Shell PLC · LSE:SHEL
Shell — Royal Dutch Shell — Investor Day (March 2009)
53 slides from Shell's investor day presentation, Mar 17, 2009
Slide 1: Building New Heartlands: Managing Recession Challenges
ROYAL DUTCH SHELL PLC BUILDING NEW HEARTLANDS MANAGING RECESSION CHALLENGES March 17, 2009 INVESTOR PRESENTATION
Slide 2: Jeroen van der Veer, Chief Executive
ROYAL DUTCH SHELL PLC BUILDING NEW HEARTLANDS MANAGING RECESSION CHALLENGES JEROEN VAN DER VEER CHIEF EXECUTIVE 1
Slide 3: Agenda
AGENDA STRATEGY OVERVIEW Jeroen van der Veer PORTFOLIO UPDATE Chief Executive FINANCIAL FRAMEWORK Peter Voser LONG-TERM OPTIONS Chief Financial Officer Q&A 2
Slide 4: Definitions and Cautionary Note
DEFINITIONS AND CAUTIONARY NOTE Reserves: Our use of the term “reserves” in this presentation means SEC proved oil and gas reserves and SEC proven mining reserves. Resources: Our use of the term “resources” in this presentation includes quantities of oil and gas not yet classified as SEC proved oil
Slide 5: Summary
SUMMARY BUILDING NEW HEARTLANDS • Rebuilding Upstream strength; repositioning Downstream • Technology, integration, scale, top quartile REJUVENATING THE PORTFOLIO UPSTREAM + DOWNSTREAM • Building 1.0 mboe/d Upstream, 6.5mtpa LNG and ~0.3 mb/d Downstream • >1 mboe/d new options in design PRUDENT APPR
Slide 6: Strategy Overview
ROYAL DUTCH SHELL PLC BUILDING NEW HEARTLANDS MANAGING RECESSION CHALLENGES STRATEGY OVERVIEW 5
Slide 7: Building New Heartlands
BUILDING NEW HEARTLANDS STRATEGY ON TRACK • Consistent view of industry landscape • More upstream, profitable downstream • Capital discipline, portfolio approach PRIORITIES • Process + personal safety • Operational excellence + top quartile assets • Project management + technology • Prudent approach
Slide 8: Strategy Underpinned by Financial Performance
STRATEGY UNDERPINNED BY FINANCIAL PERFORMANCE EARNINGS INVESTMENT $ Bln $ Bln 35 50 45 30 40 25 35 20 30 15 25 20 10 15 5 10 0 5 -5 0 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 2009 Est. UPSTREAM CORPORATE NET CAPITAL INVESTMENT SHARE BUYBACKS DOWNSTREAM DIVESTMENTS/OTHER DIVIDENDS CCS EARNIN
Slide 9: Energy Landscape
ENERGY LANDSCAPE INDUSTRY DOWNTURN INTO 2009 LONG-TERM BUSINESS FUNDAMENTALS POSITIVE Brent $/bbl Refining $/bbl Billion toe 120 12 18 90 12 8 6 60 4 0 30 1980 2000 2015 2030 0 0 SHELL ACTIVITIES 2003 2004 2005 2006 2007 2008 OIL OTHER RENEWABLES NUCLEAR HYDRO GLOBAL REFINING MARGIN BRENT GAS BIOMAS
Slide 10: Changing Cost Landscape
CHANGING COST LANDSCAPE INDUSTRY COSTS NEW COST OPPORTUNITIES CERA cost index % • SUPPLY CHAIN Offshore rigs • Monitoring supplier risk Offshore installation vessesls • Negotiations reflect new market conditions Land rigs • Lower price + improved service quality €/$ Oil Price • SHELL SELF-HELP Engin
Slide 11: Project Management + Performance
PROJECT MANAGEMENT + PERFORMANCE PROJECT STATUS Development time elapsed % Sakhalin II BC-10 Assess Select Define FID Execute Forcados Yokri Perdido Feasibility Concept Project Construction Harweel Study Selection Specifications Corrib Pearl – January 2009 Shell Eastern Petroc. Gbaran Ubie Ph1 Qatar
