnings excluding identified items benefited from higher realised refining margins, reflecting the industry environment. Earnings also benefited from lower costs, including favourable exchange rate effects overall and divestments, and lower taxation. This was partly offset by the negative impact of exchange rate effects in marketing, despite stronger underlying performance. Contributions from Chemicals increased mainly as a result of improved intermediates industry conditions.
Refinery intake volumes were 4% lower compared with the same quarter last year. Excluding portfolio impacts, refinery intake volumes were 3% lower compared with the same period a year ago. Refinery availability was 89%, compared with 92% for the third quarter 2014.
Oil products sales volumes increased by 5% compared with the same period a year ago, mainly reflecting higher trading volumes.
Chemicals sales volumes were in line with the same quarter last year. Chemicals manufacturing plant availability decreased to 88% from 90% for the third quarter 2014, reflecting downtime at the Moerdijk chemical site in the Netherlands.
CORPORATE AND NON-CONTROLLING INTEREST Quarters $ million Nine months Q3 2015 Q2 2015 Q3 2014 2015 2014 Corporate and Non-controlling interest excl. identified (422) (163) (289) items (660) (190) Of which: (355) (69) (306) Corporate (378) (129) (67) (94) 17 Non-controlling interest (282) (61) Corporate and Non-controlling 42 (159) (284) interest (409) (185)
Third quarter Corporate results and Non-controlling interest excluding identified items were a loss of $422 million, compared with a loss of $289 million for the same period last year. Identified items for the third quarter 2015 were a net gain of $464 million, whereas earnings for the third quarter 2014 included a net gain of $5 million (see page 5).
Compared with the third quarter 2014, Corporate results excluding identified items mainly reflected adverse currency exchange rate effects, which in the third quarter were $362 million, and higher net interest expense, partly offset by a higher tax credit.
Compared with the third quarter 2014, earnings benefited from the impact of the weakening Brazilian real on deferred tax positions in Upstream by some $143 million. The impact of this on the third quarter 2015 earnings excluding identified items was a gain of some $155 million after tax, compared with a $12 million gain in the same period a year ago.
OPERATIONAL OUTLOOK FOR THE FOURTH QUARTER 2015
Compared with the fourth quarter 2014, Upstream earnings are expected to be impacted by some 50 thousand boe/d as a result of divestments, some 30 thousand boe/d related to a Malaysia PSC expiry and some 40 thousand boe/d associated with the impact of curtailment and underground storage reinjection at NAM. The impact of maintenance is expected to be lower by some 25 thousand boe/d.
Refinery availability is expected to decline in the fourth quarter 2015 as a result of higher turnaround activity and increased maintenance compared with the same period a year ago. Chemicals manufacturing plant availability is expected to increase in the fourth quarter 2015 as the Moerdijk chemical site in the Netherlands continues to recover.
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FORTHCOMING EVENTS
Fourth quarter 2015 results and fourth quarter 2015 dividend are scheduled to be announced on February 4, 2016. First quarter 2016 results and first quarter 2016 dividend are scheduled to be announced on April 28, 2016. Second quarter 2016 results and second quarter 2016 dividend are scheduled to be announced on July 28, 2016. Third quarter 2016 results and third quarter 2016 dividend are scheduled to be announced on October 27, 2016.
