ROYAL DUTCH SHELL PLC
2ND QUARTER AND HALF YEAR 2014 UNAUDITED RESULTS
* Royal Dutch Shell's second quarter 2014 earnings, on a current cost of
supplies (CCS) basis (see Note 2), were $5.1 billion compared with $2.4
billion for the same quarter a year ago. Earnings included an identified
net charge of $1.0 billion after tax, mainly reflecting impairments which
were partly offset by divestment gains (see page 6).
* Second quarter 2014 CCS earnings excluding identified items (see page 6)
were $6.1 billion compared with $4.6 billion for the second quarter 2013,
an increase of 33%.
* Compared with the second quarter 2013, CCS earnings excluding identified
items benefited from higher liquids production volumes and prices, the
impact of the strengthening Australian dollar on a deferred tax liability,
and higher contributions from Manufacturing. These items were partly offset
by increased depreciation, higher costs, and the phasing of a dividend from
an LNG venture into the third quarter of 2014.
* Basic CCS earnings per share excluding identified items increased by 33%
versus the same quarter last year.
* Cash flow from operating activities for the second quarter 2014 was $8.6
billion, compared with $12.4 billion for the same quarter last year.
Excluding working capital movements, cash flow from operating activities
for the second quarter 2014 was $11.0 billion, compared with $8.4 billion
for the second quarter 2013.
* Capital investment for the second quarter 2014 was $8.5 billion. Net
capital investment (see Note 2) for the second quarter 2014 was $1.1
billion, compared with $10.9 billion for the same period a year ago.
* Total dividends distributed in the quarter were $3.0 billion, of which $1.0
billion were settled under the Scrip Dividend Programme. During the second
quarter some 8.6 million A shares were bought back for cancellation for a
consideration of $0.3 billion. Shell has now cancelled the Scrip Dividend
Programme and scrip dividends will not be offered for the second quarter
2014 dividend.
* Gearing at the end of the second quarter 2014 was 13.4%.
* A second quarter 2014 dividend has been announced of $0.47 per ordinary
share and $0.94 per American Depositary Share ("ADS"), an increase of 4%
compared with the second quarter 2013.
SUMMARY OF UNAUDITED RESULTS
Quarters $ million Half year
Q2
2014 Q1 2014 Q2 2013 %1 2014 2013 %
Income attributable to Royal
5,307 4,509 1,737 +206 Dutch Shell plc shareholders 9,816 9,913 -1
Current cost of supplies (CCS)
(160) (44) 657 adjustment for Downstream (204) 432
5,147 4,465 2,394 +115 CCS earnings 9,612 10,345 -7
(979) (2,862) (2,206) Identified items2 (3,841) (1,775)
CCS earnings excluding identified
6,126 7,327 4,600 +33 items 13,453 12,120 +11
Of which:
4,722 5,710 3,526 Upstream 10,432 9,174
1,347 1,575 1,168 Downstream 2,922 3,016
Corporate and Non-controlling
57 42 (94) interest 99 (70)
Cash flow from operating
8,641 13,984 12,444 -31 activities 22,625 24,003 -6
0.81 0.71 0.38 +113 Basic CCS earnings per share ($) 1.52 1.64 -7
1.62 1.42 0.76 Basic CCS earnings per ADS ($) 3.04 3.28
Basic CCS earnings per share
0.97 1.17 0.73 +33 excl. identified items ($) 2.13 1.92 +11
Basic CCS earnings per ADS excl.
1.94 2.34 1.46 identified items ($) 4.26 3.84
0.47 0.47 0.45 +4 Dividend per share ($) 0.94 0.90 +4
0.94 0.94 0.90 Dividend per ADS ($) 1.88 1.80
1 Q2 on Q2 change
2 See page 6
Royal Dutch Shell Chief Executive Officer Ben van Beurden commented:
"We are making progress with the priorities I set out at the start of 2014: to
balance growth and returns by focusing on better financial performance,
enhanced capital efficiency, and continued strong project delivery.
Shell's strategy is founded on technological expertise, disciplined capital
investment, integrated operations, and large scale. This is underpinned by an
unrelenting focus on safety. We aim to grow cash flow through the cycle and
deliver competitive shareholder returns.
I am determined to get a tighter grip on business performance management in the
company, and improve the balance between growth and returns.
Our financial performance for the second quarter of 2014 was more robust than
year-ago levels but I want to see stronger, more competitive results right
across the company, particularly in Oil Products and North America resources
plays. Improvement of financial performance in these two parts of the business
will take time, but I see early momentum, which we must maintain.
Sharper accountability in the company means that we are targeting our growth
investment more effectively, focusing on areas of the business where
performance improvement is most needed, and driving asset sales in
non-strategic positions.
The impairments we have announced today in Upstream Americas reflect the
restructuring of Shell's resources plays portfolio. We see attractive growth
opportunities there such as natural gas integration and liquids-rich shales.
We are taking firm actions to improve Shell's capital efficiency by selling
selected assets and making tougher project decisions. We have completed some $8
billion of asset sales so far in 2014. This represents good progress towards
our targets to focus the portfolio, and to maintain the financial framework in
robust health.
We've continued to ramp up production at Mars B in the Gulf of Mexico - part of
Shell's industry-leading deep-water portfolio - and our exploration programme
is delivering, with new finds in the Gulf of Mexico and Malaysia.
Our dividend for the second quarter of 2014 is 4% up from year-ago levels. We
are expecting some $7 - $8 billion of share buybacks for 2014 and 2015
combined, of which $1.6 billion were completed in the first half of this year.
These expected buybacks and dividend distributions are expected to exceed $30
billion over the two-year period. All of this underlines the company's recent
improved performance and future potential."
SECOND QUARTER 2014 PORTFOLIO DEVELOPMENTS1
Upstream
Shell continued to divest non-strategic Upstream positions during the second
quarter of 2014 with divestment proceeds totalling some $6.5 billion.
During the quarter Shell completed a sell-down of 78.27 million shares in
Woodside Petroleum Limited ("Woodside") in Australia for a consideration of $3
billion, reducing Shell's interest from 23% to approximately 14%.
Also in Australia, Shell completed the sale of its 8% interest in the
Wheatstone-lago joint venture and its 6.4% interest in the 8.9 million tonnes
per annum ("mtpa") Wheatstone LNG project, which is under development, to the
Kuwait Foreign Petroleum Exploration Company for $1.5 billion.
In Brazil, Shell completed the sale of its 23% interest in the Shell-operated
deep-water project BC-10 to Qatar Petroleum International for a consideration
of $1.2 billion.
In Canada, Shell agreed to divest its 100% interest in the Orion Steam Assisted
Gravity Drainage ("SAGD") project, currently producing approximately six
thousand barrels of oil equivalent per day ("boe/d"), to Osum Oil Sands Corp
for a consideration of some $0.3 billion, subject to closing. The deal is
expected to close in the third quarter 2014.