Slide 12: Rebuilding Upstream Strength
REBUILDING UPSTREAM STRENGTH OIL & GAS PRODUCTION PROFILE TYPICAL PRODUCTION & RETURNS PROFILES Kboe/d Kboe/d ROACE % 4,000 2,000 0 '00 '01 '02 '03 '04 '05 '06 '07 '08 2000 PORTFOLIO SPDC NIGERIA GROWTH DISPOSALS MANAGING 5% DECLINE RATES 0 5 10 15 20 25 • Balancing decline with capital discipline •
Slide 13: Well Positioned in Downstream Landscape
WELL POSITIONED IN DOWNSTREAM LANDSCAPE GLOBAL RECESSION • Choice • Tighter specifications • Lower prices CUSTOMERS GOVERNMENTS • Bio mandates • Increase fuel efficiency • Lower emissions SHELL WELL POSITIONED: INDUSTRY DYNAMICS • Portfolio focused on scale + growth • Refining + chemicals integratio
Slide 14: Leading Downstream Portfolio
LEADING DOWNSTREAM PORTFOLIO GLOBAL DOWNSTREAM PORTFOLIO BALANCED EARNINGS PROFILE CCS Earnings - $ Bln 8 6 4 2 0 '04 '05 '06 '07 '08 REFINING MARKETING CHEMICALS DIVESTMENT & OTHERS ACTIVE PORTFOLIO MANAGEMENT Cumulative disposal proceeds - $ Bln 15 • ~ 4 mln b/d refining capacity 10 • ~ 11 mln b/d
Slide 15: Global Leadership in Oil Products Marketing
GLOBAL LEADERSHIP IN OIL PRODUCTS MARKETING LEADING RETAIL PORTFOLIO STRONG BRAND PREFERENCE # Retail stations % 45,000 20 15 30,000 10 15,000 5 0 0 Shell Exxon BP Chevron Total Shell Competitors (Majors) Mobil 2007 2008 EUROPE & NORTH AMERICA OTHER SOURCE: GLOBAL BRAND TRACKER, Q4.08 DIFFERENTIATED
Slide 16: Alternative Energy & CO2 Technologies
ALTERNATIVE ENERGY & CO2 TECHNOLOGIES BIOFUELS RESEARCH ALTERNATIVE ENERGY AND C02 INVESTMENT Cumulative spend - $ Bln IOGEN Canada: Cellulosic ethanol- Fermentor 2.0 1.5 1.0 0.5 0.0 2004 2005 2006 2007 2008 REFOCUSING PORTFOLIO • Increasing priority on Biofuels • CCS technologies 15
Slide 17: Corporate and Social Responsibility
CORPORATE AND SOCIAL RESPONSIBILITY PROJECT DEVELOPMENT ‘GOAL ZERO’ ON SAFETY Injuries - TRCF per million working hours 4 3 Project profitability 2 1 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 Employees and contractors per million working hours; Shell operated facilities Environment Technology Safety G
Slide 18: Investing in Technology
INVESTING IN TECHNOLOGY R&D SPENDING INNOVATION In $mln Operations today 1,200 • Safety + reliability • Production performance • Margin optimization 1,000 • Product differentiation 800 Delivering growth • LNG 600 • GTL • Oil Sands • Differentiated Fuels 400 • Deepwater LNG transport Shaping the futu
Slide 19: Portfolio Update
ROYAL DUTCH SHELL PLC BUILDING NEW HEARTLANDS MANAGING RECESSION CHALLENGES PORTFOLIO UPDATE 18
Slide 20: Strong and Balanced Upstream Portfolio
STRONG AND BALANCED UPSTREAM PORTFOLIO RESOURCES Region Theme Resources development status 100% 75% 50% 25% 0% Status Theme AMERICAS ASIA PACIFIC HEAVY OIL & EOR LNG OPTIONS EUROPE ME, RUSSIA, CIS SOUR DEEPWATER CONSTRUCTION AFRICA GTL TRADITIONAL ONSTREAM TIGHT GAS 19
Slide 21: 2008 Exploration + Business Development
2008 EXPLORATION + BUSINESS DEVELOPMENT ADDING NEW RESOURCES: 2008 EXPLORATION RESOURCES ADDITIONS Bln Boe % 1.5 100 Chukchi 1 Sweden 50 Alberta Deep Basin UK Duvernay 0.5 Groundbirch Caspian Haynesville 0 0 Gulf of Mexico '01 '02 '03 '04 '05 '06 '07 '08 MLJ2-06 Llanos Basin OIL GAS SUCCESS RATE % N