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME Quarters $ million Nine months Q3 2015 Q2 2015 Q3 2014 %[1] 2015 2014 % 68,706 72,402 107,851 Revenue 206,814 328,731 Share of profit of joint ventures and 193 1,136 1,512 associates 2,734 5,298 Interest and other 285 412 462 income 2,432 3,149 Total revenue and other 69,184 73,950 109,825 income 211,980 337,178 51,612 52,441 84,507 Purchases 151,478 253,638 Production and 7,419 6,506 7,555 manufacturing expenses 20,580 22,573 Selling, distribution and administrative 2,896 3,076 3,350 expenses 8,866 10,539 Research and 291 252 302 development 796 859 3,406 964 846 Exploration 5,170 2,901 Depreciation, depletion 12,156 4,673 4,730 and amortisation 21,433 19,508 527 466 417 Interest expense 1,369 1,374 Income/(loss) before (9,123) 5,572 8,118 -212 taxation 2,288 25,786 -91 (1,730) 1,458 3,693 Taxation 1,030 11,474 Income/(loss) for the (7,393) 4,114 4,425 -267 period 1,258 14,312 -91 Income attributable to non-controlling 23 128 (38) interest 258 33 Income/(loss) attributable to Royal Dutch Shell plc (7,416) 3,986 4,463 -266 shareholders 1,000 14,279 -93 [1] Q3 on Q3 change
EARNINGS PER SHARE Quarters $ Nine months Q3 2015 Q2 2015 Q3 2014 2015 2014 (1.17) 0.63 0.70 Basic earnings per share 0.16 2.26 (1.16) 0.62 0.70 Diluted earnings per share 0.16 2.26
SHARES[1] Quarters Millions Nine months Q3 2015 Q2 2015 Q3 2014 2015 2014 Weighted average number of shares as the basis for: 6,327.7 6,304.6 6,333.8 Basic earnings per share 6,308.3 6,315.0 6,396.9 6,383.9 6,334.1 Diluted earnings per share 6,386.0 6,315.3 Shares outstanding at the 6,348.4 6,325.2 6,320.3 end of the period 6,348.4 6,320.3 [1] Royal Dutch Shell plc ordinary shares of EUR0.07 each
Notes 1 to 6 are an integral part of these unaudited Condensed Consolidated Interim Financial Statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Quarters $ million Nine months Q3 2015 Q2 2015 Q3 2014 2015 2014 Income/(loss) for the (7,393) 4,114 4,425 period 1,258 14,312 Other comprehensive income net of tax: Items that may be reclassified to income in later periods: - Currency translation (3,341) 1,668 (2,963) differences (5,872) (2,923) - Unrealised gains/(losses) (324) (129) (83) on securities (588) (237) - Cash flow hedging 139 133 (10) gains/(losses) 263 (9) - Share of other comprehensive income/(loss) of joint ventures and 19 (25) (68) associates 1 (70) (3,507) 1,647 (3,124) Total (6,196) (3,239) Items that are not reclassified to income in later periods: - Retirement benefits (2,369) 5,496 (2,672) remeasurements 1,811 (3,471) Other comprehensive income/(loss) for the (5,876) 7,143 (5,796) period (4,385) (6,710) Comprehensive income/(loss) (13,269) 11,257 (1,371) for the period (3,127) 7,602 Comprehensive income/(loss) attributable to (53) 161 (104) non-controlling interest 171 (27) Comprehensive income/(loss) attributable to Royal Dutch (13,216) 11,096 (1,267) Shell plc shareholders (3,298) 7,629
Notes 1 to 6 are an integral part of these unaudited Condensed Consolidated Interim Financial Statements.