Also in Canada, Shell signed a binding agreement to sell its entire interest in
the Burnt Timber, Hunter Valley and Panther River gas fields and associated
infrastructure (current production of approximately four thousand boe/d) to CQ
Energy Partnership for a consideration of some $50 million. The Burnt Timber
Gas Plant is not included in the sale and ceased operations in the second
quarter 2014.
Shell also agreed to sell its interest in a portion of its dry gas Deep Basin
assets in Canada (current production of some seven thousand boe/d) to Mapan
Energy Ltd. for a consideration of some $0.1 billion, subject to closing.
In Japan, Shell announced that it will begin supplying liquefied natural gas
("LNG") to one of Japan's leading electric companies from October 2014. The
deal, with Chubu Electric, includes an agreement to supply up to 12 cargoes of
LNG a year (0.7 mtpa) for the next 20 years.
In the United States, Shell completed the divestment of its 100% interest in
approximately 106,000 net acres of the Eagle Ford liquids-rich shale ("LRS")
asset (current production of some 20 thousand boe/d) to Sanchez Energy
Corporation for a consideration of some $0.6 billion. The agreement is
effective from January 1, 2014.
Also in the United States, Shell completed the sale of its 50% interest in
approximately 312,000 net acres in the Niobrara and Sandwash basins for a
consideration of some $90 million.
In the United Kingdom North Sea, Shell is considering the sale of the Anasuria,
Nelson and Sean late-life assets, currently producing some 14 thousand boe/d.
During the quarter, in Shell's heartlands exploration programme Shell announced
an oil discovery in the Norphlet play in the deep waters of the Gulf of Mexico
with the successful Rydberg exploration well (Shell interest 57.2%). As
previously reported, Shell participated in the non-operated Rosmari-1 discovery
(Shell interest 85%) offshore Malaysia during the quarter, adding new gas
resources.
Shell had continued success with near-field exploration discoveries in a number
of countries.
As part of its global exploration programme, Shell added new acreage positions
following successful bidding results in New Zealand, the Netherlands and the
Gulf of Mexico in the United States.
During the second quarter Shell entered the front end engineering and design
("FEED") phase on the key non-operated project Val d'Agri Phase 2 (Shell
interest 39%) in Italy. This project is expected to deliver peak production of
some 65 thousand boe/d after coming on-stream.
In Upstream Americas resources plays (shale oil and gas), we have completed a
new bottom-up review of our portfolio and strategy. The majority of near-term
investments will be directed at North America liquids-rich shales, focused on
appraisal in Western Canada and the Permian. Major divestments of non-core
liquids-rich shales positions are now complete. In Western Canada dry gas, the
company has long-term growth potential related to LNG opportunities. Shell's
Lower 48 dry gas positions, where we have established production and further
exploration potential, remain under review and could potentially be the subject
of further impairments and/or asset sales.
Downstream
Downstream divestment proceeds totalled some $0.9 billion for the second
quarter 2014.
In the United States, Shell announced that its wholly-owned subsidiary, Shell
Midstream Partners, L.P., has filed a Registration Statement on Form S-1 with
the U.S. Securities and Exchange Commission related to the proposed initial
public offering of common units representing limited partner interests. Shell
intends to apply to list the common units on the New York Stock Exchange under
the ticker symbol "SHLX". The offering is expected to occur in the second half
of 2014.
In July, Shell signed an agreement to become the first customer of new,
dedicated LNG for transport infrastructure planned at the Port of Rotterdam in
the Netherlands. Shell has committed to buy capacity from the Gate terminal,
which has enabled investment in the terminal expansion. This agreement is
expected to increase availability of LNG as a transport fuel for vessels in
northwest Europe.
1 See pages 20 and 21 for first quarter 2014 portfolio developments.
KEY FEATURES OF THE SECOND QUARTER 2014
* Second quarter 2014 CCS earnings (see Note 2) were $5,147 million, 115%
higher than for the same quarter a year ago. Second quarter 2014 earnings
included an identified net charge of $1.0 billion after tax, mainly
reflecting impairments which were partly offset by divestment gains (see
page 6).
* Second quarter 2014 CCS earnings excluding identified items (see page 6)
were $6,126 million compared with $4,600 million for the second quarter
2013, an increase of 33%.
* Compared with the second quarter 2013, CCS earnings excluding identified
items benefited from higher liquids production volumes and prices, the
impact of the strengthening Australian dollar on a deferred tax liability,
and higher contributions from Manufacturing. These items were partly offset
by increased depreciation, higher costs, and the phasing of a dividend from
an LNG venture into the third quarter of 2014.
* Basic CCS earnings per share increased by 113% versus the same quarter a
year ago.
* Basic CCS earnings per share excluding identified items increased by 33%
versus the same quarter a year ago.
* Cash flow from operating activities for the second quarter 2014 was $8.6
billion, compared with $12.4 billion for the same quarter last year.
Excluding working capital movements, cash flow from operating activities
for the second quarter 2014 was $11.0 billion, compared with $8.4 billion
for the same quarter last year.
* Net capital investment (see Note 2) for the second quarter 2014 was $1.1
billion. Capital investment for the second quarter 2014 was $8.5 billion
and divestment proceeds were $7.4 billion.
* Total dividends distributed in the second quarter 2014 were $3.0 billion,
of which $1.0 billion were settled by issuing some 26.6 million A shares
under the Scrip Dividend Programme for the first quarter 2014 dividend.
* Under our share buyback programme some 8.6 million A shares were bought
back for cancellation during the second quarter 2014 for a consideration of
$0.3 billion.
* Return on average capital employed on a reported income basis (see Note 8)
was 7.9% at the end of the second quarter 2014, versus 12.1% at the end of
the second quarter 2013.
* Gearing was 13.4% at the end of the second quarter 2014 versus 10.3% at the
end of the second quarter 2013.
* Oil and gas production for the second quarter 2014 was 3,077 thousand boe/
d, in line with the second quarter 2013. Excluding the impact of
divestments, Abu Dhabi license expiry, PSC price effects, and security
impacts in Nigeria, second quarter 2014 production was 4% higher than for
the same period last year.
* Equity sales of LNG of 6.00 million tonnes for the second quarter 2014 were
28% higher than for the same quarter a year ago.
* Oil products sales volumes for the second quarter 2014 were 4% higher than
for the second quarter 2013. Chemicals sales volumes for the second quarter
2014 increased by 4% compared with the same quarter a year ago.
* Supplementary financial and operational disclosure for the second quarter
2014 is available at www.shell.com/investor.
SUMMARY OF IDENTIFIED ITEMS
Earnings for the second quarter 2014 reflected the following items, which in
aggregate amounted to a net charge of $979 million (compared with a net charge
of $2,206 million for the second quarter 2013), as summarised in the table
below:
* Upstream earnings included a net charge of $902 million, reflecting
impairments of $1,943 million, predominantly related to dry gas properties
in the United States, triggered by a reduced capital allocation to these
assets. These were partly offset by divestment gains of $1,230 million
mainly related to Wheatstone and the sell-down of 78.27 million shares in
Woodside. Identified items also included a net charge on fair value
accounting of commodity derivatives and certain gas contracts of $44
million and a net charge of $145 million for other items, mainly comprised
of a tax charge on an asset transfer. Upstream earnings for the second
quarter 2013 included a net charge of $1,845 million.
