Royal Dutch Shell plc 1st Quarter 2011 Results
THE HAGUE, The Netherlands, April 28, 2011 /PRNewswire-FirstCall/ --
- 1st Quarter 2011 Unaudited Results
- Royal Dutch Shell's (NYSE: RDS.A, NYSE: RDS.B) first quarter 2011 earnings, on a current cost of supplies (CCS) basis (see Note 1), were $6.9 billion compared with $4.9 billion a year ago. Basic CCS earnings per share increased by 40% versus the same quarter a year ago.
- First quarter 2011 CCS earnings, excluding identified items (see page 5), were $6.3 billion compared with $4.8 billion in the first quarter 2010, an increase of 30%. Basic CCS earnings per share, excluding identified items, increased by 29% versus the same quarter a year ago.
- Cash flow from operating activities for the first quarter 2011 was $8.6 billion. Excluding net working capital movements, cash flow from operating activities in the first quarter 2011 was $13.1 billion, compared with $10.4 billion in the same quarter last year.
- Net capital investment (see Note 1) for the quarter was $1.7 billion. Total cash dividends paid to shareholders during the first quarter 2011 were $1.6 billion. Some 31.1 million Class A shares, equivalent to $1.1 billion, were issued under the Scrip Dividend Programme for the fourth quarter 2010.
- Gearing at the end of the first quarter 2011 was 14.0%.
- A first quarter 2011 dividend has been announced of $0.42 per ordinary share, unchanged from the US dollar dividend per share for the same period in 2010.
Summary of unaudited results
$ million Quarters
Q1 2011 Q4 2010 Q1 2010 %[1]
Income attributable to shareholders 8,780 6,790 5,481 +60
Current cost of supplies (CCS)
adjustment for Downstream (1,855) (1,094) (584)
CCS earnings 6,925 5,696 4,897 +41
Less: Identified items[2] 637 1,586 75
CCS earnings excluding identified
items 6,288 4,110 4,822 +30
Of which:
Upstream 4,638 3,440 4,305
Downstream 1,653 482 778
Corporate and Non-controlling (3) 188 (261)
interest
Basic CCS earnings per share ($) 1.12 0.93 0.80 +40
Basic CCS earnings per share 1.02 0.67 0.79 +29
excluding identified items ($)
Dividend per share ($) 0.42 0.42 0.42 -
Cash flow from operating activities 8,621 5,456 4,782 +80
1 Q1 on Q1 change
2 See page 5
Royal Dutch Shell Chief Executive Officer Peter Voser commented:
"Our first quarter 2011 earnings have risen from year-ago levels, driven by higher industry margins and our own operating performance.
We continue to make good progress in implementing our strategy; improving near-term performance, delivering a new wave of production growth, and maturing the next generation of growth options for shareholders.
We have announced new asset sales and cost savings programmes, as part of Shell's focus on continuous improvement, to enhance our profitability and performance. Shell sold $3.2 billion of non-core positions, including tight gas assets in South Texas, in the quarter. Exits from non-core positions continue, with the announcements of further disposals, with proceeds mainly expected during 2011-2012. These additional disposals include refining capacity in the United Kingdom, and marketing positions in Chile and several African countries. This will enhance our competitive performance, and improve our customer and partner focus.
Shell started commercial production at two new projects during the quarter; the 20 thousand boe/d Schoonebeek Enhanced Oil Recovery project in the Netherlands, and Qatargas 4 LNG, with a capacity of 7.8 million tonnes per year. Together, in an industry that needs sustained investment in diverse energy sources to meet customer demand, these projects are expected to add 90 thousand boe/d of peak production for Shell. These projects are part of a sequence of over 20 new Upstream start-ups planned for 2011-14, as we deliver on our plans for sustainable growth. The first gas flowed from Qatar's North Field into the new Pearl Gas-to-Liquids project during the quarter, where Shell's value-added technology is underpinning the development of the world's largest GTL facility.
