Shell PLC 4th quarter and full year unaudited results

1. Q4 on Q3 change.
2. Adjusted Earnings is defined as income/(loss) attributable to Shell plc shareholders plus cost of supplies adjustment (see Note 2) and excluding identified items (see Reference A).

Fourth quarter 2021 income attributable to Shell plc shareholders was $11.5 billion, which included non-cash gains of $3.2 billion due to the fair value accounting of commodity derivatives and net gains on sale of assets of $3.0 billion, partly offset by post-tax impairment charges of $0.8 billion.

Adjusted Earnings for the quarter were $6.4 billion. Cost of supplies adjustment attributable to Shell plc shareholders for the fourth quarter 2021 was negative $0.4 billion.

Cash flow from operating activities for the fourth quarter 2021 was $8.2 billion, which included negative working capital movements of $3.0 billion and negative impacts of $2.7 billion related to commodity derivatives. Cash flow from investing activities for the quarter was an inflow of $2.6 billion, mainly driven by proceeds from sale of property, plant and equipment and businesses of $8.8 billion, mostly due to the Permian sale in the USA, partly offset by capital expenditure of $6.2 billion.

Compared with the third quarter 2021, current quarter Adjusted Earnings reflected higher contributions from LNG trading and optimisation and higher realised oil, gas and LNG prices. This was partly offset by lower chemicals and marketing margins.

At the end of the fourth quarter 2021, net debt was $52.6 billion, compared with $57.5 billion at the end of the third quarter 2021, mainly driven by free cash flow generation in the quarter, which included divestment proceeds from the Permian sale in the USA. This was partly offset by dividends and share buybacks. Gearing was 23.1% at the end of the fourth quarter 2021, compared with 25.6% at the end of the third quarter 2021, mainly driven by net debt reduction and higher earnings.

Dividends declared to Shell plc shareholders for the quarter amount to $0.24 per share. The Board expects that the first quarter 2022 interim dividend will be $0.25 per share, an increase of ~4% over the US dollar dividend for the fourth quarter 2021. During the fourth quarter 2021, $1.7 billion of share buybacks were completed. Share buybacks of $8.5 billion for the first half of 2022 were announced today including $5.5 billion of Permian divestment proceeds.

This announcement, together with supplementary financial and operational disclosure and a separate press release for this quarter, is available at www.shell.com/investors1.

1. Not incorporated by reference.
FOURTH QUARTER 2021 PORTFOLIO DEVELOPMENTS

Integrated Gas

In December 2021, we completed the acquisition of solar and energy storage developer Savion in the USA.

In December 2021, we signed a gas concession agreement for Block 10 in Oman.

In January 2022, we announced that Shell and ScottishPower won bids to develop 5GW of floating wind power in the UK.

In January 2022, we started up a hydrogen hydrolyser with 20MW production capacity in China.

In February 2022, we completed the acquisition of online energy retailer Powershop Australia.

Upstream

In December 2021, we completed the sale of the Permian business in the USA.

Oil Products

In October 2021, we signed an agreement to acquire 248 company-owned fuel and convenience retail sites from the Landmark group of companies, whose convenience stores operate in Texas under the Timewise brand. The agreement also includes supply agreements with an additional 117 independently operated fuel and convenience sites, with the deal expected to complete in the first half of 2022.

In January 2022, we completed the sale of our interest in Deer Park Refining Limited Partnership in the USA.

Page 2

PERFORMANCE BY SEGMENT

1.Q4 on Q3 change.

Fourth quarter segment earnings were $6,637 million. As part of our normal business, commodity derivative hedge contracts are entered into for mitigation of future purchases, sales and inventory. As these commodity derivatives are fair value accounted for, this creates an accounting mismatch over periods. As a result, this quarter included gains of $2,806 million due to the fair value accounting of commodity derivatives (primarily due to gas price developments). This was partly offset by provisions for onerous contracts of $217 million. These gains and losses are part of identified items (see Reference A). Adjusted Earnings for the quarter were $4,052 million.

