Royal Dutch Shell plc: 1st Quarter 2017 Unaudited Results
THE HAGUE, Netherlands, May 4, 2017 /PRNewswire/ --
SUMMARY OF UNAUDITED RESULTS
$ million Quarters
Definition Q1 2017 Q4 2016 Q1 2016 %[1]
Income/(loss) attributable
to shareholders 3,538 1,541 484 +631
CCS earnings attributable to
shareholders [A] 3,381 1,032 814 +315
Of which: Identified items [B] (373) (763) (739)
CCS earnings attributable to
shareholders excluding
identified items 3,754 1,795 1,553 +142
Add: CCS earnings
attributable to
non-controlling interest 109 40 83
CCS earnings excluding
identified items 3,863 1,835 1,636 +136
Of which:
Integrated Gas 1,181 907 994
Upstream 540 54 (1,437)
Downstream 2,489 1,339 2,010
Corporate (347) (465) 69
Cash flow from operating
activities 9,508 9,170 661 +1,338
Cash flow from investing
activities (4,324) (3,429) (16,916)
Free cash flow [H] 5,184 5,741 (16,255)
Basic earnings per share ($) 0.43 0.19 0.07 +514
Basic CCS earnings per share
($) 0.41 0.13 0.11 +273
Basic CCS earnings per share
excl. identified items ($) 0.46 0.22 0.22 +109
Dividend per share ($) 0.47 0.47 0.47 -
1. Q1 on Q1 change
Compared with the first quarter 2016, CCS earnings attributable to shareholders excluding identified items increased by $2.2 billion, mainly driven by higher contributions from Upstream and Chemicals, partly offset by higher net interest expense.
Cash flow from operating activities for the first quarter 2017 was $9.5 billion, which included negative working capital movements of $1.8 billion, compared with $0.7 billion in the first quarter 2016, which included negative working capital movements of $3.9 billion.
Total dividends distributed to shareholders in the quarter were $3.9 billion, of which $1.2 billion were settled by issuing 47.8 million A shares under the Scrip Dividend Programme.
Royal Dutch Shell Chief Executive Officer Ben van Beurden commented: "The first quarter 2017 was a strong quarter for Shell. Cash flow from operating activities of $9.5 billion and free cash flow of $5.2 billion enabled us to reduce debt, and cover our cash dividend for the third consecutive quarter. We saw notable improvements in Upstream and Chemicals, which benefited from improved operational performance and better market conditions. Our operations in Qatar are restarting during the second quarter.
We continue to reshape Shell's portfolio and to transform the company with over $20 billion divestments completed or announced that will strengthen the balance sheet as they are completed.
The strategy we have outlined to deliver a world-class investment case is taking shape. Following the successful integration of BG, we are rapidly transforming Shell through the consistent and disciplined execution of our strategy. This includes investing around $25 billion this year and the delivery of new projects, which we expect to generate $10 billion in cash flow from operating activities by 2018."
ADDITIONAL PERFORMANCE MEASURES
$ million Quarters
Definition Q1 2017 Q4 2016 Q1 2016 %[1]
Capital investment [C] 4,720 6,913 58,975
Divestments [D] 29 3,278 485
Total production available
for sale (thousand boe/d) 3,752 3,905 3,661 +2
Global liquids realised
price ($) 48.36 44.54 29.49 +64
Global natural gas realised
price ($) 4.29 4.03 3.89 +10
Operating expenses [G] 9,282 9,895 10,114 -8
Underlying operating
expenses [G] 9,181 9,844 9,463 -3
ROACE (reported income
basis) [E] 4.0% 3.0% -0.4%
ROACE (CCS basis excluding
identified Items) [E] 3.3% 2.9% 3.8%
Gearing [F] 27.2% 28.0% 26.1%
1. Q1 on Q1 change
Supplementary financial and operational disclosure for this quarter is available at www.shell.com/investor.
FIRST QUARTER 2017 PORTFOLIO DEVELOPMENTS
Integrated Gas
During the quarter, Shell announced the sale of its interest in the Bongkot field in Thailand, and in April, Shell announced the sale of its interest in the Kapuni assets in New Zealand.
In April, Shell signed an agreement with Nord Stream 2 AG to provide a long-term funding facility of €285 million expected to be drawn down in 2017 and funds of up to €665 million to cover a combination of short and long-term funding and guarantees for a pipeline project.
Upstream
During the quarter, Shell made a final investment decision ("FID") for the Kaikias deep-water project in the Gulf of Mexico.
Shell announced the sale of a package of United Kingdom North Sea assets, oil sands and in-situ interests in Canada, and onshore interests in Gabon.
Downstream
During the quarter, Shell announced the sale of its interest in the SADAF chemicals joint venture in Saudi Arabia, and in April, Shell announced the sale of its LPG business in Hong Kong.
In April, Shell completed the sale of its interest in Vivo Energy in Africa, and in May Shell completed the separation of Motiva assets in the United States.