We continue to crystallise new investment options for medium-term growth, including the confirmation of the Geronggong discovery in deep water Brunei, and new LNG potential in the Wheatstone development in Australia, where our gas discoveries have been included in a new partner-operated LNG project, which is under study."
Voser concluded: "We are making good progress against our targets, to deliver a more competitive performance."
First quarter 2011 portfolio developments
Upstream
In Qatar, Shell and Qatargas announced delivery of the first cargo of LNG from the Qatargas 4 project (Shell share 30%). Production is expected to ramp up to 1.4 billion standard cubic feet of gas per day (scf/d), delivering 7.8 million tonnes per annum (mtpa) of LNG and 70 thousand barrels per day (b/d) of condensate and liquefied petroleum gas.
In the Netherlands, Shell produced its first oil from the Schoonebeek Enhanced Oil Recovery (EOR) project (Shell share 30%). The field is expected to ramp up to produce some 20 thousand barrels of oil equivalent per day (boe/d).
Shell sold non-core Upstream assets, with proceeds totalling $2.4 billion in the quarter. As previously announced, Shell completed the sale of a group of predominately mature tight gas fields in South Texas in the USA, producing some 200 million scf/d (Shell share), for some $1.8 billion. In addition, Shell sold various other non-core assets in Canada, Pakistan, the United Kingdom and the USA (combined Shell share of production of some 25 thousand boe/d) as well as exploration acreage in Colombia.
During the first quarter 2011, Shell confirmed a significant oil and gas discovery, Geronggong, drilled in 2010 in deep water Brunei.
Downstream
Shell sold non-core Downstream assets, mainly in the USA, with proceeds totalling $0.8 billion in the quarter.
In addition, Shell agreed to divest the majority of its shareholding in most of its downstream businesses in Africa for a total consideration of some $1 billion (including estimated working capital of $0.4 billion). The agreements are subject to regulatory approvals.
Also, in the United Kingdom, Shell agreed the sale of its 272 thousand b/d Stanlow refinery and associated local marketing businesses for a total consideration of some $1.3 billion (including estimated working capital of $0.9 billion).
On April 1, 2011, Shell agreed to sell most of its downstream business in Chile for a total consideration of some $0.6 billion (including estimated working capital of $0.1 billion).
In addition, on April 12, 2011, Shell announced a proposal to convert its 79 thousand b/d Clyde refinery and Gore Bay terminal in Australia into a fuel import terminal.
Key features of the FIRST quarter 2011
- First quarter 2011 CCS earnings (see Note 1) were $6,925 million, 41% higher than in the same quarter a year ago.
- First quarter 2011 CCS earnings excluding identified items (see page 5), were $6,288 million compared with $4,822 million in the first quarter 2010.
- Basic CCS earnings per share increased by 40% versus the same quarter a year ago.
- Basic CCS earnings per share excluding identified items increased by 29% versus the same quarter a year ago.
- Cash flow from operating activities for the first quarter 2011 was $8.6 billion, compared with $4.8 billion in the same quarter last year. Excluding net working capital movements, cash flow from operating activities in the first quarter 2011 was $13.1 billion, compared with $10.4 billion in the same quarter last year.
- Total cash dividends paid to shareholders during the first quarter 2011 were $1.6 billion. During the first quarter 2011, some 31.1 million Class A shares, equivalent to $1.1 billion, were issued under the Scrip Dividend Programme for the fourth quarter 2010.
- Net capital investment (see Note 1) for the first quarter 2011 was $1.7 billion. Capital investment for the first quarter 2011 was $4.9 billion.
- Return on average capital employed (ROACE) at the end of the first quarter 2011, on a reported income basis, was 12.9%.
- Gearing was 14.0% at the end of the first quarter 2011 versus 17.1% at the end of the first quarter 2010.
Upstream
- Oil and gas production for the first quarter 2011 was 3,504 thousand boe/d, 3% lower than in the first quarter 2010. Production for the first quarter 2011 excluding the impact of divestments was in line with the same period last year.
