Shell Plc · LSE:SHEL
Shell — Royal Dutch Shell — Q4 2018 Earnings Presentation
40 slides from Shell's earnings presentation, Jan 31, 2019
Slide 1: Fourth quarter 2018 results
Fourth quarter 2018 results Delivering a world-class investment case Royal Dutch Shell plc January 31, 2019 #makethefuture Royal Dutch Shell January 31, 2019
Slide 2: Ben van Beurden, Chief Executive Officer
Ben van Beurden Chief Executive Officer Royal Dutch Shell Royal Dutch Shell January 31, 2019
Slide 3: Definitions & cautionary note
Gearing is defined as net debt as a percentage of total capital. With effect from 2018, the net debt calculation includes the fair value of derivative financial instruments used to hedge foreign exchange and interest rate risks relating to debt, and associated collateral balances. Free Cash Flow is
Slide 4: Summary
Summary Key messages Delivering strong cash flow Thrive in the energy Free cash flow of $16.7 billion in Q4, and $39.4 billion in 2018 transition Cash flow from operations excluding working capital of $12.9 billion in Q4 and $49.6 billion in 2018 Strengthening the financial framework $25 billion
Slide 5: 2018 Financial Summary
2018 Financial Summary 21.4 Earnings ($ billion); EPS +34% vs. 2017 49.6 Cash flow from operations excluding working capital ($ billion) 39.4 Free cash flow ($ billion) 7.6 ROACE (%) 20.3 Gearing (%) Earnings and ROACE on CCS basis, excluding identified items Royal Dutch Shell January 31, 2019 5
Slide 6: HSSE performance
2018 Goal Zero on safety Operational spills HSSE Injuries – TRCF (per million working hours) million working hours Thousand tonnes # performance TRCF Working hours (RHS) Volume of spills Number of spills (RHS) Upstream flaring Process safety Million tonnes CO2e Number of incidents HSSE priority
Slide 7: Leading through the energy transition
2018 Highlights Proof points Leading through Net Carbon Footprint – long-term ambition the energy operationalised with short-term targets; linked to transition executive remuneration Methane – maintain emissions intensity below 0.2% by 2025 Nigeria Brent Delta platform (UK) Decrease in flaring i
Slide 8: $30 billion divestment programme completed
Oil Sands Upstream Ireland UK North Sea package Thailand Bongkot Showa Shell JV $7.3bln up to $1.3bln up to $3.8bln $0.8bln $1.4bln Divestment programme $30 billion completed MLP Top 20 transactions: Oil Sands 2016-2018 $1.8bln Deep water Integrated Gas Conventional MOTIVA JV Oil & Gas $2.2bln Shale
Slide 9: Key projects start-ups
Delivery Key projects Start-up Cash contribution from key projects: de-risked Key projects Deep water Brazil (8 FPSOs) $ billion start-ups Gulf of Mexico (Cardamom, Mars, Stones, Kaikias) Malikai Gumusut Kakap Ph1 +$5 billion Lula North (P-67) Q1 2019 Appomattox Q3 2019 Integrated QCLNG Ga
Slide 10: Projects delivery 2018
Portfolio & projects Geismar alpha olefins – start-up Prelude – start-up Projects delivery 2018 Fourth alpha olefins unit, with 425,000 metric tonnes Floating LNG facility offshore Australia, with capacity per annum additional capacity, Shell interest 100% to produce 3.6 million tonnes LNG per a
Slide 11: Projects delivery 2019-2020
Portfolio & projects Appomattox – installation and commissioning Permian – continued growth Projects delivery 2019-2020 Gulf of Mexico hub development producing from the ~260,000 net acres in the Delaware basin, Shell Appomattox and Vicksburg fields interest ~57% Peak production capacity of 17
Slide 12: Projects delivery 2020+
Portfolio & projects Gulf of Mexico – Whale development United States – Pennsylvania petrochemicals Projects delivery 2020+ Gulf of Mexico deep-water discovery, Shell interest 60% Pennsylvania petrochemicals complex with production Assessing exploration and appraisal results capacity of 1.6 mi
Slide 13: Strategic themes delivery: on track