* Downstream earnings included a net charge of $76 million, reflecting a net
charge on fair value accounting of commodity and derivatives of $50
million, a net impairment charge of $35 million, and a net charge of $119
million for other items, mainly related to a prior-year sale obligation.
These items were partly offset by gains on divestments of $128 million.
Downstream earnings for the second quarter 2013 included a net charge of
$365 million.
* Corporate results and Non-controlling interest included a net charge of $1
million. Earnings for the second quarter 2013 included a net gain of $4
million.
SUMMARY OF IDENTIFIED ITEMS
Quarters $ million Half year
Q2 2014 Q1 20141 Q2 2013 2014 2013
Segment earnings impact of
identified items:
(902) (283) (1,845) Upstream (1,185) (1,672)
(76) (2,580) (365) Downstream (2,656) (525)
Corporate and Non-controlling
(1) 1 4 interest 0 422
(979) (2,862) (2,206) Earnings impact (3,841) (1,775)
1 See page 21
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:
* Divestment gains and losses
* Impairments
* Fair value accounting of commodity derivatives and certain gas contracts
(see Note 7)
* Redundancy and restructuring
Further items may be identified in addition to the above.
EARNINGS BY BUSINESS SEGMENT
UPSTREAM
Quarters $ million Half year
Q2 2014 Q1 2014 Q2 2013 %1 2014 2013 %
Upstream earnings excluding
4,722 5,710 3,526 +34 identified items 10,432 9,174 +14
3,820 5,427 1,681 +127 Upstream earnings 9,247 7,502 +23
Upstream cash flow from
8,919 9,075 8,143 +10 operating activities 17,994 17,848 +1
562 9,340 9,549 -94 Upstream net capital investment 9,902 16,919 -41
Liquids production available for
1,499 1,481 1,502 0 sale (thousand b/d) 1,490 1,570 -5
Natural gas production available
9,153 10,227 9,050 +1 for sale (million scf/d) 9,687 10,085 -4
Total production available for
3,077 3,245 3,062 0 sale (thousand boe/d) 3,160 3,309 -5
Equity sales of LNG (million
6.00 6.09 4.68 +28 tonnes) 12.09 9.83 +23
1 Q2 on Q2 change
Second quarter Upstream earnings excluding identified items were $4,722 million
compared with $3,526 million a year ago. Identified items were a net charge of
$902 million, compared with a net charge of $1,845 million for the second
quarter 2013 (see page 6).
Compared with the second quarter 2013, earnings excluding identified items
benefited from higher liquids production volumes and prices, including
contributions from Deepwater in the Americas, Iraq, and Integrated Gas, as well
as the impact of the strengthening Australian dollar on a deferred tax
liability. These items were partly offset by increased depreciation, higher
costs, and the phasing of a dividend from an LNG venture into the third quarter
of 2014.
Global liquids realisations were 3% higher than for the second quarter 2013.
Global natural gas realisations were 8% lower than for the same quarter a year
ago, with a 16% increase in the Americas and a 15% decrease outside the
Americas.
Second quarter 2014 production was 3,077 thousand boe/d compared with 3,062
thousand boe/d a year ago. Liquids production was in line with the second
quarter 2013 and natural gas production increased by 1%. Excluding the impact
of divestments, Abu Dhabi license expiry, PSC price effects, and security
impacts in Nigeria, second quarter 2014 production was 4% higher than for the
same period last year.
The continuing ramp-up of fields and new field start-ups, in particular Majnoon
in Iraq and Mars B in the Gulf of Mexico, contributed some 140 thousand boe/d
to production for the second quarter 2014, more than offsetting the impact of
field declines. Production also benefited from a number of new wells in
existing fields and improved well performance in the Gulf of Mexico.
Equity sales of LNG of 6.00 million tonnes increased by 28% compared to the
same quarter a year ago, mainly reflecting the contribution from the
acquisition of Repsol's LNG business and decreased feedgas disruptions in
Nigeria.
Half year Upstream earnings excluding identified items were $10,432 million
compared with $9,174 million for the first half year 2013. Identified items
were a net charge of $1,185 million, compared with a net charge of $1,672
million for the first half year 2013 (see page 6).
Compared with the first half year 2013, Upstream earnings excluding identified
items reflected increased liquids production volumes and prices, including
contributions from Iraq, Deepwater in the Americas, and Integrated Gas, gas
trading results as well as the strengthening Australian dollar on a deferred
tax liability. Earnings were impacted by increased depreciation, higher costs
and well write-offs.
Global liquids realisations were in line with the first half year 2013. Global
natural gas realisations were 2% lower than for the first half year 2013, with
a 32% increase in the Americas and a 9% decrease outside the Americas.
Half year 2014 production was 3,160 thousand boe/d compared with 3,309 thousand
boe/d for the same period a year ago. Liquids production was down 5% and
natural gas production decreased by 4% compared with the first half year 2013.
Excluding the impact of divestments, Abu Dhabi license expiry, PSC price
effects, security impacts in Nigeria and the NAM curtailment, first half year
2014 production was in line with the same period last year.
Equity sales of LNG of 12.09 million tonnes were 23% higher than for the first
half year 2013, reflecting the contribution from the acquisition of Repsol's
LNG business and decreased feedgas disruptions in Nigeria, partly offset by
higher planned maintenance at some LNG plants.
DOWNSTREAM
Quarters $ million Half year
Q2 2014 Q1 2014 Q2 2013 %1 2014 2013 %
Downstream CCS earnings
1,347 1,575 1,168 +15 excluding identified items 2,922 3,016 -3
1,271 (1,005) 803 +58 Downstream CCS earnings 266 2,491 -89
Downstream cash flow from
262 3,145 3,761 -93 operating activities 3,407 4,126 -17
Downstream net capital
543 776 1,328 -59 investment 1,319 2,148 -39
Refinery processing intake
3,034 2,965 2,914 +4 (thousand b/d) 3,000 2,902 +3
Oil products sales volumes
6,453 6,319 6,212 +4 (thousand b/d) 6,386 6,109 +5
Chemicals sales volumes
4,387 4,285 4,211 +4 (thousand tonnes) 8,672 8,354 +4
1 Q2 on Q2 change
Second quarter Downstream earnings excluding identified items were $1,347
million compared with $1,168 million for the second quarter 2013. Identified
items were a net charge of $76 million, compared with a net charge of $365
million for the second quarter 2013 (see page 6).