Slide 22: 2006-08 Reserves Performance
2006-08 RESERVES PERFORMANCE 2006-08 RESERVES PERFORMANCE 2006-08 RESERVES PERFORMANCE Norway • Organic additions ~ 4.6 billion boe Canada • Production ~ 3.7 billion boe Netherlands Kazakhstan • Organic reserves replacement 126% USA Qatargas 4 Pearl • Reserves life ~10 years • New SEC guidelines for
Slide 23: 2009-2013 Start-ups
2009-2013 START-UPS KEY PROJECTS DEVELOPING LONG-LIFE ASSETS KBOE/d 1,200 Gjoa AOSP-1 Corrib Halfdan Sakhalin II Kashagan 600 NA Tight gas Schoonebeek Port Arthur Pearl GTL Perdido Qatargas 4 Singapore Chemicals Nigeria 0 Gumusut-Kakap 2008 2009-10 2011-12 2013+ Oman LONG LIFE OTHERS Pluto BC-10 (Wo
Slide 24: Qatar: Construction of Pearl GTL and QG4 LNG
QATAR: CONSTRUCTION OF PEARL GTL AND QG4 LNG PEARL GTL: INSTALLATION OF GAS-TO-LIQUIDS REACTORS QATAR GAS 4: LNG PLANT CONSTRUCTION Courtesy of Qatargas 23
Slide 25: Leadership in Global LNG
LEADERSHIP IN GLOBAL LNG LNG GLOBAL PORTFOLIO LNG CAPACITY GROWTH Year end mtpa 20 10 QG-4 Sakhalin 0 2008 2009 2010-11 Pluto (Woodside) NWS MALAYSIA OMAN QATARGAS 4 LNG - CONSTRUCTION BRUNEI NIGERIA SAKHALIN PLUTO (WOODSIDE) LNG - OPERATION REGAS POSITION - CONSTRUCTION REGAS POSITION - OPERATION L
Slide 26: Sakhalin LNG Start-up
SAKHALIN LNG START-UP LNG LOADING AT ANIVA BAY 25
Slide 27: Leadership in Global Deepwater
LEADERSHIP IN GLOBAL DEEPWATER GLOBAL POSITION DEEPWATER TECHNOLOGY Gulf of Mexico Ormen Lange Perdido Bonga NW Gumusut-Kakap BC-10 CONSTRUCTION PRODUCTION IOC DEEPWATER PRODUCTION LEADERSHIP Cumulative global deepwater production 1998 – 2008, Bln boe 3 2 1 0 Shell BP Exxon Chevron Total Source: Woo
Slide 28: Repositioning Downstream Manufacturing
REPOSITIONING DOWNSTREAM MANUFACTURING MANUFACTURING PORTFOLIO OPTIMISATION INCREASING AVERAGE REFINERY SIZE Mln bbl/d $/bbl Kbbl/d 12 160 4.5 Rome Delaware City Basell 140 Rayong Showa Shell 4 Bakersfield 120 Los Angeles 6 African refineries French refineries 100 3.5 '02 '05 '08 Dominican Republic
Slide 29: New Refining + Petrochemicals Capacity
NEW REFINING + PETROCHEMICALS CAPACITY PORT ARTHUR REFINERY EXPANSION SINGAPORE CHEMICALS CONSTRUCTION 2007 28
Slide 30: Rejuvenating Upstream + Downstream
REJUVENATING UPSTREAM + DOWNSTREAM OIL & GAS PRODUCTION Mln boe/d 100% 3 50% 2 0% '08 '09-10 '11-12 '08 '09-10 '11-12 OIL & GAS DISPOSALS EUROPE ME, RUSSIA, CIS ASIA PACIFIC N. AMERICA AFRICA OTHERS REFINING CAPACITY Mln bbl/d 100% 4 50% 2 0% '08 '09-10 '11-12 '08 '09-10 '11-12 REFINING + PEARL GTL
Slide 31: Peter Voser: Financial Framework
ROYAL DUTCH SHELL PLC BUILDING NEW HEARTLANDS MANAGING RECESSION CHALLENGES PETER VOSER FINANCIAL FRAMEWORK 30
Slide 32: Through-Cycle Financial Strategy
THROUGH-CYCLE FINANCIAL STRATEGY Global portfolio Financing capacity ranking Through-cycle Selective deals flexibility Competitive Returns Operating Dividend growth performance Non-core asset Share buy-back sales 31
Slide 33: Competitive Returns