Cash flow from operating activities for the quarter was $1,189 million, primarily driven by Adjusted EBITDA of $6,082 million, cash outflows of $3,830 million related to commodity derivatives and negative working capital movements of $1,210 million.

Compared with the third quarter 2021, Integrated Gas Adjusted Earnings primarily reflected significantly higher contributions from LNG trading and optimisation, leveraging the scale and global reach of the Shell LNG portfolio, and higher realised prices for LNG, oil and gas. This was partly offset by higher operating expenditure.

Compared with the third quarter 2021, total oil and gas production remained at a similar level due to higher maintenance activities partly offset by field ramp-ups. LNG liquefaction volumes increased by 7% due to higher feedgas supply and overall lower maintenance activities.

Full year segment earnings were $6,340 million. This included losses of $2,641 million due to the fair value accounting of commodity derivatives and post-tax impairment charges of $594 million and provisions for onerous contracts of $217 million, partly offset by gains on sale of assets of $1,086 million. These gains and losses are part of identified items (see Reference A). Adjusted Earnings for the full year were $8,757 million.

Cash flow from operating activities was $13,115 million, primarily driven by Adjusted EBITDA of $16,421 million, negative working capital movements of $5,159 million and cash inflows of $2,939 million related to commodity derivatives.

Compared with the full year 2020, Integrated Gas Adjusted Earnings primarily reflected higher realised prices for oil, LNG and gas, favourable deferred tax movements and higher volumes. This was partly offset by higher operating expenditure.

Compared with the full year 2020, total oil and gas production increased by 3% mainly due to the restart of production at the Prelude floating LNG operations in Australia, and production sharing contract effects, partly offset by field decline. LNG liquefaction volumes decreased by 7% due to feedgas constraints and higher maintenance activities, partly offset by the restart of production at the Prelude floating LNG operations in Australia.

Page 3

1. Q4 on Q3 change.

Fourth quarter segment earnings were $4,909 million. This included a gain of $3,028 million related to the sale of assets (mainly related to the sale of the Permian business in the USA), partly offset by post-tax impairment charges of $407 million and legal provisions of $287 million. These net gains are part of identified items (see Reference A). Adjusted Earnings were $2,832 million.

Cash flow from operating activities for the quarter was $7,074 million, primarily driven by Adjusted EBITDA, as well as positive working capital movements.

Compared with the third quarter 2021, Upstream Adjusted Earnings reflected higher realised oil and gas prices, lower depreciation and lower well write-offs.

Compared with the third quarter 2021, total production increased by 4%, mainly due to favourable seasonal effects and the effects of Hurricane Ida in the third quarter 2021, partly offset by the impact of divestments.

Full year segment earnings were $9,694 million. This included a net gain of $3,268 million related to the sale of assets (mainly related to the sale of the Permian business in the USA), partly offset by post-tax impairment charges of $479 million, losses of $393 million due to the fair value accounting of commodity derivatives, fourth quarter 2021 legal provisions of $287 million and a net charge of $154 million related to the impact of the weakening Brazilian real on a deferred tax position. These net gains are part of identified items (see Reference A). Adjusted Earnings were $7,950 million.

Cash flow from operating activities for the full year 2021 was $22,014 million, primarily driven by Adjusted EBITDA, partly offset by negative working capital movements.

Compared with the full year 2020, Upstream Adjusted Earnings reflected higher realised oil and gas prices, the one-off release of a tax provision in Nigeria and lower depreciation, partly offset by lower production volumes.

Compared with the full year 2020, total production decreased by 8%, mainly due to the impact of divestments and higher maintenance activities.