Compared with the second quarter 2013, Downstream earnings excluding identified
items benefited from higher contributions from Manufacturing. This was despite
weaker refining industry conditions, in particular in Asia and Europe. Earnings
were impacted by increased costs resulting from one-off provisions, and lower
contributions from trading and supply activities. Contributions from Chemicals
were higher as a result of improved base chemicals industry conditions mainly
in North America as well as lower planned maintenance, partly offset by weaker
intermediates industry conditions.
Downstream cash flow from operating activities was impacted by negative working
capital movements in Oil Products primarily driven by inventory effects.
Refinery intake volumes were 4% higher compared with the same quarter last
year, mainly as a result of improved operational performance. Refinery
availability increased to 94% compared with 92% in the second quarter 2013.
Oil products sales volumes increased by 4% compared with the same period a year
ago reflecting higher trading volumes partly offset by lower marketing volumes.
Chemicals sales volumes increased by 4% compared with the same quarter last
year, mainly as a result of higher utilisation. Chemicals manufacturing plant
availability increased to 90% from 88% for the second quarter 2013, as a result
of lower planned maintenance, partly offset by higher unplanned maintenance.
Half year Downstream earnings excluding identified items were $2,922 million
compared with $3,016 million for the first half year 2013. Identified items
were a net charge of $2,656 million, compared with a net charge of $525 million
for the first half year 2013 (see page 6).
Compared with the first half year 2013, Downstream earnings excluding
identified items were impacted by lower contributions from trading and supply
and weaker refining industry conditions in Asia and Europe. These items were
partly offset by a stronger refining margin environment in the United States
Gulf Coast and improved refining operational performance. Contributions from
Chemicals were higher as a result of improved base chemicals industry
conditions primarily in North America as well as lower planned maintenance,
partly offset by weaker intermediates industry conditions.
Refinery intake volumes were 3% higher compared with the first half year 2013,
mainly as a result of improved operational performance. Refinery availability
increased to 93% from 92% for the same period a year ago.
Oil products sales volumes increased by 5% compared with the same period a year
ago, mainly as a result of higher trading volumes partly offset by lower
marketing volumes.
Chemicals sales volumes increased by 4% compared with the first half year 2013,
mainly as a result of higher utilisation. Chemicals manufacturing plant
availability increased to 93% from 90% for the first half year 2013, as a
result of lower planned maintenance, partly offset by higher unplanned
maintenance.
CORPORATE AND NON-CONTROLLING INTEREST
Quarters $ million Half year
Q2 2014 Q1 2014 Q2 2013 2014 2013
Corporate and Non-controlling interest
57 42 (94) excl. identified items 99 (70)
Of which:
101 76 (77) Corporate 177 11
(44) (34) (17) Non-controlling interest (78) (81)
56 43 (90) Corporate and Non-controlling interest 99 352
Second quarter Corporate results and Non-controlling interest excluding
identified items were a gain of $57 million, compared with a loss of $94
million for the same period last year. Identified items for the second quarter
2014 were a net charge of $1 million, whereas earnings for the second quarter
2013 included a net gain of $4 million (see page 6).
Compared with the second quarter 2013, Corporate results excluding identified
items mainly reflected favourable currency exchange rate effects, higher tax
credits, and lower costs, partly offset by increased net interest expense.
Half year Corporate results and Non-controlling interest excluding identified
items were a gain of $99 million compared with a loss of $70 million for the
first half year 2013. Identified items for the first half year 2014 offset to
nil, compared with a net gain of $422 million for the first half year 2013 (see
page 6).
Compared with the first half year 2013, Corporate results excluding identified
items mainly reflected favourable currency exchange rate effects and lower
costs, partly offset by higher net interest expense.
FORTHCOMING EVENTS
On September 5, 2014 an Investor Day will be held in New York, United States.
Third quarter 2014 results and third quarter 2014 dividend are scheduled to be
announced on October 30, 2014.
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME
Quarters $ million Half year
Q2 2014 Q1 2014 Q2 2013 %1 2014 2013 %
111,222 109,658 112,669 Revenue 220,880 225,479
Share of profit of joint
1,716 2,070 1,433 ventures and associates 3,786 3,736
2,336 351 246 Interest and other income 2,687 647
Total revenue and other
115,274 112,079 114,348 income 227,353 229,862
85,296 83,835 88,901 Purchases 169,131 175,504
Production and manufacturing
7,839 7,179 7,000 expenses 15,018 13,458
Selling, distribution and
3,755 3,434 3,661 administrative expenses 7,189 7,248
274 283 305 Research and development 557 599
1,128 927 1,228 Exploration 2,055 1,876
Depreciation, depletion and
7,354 7,424 7,502 amortisation 14,778 11,727
505 452 379 Interest expense 957 780
9,123 8,545 5,372 +70 Income before taxation 17,668 18,670 -5
3,778 4,003 3,631 Taxation 7,781 8,703
5,345 4,542 1,741 +207 Income for the period 9,887 9,967 -1
Income attributable to
38 33 4 non-controlling interest 71 54
Income attributable to Royal
5,307 4,509 1,737 +206 Dutch Shell plc shareholders 9,816 9,913 -1
1 Q2 on Q2 change
EARNINGS PER SHARE
Quarters $ Half year
Q2 2014 Q1 2014 Q2 2013 2014 2013
0.84 0.72 0.28 Basic earnings per share 1.56 1.57
0.84 0.72 0.27 Diluted earnings per share 1.56 1.57
SHARES1
Quarters Millions Half year
Q2 2014 Q1 2014 Q2 2013 2014 2013
Weighted average number of
shares as the basis for:
6,323.0 6,287.8 6,313.7 Basic earnings per share 6,305.5 6,311.3
6,323.4 6,288.9 6,316.9 Diluted earnings per share 6,305.8 6,314.6
Shares outstanding at the end of
6,341.7 6,321.8 6,296.0 the period 6,341.7 6,296.0
1 Royal Dutch Shell plc ordinary shares of euro 0.07 each
Notes 1 to 6 are an integral part of these unaudited Condensed Consolidated
Interim Financial Statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Quarters $ million Half year
Q2 2014 Q1 2014 Q2 2013 2014 2013
5,345 4,542 1,741 Income for the period 9,887 9,967
Other comprehensive income net of
tax:
Items that may be reclassified to
income in later periods:
591 (551) (1,024) -Currency translation differences 40 (2,676)
-Unrealised (losses)/gains on
(182) 28 (71) securities (154) (40)
(18) 19 142 -Cash flow hedging (losses)/gains 1 155
-Share of other comprehensive income
/(loss) of joint ventures and
5 (7) (29) associates (2) (85)
396 (511) (982) Total (115) (2,646)
Items that are not reclassified
to income in later periods:
(253) (546) 584 -Retirement benefits remeasurements (799) 2,020
(253) (546) 584 Total (799) 2,020
Other comprehensive income/(loss)
143 (1,057) (398) for the period (914) (626)
5,488 3,485 1,343 Comprehensive income for the period 8,973 9,341
Comprehensive income/(loss)
attributable to non-controlling
48 29 (22) interest 77 3
Comprehensive income attributable
to Royal Dutch Shell plc
5,440 3,456 1,365 shareholders 8,896 9,338
Notes 1 to 6 are an integral part of these unaudited Condensed Consolidated
Interim Financial Statements.