World-class investment case 2017 ~$54 2018 ~$71 2019-21 ~$60RT Strategic themes Organic free Organic free Organic free Strategic themes cash flow cash flow cash flow delivery: $ billion $ billion $ billion p.a. on track Integrated Gas 2.8 10.8 8-10 Deep water 0.8 5.0 6-7 Conventional Oil & Gas 6.1 6
Slide 14: Delivering on commitments
World-class investment case Delivering on Delivery in Financial Cancel scrip dividend commitments 2016-2018 Framework Start $25 billion buyback programme: $4.5 billion completed Delivery Disciplined & efficient capital allocation: $25 billion capital investment Portfolio & Deliver $30 billio
Slide 15: Jessica Uhl, Chief Financial Officer
Jessica Uhl Chief Financial Officer Royal Dutch Shell Royal Dutch Shell January 31, 2019
Slide 16: Financial highlights: summary
Q4 2018 Financial Cash Cash flow Good cash conversion of strong underlying earnings from operations highlights: generation excl. working $12.9 billion Seasonally higher cost and tax Positive contribution from margining, driven by falling summary capital Brent oil price Of which $14.3 billion
Slide 17: Portfolio developments
Q3 2018 Q4 Portfolio Other portfolio Project delivery Clair phase 2 – up to 120 thousand barrels of oil per day production, Shell developments highlights interest 28% Geismar Chemicals – start-up of fourth Alpha Olefins unit, Shell interest 100% Prelude FLNG – first gas in wells and condensate
Slide 18: Financial highlights: earnings
Q4 2018 $ billion Q4 2017 Q4 2018 Earnings Q4 2017 to Q4 2018 Financial Integrated Gas 1.6 2.4 $ billion highlights: Upstream 1.7 1.9 earnings Downstream (CCS) 1.4 2.1 Corporate & (0.4) (0.7) non-controlling interest CCS earnings 4.3 5.7 CCS earnings, $ per share 0.52 0.69 ROACE (%) 5.6 7.6 Earnings
Slide 19: Financial highlights: cash flow
Q4 2018 $ billion Q4 2017 Q4 2018 CFFO excl. working capital Q4 2017 to Q4 2018 Financial Integrated Gas 0.8 5.8 $ billion highlights: Upstream 3.8 6.9 cash flow Downstream 2.6 8.8 Corporate 0.0 0.6 Cash flow from operations 7.3 22.0 Cash flow from operations excl. working capital 9.1 12.9 Cash flow
Slide 20: Gulf of Mexico: Strong cash flow growth
2018 Operational excellence Gulf of Mexico: Improving asset availability Strong cash flow Reduction in unit operating costs growth Fill the hub strategy Maximising existing production through well reservoir facility management Subsea tiebacks Optimised waterflood performance Gulf of Mexico
Slide 21: Financial highlights: improving year on year
2018 Earnings & ROACE Cash flow Gearing Financial $ billion % $ billion $ billion % highlights: improving year on year Upstream Downstream CFFO CFFI FCF Net debt (at year end) Integrated Gas Corporate + NCI Gearing (RHS) ROACE (RHS) $21.4 billion earnings $39 billion free cash flow $26 billion
Slide 22: SEC proved reserves position
Preliminary results 2018 Reserves performance Reserves performance SEC proved 2018 RRR 53% Billion boe reserves position 2018 RRR (excl. A&D) 66% 2018 RRR (excl. Groningen) 98% 3-year average RRR 96% Reserves/Production at end 2018 ~8.3 years billion boe 2016 2017 2018 Production 1.4 1.4 1
Slide 23: Cash allocation
Financial framework Cash allocation Buybacks Intention to purchase $25 billion by the end of 2020 Surplus Subject to further progress with debt reduction and oil price CFFO conditions $25-30 billion per annum, organic & inorganic Capital investment 2018: $25 billion 2019: within the $25-30
Slide 24: Free cash flow performance and payout
Financial framework Distributions from free cash flow Free cash flow $ billion performance $99/bbl $54/bbl $71/bbl $60/bbl and payout Available for share buybacks and debt reduction 2019-2021: ample capacity 2014 2017 2018 2019-2021 for debt reduction and average Divestment proceeds less acquisition
Slide 25: World-class investment case
Competitive performance ROACE Free cash flow – 4 quarters rolling World-class % $ billion investment case Thrive in the energy transition World-class investment Gearing Total shareholder return case % % Since Jan 2016 Since Jan 2017 Since Jan 2018 Strong license to operate Shell Peer group Shell Pee