Page 4

1. Q4 on Q3 change.
2. Earnings are presented on a CCS basis (see Note 2).

3. With effect from Q1 2021, changes are made in the cost and activity allocation between Marketing and Refining & Trading. This resulted in Q4 2021 income of $35 million (full year 2021: net cost of $304 million) to Refining & Trading, with an offsetting amount in Marketing. This change does not impact consolidated Oil Products Adjusted Earnings.

Fourth quarter segment earnings were $620 million. This included a gain of $300 million due to the fair value accounting of commodity derivatives, and a gain of $73 million related to the remeasurement of redundancy and restructuring costs, partly offset by post-tax impairment charges of $351 million. These net gains are part of identified items (see Reference A). Adjusted Earnings were $555 million.

Cash flow from operating activities for the fourth quarter 2021 was an outflow of $721 million, primarily driven by negative working capital movements and timing of payments of emissions certificates relating to the German BEHG and US Biofuel programmes. These cash outflows were partly offset by Adjusted EBITDA and non-cash cost-of-sales adjustments, as well as cash inflows from commodity derivatives.

Compared with the third quarter 2021, Oil Products Adjusted Earnings reflected higher operating expenses, lower Retail margins, lower contributions from trading and optimisation, and unfavourable deferred tax movements.

Oil Products sales volumes decreased due to unfavourable seasonal effects.

• Refining & Trading Adjusted Earnings reflected lower contributions from trading and optimisation, lower realised refining margins due to extended turnarounds and Hurricane Ida recovery efforts, unfavourable deferred tax movements and the impact of divestments.
• Marketing Adjusted Earnings reflected higher operating expenses and lower margins mainly due to unfavourable seasonal effects.

Refinery utilisation was 68% compared with 71% in the third quarter 2021, due to extended turnarounds and Hurricane Ida recovery efforts.

Full year segment earnings were $2,664 million. This included post-tax impairment charges of $1,619 million, partly offset by a gain of $301 million related to the dilution of interest in the Raizen joint venture, and gains of $142 million due to the fair value accounting of commodity derivatives. These net losses are part of identified items (see Reference A). Adjusted Earnings were $3,944 million.

Page 5

Cash flow from operating activities for the full year 2021 was $6,141 million, primarily driven by Adjusted EBITDA and non-cash cost-of-sales adjustments, partly offset by negative working capital movements.

Compared with the full year 2020, Oil Products Adjusted Earnings reflected lower contributions from trading and optimisation, higher operating expenses and unfavourable deferred tax movements. These were partly offset by higher marketing volumes and Oil Sands margins.

Oil Products sales volumes decreased due to lower trading volumes partly offset by higher marketing volumes compared with the full year 2020.

• Refining & Trading Adjusted Earnings reflected lower contributions from trading and optimisation, unfavourable deferred tax movements and higher operating expenses. These were partly offset by higher refining margins, higher Oil Sands margins and lower depreciation.
• Marketing Adjusted Earnings reflected higher operating expenses offset by higher sales volumes.

Refinery utilisation remained at 72% compared with the full year 2020.

Page 6

1. Q4 on Q3 change.
2. Earnings are presented on a CCS basis (see Note 2).

Fourth quarter segment earnings were a loss of $119 million. This included post-tax impairment charges, which are part of identified items (see Reference A). Adjusted earnings were a loss of $42 million.

Cash flow from operating activities for the quarter was $383 million, primarily driven by Adjusted EBITDA and non-cash cost-of-sales adjustments, as well as positive working capital movements, and the timing impact of dividends from Joint Ventures and Associates.

Compared with the third quarter 2021, Chemicals Adjusted Earnings reflected lower base chemicals margins, Hurricane Ida recovery efforts, unplanned maintenance and lower income from Joint Ventures and Associates.

Chemicals manufacturing plant utilisation was 75% compared with 78% in the third quarter 2021, due to Hurricane Ida recovery efforts, unplanned maintenance and extended turnarounds.

Full year segment earnings were $1,390 million. This included post-tax impairment charges of $301 million and legal provisions of $37 million. These net losses are part of identified items (see Reference A). Adjusted earnings were $1,753 million.