CONDENSED CONSOLIDATED BALANCE SHEET $ million Sep 30, 2015 Jun 30, 2015 Sep 30, 2014 Assets Non-current assets: Intangible assets 6,300 6,779 7,135 Property, plant and equipment 181,681 192,633 190,842 Joint ventures and associates 30,940 32,284 33,316 Investments in securities 3,573 3,854 4,592 Deferred tax 10,258 7,969 7,465 Retirement benefits 2,366 3,892 2,405 Trade and other receivables 8,331 8,522 8,255 243,449 255,933 254,010 Current assets: Inventories 19,276 22,485 27,318 Trade and other receivables 49,130 50,929 59,056 Cash and cash equivalents 31,846 26,981 19,027 100,252 100,395 105,401 Total assets 343,701 356,328 359,411 Liabilities Non-current liabilities: Debt 50,438 45,575 37,065 Trade and other payables 4,510 4,877 3,735 Deferred tax 9,935 11,676 12,970 Retirement benefits 14,557 12,642 14,064 Decommissioning and other provisions 25,110 25,055 22,156 104,550 99,825 89,990 Current liabilities: Debt 5,149 7,366 5,917 Trade and other payables 55,230 56,424 65,741 Taxes payable 10,378 10,362 13,181 Retirement benefits 359 367 364 Decommissioning and other provisions 5,553 3,976 3,226 76,669 78,495 88,429 Total liabilities 181,219 178,320 178,419 Equity attributable to Royal Dutch Shell plc shareholders 161,348 176,787 180,002 Non-controlling interest 1,134 1,221 990 Total equity 162,482 178,008 180,992 Total liabilities and equity 343,701 356,328 359,411
Notes 1 to 6 are an integral part of these unaudited Condensed Consolidated Interim Financial Statements.
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 trust reserves earnings Total interest equity At January 1, 2015 540 (1,190) (14,365) 186,981 171,966 820 172,786 Comprehensive income/(loss) for the period - - (4,298) 1,000 (3,298) 171 (3,127) Capital contributions from, and other changes in, non-controllin g interest - - - (90) (90) 215 125 Dividends paid - - - (8,987) (8,987) (72) (9,059) Scrip dividends[1] 4 - (4) 1,399 1,399 - 1,399 Repurchases of shares[2] (1) - 1 1 1 - 1 Shares held in trust: net sales and dividends received - 624 - 50 674 - 674 Share-based compensation - - (289) (28) (317) - (317) At September 30, 2015 543 (566) (18,955) 180,326 161,348 1,134 162,482 At January 1, 2014 542 (1,932) (2,037) 183,474 180,047 1,101 181,148 Comprehensive income/(loss) for the period - - (6,650) 14,279 7,629 (27) 7,602 Capital contributions from, and other changes in, non-controllin g interest - - - 3 3 (7) (4) Dividends paid - - - (8,856) (8,856) (77) (8,933) Scrip dividends[1] 6 - (6) 2,399 2,399 - 2,399 Repurchases of shares[2] (5) - 5 (2,010) (2,010) - (2,010) Shares held in trust: net sales and dividends received - 807 - 77 884 - 884 Share-based compensation - - (122) 28 (94) - (94) At September 30, 2014 543 (1,125) (8,810) 189,394 180,002 990 180,992
[1] Under the Scrip Dividend Programme some 47.3 million A shares, equivalent to $1.4 billion, were issued during the first nine months 2015 and some 64.6 million A shares, equivalent to $2.4 billion, were issued during the first nine months 2014.
[2] Includes shares committed to repurchase and repurchases subject to settlement at the end of the quarter.