PERFORMANCE BY SEGMENT
INTEGRATED GAS
$ million Quarters
Q1 2017 Q4 2016 Q1 2016 %[1]
Segment earnings 1,822 28 905 +101
Of which: Identified items
(Definition [B]) 641 (879) (89)
Earnings excluding identified items 1,181 907 994 +19
Cash flow from operating activities 1,951 2,419 2,657 -27
Capital investment[2] 805 1,145 22,824 -96
Liquids production available for
sale (thousand b/d) 169 222 224 -25
Natural gas production available
for sale (million scf/d) 3,317 3,979 3,532 -6
Total production available for sale
(thousand boe/d) 741 908 833 -11
LNG liquefaction volumes (million
tonnes) 8.18 8.57 7.04 +16
LNG sales volumes (million tonnes) 15.84 15.34 12.29 +29
1. Q1 on Q1 change
2. Q1 2016 included capital investment of $21,773 million related to the
acquisition of BG Group plc.
First quarter identified items primarily reflected a gain of some $473 million related to the impact of the strengthening Australian dollar on a deferred tax position and a net gain on fair value accounting of certain commodity derivatives of some $168 million.
Compared with the first quarter 2016, Integrated Gas earnings excluding identified items benefited from higher realised oil, gas, and LNG prices, higher LNG volumes, and increased contributions from trading. This more than offset the impacts of lower liquids production volumes, the accounting reclassification of Woodside in the second quarter 2016, and higher taxation.
Despite higher earnings, cash flow from operating activities decreased compared with the same quarter a year ago as a result of negative working capital movements.
Compared with the first quarter 2016, production volumes decreased mainly as a result of a controlled shutdown of Pearl GTL, partly offset by the contribution of BG assets for an additional month. New field start-ups and the continuing ramp-up of existing fields, in particular Gorgon in Australia, contributed some 62 thousand boe/d to production compared with the first quarter 2016.
Compared with the first quarter 2016, LNG liquefaction volumes mainly reflected the start-up of Gorgon in Australia and the contribution of BG assets for an additional month.
LNG sales volumes mainly reflected increased trading of third-party volumes and higher liquefaction volumes compared with the same quarter a year ago.
UPSTREAM
$ million Quarters
Q1 2017 Q4 2016 Q1 2016 %[1]
Segment earnings (530) 35 (1,350) +61
Of which: Identified items
(Definition [B]) (1,070) (19) 87
Earnings excluding identified items 540 54 (1,437) +138
Cash flow from operating activities 3,849 3,904 448 +759
Capital investment[2] 2,854 3,490 35,038 -92
Liquids production available for
sale (thousand b/d) 1,697 1,732 1,557 +9
Natural gas production available
for sale (million scf/d) 7,618 7,336 7,373 +3
Total production available for sale
(thousand boe/d) 3,011 2,997 2,828 +6
1. Q1 on Q1 change
2. Q1 2016 included capital investment of $31,131 million related to the
acquisition of BG Group plc.
First quarter identified items primarily reflected the impact of the divestment of Shell's oil sands interests in Canada, including an impairment loss of $1,436 million partly offset by a gain of $329 million related to the recognition of a deferred tax asset. Identified items also included a gain of $118 million related to the impact of the strengthening Brazilian real on a deferred tax position.
Compared with the first quarter 2016, Upstream earnings excluding identified items benefited from higher realised oil and gas prices, increased production volumes mainly from new assets and improved operational performance, and lower depreciation including the impact of assets held for sale.
Compared with the same quarter a year ago, cash flow from operating activities increased as a result of higher prices and volumes.
The production contribution of BG assets for an additional month, compared with the first quarter 2016, was some 211 thousand boe/d. New field start-ups and the continuing ramp-up of existing fields, in particular Lula Central, Lula Alto and Lapa in Brazil, Kashagan in Kazakhstan, Sabah Gas Kebabangan in Malaysia, and Stones in the Gulf of Mexico, contributed some 142 thousand boe/d to production compared with the first quarter 2016, which more than offset the impact of field declines.
DOWNSTREAM
$ million Quarters
Q1 2017 Q4 2016 Q1 2016 %[1]
Segment earnings[2] 2,580 1,575 1,700 +52
Of which: Identified items
(Definition [B]) 91 236 (310)
Earnings excluding identified items2 2,489 1,339 2,010 +24
Of which:
Oil Products 1,653 823 1,633 +1
Refining & Trading 715 77 662 +8
Marketing 938 746 971 -3
Chemicals 836 516 377 +122
Cash flow from operating activities 3,705 2,286 (1,434) +358
Capital investment 1,046 2,251 1,092 -4
Refinery processing intake (thousand
b/d) 2,630 2,698 2,645 -1
Oil products sales volumes (thousand
b/d) 6,508 6,464 6,225 +5
Chemicals sales volumes (thousand
tonnes) 4,546 4,414 4,050 +12
1. Q1 on Q1 change
2. Earnings are presented on a CCS basis.
First quarter identified items primarily reflected a net gain on fair value accounting of commodity derivatives of $278 million, partly offset by impairments of $100 million. Other identified items included an onerous contract provision of $39 million, a loss on divestment of $24 million and redundancy and restructuring charges of $24 million.