Production in the first quarter 2011 increased by some 230 thousand boe/d from new field start-ups and the continuing ramp-up of fields, which more than offset the impact of field declines.
- LNG sales volumes of 4.42 million tonnes in the first quarter 2011 were 4% higher than in the same quarter a year ago.
Downstream
- Oil products sales volumes were in line with the first quarter 2010. Chemical product sales volumes in the first quarter 2011 increased by 5% compared with the first quarter 2010.
- Oil Products refinery availability was 92% compared with 89% in the first quarter 2010. Chemicals manufacturing plant availability was 92%, compared with 88% in the same period last year.
- Supplementary financial and operational disclosure for the first quarter 2011 is available at http://www.shell.com/investor.
Summary of identified items
Earnings in the first quarter 2011 reflected the following items, which in aggregate amounted to a net gain of $637 million (compared with a net gain of $75 million in the first quarter 2010), as summarised in the table below:
- Upstream earnings included a net gain of $1,120 million, reflecting mainly gains related to divestments. These were partly offset by charges related to a tax provision, the mark-to-market valuation of certain gas contracts, the estimated fair value accounting of commodity derivatives (see Note 5), an asset impairment and cost impacts related to ongoing effects from the US offshore drilling moratorium. Earnings for the first quarter 2010 included a net gain of $110 million.
- Downstream earnings included a net charge of $483 million, reflecting charges related to asset impairments and the estimated fair value accounting of commodity derivatives (see Note 5). Earnings for the first quarter 2010 included a net charge of $35 million.
Summary of identified items
$ million Quarters
Q1 2011 Q4 2010 Q1 2010
Segment earnings impact of identified items:
Upstream 1,120 1,657 110
Downstream (483) (71) (35)
Corporate and Non-controlling interest - - -
Earnings impact 637 1,586 75
These identified items generally relate to events with an impact of more than $50 million on Royal Dutch Shell's earnings and are shown to provide additional insight into its segment earnings, earnings (CCS basis, see Note 1) and income attributable to shareholders. Further additional comments on the business segments are provided in the section 'Earnings by Business Segment' on page 6 and onwards.
Earnings by business segment
UPSTREAM
$ million Quarters
Q1 2011 Q4 2010 Q1 2010 %[1]
Upstream earnings excluding identified
items 4,638 3,440 4,305 +8
Upstream earnings 5,758 5,097 4,415 +30
Upstream cash flow from operating activities 6,672 5,596 7,726 -14
Upstream net capital investment 1,727 522 5,482 -68
Crude oil production (thousand b/d) 1,678 1,741 1,733 -3
Natural gas production available for sale
(million scf/d) 10,593 10,184 10,795 -2
Barrels of oil equivalent (thousand boe/d) 3,504 3,496 3,594 -3
LNG sales volumes (million tonnes) 4.42 4.39 4.23 +4
1 Q1 on Q1 change
First quarter Upstream earnings excluding identified items were $4,638 million compared with $4,305 million a year ago. Identified items were a net gain of $1,120 million, compared with a net gain of $110 million in the first quarter 2010 (see page 5).
Upstream earnings excluding identified items, compared with the first quarter 2010, reflected the effect of higher crude oil and natural gas realisations on revenues, higher dividends from an LNG venture and increased realised LNG prices. These items were partly offset by lower crude oil and natural gas production volumes, higher production taxes, lower trading contributions, and higher operating expenses, mainly related to the start-up of new projects.
Global liquids realisations were 32% higher than in the first quarter 2010. Global natural gas realisations were 11% higher than in the same quarter a year ago. Natural gas realisations in the Americas decreased by 25%, whereas natural gas realisations outside the Americas increased by 20%.
First quarter 2011 production was 3,504 thousand boe/d compared with 3,594 thousand boe/d a year ago. Crude oil production was down 3% and natural gas production decreased by 2% compared with the first quarter 2010. Excluding the impact of divestments, the first quarter 2011 production was in line with the same period last year.