Notes 1 to 6 are an integral part of these unaudited Condensed Consolidated Interim Financial Statements.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS Quarters $ million Nine months Q3 2015 Q2 2015 Q3 2014 2015 2014 Cash flow from operating activities (7,393) 4,114 4,425 Income/(loss) for the period 1,258 14,312 Adjustment for: 1,146 1,753 2,691 - Current taxation 5,846 11,427 426 395 377 - Interest expense (net) 1,124 1,223 - Depreciation, depletion and 12,156 4,673 4,729 amortisation 21,433 19,508 - Net losses/(gains) on sale of (493) (247) (78) non-current assets and businesses (2,352) (2,240) - Decrease/(increase) in working 5,883 (1,588) 1,741 capital 3,923 281 - Share of loss/(profit) of joint (193) (1,136) (1,512) ventures and associates (2,734) (5,298) - Dividends received from joint 1,039 1,071 2,096 ventures and associates 3,187 5,371 - Deferred taxation, retirement benefits, decommissioning (2,407) (90) 689 and other provisions (4,000) (15) 2,302 255 572 - Other 2,651 1,500 Net cash from operating activities 12,466 9,200 15,730 (pre-tax) 30,336 46,069 (1,235) (3,150) (2,919) Taxation paid (5,949) (10,633) 11,231 6,050 12,811 Net cash from operating activities 24,387 35,436 Cash flow from investing activities (6,412) (6,205) (7,783) Capital expenditure[1] (18,832) (22,845) Investments in joint ventures and (274) (208) (151) associates (891) (1,533) Proceeds from sales of property, plant 913 206 3,783 and equipment and businesses 3,322 7,628 Proceeds from sales of joint ventures 81 165 157 and associates 250 3,884 82 59 29 Interest received 197 118 (108) (80) (362) Other[1] (267) (229) (5,718) (6,063) (4,327) Net cash used in investing activities (16,221) (12,977) Cash flow from financing activities Net increase/(decrease) in debt with (1,394) 1,072 (465) maturity period within three months (577) (3,159) 5,490 10,045 442 Other debt: New borrowings 16,287 3,777 (1,387) (2,188) (334) Repayments (4,205) (3,518) (532) (317) (404) Interest paid (1,258) (1,170) 2 424 - Change in non-controlling interest[2] 421 (13) Cash dividends paid to: (2,362) (2,294) (2,994) - Royal Dutch Shell plc shareholders (7,588) (6,457) (27) (27) (4) - Non-controlling interest (72) (77) - - (770) Repurchases of shares (409) (2,357) Shares held in trust: net sales/(purchases) and dividends (1) (5) 48 received (46) 261 (211) 6,710 (4,481) Net cash used in financing activities 2,553 (12,713) Currency translation differences relating to cash and (437) 417 (395) cash equivalents (480) (415) Increase/(decrease) in cash and cash 4,865 7,114 3,608 equivalents 10,239 9,331 Cash and cash equivalents at beginning 26,981 19,867 15,419 of period 21,607 9,696 Cash and cash equivalents at end of 31,846 26,981 19,027 period 31,846 19,027
[1] Reflects a minor change to definition with effect from 2015 which has no overall impact on net cash used in investing activities. Comparative information has been reclassified.
[2] In the second quarter 2015, this mainly related to the public offering of limited partner units in Shell Midstream Partners, L.P.
Notes 1 to 6 are an integral part of these unaudited Condensed Consolidated Interim Financial Statements.
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 and its subsidiaries (collectively referred to as Shell) have been prepared on the basis of the same accounting principles as, and should be read in conjunction with, the Annual Report and Form 20-F for the year ended December 31, 2014 (pages 111 to 116) as filed with the U.S. Securities and Exchange Commission.
The financial information presented in the Interim Statements does not constitute statutory accounts within the meaning of section 434(3) of the Companies Act 2006. Statutory accounts for the year ended December 31, 2014 were published in Shell’s Annual Report and a copy was delivered to the Registrar of Companies in England and Wales. The auditors’ report on those accounts was unqualified, did not include a reference to any matters to which the auditors 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 Companies Act 2006.
2. Segment information
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.
Information by business segment:
Quarters $ million Nine months Q3 2015 Q3 2014 2015 2014 Third-party revenue 7,706 10,318 Upstream 21,768 33,989 60,976 97,508 Downstream 184,974 294,659 24 25 Corporate 72 83 68,706 107,851 Total third-party revenue 206,814 328,731 Inter-segment revenue 6,215 12,758 Upstream 19,935 37,630 343 627 Downstream 976 1,698 - - Corporate - - Segment earnings (8,643) 3,949 Upstream[1] (5,330) 13,196 2,481 1,601 Downstream[2] 7,741 1,867 109 (301) Corporate (130) (124) (6,053) 5,249 Total segment earnings 2,281 14,939
Quarters $ million Nine months Q3 2015 Q3 2014 2015 2014 (6,053) 5,249 Total segment earnings 2,281 14,939 Current cost of supplies adjustment: (1,569) (894) Purchases (1,156) (751) 443 246 Taxation 326 203 Share of profit of joint ventures and (214) (176) associates (193) (79) (7,393) 4,425 Income/(loss) for the period 1,258 14,312
[1] Third quarter 2015 Upstream earnings include impairment charges of $3,689 million after taxation, primarily related to North America shale gas properties, and the impact of the decisions to cease Alaska drilling activities for the foreseeable future and to cease the Carmon Creek project ($2,584 million and $2,032 million after taxation respectively). Second quarter 2014 Upstream earnings included an impairment charge of $1,943 million after taxation, partly offset by divestment gains of $1,230 million after taxation.