Compared with the first quarter 2016, Downstream earnings excluding identified items benefited from stronger chemicals and refining industry conditions, improved operational performance, and lower operating expenses, partly offset by lower contributions from trading.
Cash flow from operating activities included negative working capital movements of $221 million compared with negative working capital movements of $3,582 million in the same quarter a year ago.
Oil Products
- Refining & Trading earnings excluding identified items benefited from improved refining industry conditions and operational performance, partly offset by lower contributions from trading.
Refinery processing intake volumes were 1% lower compared with the first quarter 2016. Excluding portfolio impacts, intake volumes were 11% higher compared with the same period a year ago. Refinery availability increased to 94% compared with 90% in the first quarter 2016, mainly as a result of lower unplanned maintenance.
- Marketing earnings excluding identified items were impacted by lower margins mainly driven by adverse exchange rate effects and divestments, partly offset by lower taxation and operating expenses.
Oil products sales volumes reflected higher trading volumes partly offset by lower marketing volumes, mainly as a result of portfolio impacts.
Chemicals
- Chemicals earnings excluding identified items benefited from stronger industry conditions driven by tight supply and improved operational performance.
Chemicals sales volumes benefited from improved operational performance and improved demand driven by tight supply conditions in the Americas. Chemicals manufacturing plant availability increased to 93% from 88% in the first quarter 2016, mainly reflecting lower planned maintenance.
CORPORATE
$ million Quarters
Q1 2017 Q4 2016 Q1 2016
Segment earnings (410) (566) (456)
Of which: Identified items
(Definition [B]) (63) (101) (525)
Earnings excluding identified items (347) (465) 69
Cash flow from operating activities 3 561 (1,010)
First quarter identified items mainly reflected a tax charge of $56 million related to an exchange rate gain on financing of the Upstream business.
Compared with the first quarter 2016, Corporate earnings excluding identified items were impacted by higher net interest expense driven by increased debt following the acquisition of BG, partly offset by higher tax credits.
Compared with the same quarter a year ago, cash flow from operating activities increased mainly as a result of lower costs and favourable working capital movements.
OUTLOOK FOR THE SECOND QUARTER 2017
Compared with the second quarter 2016, Integrated Gas production volumes are expected to be impacted by a reduction of some 25 thousand boe/d mainly associated with the impact of restoring production at Pearl GTL, partly offset by the start-up of Gorgon.
Compared with the second quarter 2016, Upstream earnings are expected to be negatively impacted by a reduction of some 45 thousand boe/d associated with completed divestments, and by some 50 thousand boe/d associated with the impact of lower production at NAM in the Netherlands. Earnings are expected to be positively impacted by some 55 thousand boe/d associated with lower levels of maintenance.
Refinery availability is expected to increase in the second quarter 2017 as a result of lower maintenance compared with the same period a year ago.
Chemicals manufacturing plant availability is expected to increase in the second quarter 2017 as a result of improved operational performance at Bukom and lower maintenance compared with the second quarter 2016.
As a result of completed divestments in Malaysia and Denmark, and the separation of Motiva assets, oil products sales volumes are expected to decrease by some 200 thousand barrels per day compared with the same period a year ago.
Corporate earnings excluding identified items, excluding the impact of currency exchange rate effects and interest rate movements, are expected to be a net charge of $350 - 450 million in the second quarter and a net charge of around $1.4 - 1.6 billion for the full year.
Downstream earnings are expected to include a non-cash tax charge of up to $600 million in the second quarter 2017, associated with the completion of the separation of Motiva assets, which will be treated as an identified item.
Corporate earnings are expected to include a non-cash charge of some $500 - 600 million in the second quarter 2017, driven by the restructuring of the funding of our businesses in North America, which will be treated as an identified item.
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME
$ million Quarters
Q1 2017 Q4 2016 Q1 2016[1]
Revenue[2] 71,796 64,767 48,554
Share of profit of joint ventures
and associates 1,198 982 789
Interest and other income 317 1,343 389
Total revenue and other income 73,311 67,092 49,732
Purchases 51,266 45,528 33,286
Production and manufacturing
expenses 6,658 6,703 6,765
Selling, distribution and
administrative expenses 2,412 2,912 3,106
Research and development 212 280 243
Exploration 443 568 457
Depreciation, depletion and
amortisation[3] 7,838 6,558 6,147
Interest expense 1,112 1,115 370
Total expenditure 69,941 63,664 50,374
Income/(loss) before taxation 3,370 3,428 (642)
Taxation charge/(credit)[4] (274) 1,820 (1,097)
Income/(loss) for the period2 3,644 1,608 455
Income/(loss) attributable to
non-controlling interest 106 67 (29)
Income/(loss) attributable to Royal
Dutch Shell plc shareholders 3,538 1,541 484
Basic earnings per share ($)[5] 0.43 0.19 0.07
Diluted earnings per share ($)[5] 0.43 0.19 0.07
1. The Consolidated Statement of Income for the first quarter 2016 has not been
revised to include a credit of $87 million after taxation that resulted from
adjustments made in the third quarter 2016 to the fair value of net assets
acquired from BG Group plc. This credit was reflected in the income for the third
quarter 2016.