CONDENSED CONSOLIDATED BALANCE SHEET
$ million
Jun 30, 2014 Mar 31, 2014 Dec 31, 2013
Assets
Non-current assets:
Intangible assets1 7,423 7,482 4,394
Property, plant and equipment 193,069 194,608 191,897
Joint ventures and associates 34,455 35,909 34,613
Investments in securities 4,647 4,761 4,715
Deferred tax 6,557 6,177 5,785
Retirement benefits 3,439 3,197 3,574
Trade and other receivables 9,121 10,036 9,191
258,711 262,170 254,169
Current assets:
Inventories 31,361 28,829 30,009
Trade and other receivables 65,225 63,670 63,638
Cash and cash equivalents1 15,419 11,924 9,696
112,005 104,423 103,343
Total assets 370,716 366,593 357,512
Liabilities
Non-current liabilities:
Debt1 38,901 41,236 36,218
Trade and other payables 4,167 4,281 4,065
Deferred tax 11,950 11,882 11,943
Retirement benefits 11,967 11,385 11,182
Decommissioning and other provisions 22,714 22,298 19,698
89,699 91,082 83,106
Current liabilities:
Debt1 5,221 4,493 8,344
Trade and other payables 72,495 70,738 70,112
Taxes payable 13,542 13,488 11,173
Retirement benefits 389 387 382
Decommissioning and other provisions 3,257 3,275 3,247
94,904 92,381 93,258
Total liabilities 184,603 183,463 176,364
Equity attributable to Royal Dutch Shell
plc shareholders 185,015 182,028 180,047
Non-controlling interest 1,098 1,102 1,101
Total equity 186,113 183,130 181,148
Total liabilities and equity 370,716 366,593 357,512
1 See Note 6
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, 2014 542 (1,932) (2,037) 183,474 180,047 1,101 181,148
Comprehensive
income for the
period - - (920) 9,816 8,896 77 8,973
Capital
contributions from,
and other changes
in, non-controlling
interest - - - 3 3 (7) (4)
Dividends paid - - - (5,862) (5,862) (73) (5,935)
Scrip dividends1 6 - (6) 2,399 2,399 - 2,399
Repurchases of
shares2 (4) - 4 (1,028) (1,028) - (1,028)
Shares held in
trust: net sales/
(purchases) and
dividends received - 809 - 56 865 - 865
Share-based
compensation - - (305) - (305) - (305)
At June 30, 2014 544 (1,123) (3,264) 188,858 185,015 1,098 186,113
At January 1, 2013 542 (2,287) (3,752) 180,246 174,749 1,433 176,182
Comprehensive
income for the
period - - (575) 9,913 9,338 3 9,341
Capital
contributions from,
and other changes
in, non-controlling
interest - - - - - (2) (2)
Dividends paid - - - (5,598) (5,598) (80) (5,678)
Scrip dividends1 4 - (4) 1,647 1,647 - 1,647
Repurchases of
shares2 (6) - 6 (3,077) (3,077) - (3,077)
Shares held in
trust: net sales/
(purchases) and
dividends received - 559 - 59 618 - 618
Share-based
compensation - - (430) (380) (810) - (810)
At June 30, 2013 540 (1,728) (4,755) 182,810 176,867 1,354 178,221
1 Under the Scrip Dividend Programme some 64.6 million A shares, equivalent to
$2.4 billion, were issued during the first half year 2014 and some 49.2 million
A shares, equivalent to $1.6 billion, were issued during the first half year
2013. On May 22, 2014, Shell announced the cancellation of its Scrip Dividend
Programme with effect from the second quarter 2014 interim dividend onwards.
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 Half year
Q2 2014 Q1 2014 Q2 2013 2014 2013
Cash flow from operating
activities
5,345 4,542 1,741 Income for the period 9,887 9,967
Adjustment for:
4,336 4,400 4,048 - Current taxation 8,736 8,940
468 378 301 - Interest expense (net) 846 658
- Depreciation, depletion and
7,355 7,424 7,502 amortisation 14,779 11,727
- Net (gains)/losses on sale of
(2,203) 41 (44) assets (2,162) (257)
- (Increase)/decrease in working
(2,335) 875 4,085 capital (1,460) 4,119
- Share of profit of joint
(1,716) (2,070) (1,433) venture and associates (3,786) (3,736)
- Dividends received from joint
1,768 1,507 2,703 ventures and associates 3,275 3,945
- Deferred taxation, retirement
benefits, decommissioning
(396) (308) (845) and other provisions (704) (856)
399 529 784 - Other 928 811
Net cash from operating
13,021 17,318 18,842 activities (pre-tax) 30,339 35,318
(4,380) (3,334) (6,398) Taxation paid (7,714) (11,315)
Net cash from operating
8,641 13,984 12,444 activities 22,625 24,003
Cash flow from investing
activities
(7,872) (7,397) (8,987) Capital expenditure1 (15,269) (16,849)
Investments in joint ventures and
(493) (889) (291) associates (1,382) (663)
3,539 306 319 Proceeds from sales of assets 3,845 701
Proceeds from sales of joint
3,671 56 63 ventures and associates 3,727 217
188 152 (347) Other investments (net) 340 (327)
31 58 71 Interest received 89 107
Net cash used in investing
(936) (7,714) (9,172) activities (8,650) (16,814)
Cash flow from financing
activities
Net decrease in debt with
maturity period within three
(1,397) (1,297) (370) months (2,694) (237)
140 3,195 198 Other debt: New borrowings 3,335 378
(251) (2,933) (3,556) Repayments (3,184) (5,741)
(398) (368) (176) Interest paid (766) (334)
Change in non-controlling
(13) - 8 interest (13) 1
Cash dividends paid to:
- Royal Dutch Shell plc
(1,964) (1,499) (2,043) shareholders (3,463) (3,951)
(45) (28) (59) - Non-controlling interest (73) (80)
(346) (1,241) (1,934) Repurchases of shares (1,587) (2,479)
Shares held in trust: net
(purchases)/sales and dividends
90 123 (432) received 213 (442)
Net cash used in financing
(4,184) (4,048) (8,364) activities (8,232) (12,885)
Currency translation differences
relating to cash and
(26) 6 18 cash equivalents (20) (314)
Increase/(decrease) in cash and
3,495 2,228 (5,074) cash equivalents 5,723 (6,010)
Cash and cash equivalents at
11,924 9,696 17,614 beginning of period 9,696 18,550
Cash and cash equivalents at end
15,419 11,924 12,540 of period 15,419 12,540
1 See Note 6
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 in accordance with IAS 34 Interim
Financial Reporting as adopted by the European Union and as issued by the
International Accounting Standards Board and 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, 2013 (pages 105 to 110) as
filed with the U.S. Securities and Exchange Commission.