[2] First quarter 2014 Downstream earnings included an impairment charge of $2,284 million related to refineries in Asia and Europe.
3. Share capital
Issued and fully paid
Sterling deferred Ordinary shares of EUR0.07 each shares Number of shares A B of GBP1 each At January 1, 2015 3,907,302,393 2,440,410,614 50,000 Scrip dividends 47,296,124 - - Repurchases of shares (12,717,512) - - At September 30, 2015 3,941,881,005 2,440,410,614 50,000 At January 1, 2014 3,898,011,213 2,472,839,187 50,000 Scrip dividends 64,568,758 - - Repurchases of shares (27,917,878) (32,428,573) - At September 30, 2014 3,934,662,093 2,440,410,614 50,000
Nominal value
Ordinary shares of EUR0.07 each $ million A B Total At January 1, 2015 334 206 540 Scrip dividends 4 - 4 Repurchases of shares (1) - (1) At September 30, 2015 337 206 543 At January 1, 2014 333 209 542 Scrip dividends 6 - 6 Repurchases of shares (2) (3) (5) At September 30, 2014 337 206 543
The total nominal value of sterling deferred shares is less than $1 million.
At Royal Dutch Shell plc’s Annual General Meeting on May 19, 2015, 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 €147 million (representing 2,100 million ordinary shares of €0.07 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, 2016, and the end of the Annual General Meeting to be held in 2016, unless previously renewed, revoked or varied by Royal Dutch Shell plc in a general meeting.
4. Other reserves
Share Accumulated premium Capital other Merger reserve[1 redemption Share plan comprehensi $ million reserve[1] ] reserve[2] reserve ve income Total At January 1, 2015 3,405 154 83 1,723 (19,730) (14,365) Other comprehensive income/(loss) attributable to Royal Dutch Shell plc shareholders - - - - (4,298) (4,298) Scrip dividends (4) - - - - (4) Repurchases of shares - - 1 - - 1 Share-based compensation - - - (289) - (289) At September 30, 2015 3,401 154 84 1,434 (24,028) (18,955) At January 1, 2014 3,411 154 75 1,871 (7,548) (2,037) Other comprehensive income/(loss) attributable to Royal Dutch Shell plc shareholders - - - - (6,650) (6,650) Scrip dividends (6) - - - - (6) Repurchases of shares - - 5 - - 5 Share-based compensation - - - (122) - (122) At September 30, 2014 3,405 154 80 1,749 (14,198) (8,810)
[1] 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, plc, now The Shell Transport and Trading Company Limited, in 2005.
[2] The capital redemption reserve was established in connection with repurchases of shares of Royal Dutch Shell plc.
5. Derivative contracts
The table below provides the carrying amounts of derivatives contracts held, disclosed in accordance with IFRS 13 Fair Value Measurement.
$ million Sep 30, 2015 Jun 30, 2015 Sep 30, 2014 Included within: Trade and other receivables – non-current 885 774 1,003 Trade and other receivables – current 12,433 9,090 7,000 Trade and other payables – non-current 1,407 1,635 589 Trade and other payables – current 9,892 7,574 6,230
As disclosed in the Consolidated Financial Statements for the year ended December 31, 2014, presented in the Annual Report 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 September 30, 2015 are consistent with those used in the year ended December 31, 2014, and the carrying amounts of derivative contracts measured using predominantly unobservable inputs have not changed materially since that date.