2. See Note [2] "Segment information"
3. The first quarter 2017 includes a pre-tax impairment charge of $2,442 million
mainly related to the divestment of Shell's oil sands interests in Canada. (Q4
2016: pre-tax charge of $211 million; Q1 2016: pre-tax charge of $641 million).
4. The first quarter 2017 includes gains of $329 million related to the
recognition of a deferred tax asset as a result of the oil sands divestment, and
$535 million driven by the strengthening of the Australian dollar and Brazilian
real (Q4 2016: charge of $433 million; Q1 2016: gain of $574 million).
5. See Note [3] "Earnings per share"
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
$ million Quarters
Q1 2017 Q4 2016 Q1 2016
Income/(loss) for the period 3,644 1,608 455
Other comprehensive income net of tax:
Items that may be reclassified to
income in later periods:
- Currency translation differences 1,222 (1,484) 2,319
- Unrealised gains/(losses) on
securities 129 120 (12)
- Cash flow hedging gains/(losses) 88 (201) 324
- Net investment hedging
gains/(losses) - (785) 136
- Share of other comprehensive
income/(loss) of joint ventures and
associates 60 66 8
Total 1,499 (2,284) 2,775
Items that are not reclassified to
income in later periods:
- Retirement benefits remeasurements 1,753 2,610 (1,634)
Other comprehensive income/(loss) for
the period 3,252 326 1,141
Comprehensive income/(loss) for the
period 6,896 1,934 1,596
Comprehensive income/(loss)
attributable to non-controlling
interest 116 8 4
Comprehensive income/(loss)
attributable to Royal Dutch Shell plc
shareholders 6,780 1,926 1,592
CONDENSED CONSOLIDATED BALANCE SHEET
$ million
Mar 31, Dec 31, Mar 31,
2017 2016 2016[1]
Assets
Non-current assets
Intangible assets 23,705 23,967 21,327
Property, plant and
equipment[2] 233,822 236,098 245,133
Joint ventures and
associates3 34,236 33,255 35,654
Investments in securities 6,124 5,952 3,474
Deferred tax[3] 15,482 14,425 15,311
Retirement benefits 2,513 1,456 3,108
Trade and other receivables4 9,684 9,553 11,047
325,566 324,706 335,054
Current assets
Inventories 21,589 21,775 17,396
Trade and other receivables4 44,201 45,664 47,872
Cash and cash equivalents 19,595 19,130 11,019
85,385 86,569 76,287
Total assets 410,951 411,275 411,341
Liabilities
Non-current liabilities
Debt 83,009 82,992 73,005
Trade and other payables[4] 6,801 6,925 3,917
Deferred tax 14,773 15,274 16,677
Retirement benefits 13,062 14,130 13,516
Decommissioning and other
provisions[5] 29,770 29,618 32,710
147,415 148,939 139,825
Current liabilities
Debt 8,620 9,484 7,868
Trade and other payables4 49,553 53,417 51,069
Taxes payable 8,777 6,685 10,387
Retirement benefits 443 455 401
Decommissioning and other
provisions 3,390 3,784 3,777
70,783 73,825 73,502
Total liabilities 218,198 222,764 213,327
Equity attributable to Royal
Dutch Shell plc shareholders 190,817 186,646 196,521
Non-controlling interest 1,936 1,865 1,493
Total equity 192,753 188,511 198,014
Total liabilities and equity 410,951 411,275 411,341
1. The Condensed Consolidated Balance Sheet at March 31, 2016 has not
been revised to reflect the adjustments made in the third quarter 2016
to the provisional fair value of net assets acquired from BG Group plc.
2. At March 31, 2017, the carrying amount includes $13,500 million of
assets held for sale (December 31, 2016: $282 million), of which $9,012
million relate to the oil sands divestment in Canada.
3. At March 31, 2017, joint ventures and associates and deferred tax
assets respectively include the carrying amount of Shell's interest in
the Motiva joint venture of $5,204 million, which is held for sale, and
an associated deferred tax liability of $1,376 million.
4. See Note [6] "Derivative contracts and debt excluding finance lease
liabilities"
5. At March 31, 2017, this includes provisions of $3,025 million related
to assets held for sale (December 31, 2016: $482 million).