New field start-ups and the continuing ramp-up of fields contributed to the production in the first quarter 2011 by some 230 thousand boe/d, in particular from the ramp-up of Gbaran Ubie in Nigeria, the start-up of the Qatargas 4 project in Qatar, and the ramp-up of the Jackpine Mine at the Athabasca Oil Sands Project in Canada, which more than offset the impact of field declines.
LNG sales volumes of 4.42 million tonnes were 4% higher than in the same quarter a year ago, reflecting higher volumes from Nigeria LNG and the Sakhalin II project as well as the successful start-up of the Qatargas 4 project.
DOWNSTREAM
$ million Quarters
Q1 2011 Q4 2010 Q1 2010 %[1]
Downstream CCS earnings excluding
identified items 1,653 482 778 +112
Downstream CCS earnings 1,170 411 743 +57
Downstream cash flow from operating 451 (348) (2,841) -
activities
Downstream net capital investment (118) 991 687 -
Refinery processing intake (thousand b/d) 3,030 3,201 2,998 +1
Oil products sales volumes (thousand b/d) 6,167 6,670 6,163 -
Chemicals sales volumes (thousand tonnes) 5,010 5,297 4,769 +5
1 Q1 on Q1 change
First quarter Downstream earnings excluding identified items were $1,653 million compared with $778 million in the first quarter 2010. Identified items were a net charge of $483 million, compared with a net charge of $35 million in the first quarter 2010 (see page 5).
Downstream earnings excluding identified items compared with the first quarter 2010 reflected higher Oil Products marketing and refining earnings as well as higher Chemicals earnings.
Oil Products marketing earnings increased compared with the first quarter 2010, mainly reflecting higher contributions from trading and lubricants, which were partly offset by lower retail earnings, as a result of lower margins.
Oil products sales volumes were in line with the same period a year ago.
Refining earnings improved significantly compared with the first quarter 2010. Earnings reflected higher realised refining margins and higher refinery intake volumes, due to lower planned and unplanned maintenance activities.
Refinery intake volumes increased by 1% compared with the first quarter of 2010. Excluding portfolio impacts, refinery intake volumes increased by 11%. Refinery availability increased to 92% compared to 89% in the first quarter 2010.
Chemicals earnings excluding identified items increased to $489 million compared with $313 million in the first quarter 2010, reflecting higher realised chemicals margins and higher income from equity-accounted investments as well as increased sales volumes.
Chemicals sales volumes increased by 5% compared with the same quarter last year. Chemicals manufacturing plant availability was 92% compared with 88% in the first quarter 2010.
Corporate and non-controlling interest
$ million Quarters
Q1 2011 Q4 2010 Q1 2010
Corporate and Non-controlling interest excluding
identified items (3) 188 (261)
Corporate and Non-controlling interest (3) 188 (261)
Of which:
Corporate 99 231 (176)
Non-controlling interest (102) (43) (85)
Corporate results and Non-controlling interest excluding identified items were a loss of $3 million in the first quarter 2011, compared with a loss of $261 million in the same period last year.
Corporate earnings excluding identified items compared with the first quarter 2010 mainly reflected currency exchange gains, which were partly offset by increased net interest expense.
FORTHCOMING EVENTS
Second quarter 2011 results and second quarter 2011 dividend are scheduled to be announced on July 28, 2011. Third quarter 2011 results and third quarter 2011 dividend are scheduled to be announced on October 27, 2011. The 2011 Annual General Meeting will be held on May 17, 2011.