Shell's operating plan for the foreseeable future demonstrates its ability to
operate its cash-generating activities, selling products to a diversified
customer base. These activities are expected to generate sufficient cash to
enable Shell to service its financing requirements, pay dividends and fund its
investing activities. As a result, the Directors have a reasonable expectation
that Shell has adequate resources to continue in operational existence for the
foreseeable future and continue to adopt the going concern basis of accounting
in preparing the financial statements contained in this Report.
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, 2013
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). 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.
Net capital investment (see Note 9) is defined as capital expenditure as
reported in the Condensed Consolidated Statement of Cash Flows, adjusted for:
proceeds from disposals (excluding other investments (net) in the Corporate
segment); exploration expense excluding exploration wells written off;
investments in joint ventures and associates; and leases and other items.
CCS earnings and net capital investment information are the dominant measures
used by the Chief Executive Officer for the purposes of making decisions about
allocating resources and assessing performance.
Information by business segment:
Quarters $ million Half year
Q2 2014 Q2 2013 2014 2013
Third-party revenue
10,658 12,085 Upstream 23,671 24,461
100,548 100,534 Downstream 197,151 200,943
16 50 Corporate 58 75
111,222 112,669 Total third-party revenue 220,880 225,479
Inter-segment revenue
12,621 10,353 Upstream 24,872 22,495
463 158 Downstream 1,071 401
- - Corporate - -
Segment earnings
3,820 1,681 Upstream1 9,247 7,502
1,271 803 Downstream2 266 2,491
100 (73) Corporate 177 418
5,191 2,411 Total segment earnings 9,690 10,411
1 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. Second quarter 2013 Upstream earnings included an impairment
charge of $2,071 million after taxation.
2 First quarter 2014 Downstream earnings included an impairment charge of $2,284
million related to refineries in Asia and Europe.
Quarters $ million Half year
Q2 2014 Q2 2013 2014 2013
5,191 2,411 Total segment earnings 9,690 10,411
Current cost of supplies adjustment:
151 (794) Purchases 143 (681)
(42) 218 Taxation (43) 190
Share of profit of joint ventures and
45 (94) associates 97 47
5,345 1,741 Income for the period 9,887 9,967
3. Share capital
Issued and fully paid
Sterling deferred
Ordinary shares of euro 0.07 each shares
Number of shares A B of £1 each
At January 1, 2014 3,898,011,213 2,472,839,187 50,000
Scrip dividends 64,568,758 - -
Repurchases of shares (8,620,000) (32,428,573) -
At June 30, 2014 3,953,959,971 2,440,410,614 50,000
At January 1, 2013 3,772,388,687 2,617,715,189 50,000
Scrip dividends 49,223,025 - -
Repurchases of shares - (72,247,018) -
At June 30, 2013 3,821,611,712 2,545,468,171 50,000
Nominal value
Ordinary shares of euro 0.07 each
$ million A B Total
At January 1, 2014 333 209 542
Scrip dividends 6 - 6
Repurchases of shares (1) (3) (4)
At June 30, 2014 338 206 544
At January 1, 2013 321 221 542
Scrip dividends 4 - 4
Repurchases of shares - (6) (6)
At June 30, 2013 325 215 540
The total nominal value of sterling deferred shares is less than $1 million.
At Royal Dutch Shell plc's Annual General Meeting on May 20, 2014, 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 euro 147 million
(representing 2,100 million ordinary shares of euro 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 20, 2015, and the end of the Annual
General Meeting to be held in 2015, unless previously renewed, revoked or
varied by Royal Dutch Shell plc in a general meeting.
4. Other reserves
Accumulated
Share Capital Share other
Merger premium redemption plan comprehensive
$ million reserve1 reserve1 reserve2 reserve income Total
At January 1, 2014 3,411 154 75 1,871 (7,548) (2,037)
Other comprehensive
loss attributable to
Royal Dutch Shell plc
shareholders - - - - (920) (920)
Scrip dividends (6) - - - - (6)
Repurchases of shares - - 4 - - 4
Share-based
compensation - - - (305) - (305)
At June 30, 2014 3,405 154 79 1,566 (8,468) (3,264)
At January 1, 2013 3,423 154 63 2,028 (9,420) (3,752)
Other comprehensive
loss attributable to
Royal Dutch Shell plc
shareholders - - - - (575) (575)
Scrip dividends (4) - - - - (4)
Repurchases of shares - - 6 - - 6
Share-based
compensation - - - (430) - (430)
At June 30, 2013 3,419 154 69 1,598 (9,995) (4,755)
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 Jun 30, 2014 Mar 31, 2014 Dec 31, 2013
Included within:
Trade and other receivables - non-current 1,587 1,761 1,772
Trade and other receivables - current 8,393 7,577 6,445
Trade and other payables - non-current 497 569 587
Trade and other payables - current 8,949 7,944 6,474
As disclosed in the Consolidated Financial Statements for the year ended
December 31, 2013, 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 June 30, 2014 are consistent with those used in the year ended December 31,
2013, and the carrying amounts of derivative contracts measured using
predominantly unobservable inputs has not changed materially since that date.
The fair value of debt excluding finance lease liabilities at June 30, 2014,
was $39,047 million (March 31, 2014: $39,967 million; December 31, 2013:
$40,569 million). Fair value is determined from the prices quoted for those
securities.
6. Acquisition of Repsol LNG businesses
On January 1, 2014, Shell completed the acquisition from Repsol S.A. of its LNG
operations located in Trinidad and Tobago and Peru and related shipping and
marketing activities, as reported in the Annual Report and Form 20-F for the
year ended December 31, 2013 (page 139).
Cash consideration was $4.1 billion, of which $3.4 billion was transferred on
December 31, 2013 and $0.7 billion on January 2, 2014. After taking account of
cash balances of $0.3 billion in the entities acquired, the impact on capital
expenditure in the Condensed Consolidated Statement of Cash Flows was $3.4
billion and $0.4 billion in the fourth quarter 2013 and the first quarter 2014
respectively. The impact on net capital investment, which also reflected the
inclusion of finance lease liabilities assumed on January 1, 2014, was $3.4
billion and $2.0 billion in the fourth quarter 2013 and the first quarter 2014
respectively.
The updated fair values of the net assets acquired at January 1, 2014 and the
fair value of the consideration paid were as follows:
$ million
Fair value1
Net assets acquired:
Intangible assets 3,273
Property, plant and equipment 1,198
Joint ventures and associates 531
Cash and cash equivalents 329
Other assets 424
Debt (1,601)
Other liabilities (39)
Consideration paid 4,115
1 The determination of the fair values of the net assets acquired is
provisional and will be subject to further review during the 12 months from the
acquisition date.
7. Impacts of accounting for derivatives
In the ordinary course of business Shell enters into contracts to supply or
purchase oil and gas products, and also enters into derivative contracts to
mitigate resulting economic exposures (generally price exposure). 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.
8. 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. Capital
employed consists of total equity, current debt and non-current debt.