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Equity attributable to Royal Dutch
Shell plc shareholders
Shares Other Non-
Share held in reserves Retained controlling Total
$ million capital[1] trust [2] earnings Total interest equity
At January 1, 188,51
2017 683 (901) 11,298 175,566 186,646 1,865 1
Comprehensive
income/(loss)
for the period - - 3,242 3,538 6,780 116 6,896
(3,934
Dividends paid - - - (3,903) (3,903) (31) )
Scrip dividends 4 - (4) 1,249 1,249 - 1,249
Share-based
compensation - 557 (510) (1) 46 - 46
Other changes
in
non-controlling
interest - - - (1) (1) (14) (15)
At March 31, 192,75
2017 687 (344) 14,026 176,448 190,817 1,936 3
At January 1, 164,12
2016 546 (584) (17,186) 180,100 162,876 1,245 1
Comprehensive
income/(loss)
for the period - - 1,108 484 1,592 4 1,596
(3,769
Dividends paid - - - (3,734) (3,734) (35) )
Scrip dividends 5 - (5) 1,476 1,476 - 1,476
Shares issued 120 - 33,930 - 34,050 - 34,050
Share-based
compensation - 369 (381) 123 111 - 111
Other changes
in
non-controlling
interest - - - 150 150 279 429
At March 31, 198,01
2016 671 (215) 17,466 178,599 196,521 1,493 4
1. See Note [4] "Share capital"
2. See Note [5] "Other reserves"
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
$ million Quarters
Q1 2017 Q4 2016 Q1 2016
Income/(loss) for the period 3,644 1,608 455
Adjustment for:
- Current tax 1,882 1,241 753
- Interest expense (net) 952 980 272
- Depreciation, depletion and
amortisation 7,838 6,558 6,147
- Net (gains)/losses on sale
and revaluation of non-current
assets and businesses 70 (1,238) (175)
- Decrease/(increase) in
working capital (1,828) (648) (3,909)
- Share of (profit)/loss of
joint ventures and associates (1,198) (982) (789)
- Dividends received from joint
ventures and associates 776 1,466 688
- Deferred tax, retirement
benefits, decommissioning and
other provisions (2,039) 1,078 (1,755)
- Other 501 (153) (292)
Tax paid (1,090) (740) (734)
Cash flow from operating
activities 9,508 9,170 661
Capital expenditure (4,306) (5,714) (5,324)
Acquisition of BG Group plc,
net of cash and cash
equivalents acquired - - (11,421)
Investments in joint ventures
and associates (194) (527) (332)
Proceeds from sale of property,
plant and equipment and
businesses 122 1,306 46
Proceeds from sale of joint
ventures and associates 1 1,411 16
Interest received 123 176 136
Other (70) (81) (37)
Cash flow from investing
activities (4,324) (3,429) (16,916)
Net increase/(decrease) in debt
with maturity period
within three months (290) 23 873
Other debt:
- New borrowings 364 189 264
- Repayments (1,322) (3,327) (1,969)
Interest paid (850) (1,073) (534)
Change in non-controlling
interest 2 291 422
Cash dividends paid to:
- Royal Dutch Shell plc
shareholders (2,654) (2,323) (2,258)
- Non-controlling interest (31) (72) (35)
Repurchases of shares - - -
Shares held in trust: net
sales/(purchases) and dividends
received (60) (175) (4)
Cash flow from financing
activities (4,841) (6,467) (3,241)
Currency translation
differences relating to cash
and
cash equivalents 122 (128) (1,237)
Increase/(decrease) in cash and
cash equivalents 465 (854) (20,733)
Cash and cash equivalents at
beginning of period 19,130 19,984 31,752
Cash and cash equivalents at
end of period 19,595 19,130 11,019
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 ("the Company") and its subsidiaries (collectively referred to as "Shell") have been prepared in accordance with IAS 34 Interim Financial Reporting as issued by the International Accounting Standards Board and as adopted by the European Union, 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, 2016 (pages 122 to 127) as filed with the U.S. Securities and Exchange Commission.
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 ("the Act"). Statutory accounts for the year ended December 31, 2016 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 Act.
2. Segment information
Segment earnings are presented on a current cost of supplies basis (CCS earnings), which is the earnings measure used by the Chief Executive Officer for the purposes of making decisions about allocating resources and assessing performance. On this basis, the purchase price of volumes sold during the period is based on the current cost of supplies during the same period after making allowance for the tax effect. CCS earnings therefore exclude the effect of changes in the oil price on inventory carrying amounts. Sales between segments are based on prices generally equivalent to commercially available prices.