Cash flow from operating activities for the full year 2021 was $2,680 million, primarily driven by Adjusted EBITDA and non-cash cost-of-sales adjustments, partly offset by negative working capital movements.

Compared with the full year 2020, Chemicals Adjusted Earnings reflected higher realised margins in base chemicals and intermediates from a stronger price environment, partly offset by the impact of Hurricane Ida.

Chemicals manufacturing plant utilisation was 78% compared with 80% for the full year 2020 due to the impact of Hurricane Ida.

Page 7

Fourth quarter segment earnings were an expense of $859 million. This included a gain of $30 million from the deferred tax impact of the weakening Brazilian real on financing positions, which is part of identified items (see Reference A). Adjusted Earnings were a net expense of $889 million.

Compared with the third quarter 2021, Adjusted Earnings reflected unfavourable movements in tax credits, higher operating and net interest expenses, which included the impact of debt redemption, partly offset by favourable currency exchange rate effects.
Full year segment earnings were an expense of $2,606 million. This included a gain of $79 million from the deferred tax impact of the weakening Brazilian real on financing positions, which is part of identified items (see Reference A). Adjusted Earnings were a net expense of $2,686 million.
Compared with the full year 2020, Adjusted Earnings reflected lower net interest expense and favourable currency exchange rate effects.
PRELIMINARY RESERVES UPDATE

When final volumes are reported in the 2021 Annual Report and Accounts and 2021 Form 20-F, Shell expects that SEC proved oil and gas reserves additions before taking into account production will be approximately 1.5 billion boe, and that 2021 production will be approximately 1.2 billion boe. As a result, total proved reserves on an SEC basis are expected to be approximately 9.4 billion boe. Acquisitions and divestments of 2021 reserves are expected to account for a net reduction of approximately 0.2 billion boe.

The proved Reserves Replacement Ratio on an SEC basis is expected to be 120% for the year and 43% for the 3-year average. Excluding the impact of acquisitions and divestments, the proved Reserves Replacement Ratio is expected to be 138% for the year and 56% for the 3-year average.

Further information will be provided in the 2021 Annual Report and Accounts and 2021 Form 20-F, which are expected to be filed in March 2022.

OUTLOOK FOR THE FIRST QUARTER 2022

With effect from 2022, our reporting segments will consist of Marketing, Renewables & Energy Solutions, Chemicals & Products, Integrated Gas, Upstream and Corporate, reflecting the way Shell reviews and assesses its performance. The Marketing segment is currently reported under the Oil Products segment. The Chemicals & Products segment is currently reported under the Oil Products and Chemicals segments. The Renewables & Energy Solutions segment is currently reported under the Integrated Gas segment.

Cash capital expenditure for the full year 2022 is expected to be at the lower end of the $23 billion to $27 billion range.
Integrated Gas production is expected to be approximately 760 – 820 thousand boe/d due to turnaround activities and LNG liquefaction volumes are expected to be approximately 7.7 – 8.3 million tonnes.

Upstream production is expected to be approximately 2,000 – 2,200 thousand boe/d.

Refinery utilisation is expected to be approximately 71% – 79%.

Oil Products sales volumes are expected to be approximately 4,100 – 5,400 thousand b/d (of which, Marketing: 2,300 – 2,800 thousand b/d and Refining & Trading: 1,800 – 2,600 thousand b/d).

Page 8

Chemicals manufacturing plant utilisation is expected to be approximately 78% – 86%.

Chemicals sales volumes are expected to be approximately 3,300 – 3,700 thousand tonnes.

Corporate Adjusted Earnings are expected to be a net expense of approximately $550 – $650 million in the first quarter 2022 and a net expense of approximately $2,200 – $2,600 million for the full year 2022. This excludes the impact of currency exchange rate effects.