The fair value of debt excluding finance lease liabilities at September 30, 2015, was $50,744 million (June 30, 2015: $47,942 million; September 30, 2014: $38,013 million). Fair value is determined from the prices quoted for those securities.
6. Recommended cash and share offer for BG Group plc by Royal Dutch shell plc
On April 8, 2015, the Boards of Royal Dutch Shell plc and BG Group plc announced that they have reached agreement on the terms of a recommended cash and share offer to be made by Royal Dutch Shell plc for the entire issued and to be issued share capital of BG Group plc, representing a value of approximately £47 billion based on the closing price of 2,208.5 pence per Royal Dutch Shell plc B share on April 7, 2015.
The transaction is subject to certain pre-conditions and conditions and Royal Dutch Shell plc has agreed to use its reasonable endeavours to secure the necessary regulatory clearances and authorisations. It is expected that Royal Dutch Shell plc’s circular and prospectus and BG Group plc’s scheme document will be published at the same time, and no later than 28 days after the pre-conditions are satisfied and/or waived. The transaction is expected to complete in early 2016.
Under certain circumstances occurring on or prior to July 31, 2016, such as the Royal Dutch Shell plc Board withdrawing its recommendation to Royal Dutch Shell plc shareholders to vote in favour of the transaction, Royal Dutch Shell plc has agreed to pay BG Group plc £750 million by way of compensation for any loss suffered by BG Group plc in connection with the preparation and negotiation of the transaction.
ADDITIONAL NOTES FOR INFORMATION
A. Impacts of accounting for derivatives
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. 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 are, by contrast, recognised when the transaction occurs (see also below); 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 UK gas contracts held by Upstream 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 of the aforementioned are reported as identified items in this Report.
B. Capital investment
Capital investment is a measure used to make decisions about allocating resources and assessing performance. It is defined as the sum of capital expenditure, exploration expense (excluding well write-offs), new investments in joint ventures and associates, new finance leases and other adjustments.
C. Return on average capital employed
Return on average capital employed (ROACE) measures the efficiency of Shell’s utilisation of the capital that it employs and is a common measure of business performance. In this calculation, ROACE is defined as the sum of income for the current and previous three quarters, adjusted for after-tax interest expense, as a percentage of the average capital employed for the same period. The tax rate used is Shell’s effective tax rate for the period. Capital employed consists of total equity, current debt and non-current debt.
D. Gearing
Gearing, calculated as net debt (total debt less cash and cash equivalents) as a percentage of total capital (net debt plus total equity), is a key measure of Shell’s capital structure.
E. Liquidity and capital resources
Third quarter net cash from operating activities was $11.2 billion compared with $12.8 billion for the same period last year.
Total current and non-current debt increased to $55.6 billion at September 30, 2015 from $52.9 billion at June 30, 2015 while cash and cash equivalents increased to $31.8 billion at September 30, 2015 from $27.0 billion at June 30, 2015. During the third quarter 2015, Shell issued $5.2 billion of debt under the European medium-term note programme. No new debt was issued under the US shelf registration.
Capital investment for the third quarter 2015 was $7.1 billion, of which $5.8 billion in Upstream and $1.2 billion in Downstream. Capital investment for the same period last year was $8.5 billion, of which $7.0 billion in Upstream and $1.4 billion in Downstream.
Dividends of $0.47 per share are announced on October 29, 2015 in respect of the third quarter. These dividends are payable on December 18, 2015. In the case of B shares, the dividends will be payable through the dividend access mechanism and are expected to be treated as UK-source rather than Dutch-source. See the Annual Report and Form 20-F for the year ended December 31, 2014 for additional information on the dividend access mechanism.