INFORMATION BY SEGMENT
$ million Quarters
Q1 2017 Q4 2016 Q1 2016
Third-party revenue
Integrated Gas 8,419 7,031 5,679
Upstream 1,609 1,418 1,922
Downstream 61,752 56,300 40,929
Corporate 16 18 24
Total third-party revenue 71,796 64,767 48,554
Inter-segment revenue
Integrated Gas 805 1,087 743
Upstream 8,661 8,218 5,037
Downstream 726 796 331
Corporate - - -
CCS earnings
Integrated Gas 1,822 28 905
Upstream (530) 35 (1,350)
Downstream 2,580 1,575 1,700
Corporate (410) (566) (456)
Total 3,462 1,072 799
RECONCILIATION OF INCOME FOR THE PERIOD to CCS EARNINGS
$ million Quarters
Q1 2017 Q4 2016 Q1 2016
Income/(loss) for the period 3,644 1,608 455
Current cost of supplies
adjustment:
Purchases (217) (633) 398
Taxation 60 173 (120)
Share of profit/(loss) of
joint ventures and associates (25) (76) 66
(182) (536) 344
CCS earnings 3,462 1,072 799
3. Earnings per share
EARNINGS PER SHARE
Quarters
Q1 2017 Q4 2016 Q1 2016
Income/(loss) attributable to
Royal Dutch Shell plc
shareholders
($ million) 3,538 1,541 484
Weighted average number of
shares used as the basis for
determining:
Basic earnings per share
(million) 8,154.8 8,101.8 7,173.4
Diluted earnings per share
(million) 8,222.9 8,170.1 7,230.4
4. Share Capital
ISSUED AND FULLY PAID ORDINARY SHARES OF EUR0.07 EACH1
Number of shares Nominal value ($ million)
A B A B Total
4,428,903,81 3,745,486,73
At January 1, 2017 3 1 374 309 683
Scrip dividends 47,791,678 - 4 - 4
4,476,695,49 3,745,486,73
At March 31, 2017 1 1 378 309 687
3,990,921,56 2,440,410,61
At January 1, 2016 9 4 340 206 546
Scrip dividends 65,704,048 - 5 - 5
1,305,076,11
Shares issued 218,728,308 7 17 103 120
4,275,353,92 3,745,486,73
At March 31, 2016 5 1 362 309 671
1. Share capital at March 31, 2017 also included 50,000 issued and fully paid
sterling deferred shares of GBP1 each.
At Royal Dutch Shell plc's Annual General Meeting on May 24, 2016, 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 €185 million (representing 2,643 million ordinary shares of €0.07 each), and to list such shares or rights on any stock exchange. This authority expires at the earlier of the close of business on August 24, 2017, and the end of the Annual General Meeting to be held in 2017, unless previously renewed, revoked or varied by Royal Dutch Shell plc in a general meeting.
5. Other reserves
OTHER RESERVES
Accumulated
Share Capital other
Merger premium redemption Share plan comprehensi
$ million reserve reserve reserve reserve ve income Total
At January 1, 2017 37,311 154 84 1,644 (27,895) 11,298
Other comprehensive
income/(loss)
attributable to Royal
Dutch Shell plc
shareholders - - - - 3,242 3,242
Scrip dividends (4) - - - - (4)
Share-based
compensation - - - (510) - (510)
At March 31, 2017 37,307 154 84 1,134 (24,653) 14,026
At January 1, 2016 3,398 154 84 1,658 (22,480) (17,186)
Other comprehensive
income/(loss)
attributable to Royal
Dutch Shell plc
shareholders - - - - 1,108 1,108
Scrip dividends (5) - - - - (5)
Shares issued 33,930 - - - - 33,930
Share-based
compensation - - (381) (381)
At March 31, 2016 37,323 154 84 1,277 (21,372) 17,466
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, p.l.c., now The Shell Transport and Trading Company Limited, in 2005. The capital redemption reserve was established in connection with repurchases of shares of Royal Dutch Shell plc. The share plan reserve is in respect of equity-settled share-based compensation plans.
6. Derivative contracts and debt excluding finance lease liabilities
The table below provides the carrying amounts of derivatives contracts held, disclosed in accordance with
IFRS 13 Fair Value Measurement .
DERIVATIVE CONTRACTS
$ million Mar 31, 2017 Dec 31, 2016 Mar 31, 2016
Included within:
Trade and other receivables -
non-current 482 405 1,250
Trade and other receivables -
current 4,956 5,957 12,297
Trade and other payables -
non-current 3,094 3,315 1,369
Trade and other payables - current 5,387 6,418 11,026
As disclosed in the Consolidated Financial Statements for the year ended December 31, 2016, 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 March 31, 2017 are consistent with those used in the year ended December 31, 2016, and the carrying amounts of derivative contracts measured using predominantly unobservable inputs have not changed materially since that date.
The table below provides the comparison of the fair value with the carrying amount of debt excluding finance lease liabilities, disclosed in accordance with IFRS 7 Financial Instruments: Disclosures.
-
DEBT EXCLUDING FINANCE LEASE LIABILITIES $ million Mar 31, 2017 Dec 31, 2016 Mar 31, 2016 Carrying amount 76,925 77,617 68,723 Fair value1 80,087 80,408 71,903 1. Mainly determined from the prices quoted for these securities
DEFINITIONS
A. Earnings on a current cost of supplies basis attributable to shareholders
CCS earnings is defined in Note 2 "Segment information" to the Interim Statements in this Report. CCS earnings attributable to Royal Dutch Shell plc shareholders excludes the non-controlling interest share of CCS earnings and is reconciled to income/(loss) attributable to Royal Dutch Shell plc shareholders as follows.