Page 9

FORTHCOMING EVENTS

The “LNG Outlook and Shell Insights Integrated Gas Business Update” event is scheduled on February 21, 2022. First quarter 2022 results and dividends are scheduled to be announced on May 5, 2022. The Annual ESG Update is scheduled on May 10, 2022. The Annual General Meeting is scheduled on May 24, 2022. Second quarter 2022 and half year results and dividends are scheduled to be announced on July 28, 2022. Third quarter 2022 results and dividends are scheduled to be announced on October 27, 2022.

Page 10

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. See Note 2 “Segment information”.
2. See Note 7 “Other notes to the unaudited Condensed Consolidated Financial Statements”.

3. See Note 3 “Earnings per share”.

Page 11

1. See Note 7 “Other notes to the unaudited Condensed Consolidated Financial Statements”.
2. See Note 6 “Derivative financial instruments and debt excluding lease liabilities”.

3. As from January 1, 2021 the ‘Retirement benefits’ liability has been classified under non-current liabilities (previously partly presented within current liabilities) and taxes payable not related to income tax are presented within ‘Trade and other payables’ (previously ‘Taxes payable’). Prior period comparatives have been revised to conform with current year presentation. See Note 7.

Page 12

4. For Q4 2021, assets held for sale are presented separately. Prior period comparatives have been revised to conform with current year presentation.

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.
4. Includes shares committed to repurchase under an irrevocable contract and repurchases subject to settlement at the end of the quarter.

Page 13

1. See Note 7 “Other notes to the unaudited Condensed Consolidated Financial Statements”.
2. As from 2021 renamed from ‘Proceeds from sale of joint ventures and associates’.
3. 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.

Page 14

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of preparation

These unaudited Condensed Consolidated Financial Statements of Shell plc (formerly Royal Dutch Shell plc) (“the Company”) and its subsidiaries (collectively referred to as “Shell”) have been prepared on the basis of the same accounting principles, except for the application of UK-adopted international accounting standards, as those used in the Annual Report and Accounts (pages 216 to 264) and Form 20-F (pages 164 to 211) for the year ended December 31, 2020 as filed with the Registrar of Companies for England and Wales and the US Securities and Exchange Commission, respectively, and should be read in conjunction with these filings. For periods beginning on or after January 1, 2021, Shell’s (interim) financial statements are prepared in accordance with UK-adopted international accounting standards which were established as a result of the UK’s exit from the European Union. As applied to Shell there are no material differences from accounting principles used in the Annual Report and Accounts and Form 20-F for the year ended December 31, 2020.

The financial information presented in the unaudited Condensed Consolidated Financial 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, 2020 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, significant judgements and estimates

In the fourth quarter 2021, the Company changed its estimation technique to determine the value in use for impairment testing purposes. A key element is the update of the discount rate, that is now based on a nominal post-tax weighted average cost of capital (WACC) of 5% for Power activities and a nominal post-tax WACC of 6.5% for all other activities (previously 6% pre-tax was applied for all activities). Cashflow projections are based on management’s most recent operating plan that represent management’s best estimate and are risked as appropriate. The change in discount rate to a nominal post-tax WACC has been reflected in a commensurate manner in the risk adjustments to cashflow projections. The impact of this change is not material.

Future long-term 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 2020, resulting in the recognition of impairments in 2020. These assumptions continue to apply for impairment testing purposes in the fourth quarter 2021.

The discount rate applied to provisions is reviewed on a regular basis. The discount rate was reviewed and adjusted in the fourth quarter 2021. See Note 7.

Simplification of share structure

On December 10, 2021, the shareholders of the Company supported the resolution to amend Shell’s articles of association to enable the simplification of the Company. The simplification entails the establishment through assimilation into a single line of shares, the alignment of the Company’s tax residence with its country of incorporation in the UK and granting the Board the power to change the Company’s name. On December 20, 2021, the Board decided to proceed with the proposal. The alignment of the Company’s tax residence with its country of incorporation in the UK resulted in recognition in 2021 of a taxable deemed disposal gain fully offset by taxable losses in the Netherlands.