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Consolidated Statement of income
$ million Quarters
Q1 2011 Q4 2010 Q1 2010 %[1]
Revenue 109,923 100,714 86,062
Share of profit of equity-accounted
investments 2,337 1,979 1,646
Interest and other income 2,582 2,832 317
Total revenue and other income 114,842 105,525 88,025
Purchases 84,810 78,138 65,001
Production and manufacturing expenses 5,913 7,294 5,187
Selling, distribution and administrative
expenses 3,364 4,301 4,093
Research and development 219 422 214
Exploration 401 646 377
Depreciation, depletion and amortisation 3,317 3,236 2,926
Interest expense 395 227 261
Income before taxation 16,423 11,261 9,966 +65
Taxation 7,498 4,405 4,400
Income for the period 8,925 6,856 5,566 +60
Income attributable to non-controlling
interest 145 66 85
Income attributable to Royal Dutch Shell
plc shareholders 8,780 6,790 5,481 +60
Current cost of supplies (CCS) adjustment for
Downstream (1,855) (1,094) (584)
CCS earnings 6,925 5,696 4,897 +41
Less: Identified items 637 1,586 75
CCS earnings excluding identified items 6,288 4,110 4,822 +30
Basic earnings per share
Quarters
Q1 2011 Q4 2010 Q1 2010
Earnings per share ($) 1.42 1.11 0.89
CCS earnings per share ($) 1.12 0.93 0.80
CCS earnings per share excluding identified
items ($) 1.02 0.67 0.79
Diluted earnings per share
Quarters
Q1 2011 Q4 2010 Q1 2010
Earnings per share ($) 1.42 1.10 0.89
CCS earnings per share ($) 1.12 0.93 0.80
CCS earnings per share excluding identified
items ($) 1.02 0.67 0.79
SHARES2
Millions
Q1 2011 Q4 2010 Q1 2010
Weighted average number of shares as the
basis for:
Basic earnings per share 6,163.3 6,137.3 6,126.5
Diluted earnings per share 6,174.0 6,147.4 6,132.8
Shares outstanding at the end of the
period 6,207.4 6,154.2 6,126.9
1 Q1 on Q1 change.
2 Royal Dutch Shell plc ordinary shares of EUR0.07 each.
The Notes on pages 13 to 14 are an integral
part of these Condensed Consolidated Interim Financial Statements.
Consolidated Statement of Comprehensive Income
$ million Quarters
Q1 2011 Q4 2010 Q1 2010 %[1]
Income for the period 8,925 6,856 5,566 +60
Other comprehensive income, net of tax:
Currency translation differences 2,134 (25) (1,567)
Unrealised gains/(losses) on securities (19) (182) (44)
Cash flow hedging gains/(losses) 22 (16) (2)
Share of other comprehensive income/(loss)
of equity-accounted investments 99 483 (11)
Other comprehensive income/(loss) for the
period 2,236 260 (1,624) -
Comprehensive income for the period 11,161 7,116 3,942 +183
Comprehensive income/(loss) attributable
to non-controlling interest 173 51 80
Comprehensive income attributable to Royal
Dutch Shell plc shareholders 10,988 7,065 3,862 +185
1 Q1 on Q1 change.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Non-
$ million Ordinary Shares Other Retained Total controlling Total
share held in reserves earnings interest equity
capital trust
At January 1,
2011 529 (2,789) 10,094 140,179 148,013 1,767 149,780
Comprehensive
income for the
period - - 2,208 8,780 10,988 173 11,161
Capital
contributions
from and other
changes in
non-controlling
interest - - - - - 9 9
Dividends paid - - - (2,626) (2,626) (71) (2,697)
Scrip
dividends[1] 3 - (3) 1,068 1,068 - 1,068
Shares held in
trust: net
sales/(purchases)
and dividends
received - 603 - 42 645 - 645
Share-based
compensation - - (307) 24 (283) - (283)
At March 31,
2011 532 (2,186) 11,992 147,467 157,805 1,878 159,683
1 During the first quarter 2011 some 31.1 million Class A shares,
equivalent to $1.1 billion, were issued under the Scrip Dividend Programme
for the fourth quarter 2010. The fair value of the shares issued in
connection with the Scrip Dividend Programme is reflected in retained
earnings.