$ million Quarters
Q1 2017 Q4 2016 Q1 2016
Income/(loss) attributable to
Royal Dutch Shell plc
shareholders 3,538 1,541 484
CCS adjustment (182) (536) 344
CCS adjustment attributable to
non-controlling interest 25 27 (14)
CCS adjustment attributable to
Royal Dutch Shell plc
shareholders (157) (509) 330
CCS earnings attributable to
Royal Dutch Shell plc
shareholders 3,381 1,032 814
B. Identified items
Identified items comprise: divestment gains and losses, impairments, fair value accounting of commodity derivatives and certain gas contracts, redundancy and restructuring, the impact of exchange rate movements on certain deferred tax balances, and other items. These items, either individually or collectively, can cause volatility to net income, in some cases driven by external factors, which may hinder the comparative understanding of Shell's financial results from period to period. The impact of identified items on Shell's CCS earnings is shown below.
-
IDENTIFIED ITEMS AFTER TAX $ million Quarters Q1 2017 Q4 2016 Q1 2016 Divestment gains/(losses) 197 1,061 163 Impairments (1,525) (293) (613) Fair value accounting of commodity derivatives and certain gas contracts 504 (239) (382) Redundancy and restructuring (45) (48) (54) Impact of exchange rate movements on tax balances 535 (433) 574 Other (67) (811) (525) Impact on CCS earnings (401) (763) (837) Of which: Integrated Gas 641 (879) (89) Upstream (1,070) (19) 87 Downstream 91 236 (310) Corporate (63) (101) (525) Impact on CCS earnings attributable to non-controlling interest (28) - (98) Impact on CCS earnings attributable to shareholders (373) (763) (739)
The categories above represent the nature of the items identified irrespective of whether the items relate to Shell subsidiaries or joint ventures and associates. The after-tax impact of identified items of joint ventures and associates is fully reported within "Share of profit and joint ventures and associates" on the Consolidated Statement of Income. Identified items related to subsidiaries are consolidated and reported across appropriate lines of the Consolidated Statement of Income. Only pre-tax identified items reported by subsidiaries are taken into account in the calculation of "underlying operating expenses" (Definition G).
Fair value accounting of commodity derivatives and certain gas contracts: In the ordinary course of business, Shell enters into contracts to supply or purchase oil and gas products as well as power and environmental products. Derivative contracts are entered into for mitigation of resulting economic exposures (generally price exposure) and these derivative contracts are carried at period-end market price (fair value), with movements in fair value recognised in income for the period. Supply and purchase contracts entered into for operational purposes 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.
Impacts of exchange rate movements on tax balances represent the impact on tax balances of exchange rate movements arising on (a) the conversion to dollars of the local currency tax base of non-monetary assets and liabilities, as well as losses (this primarily impacts the Integrated Gas and Upstream segments) and (b) the conversion of dollar-denominated inter-segment loans to local currency, leading to taxable exchange rate gains or losses (this primarily impacts the Corporate segment).
Other identified items represent other credits or charges Shell's management assesses should be excluded to provide additional insight, such as certain provisions for onerous contracts or litigation.
C. Capital investment
Capital investment is a measure used to make decisions about allocating resources and assessing performance. It comprises capital expenditure, exploration expense excluding well write-offs, new investments in joint ventures and associates, new finance leases and investments in Integrated Gas, Upstream and Downstream securities, all of which on an accruals basis. In 2016, it also included the capital investment related to the acquisition of BG Group plc.
The reconciliation of "Capital expenditure" to "Capital investment" is as follows.
-
$ million Quarters Q1 2017 Q4 2016 Q1 2016 Capital expenditure 4,306 5,714 5,324 Capital investment related to the acquisition of BG Group plc - - 52,904 Investments in joint ventures and associates 194 527 332 Exploration expense, excluding exploration wells written off 157 416 224 Finance leases 41 215 414 Other 22 41 (223) Capital investment 4,720 6,913 58,975 Of which: Integrated Gas 805 1,145 22,824 Upstream 2,854 3,490 35,038 Downstream 1,046 2,251 1,092 Corporate 15 27 21
D. Divestments
Divestments is a measure used to monitor the progress of Shell's divestment programme. This measure comprises proceeds from sale of property, plant and equipment and businesses, joint ventures and associates, and other Integrated Gas, Upstream and Downstream investments, reported in "Cash flow from investing activities", adjusted onto an accruals basis and for any share consideration received or contingent consideration recognised upon divestment, as well as proceeds from the sale of interests in entities while retaining control (for example, proceeds from sale of interest in Shell Midstream Partners, L.P.), which are included in "Change in non-controlling interest" within "Cash flow from financing activities".
With effect from January 1, 2017, consideration received in the form of shares is valued and included in this measure upon completion of the divestment transactions, instead of when these shares are disposed of. This change in timing of recognition enables Shell to better evaluate its progress against its divestment programme. The share or contingent consideration is not remeasured thereafter, including if and when the shares received are eventually disposed of, or contingent consideration is realised. Comparative information for 2016 has been adjusted to include the share consideration received upon the divestments of Shell's interests in the Deep Basin and Gundy acreages (Canada) and the Brutus TLP and Glider subsea production system (USA), both in the fourth quarter 2016.
In future periods, the proceeds from any disposal of shares received as divestment consideration, and proceeds from realisation of contingent consideration, will be included in "Cash flow from investing activities".