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. Sales between segments are based on prices generally equivalent to commercially available prices.

Page 15

1. Includes revenue from sources other than from contracts with customers, which mainly comprises the impact of fair value accounting of commodity derivatives. Fourth quarter 2021 included income of $4,287 million mainly driven by Integrated Gas, refer to “Performance by Segment” (Q3 2021: $5,032 million losses; Q4 2020: $114 million income). This amount includes both the reversal of prior losses of $2,860 million (Q3 2021: $1,205 million losses; Q4 2020: $147 million gains) related to sales contracts and prior gains of $2,476 million (Q3 2021: $1,517 million gains; Q4 2020: $23 million gains) related to purchase contracts that were previously recognised and where physical settlement took place in the fourth quarter 2021.

Page 16

3. Earnings per share

4. Share capital

1. Share capital at December 31, 2021 also included 50,000 issued and fully paid sterling deferred shares of £1 each.

At Shell plc’s (formerly Royal Dutch Shell plc) Annual General Meeting on May 18, 2021, the Board was authorised to allot ordinary shares in Shell plc, and to grant rights to subscribe for, or to convert, any security into ordinary shares in Shell plc, up to an aggregate nominal amount of €182.1 million (representing 2,602 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 18, 2022, and the end of the Annual General Meeting to be held in 2022, unless previously renewed, revoked or varied by Shell plc in a general meeting.

Also see Note 9 “Post-balance sheet events”.

5. Other reserves

Page 17

The merger reserve and share premium reserve were established as a consequence of Shell plc (formerly 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 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, 2020, 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 December 31, 2021, are consistent with those used in the year ended December 31, 2020, 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.

1. Mainly determined from the prices quoted for these securities.

7. Other notes to the unaudited Condensed Consolidated Financial Statements

Consolidated Statement of Income
Interest and other income

Depreciation, depletion and amortisation

Depreciation, depletion and amortisation in Q4 2021 includes $1,081 million pre-tax (Q3 2021: $352 million; Q4 2020: $3,318 million; full year 2021: $3,850 million; full year 2020: $27,463) of impairments.

Condensed Consolidated Balance Sheet

Intangible assets

Page 18

Intangible assets as at December 31, 2021 includes $1,167 million acquisition related goodwill recognised in the fourth quarter 2021. The accounting is provisional because of the limited period since the acquisition date and will be completed in 2022.

Assets classified as held for sale

Assets classified as held for sale and associated liabilities at December 31, 2021 mainly relate to two refineries. The major classes of assets and liabilities classified as held for sale are Property, plant and equipment ($896 million; December 31, 2020: $1,146 million), Inventories ($528 million; December 31, 2020: zero) and Debt ($456 million; December 31, 2020: zero).

Retirement benefits

1.As from January 1, 2021 the ‘Retirement benefits’ liability has been classified under non-current liabilities (previously partly presented within current liabilities). Prior period comparatives have been revised by $437 million to conform with current year presentation.

The decrease in the net retirement benefit liability is mainly driven by positive returns on plan assets, an increase of the market yield on high-quality corporate bonds in the USA, the UK and Eurozone, partly offset by an increase in expected inflation in the UK and Eurozone. Amounts recognised in the balance sheet in relation to defined benefit plans include both plan assets and obligations that are presented on a net basis on a plan-by-plan basis.

Decommissioning and other provisions

The discount rate applied at December 31, 2021 was 2.00% (December 31, 2020: 1.75%). Non-current decommissioning and restoration provisions decreased by $0.7 billion as a result of the change in the discount rate.

Income taxes payable

As from January 1, 2021 taxes payable not related to income tax are presented within ‘Trade and other payables’ (previously within ‘Taxes payable’) and ‘Taxes payable’ has been renamed into ‘Income taxes payable’. Prior period comparatives have been revised by $2,895 million to conform with current year presentation.