Non-
$ million Ordinary Shares Other Retained Total controlling Total
share held in reserves earnings interest equity
capital trust
At January 1,
2010 527 (1,711) 9,982 127,633 136,431 1,704 138,135
Comprehensive
income for the
period - - (1,619) 5,481 3,862 80 3,942
Capital
contributions
from and other
changes in
non-controlling
interest - - - - - (18) (18)
Dividends paid - - - (2,555) (2,555) (39) (2,594)
Shares held in
trust: net
sales/(purchases)
and dividends
received - 295 - - 295 - 295
Share-based
compensation - - (145) 122 (23) - (23)
At March 31,
2010 527 (1,416) 8,218 130,681 138,010 1,727 139,737
The Notes on pages 13 to 14 are an integral
part of these Condensed Consolidated Interim Financial Statements.
Condensed consolidated balance sheet
$ million
March 31, Dec 31, 2010 March 31,
2011 2010
Assets
Non-current assets:
Intangible assets 4,725 5,039 5,296
Property, plant and equipment 144,835 142,705 133,669
Equity-accounted investments 35,558 33,414 31,751
Investments in securities 3,971 3,809 3,832
Deferred tax 5,661 5,361 4,563
Prepaid pension costs 10,874 10,368 9,705
Trade and other receivables 9,360 8,970 8,350
214,984 209,666 197,166
Current assets:
Inventories 33,632 29,348 28,714
Trade and other receivables 78,103 70,102 62,874
Cash and cash equivalents 16,608 13,444 8,448
128,343 112,894 100,036
Total assets 343,327 322,560 297,202
Liabilities
Non-current liabilities:
Debt 31,788 34,381 34,889
Deferred tax 15,573 13,388 14,184
Retirement benefit obligations 6,105 5,924 5,925
Decommissioning and other 14,321 14,285 13,535
provisions
Trade and other payables 4,417 4,250 4,579
72,204 72,228 73,112
Current liabilities:
Debt 10,839 9,951 2,422
Trade and other payables 82,270 76,550 65,603
Taxes payable 14,794 10,306 12,504
Retirement benefit obligations 393 377 405
Decommissioning and other 3,144 3,368 3,419
provisions
111,440 100,552 84,353
Total liabilities 183,644 172,780 157,465
Equity attributable to Royal Dutch 157,805 148,013 138,010
Shell plc shareholders
Non-controlling interest 1,878 1,767 1,727
Total equity 159,683 149,780 139,737
Total liabilities and equity 343,327 322,560 297,202
The Notes on pages 13 to 14 are an integral
part of these Condensed Consolidated Interim Financial Statements.
Condensed consolidated statement of cash flows
$ million Quarters
Q1 2011 Q4 2010 Q1 2010
Cash flow from operating activities
Income for the period 8,925 6,856 5,566
Adjustment for:
- Current taxation 5,901 4,515 4,114
- Interest expense (net) 356 186 231
- Depreciation, depletion and amortisation 3,316 3,236 2,926
- Net (gains)/losses on sale of assets (2,192) (2,344) (223)
- Decrease/(increase) in net working
capital (4,511) (754) (5,630)
- Share of profit of equity-accounted
investments (2,337) (1,979) (1,646)
- Dividends received from equity-accounted
investments 1,523 2,064 1,544
- Deferred taxation and other provisions 1,578 (468) 293
- Other 213 (696) 347
Net cash from operating activities
(pre-tax) 12,772 10,616 7,522
Taxation paid (4,151) (5,160) (2,740)
Net cash from operating activities 8,621 5,456 4,782
Cash flow from investing activities
Capital expenditure (4,146) (5,571) (5,247)
Investments in equity-accounted
investments (703) (110) (625)
Proceeds from sale of assets 3,111 1,286 366
Proceeds from sale of equity-accounted
investments 53 3,380 31
(Additions to)/proceeds from sale of
securities 1 (16) (7)
Interest received 37 34 38
Net cash used in investing activities (1,647) (997) (5,444)
Cash flow from financing activities
Net (decrease)/increase in debt with
maturity period within three months (2,637) 248 150
Other debt: New borrowings 481 120 4,207
Repayments (236) (388) (1,947)
Interest paid (500) (108) (518)
Change in non-controlling interest 9 66 (12)
Dividends paid to:
- Royal Dutch Shell plc shareholders (1,558) (1,998) (2,555)
- Non-controlling interest (71) (38) (39)
Shares held in trust: net
sales/(purchases) and dividends received 144 17 118
Net cash used in financing activities (4,368) (2,081) (596)
Currency translation differences relating
to cash and cash equivalents 558 (216) (13)
Increase/(decrease) in cash and cash
equivalents 3,164 2,162 (1,271)
Cash and cash equivalents at beginning of
period 13,444 11,282 9,719
Cash and cash equivalents at end of period 16,608 13,444 8,448
The Notes on pages 13 to 14 are an integral part of these
Condensed Consolidated Interim Financial Statements.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. Basis of preparation
The Condensed Consolidated Interim Financial Statements ("Interim Statements") of Royal Dutch Shell plc and its subsidiaries (collectively, "Shell") have been prepared in accordance with International Financial Reporting Standards (IFRS) adopted for use by the European Union, including IAS 34 Interim Financial Reporting.