COMPETITIVE RETURNS RETURNS TO SHAREHOLDERS RETURN ON CAPITAL EMPLOYED $ Bln (Cumulative) $ Bln Return % 35 35% 70 30 30% 60 25 25% 50 20 20% 40 15 15% 30 10 10% 20 5 5% 10 0 0% 0 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 ROACE RETURN ON CAPITAL IN SERVICE UPSTREAM CAPITAL UNDER CONSTRUCTION
Slide 34: Financial Performance
FINANCIAL PERFORMANCE COMPETITIVE CASH FLOW CAPITAL DISCIPLINE Cash flow per share growth - indexed Cumulative disposal proceeds - $ Bln 250 30 200 20 150 10 100 0 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 UPSTREAM DOWNSTREAM OTHER COMPETITIVE PAYOUT PRUDENT BALANCE SHEET Dividend/Earnings p
Slide 35: Capital Investment
CAPITAL INVESTMENT CAPITAL INVESTMENT 2008-09 TOTAL ORGANIC CAPEX $ Bln 2006 2007 2008 2009E ORGANIC 20 26 30 31-32 TOTAL GROWTH ACQUISITIONS 3 8 9 DISPOSALS (2) (10) (7) NET CAPITAL SPENDING 21 24 32 ~31-32 OIL & GAS PRODUCTION GROWTH LNG LIQUEFACTION, OIL SANDS BASE UPGRADING, DOWNSTREAM GTL EXPLO
Slide 36: Cost Structure of New Projects
COST STRUCTURE OF NEW PROJECTS BREAK-EVEN OIL PRICE INTEGRATED DEVELOPMENT COSTS $/boe price required for positive NPV $/boe resources 30 70 Oil Sands 20 50 Deepwater Weighted average Deepwater Integrated gas Tight gas 10 Oil Sands 30 Weighted average Integrated gas Tight gas 10 0 0% 50% 100% 0% 50%
Slide 37: Profitability of New Projects
PROFITABILITY OF NEW PROJECTS PROJECT LIFE PROJECT THEME IRR/Profitability – Portfolio averages IRR/Profitability – Thematic averages IRR IRR Deepwater 30% $90/bbl 30% $70/bbl 20% Others 20% Traditional Integrated gas $50/bbl Downstream Long-life projects 10% 10% Oil Sands 0% 0% 0.5 1 1.5 2 0.5 1 1.
Slide 38: Balancing Spending with Growth
BALANCING SPENDING WITH GROWTH CAPITAL EXPENDITURE OIL & GAS PRODUCTION % Kboe/d 100% 4,000 75% 50% 2,000 25% 0% 0 2007 2008 2009 2010 2011-12 2007 2008 2009-10 2011-12 2013+ COMMITTED PSC OPTIONS COMMITTED OPTIONS OTHERS 2008-09 FID slowdown due to industry costs + affordability management FID pace
Slide 39: Profitability & Affordability
PROFITABILITY & AFFORDABILITY COMPETITIVE REINVESTMENT RATIO Capex as % cash flow INVESTING IN ATTRACTIVE PROJECTS 100% • New projects typically 15 years production life • Long-run assumption on cost/price structure • Post-FID portfolio creates value > $45 per bbl MANAGING AFFORDABILITY 50% • Strong
Slide 40: Managing Portfolio Risk
MANAGING PORTFOLIO RISK CAPITAL INVESTMENT CASH FROM OPERATIONS % % 100% 100% 75% 75% 50% 50% 25% 25% 0% 0% '07 '08 '09-'10 '11-'12 '07 '08 '09-'10 '11-'12 S&P COUNTRY RISK ASSESSMENT HIGH LOW INTERMEDIATE VERY LOW 39
Slide 41: Peter Voser: Long-Term Options
ROYAL DUTCH SHELL PLC BUILDING NEW HEARTLANDS MANAGING RECESSION CHALLENGES PETER VOSER LONG-TERM OPTIONS 40
Slide 42: Strong Portfolio of Pre-FID Options
STRONG PORTFOLIO OF PRE-FID OPTIONS GLOBAL PORTFOLIO + CHOICES RESOURCES 100% ALBERTA HEAVY OIL 75% N. AMERICA TIGHT GAS 50% GULF OF MEXICO NIGERIA 25% AUSTRALIA GAS 0% Resources Theme OPTIONS HEAVY OIL & EOR CONSTRUCTION SOUR • Designing >1 million boe/d capacity potential ONSTREAM GTL • Portfolio
Slide 43: Exploration