Consolidated Statement of Cash Flows

Cash flow from operating activities – Other

Page 19

Cash flow from operating activities – Other for the fourth quarter 2021 includes $1.1 billion of net outflows due to the timing of payments relating to emission and biofuel programmes in Europe and North America.

8. Other contingencies

On December 20, 2021, the Board decided to proceed with the simplification (as outlined in Note 1). Preceding this decision, a proposed bill on the Dutch dividend withholding tax (DWT) exit tax charge and subsequent amendments were submitted to the Dutch Parliament imposing a DWT exit tax charge on any company that transfers its tax residence to a country that does not levy dividend withholding tax, such as the UK. The amended bill was submitted to the Dutch Council of State for advice and is at an early stage of discussion in the Dutch Parliament. Having considered a range of factors including legal advice, following the transfer of the Company’s tax residence it is expected that the Company will ultimately not incur any DWT exit tax cost.

9. Post-balance sheet events

On January 20, 2022, Shell completed the sale of its interest in Deer Park Refining Limited Partnership, a 50-50 joint venture between Shell Oil Company and P.M.I. Norteamerica, S.A. De C.V. (a subsidiary of Petroleos Mexicanos, or Pemex) for a total of $596 million, consisting of a combination of cash and debt.

On January 21, 2022, the Company changed its name from Royal Dutch Shell plc to Shell plc.

On January 29, 2022, one line of shares was established through assimilation of each A share and each B share into one ordinary share of the Company. This assimilation had no impact on voting rights or dividend entitlements. Dutch withholding tax, applied previously on dividends on A shares, no longer applies on dividends paid on the ordinary shares following assimilation.

Page 20

ALTERNATIVE PERFORMANCE (NON-GAAP) MEASURES

A.Adjusted Earnings and Adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA)

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.
The “Adjusted EBITDA (CCS basis)” and “Adjusted EBITDA (FIFO basis)” measures are introduced with effect from January 1, 2021. Management uses both measures to evaluate Shell’s performance in the period and over time.

We define “Adjusted EBITDA (CCS basis)” as “Income/(loss) for the period” adjusted for current cost of supplies; identified items; tax charge/(credit); depreciation, amortisation and depletion; exploration well write-offs and net interest expense. All items include the non-controlling interest component.

We define “Adjusted EBITDA (FIFO basis)” as “Income/(loss) for the period adjusted for identified items; tax charge/(credit); depreciation, amortisation and depletion; exploration well write-offs and net interest expense. All items include the non-controlling interest component.

Page 21

Page 22

Identified items
Identified items comprise: divestment gains and losses, impairments, redundancy and restructuring, provisions for onerous contracts, fair value accounting of commodity derivatives and certain gas contracts and the impact of exchange rate movements on certain deferred tax balances, and other items.

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).

Provisions for onerous contracts: Provisions for onerous contracts that relate to businesses that Shell has exited or to redundant assets or assets that cannot be used.

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

Page 23

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.

B. Adjusted Earnings per share

Adjusted Earnings per share is calculated as Adjusted Earnings (see Reference A), 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.

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 an Adjusted Earnings plus Non-controlling interest (NCI) basis, both adjusted for after-tax interest expense.

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.

Page 24

ROACE on an Adjusted Earnings plus Non-controlling interest (NCI) basis

In this calculation, the sum of Adjusted Earnings (see Reference A) plus non-controlling interest (NCI) 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. This measure was previously referred to as “ROACE on a CCS basis excluding identified items” and was renamed to improve clarity with effect from the second quarter 2021. There is no change to the calculation outcome as a result of this nomenclature update.

E. Gearing

Gearing is a 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 25

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.

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 26

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.

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.

1.As from 2021 renamed from ‘Proceeds from sale of joint ventures and associates’.

Page 27