The financial information presented in the Interim Statements does not comprise statutory accounts as defined in sections 435(1) and (2) of the Companies Act 2006. Statutory accounts for the year ended December 31, 2010 were published in Shell's Annual Report and Form 20-F, copies of which were delivered to the Registrar of Companies and filed with the United States Securities and Exchange Commission. The report of the auditors 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 any statement under sections 498(2) or (3) of the Companies Act 2006.
The accounting policies applied are consistent with those adopted and disclosed in the statutory accounts (pages 102 - 107) referred to above.
The Interim Statements are unaudited; however, in the opinion of Shell, the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim period.
Segment Information
Downstream 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 estimated current cost of supplies during the same period after making allowance for the estimated tax effect. CCS earnings thus exclude the effect of changes in the oil price on inventory carrying amounts. Net capital investment information is presented as measured based on capital expenditure as reported in the Consolidated Statement of Cash Flows, adjusted for: proceeds from disposals; exploration expenses excluding exploration wells written off; investments in equity-accounted investments; and leases and other items.
CCS earnings and net capital investment information have become the dominant measures used by the Chief Executive Officer for the purposes of making decisions about allocating resources and assessing performance; the disclosure of CCS earnings information is also more closely aligned with industry practice.
For the purposes of this document, CCS earnings is calculated based on Income attributable to Royal Dutch Shell plc shareholders.
2. Other reserves
$ million Merger Share Capital Share Accumulated Total
reserve[1] premium redemption plan other
reserve[1] reserve[2] reserve comprehensive
income
At January 1, 3,442 154 57 1,483 4,958 10,094
2011
Other
comprehensive
income/(loss)
attributable to
Royal Dutch
Shell plc
shareholders - - - - 2,208 2,208
Scrip dividends (3) - - - - (3)
Share-based
compensation - - - (307) - (307)
At March 31,
2011 3,439 154 57 1,176 7,166 11,992
At January 1,
2010 3,444 154 57 1,373 4,954 9,982
Other
comprehensive
income/(loss)
attributable to
Royal Dutch
Shell plc
shareholders - - - - (1,619) (1,619)
Share-based
compensation - - - (145) - (145)
At March 31,
2010 3,444 154 57 1,228 3,335 8,218
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 of 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.
3. Information by business segment
$ million Upstream Downstream Corporate Total
Three months ended March 31, 2011:
Revenue
Third party 9,652 100,259 12 109,923
Inter-segment 11,998 180 -
Segment earnings 5,758 1,170 99 7,027
$ million Upstream Downstream Corporate Total
Three months ended March 31, 2010:
Revenue
Third party 9,448 76,603 11 86,062
Inter-segment 8,314 84 -
Segment earnings 4,415 743 (176) 4,982
4. Ordinary share capital
Issued and fully paid
shares of EUR0.07 each shares of GBP1 each
Number of shares Class A Class B Sterling
deferred
At January 1, 2011 3,563,952,539 2,695,808,103 50,000
Scrip dividends 31,143,934 - -
At March 31, 2011 3,595,096,473 2,695,808,103 50,000
Nominal value
$ million Class A Class B Total
At January 1, 2011 302 227 529
Scrip dividends 3 - 3
At March 31, 2011 305 227 532
The total nominal value of sterling deferred shares is less than
$1 million.