9. Liquidity and capital resources
Second quarter net cash from operating activities was $8.6 billion compared
with $12.4 billion for the same period last year.
Total current and non-current debt decreased to $44.1 billion at June 30, 2014
from $45.7 billion at March 31, 2014 while cash and cash equivalents increased
to $15.4 billion at June 30, 2014 from $11.9 billion at March 31, 2014. No new
debt was issued under the US shelf registration or under the euro medium-term
note programme during the second quarter of 2014.
Net capital investment for the second quarter 2014 was $1.1 billion, of which
$0.6 billion in Upstream and $0.5 billion in Downstream. Net capital investment
for the same period of 2013 was $10.9 billion, of which $9.5 billion in
Upstream, $1.3 billion in Downstream and $0.1 billion in Corporate.
Dividends of $0.47 per share are announced on July 31, 2014 in respect of the
second quarter. These dividends are payable on September 25, 2014. 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, 2013 for
additional information on the dividend access mechanism.
On May 22, 2014, Shell announced the cancellation of its Scrip Dividend
Programme with effect from the second quarter 2014 interim dividend onwards.
Half year net cash from operating activities was $22.6 billion compared with
$24.0 billion for the same period last year.
Total current and non-current debt decreased to $44.1 billion at June 30, 2014
from $44.6 billion at December 31, 2013 while cash and cash equivalents
increased to $15.4 billion at June 30, 2014 from $9.7 billion at December 31,
2013. New debt was issued under the euro medium-term note programme during the
first half 2014.
Net capital investment for the first half 2014 was $11.3 billion, of which $9.9
billion in Upstream, $1.3 billion in Downstream and $0.1 billion in Corporate.
Net capital investment for the same period of 2013 was $19.1 billion, of which
$16.9 billion in Upstream, $2.1 billion in Downstream and $0.1 billion in
Corporate.
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties affecting Shell are described in the Risk
Factors section of the Annual Report and Form 20-F for the year ended December
31, 2013 (pages 11 to 14) 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 fluctuating prices of crude oil, natural gas, oil
products and chemicals.
* Our ability to achieve strategic objectives depends on how we react to
competitive forces.
* As our business model involves treasury and trading risks, we are affected
by the global macroeconomic environment as well as financial and commodity
market conditions.
* Our future hydrocarbon production depends on the delivery of large and
complex projects, as well as on our ability to replace proved oil and gas
reserves.
* An erosion of our business reputation would have a negative impact on our
brand, our ability to secure new resources and our licence to operate.
* Our future performance depends on the successful development and deployment
of new technologies.
* Rising climate change concerns could lead to additional regulatory measures
that may result in project delays and higher costs.
* The nature of our operations exposes us to a wide range of health, safety,
security and environment risks.
* Shell mainly self-insures its risk exposures.
* A further erosion of the business and operating environment in Nigeria
would adversely impact Shell.
* 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 laws and
regulations. In addition, Shell and its joint ventures and associates face
the risk of litigation and disputes worldwide.
* Our operations expose us to social instability, civil unrest, terrorism,
acts of war, piracy and government sanctions that could have an adverse
impact on our business.
* We rely heavily on information technology systems for our operations.
* We have substantial pension commitments, whose funding is subject to
capital market risks.
* The estimation of proved oil and gas reserves involves subjective
judgements based on available information and the application of complex
rules, so subsequent downward adjustments are possible.
* Many of our major projects and operations are conducted in joint
arrangements or associates. This may reduce our degree of control, as well
as our ability to identify and manage risks.
* Violations of antitrust and competition law carry fines and expose us and/
or our employees to criminal sanctions and civil suits.
* Violations of anti-bribery and corruption law carry fines and expose us and
/or our employees to criminal sanctions and civil suits.
* Violations of data protection laws carry fines and expose us and/or our
employees to criminal sanctions and civil suits.
* The Company's Articles of Association determine the jurisdiction for
shareholder disputes. This might limit shareholder remedies.
FIRST QUARTER 2014 PORTFOLIO DEVELOPMENTS
Upstream
In Brazil, Shell announced an agreement to sell a 23% interest in the
Shell-operated deep-water project BC-10 to Qatar Petroleum International for a
consideration of some $1 billion. Subject to regulatory approval, the
transaction is expected to close in 2014.
In Brunei, final investment decision ("FID") was taken on the Maharaja Lela
South ("ML South") development (Shell interest 35%). The development is
expected to deliver peak production of 35 thousand barrels of oil equivalent
per day ("boe/d").
Shell successfully commenced export of its first crude from the Majnoon oil
field in Iraq, where production exceeded the 175,000 barrels per day (b/d)
First Commercial Production target which initiated the commencement of cost
recovery.
In the United Kingdom, Shell entered into an agreement with the government to
progress the Peterhead Carbon Capture and Storage ("CCS") project to the next
phase of front-end engineering and design ("FEED"). The project aims to capture
and store 10 million tonnes of CO2 over 10 years. If successful, the project
could represent the first industrial-scale application of CCS technology at a
gas-fired power station anywhere in the world.
In the United States, Shell announced first production from the Mars B
deep-water development (Shell interest 71.5%) in the Gulf of Mexico. The
Olympus platform was completed and installed more than six months ahead of
schedule, allowing for early production. Olympus is Shell's seventh, and
largest, floating deep-water platform in the Gulf of Mexico and extends the
life of the overall Mars basin to around 2050. It is expected that the project
will ramp up to a peak production of 100 thousand boe/d in 2016.
Also in the United States, Shell reached an agreement to sell its 50% interest
in approximately 312,000 acres in the Niobrara and Sandwash basins for a
consideration of some $90 million. Subject to regulatory approval, the deal is
expected to close in May, 2014.
Shell commenced FEED on the Appomattox deep-water development project (Shell
interest 80%) in the Gulf of Mexico, United States. Including the Vicksburg A
discovery (Shell interest 75%), the resources associated with this development
are estimated to be greater than 600 million barrels of oil equivalent ("boe").
The project is expected to deliver peak production of 150 thousand boe/d.
The Siakap North-Petai development (Shell interest 21%) offshore Malaysia
commenced production. The development is expected to deliver peak production of
around 30 thousand boe/d.
During the quarter, in Shell's heartlands exploration programme, a
Shell-operated oil discovery at the Limbayong prospect (Shell interest 35%)
offshore Malaysia was announced. Shell participated in the non-operated
Lympstone gas discovery (Shell interest 50%) offshore Australia, and in April
in the Rosmari-1 discovery (Shell interest 85%) offshore Malaysia, adding new
gas resources. In addition during the quarter, we had a successful appraisal of
the Pegaga gas discovery (Shell interest 20%) offshore Malaysia.
Shell had continued success with near-field exploration discoveries in a number
of countries.
As part of its global exploration programme, Shell added new acreage positions
following successful bidding results in Namibia, Norway, and Russia.