EXPLORATION EXPLORATION MATURATION POTENTIAL FROM 1999-2008 DISCOVERIES Discovered resources in Bln Boe Kboe/d RESOURCES DEVELOPMENT STATUS 1,200 16 2008 12 2007 2006 800 2005 8 2004 2003 2002 2001 400 4 2000 1999 0 0 PRODUCING 2008-09 2010-11 ~2020 CONSTRUCTION OPTIONS DIVESTED ONSTREAM CONSTRUCTIO
Slide 44: North America Tight Gas Potential
NORTH AMERICA TIGHT GAS POTENTIAL TIGHT GAS PORTFOLIO NEW POSITIONS 2007-08 Groundbirch drilling location TIGHT GAS FOCUS BASINS Groundbirch Alberta Deep Basin Canada BCG Pinedale Haynesville South Texas STRONG DRILLING PERFORMANCE PRODUCTION AND POTENTIAL # Days Kboe/d 120 400 80 300 40 200 100 0 2
Slide 45: Australia LNG Potential
AUSTRALIA LNG POTENTIAL LNG PORTFOLIO SUNRISE !!!! BROWSE PRELUDE PLUTO (WOODSIDE) NORTH WEST SHELF GORGON 0 110 220 Kilometers North West Shelf T5 AUSTRALIA LIQUEFACTION CAPACITY & POTENTIAL ACREAGE WEST-AUSTRALIA Mtpa Million KM2 # wells drilled (cumulative) 20 2.0 120 Others 15 1.5 Prelude 80 10
Slide 46: North America Heavy Oil Potential
NORTH AMERICA HEAVY OIL POTENTIAL PORTFOLIO PRODUCTION CAPACITY AND POTENTIAL NEW POSITIONS 2004-08 Kboe/d MINING 400 AOSP IN SITU OIL Expansions OIL SHALE AOSP Carmon Debottlenecking Creek Athabasca AOSP Grosmont Debottlenecking 200 AOSP -1 Peace River AOSP + Cold Lake In Situ Colorado 0 2008-09 20
Slide 47: Jeroen van der Veer, Chief Executive
ROYAL DUTCH SHELL PLC BUILDING NEW HEARTLANDS MANAGING RECESSION CHALLENGES JEROEN VAN DER VEER CHIEF EXECUTIVE 46
Slide 48: Upstream-Downstream Production Outlook
UPSTREAM-DOWNSTREAM PRODUCTION OUTLOOK OIL + GAS PRODUCTION REFINING CAPACITY Mln boe/d Mln boe/d 4 5 2 2.5 0 0 '00 '02 '04 '06 '08 '11-'12 '11-'12 '00 '02 '04 '06 '08 '11-'12 '11-'12 GAS EUROPE AFRICA REFINING + GTL EUROPE ME/ASIA PACIFIC OIL N. AMERICA ASIA PACIFIC DISPOSAL N. AMERICA OTHER DISPOS
Slide 49: Summary
SUMMARY BUILDING NEW HEARTLANDS • Rebuilding Upstream strength; repositioning Downstream • Technology, integration, scale, top quartile REJUVENATING THE PORTFOLIO UPSTREAM + DOWNSTREAM • Building 1.0 mboe/d Upstream, 6.5mtpa LNG and ~0.3 mb/d Downstream • >1 mboe/d new options in design PRUDENT APPR
Slide 50: Q&A
ROYAL DUTCH SHELL PLC BUILDING NEW HEARTLANDS MANAGING RECESSION CHALLENGES Q&A Jeroen van der Veer - Chief Executive Peter Voser - Chief Financial Officer Malcolm Brinded - Exploration & Production Linda Cook - Gas & Power Mark Williams - Downstream 49
Slide 51: 2006-2008 Reserves Summary
2006-2008 RESERVES1 SUMMARY RESERVES IN MLN BOE Movements 2006 2007 2008 Organic2 reserves additions 1,991 1,504 1,132 Year end price effect -59 -183 19 Production -1,268 -1,210 -1,189 Acquisition & divestment 65 -1,115 13 Total subsidiaries and affiliates movements 1,997 206 1,164 Year end position
Slide 52: Key Projects
KEY PROJECTS Start up Project Country Shell Share Peak Production LNG 100% Products Category Shell % kboe/d Capacity Operated mtpa 2008-09 AFAM GAS SUPPLY NIGERIA 30 67 BC 10 BRAZIL 50 100 NW SHELF LNG T5/ANGEL AUSTRALIA 22.4 170 4.4 PINEDALE GROWTH USA Various 140* HEAVY OIL & EOR SAKHALIN II / LNG
Slide 53: Building New Heartlands: Managing Recession Challenges
ROYAL DUTCH SHELL PLC BUILDING NEW HEARTLANDS MANAGING RECESSION CHALLENGES March 17, 2009 INVESTOR PRESENTATION