Under the Scrip Dividend Programme shareholders can increase their shareholding in Shell by choosing to receive new shares instead of cash dividends. Only new A shares will be issued under the Programme, including to shareholders who currently hold B shares.
Nine months net cash from operating activities was $24.4 billion compared with $35.4 billion for the same period last year.
Total current and non-current debt increased to $55.6 billion at September 30, 2015 from $45.5 billion at December 31, 2014 while cash and cash equivalents increased to $31.8 billion at September 30, 2015 from $21.6 billion at December 31, 2014. During the first nine months 2015 Shell issued $10.0 billion of debt under the US shelf registration, and $5.2 billion of debt under the European medium-term note programme.
Capital investment for the first nine months 2015 was $21.0 billion, of which $17.7 billion in Upstream, $3.1 billion in Downstream and $0.1 billion in Corporate. Capital investment for the same period last year was $27.7 billion, of which $23.8 billion in Upstream, $3.8 billion in Downstream and $0.1 billion in Corporate.
CAUTIONARY STATEMENT
The release, presentation, publication or distribution of this announcement in jurisdictions other than the United Kingdom may be restricted by law and therefore any persons who are subject to the laws of any jurisdiction other than the United Kingdom should inform themselves about and observe any applicable requirements. Any failure to comply with applicable requirements may constitute a violation of the laws and/or regulations of any such jurisdiction.
This announcement is not intended to and does not constitute or form part of any offer to sell or subscribe for or any invitation to purchase or subscribe for any securities or the solicitation of any vote or approval in any jurisdiction pursuant to the recommended combination of Royal Dutch Shell plc (“Shell”) and BG Group plc (“BG”) (the “Combination”) or otherwise nor shall there be any sale, issuance or transfer of securities of Shell or BG pursuant to the Combination in any jurisdiction in contravention of applicable laws.
All amounts shown throughout this announcement are unaudited. All peak production figures in Portfolio Developments are quoted at 100% expected production.
The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate 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 subsidiaries in general or to those who work for them. These expressions are also used where no useful purpose is served by identifying the particular company or companies. ‘‘Subsidiaries’’, “Shell subsidiaries” and “Shell companies” as used in this announcement refer to companies over which Royal Dutch Shell plc either directly or indirectly has control. Companies over which Shell has joint control are generally referred to as “joint ventures” and companies 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 a venture, partnership or company, after exclusion of all third-party interest.
This announcement contains forward-looking statements concerning the financial condition, results of operations and businesses of Royal Dutch Shell and of the Combination. 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, BG and the combined group to market risks and statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of terms and phrases such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “goals”, “intend”, “may”, “objectives”, “outlook”, “plan”, “probably”, “project”, “risks”, “schedule”, “seek”, “should”, “target”, “will” and similar terms and phrases. There are a number of factors that could affect the future operations of Royal Dutch Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this announcement, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for Shell’s products; (c) currency fluctuations; (d) drilling and production results; (e) reserves estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and regulatory developments including regulatory measures addressing climate change; (k) economic and financial market conditions in various countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; and (m) changes in trading conditions. All forward-looking statements contained in this announcement are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Additional risk factors that may affect future results are contained in Royal Dutch Shell’s Form 20-F for the year ended December 31, 2014 (available at http://www.shell.com/investor and http://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, October 29, 2015. 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 Report contains references to Shell’s website. These references are for the readers’ convenience only. Shell is not incorporating by reference any information posted on http://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. U.S. investors are urged to consider closely the disclosure in our Form 20-F, File No 1-32575, available on the SEC website http://www.sec.gov . You can also obtain this form from the SEC by calling 1-800-SEC-0330.
October 29, 2015
The information in this Report 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:
– Investor Relations: International +31-(0)70-377-4540; North America +1-832-337-2034
– Media: International +44-(0)207-934-5550; USA +1-713-241-4544
SOURCE Royal Dutch Shell plc
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