Upstream divestment proceeds totalled some $0.3 billion for the first quarter
2014 and included among others proceeds from the completed sale of Shell's
interest in Mississippi Lime acreage in Kansas, United States.
In April, Shell approved to move into FEED for an LNG facility in Canada. The
facility is expected to have capacity of approximately 12 million tonnes per
annum ("mtpa") with expansion potential to approximately 24 mtpa.
In Upstream Americas resources plays (shale oil and gas), insights from ongoing
exploration and appraisal drilling results and production information, and
Shell's ongoing restructuring of this portfolio, could potentially lead to
future asset sales and/or impairments.
Downstream
In Australia, Shell announced a binding agreement to sell its Downstream
businesses (excluding Aviation) to Vitol for a total transaction value of
approximately $2.6 billion. The sale covers Shell's Geelong Refinery and
870-site Retail business, along with its Bulk Fuels, Bitumen, Chemicals and
part of its Lubricants businesses. It also includes a brand licence arrangement
and an exclusive distributor arrangement in Australia for Shell Lubricants. The
deal is subject to regulatory approvals and is expected to close in 2014.
In Italy, Shell reached an agreement with Kuwait Petroleum International for
the sale of its Retail, Supply & Distribution Logistics and Aviation
businesses. Under this agreement, Shell's Retail network will be re-branded to
Q8 in the country. The sale is subject to regulatory approvals and is expected
to close in 2014.
Consistent with Shell's strategic intent to concentrate its Downstream global
footprint and businesses where it can be most competitive, Shell announced the
intent to sell its Downstream Refining and Marketing businesses in Denmark.
Shell is also considering the sale of certain of its Marketing assets in
Norway.
Downstream divestment proceeds totalled some $0.2 billion for the first quarter
2014 and included among others proceeds from the divestment of Shell's 16.3%
interest in Ceska Rafinerska in the Czech Republic.
FIRST QUARTER 2014 SUMMARY OF IDENTIFIED ITEMS
Earnings for the first quarter 2014 reflected the following items, which in
aggregate amounted to a net charge of $2,862 million (compared with a net gain
of $431 million in the first quarter 2013), as summarised in the table below:
* Upstream earnings included a net charge of $283 million, mainly reflecting
charges related to asset impairments of $168 million. Identified items also
included net charges related to the fair value accounting of commodity
derivatives and certain gas contracts, the impact of a reduction in the
discount rate used for provisions, and divestments. Earnings for the first
quarter 2013 included a net gain of $173 million.
* Downstream earnings included a net charge of $2,580 million, including
impairments of $2,284 million related to refineries in Asia and Europe. The
refining-related impairments, equivalent to 14% of Shell's refinery asset
base, reflect the latest insight into margins based on feedstock supply and
product demand outlook. This charge includes the write-off of the Bukom oil
refinery, at Shell's integrated refinery and chemicals facility in
Singapore, and excludes the Bukom chemicals plant. The company has
initiatives underway to improve the profitability of the integrated
facilities at Bukom. Earnings for the first quarter 2013 included a net
charge of $160 million.
* Corporate and Non-controlling interest earnings included a net gain of $1
million. Earnings for the first quarter 2013 included a net gain of $418
million.
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 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 as shown on pages 58-59 in the
Annual Report and Form 20-F for the year ended December 31, 2013 except that
Josef Ackermann stepped down as a Director on May 20, 2014, and Patricia A.
Woertz was appointed a Director with effect from June 1, 2014.
On behalf of the Board
Ben van Beurden Simon Henry
Chief Executive Officer Chief Financial Officer
July 31, 2014 July 31, 2014
INDEPENDENT REVIEW REPORT TO ROYAL DUTCH SHELL PLC
REPORT ON THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Our conclusion
We have reviewed the Condensed Consolidated Interim Financial Statements,
defined below, in the half-yearly financial report of Royal Dutch Shell plc for
the six months ended June 30, 2014. Based on our review, nothing has come to
our attention that causes us to believe that the Condensed Consolidated Interim
Financial Statements are not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the European Union and
the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct
Authority. This conclusion is to be read in the context of what we say in the
remainder of this report.
What we have reviewed
The Condensed Consolidated Interim Financial Statements, which are prepared by
Royal Dutch Shell plc, comprise:
* the Consolidated Statement of Income and Consolidated Statement of
Comprehensive Income for the six months ended June 30, 2014;
* the Condensed Consolidated Balance Sheet as at June 30, 2014;
* the Consolidated Statement of Changes in Equity and Condensed Consolidated
Statement of Cash Flows for the six months ended June 30, 2014; and
* the explanatory notes to the Condensed Consolidated Interim Financial
Statements.
The annual financial statements of Royal Dutch Shell plc are prepared in
accordance with applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union. The Condensed Consolidated Interim
Financial Statements included in this half-yearly financial report have been
prepared in accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union and the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct Authority.
What a review of the Condensed Consolidated Financial Statements involves
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, '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 Ireland) 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. 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 Consolidated Interim Financial Statements.
RESPONSIBILITIES FOR THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
AND THE REVIEW
Our responsibilities and those of the directors
The half-yearly financial report, including the Condensed Consolidated Interim
Financial Statements, 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 and Transparency Rules of
the United Kingdom's Financial Conduct Authority. Our responsibility is to
express to the company a conclusion on the Condensed Consolidated Interim
Financial Statements in the half-yearly financial report based on our review.
This report, including the conclusion, has been prepared for and only for the
company for the purpose of complying with the Disclosure and Transparency Rules
of the Financial Conduct Authority and for no other purpose. We do not, in
giving this conclusion, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
July 31, 2014
a) 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.
b) Legislation in the United Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in other jurisdictions.
CAUTIONARY STATEMENT
All amounts shown throughout this Report are unaudited.
The companies in which Royal Dutch Shell plc directly and indirectly owns
investments are separate entities. In this document "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
document 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 document contains forward-looking statements 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 ''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 document, 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 document
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, 2013 (available at www.shell.com/investor and www.sec.gov).
These risk factors also expressly qualify all forward-looking statements
contained in this document and should be considered by the reader. Each
forward-looking statement speaks only as of the date of this document, July 31,
2014. 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 document.
We may have used certain terms, such as resources, in this document that the
United States Securities and Exchange Commission (SEC) strictly prohibits us
from including in our filings with the SEC. U.S. investors are urged to
consider closely the disclosure in our Form 20-F, File No 1-32575, available on
the SEC website www.sec.gov. You can also obtain this form from the SEC by
calling 1-800-SEC-0330.
July 31, 2014
The information in this Report reflects the unaudited consolidated financial
position and results of Royal Dutch Shell plc. The information in this Report
also represents Royal Dutch Shell plc's half-yearly financial report for the
purposes of the Disclosure and Transparency Rules of the UK Financial Conduct
Authority. As such: (1) the interim management report can be found on pages 3
to 9 and 18 to 21; (2) the condensed set of financial statements on pages 10 to
17; and (3) the directors' responsibility statement on page 22 and the
auditors' independent review on page 23. 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