The reconciliation of "Proceeds from sale of property, plant and equipment and businesses" to "Divestments" is as follows.
$ million Quarters
Q1 2017 Q4 20161 Q1 2016
Proceeds from sale of property,
plant and equipment and businesses 122 1,306 46
Proceeds from sale of joint
ventures and associates 1 1,411 16
Share and contingent consideration - 275 -
Proceeds from sale of interests in
entities while retaining control - 289 421
Other adjustments (94) (3) 2
Divestments 29 3,278 485
Of which:
Integrated Gas 12 47 16
Upstream 17 1,480 38
Downstream - 1,747 427
Corporate - 4 4
1. Comparative information has been adjusted to include share consideration
received upon divestments.
E. Return on average capital employed
Return on average capital employed (ROACE) measures the efficiency of Shell's utilisation of the capital that it employs. In this calculation, ROACE is defined as 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.
-
$ million Q1 2017 Q4 2016 Q1 2016 Income for current and previous three quarters 7,966 4,777 (1,882) Interest expense after tax 3,268 2,730 799 Income before interest expense 11,234 7,507 (1,083) Capital employed - opening 278,887 222,500 212,662 Capital employed - closing 284,382 280,987 278,887 Capital employed - average 281,635 251,744 245,775 ROACE 4.0% 3.0% -0.4%
Return on average capital employed on a CCS basis excluding identified items is defined as the sum of CCS earnings attributable to shareholders excluding identified items for the current and previous three quarters, as a percentage of the average capital employed for the same period.
-
$ million Q1 2017 Q4 2016 Q1 2016 CCS earnings excluding identified items 9,386 7,185 9,261 Capital employed - average 281,635 251,744 245,775 ROACE on a CCS basis excluding identified items 3.3% 2.9% 3.8%
F. Gearing
Gearing is a key measure of Shell's capital structure and is calculated as follows.
-
$ million Mar 31, 2017 Dec 31, 2016 Mar 31, 2016 Current debt 8,620 9,484 7,868 Non-current debt 83,009 82,992 73,005 Total debt1 91,629 92,476 80,873 Less: Cash and cash equivalents (19,595) (19,130) (11,019) Net debt 72,034 73,346 69,854 Add: Total equity 192,753 188,511 198,014 Total capital 264,787 261,857 267,868 Gearing 27.2% 28.0% 26.1% 1. Included finance lease liabilities of $14,704 million at March 31, 2017, $14,859 million at December 31, 2016, and $12,150 million at March 31, 2016.
G. Operating expenses
Operating expenses is a measure of Shell's total operating expenses performance, comprising the following items from the Consolidated Statement of Income: production and manufacturing expenses; selling, distribution and administrative expenses; and research and development expenses. Underlying operating expenses measures Shell's total operating expenses performance excluding identified items.
$ million Q1 2017 Q4 2016 Q1 2016
Production and manufacturing expenses 6,658 6,703 6,765
Selling, distribution and
administrative expenses 2,412 2,912 3,106
Research and Development 212 280 243
Operating Expenses 9,282 9,895 10,114
Less Defined Items:
Redundancy and restructuring charges (73) (51) (69)
Provisions (28) - (160)
BG acquisition costs - - (422)
(101) (51) (651)
Underlying operating expenses 9,181 9,844 9,463
H. Free cash flow
Free cash flow is used to evaluate cash available for financing activities, including dividend payments, after investment in maintaining and growing our business. It is defined as the sum of "Cash flow from operating activities" and "Cash flow from investing activities" as shown on page 1.
CAUTIONARY STATEMENT
All amounts shown throughout this announcement are unaudited. All peak production figures in Portfolio Developments are quoted at 100% expected production.
The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate legal entities. In this announcement "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 announcement refer to companies over which Royal Dutch Shell plc either directly or indirectly has control. Entities and unincorporated arrangements over which Shell has joint control are generally referred to as "joint ventures" and "joint operations" respectively. Entities 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 announcement 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 announcement, 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. No assurance is provided that future dividend payments will match or exceed previous dividend payments. All forward-looking statements contained in this announcement 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, 2016 (available at www.shell.com/investor and www.sec.gov). These risk factors also expressly qualify all forward-looking statements contained in this announcement and should be considered by the reader. Each forward-looking statement speaks only as of the date of this announcement, May 4, 2017. 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 announcement.
This Report contains references to Shell's website. These references are for the readers' convenience only. Shell is not incorporating by reference any information posted on www.shell.com
We may have used certain terms, such as resources, in this announcement 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.
This announcement contains inside information.
May 4, 2017
The information in this Report reflects the unaudited consolidated financial position and results of Royal Dutch Shell plc. Company No. 4366849, Registered Office: Shell Centre, London, SE1 7NA, England, UK.
Contacts:
Linda Szymanski - Company Secretary
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
LEI number of Royal Dutch Shell plc: 21380068P1DRHMJ8KU70
Classification: Inside Information
SOURCE Royal Dutch Shell plc
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