Slide 26: Ben van Beurden, Chief Executive Officer
Ben van Beurden Chief Executive Officer Royal Dutch Shell Royal Dutch Shell January 31, 2019
Slide 27: Summary
Summary Key messages Delivering strong cash flow Thrive in the energy Free cash flow of $16.7 billion in Q4, and $39.4 billion in 2018 transition Cash flow from operations excluding working capital of $12.9 billion in Q4 and $49.6 billion in 2018 Strengthening the financial framework $25 billion
Slide 28: Questions & Answers
Questions & Answers Ben van Beurden Jessica Uhl Maarten Wetselaar Chief Executive Officer Chief Financial Officer Integrated Gas and New Energies Director Royal Dutch Shell January 31, 2019 28
Slide 29: Royal Dutch Shell January 31, 2019
Royal Dutch Shell January 31, 2019
Slide 30: Q1 2019 Outlook
Outlook Q1 2018 – Q1 2019 OUTLOOK: Year-ago baseline reflects Shell’s earnings seasonality Q1 2019 Integrated gas Outlook Production volumes: 140-170 thousand boe/d lower, mainly due to divestments, the transfer of some activities into the Upstream segment as of 2019 and higher maintenance activ
Slide 31: Impact of IFRS16 Leases
Outlook Impact of ~4%-5% Operating lease liabilities on balance sheet Gearing IFRS16 Leases increase Increase in net debt and gearing ~$4 billion Lease payments will be reported under CFFF, instead of Free cash flow increase under CFFO and CFFI as previously Capital ~$1-2 billion Capital inv
Slide 32: Financial highlights: cash flow
Q4 2018 $ billion Q3 2018 Q4 2018 CFFO excl. working capital Q3 2018 to Q4 2018 Financial Integrated Gas 3.3 5.8 $ billion highlights: Upstream 6.7 6.9 cash flow Downstream 1.0 8.8 Corporate 1.1 0.6 Cash flow from operations 12.1 22.0 Cash flow from operations excl. working capital 14.7 12.9 Cash fl
Slide 33: Working capital & IG Brent hedging
2018 Working capital Integrated Gas – Brent hedging cash impact Working capital $ billion $/bbl $ billion $/bbl & IG Brent hedging Movement in working capital IG Brent hedging cash impact Average Brent price for the quarter (RHS) Brent price at the end of the quarter (RHS) Cumulative movement in wor
Slide 34: Organic free cash flow
Outlook Organic free cash flow 2018 to 2019-2021 outlook Organic free $ billion On track to deliver 2019-2021 outlook of cash flow $25-30 billion organic free cash flow ~31 >5 25-30 Normalised organic free cash flow excludes ~23 (4) effects of margining and working capital movements New projec
Slide 35: Digitalisation in Shell
Digitalisation Operational Effectiveness Customer Experience Asset Management in Shell Shearwater UK Shell Cashless App QGC Australia AI & machine learning powering Residential & commercial customer Asset safeguarding & leak detection decision making convenience Automated materials, people a
Slide 36: Prices & margins
Q4 2018 Shell oil & gas realisations Industry refining margins Industry chemicals margins Prices & margins $/barrel $/mscf $/barrel $/tonne Oil US West Coast US ethane Gas (RHS) US Gulf Coast coking Western Europe naphtha Rotterdam complex NE/SE Asia naphtha Singapore Royal Dutch Shell January 31, 2
Slide 37: Upstream results
Q4 2018 Earnings Q4 2017 to Q4 2018 Upstream $ billion results Environment Choice Earnings on CCS basis, excluding identified items Royal Dutch Shell January 31, 2019 37
Slide 38: Integrated Gas results
Q4 2018 Earnings Q4 2017 to Q4 2018 Integrated Gas $ billion results Environment Choice Earnings on CCS basis, excluding identified items Royal Dutch Shell January 31, 2019 38
Slide 39: Downstream results
Q4 2018 Earnings Q4 2017 to Q4 2018 Earnings mix Downstream $ billion $ billion results Marketing Refining & Trading Chemicals Earnings on CCS basis, excluding identified items Royal Dutch Shell January 31, 2019 39
Slide 40: Royal Dutch Shell January 31, 2019
Royal Dutch Shell January 31, 2019