At its Annual General Meeting on May 18, 2010, Royal Dutch Shell plc's shareholders approved an amendment to the Articles of Association, pursuant to the Companies Act 2006, removing the requirement to limit authorised share capital. At the same meeting, the Board was authorised to allot the shares or grant rights to subscribe for or convert any securities into ordinary shares of Royal Dutch Shell plc up to an aggregate amount equal to EUR145 million (representing 2,080 million ordinary shares of EUR0.07 each). This authority expires at the earlier of August 18, 2011, and the conclusion of the Annual General Meeting held in 2011.
5. 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 the quarterly results.
LIQUIDITY AND CAPITAL RESOURCES
Net cash from operating activities in the first quarter 2011 was $8.6 billion compared with $4.8 billion for the same period last year.
Total current and non-current debt increased to $42.6 billion at March 31, 2011 from $37.3 billion at March 31, 2010 while cash and cash equivalents increased to $16.6 billion at March 31, 2011 from $8.4 billion at March 31, 2010. During the first three months of 2011 no new debt was issued under the US shelf registration programme.
Net capital investment in the first quarter 2011 was $1.7 billion of which $1.7 billion was invested in Upstream and $0.1 billion in Corporate whereas $0.1 billion was divested from Downstream. Net capital investment in the same period of 2010 was $6.2 billion of which $5.5 billion was invested in Upstream and $0.7 billion in Downstream.
Dividends of $0.42 per share are declared on April 28, 2011 in respect of the first quarter. These dividends are payable on June 27, 2011. In the case of the Class 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, 2010 for additional information on the dividend access mechanism.
Shell provides shareholders with a choice to receive dividends in cash or in shares via a Scrip Dividend Programme. Under the Scrip Dividend Programme shareholders can increase their shareholding in Shell by choosing to receive new shares instead of cash dividends. Only new Class A shares will be issued under the Programme, including to shareholders who currently hold Class B shares.
Glossary
1. CCS earnings excluding identified items
CCS earnings excluding identified earnings is presented as measured based on CCS earnings adjusted for identified items (see page 5), which generally relate to events with an impact of more than $50 million on Royal Dutch Shell's earnings and are shown to provide additional insight into its segment earnings, earnings (CCS basis, see Note 1) and income attributable to shareholders.
2. Return on average capital employed (ROACE)
Return on average capital employed measures the efficiency of Shell's utilisation of the capital that it employs. 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. The tax rate is derived from calculations at the published segment level.
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 in which Royal Dutch Shell either directly or indirectly has control, by having either a majority of the voting rights or the right to exercise a controlling influence. The companies in which Shell has significant influence but not control are referred to as "associated companies" or "associates" and companies in which Shell has joint control are referred to as "jointly controlled entities". In this document, associates and jointly controlled entities are also referred to as "equity-accounted investments". The term "Shell interest" is used for convenience to indicate the direct and/or indirect (for example, through our 24% shareholding in Woodside Petroleum Ltd.) 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", "intend", "may", "plan", "objectives", "outlook", "probably", "project", "will", "seek", "target", "risks", "goals", "should", "scheduled" 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 potential litigation and regulatory effects arising from recategorisation of reserves; (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 factors that may affect future results are contained in Royal Dutch Shell's Annual Report and Form 20-F for the year ended December 31, 2010 (available at http://www.shell.com/investor and http://www.sec.gov). These factors also should be considered by the reader. Each forward-looking statement speaks only as of the date of this document, April 28, 2011. Neither Royal Dutch Shell 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.
April 28, 2011
SOURCE Royal Dutch Shell plc
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