royal dutch shell plc second quarter 2016 results webcast presentation

Royal Dutch Shell plc July 28, 2016

Second quarter 2016 results Re-shaping Shell, to create a world-class investment case

“Let’s make the future”

Ben van Beurden Chief Executive Officer Royal Dutch Shell

Royal Dutch Shell July 28, 2016

Reserves: Our use of the term “reserves” in this presentation means SEC proved oil and gas reserves. Resources: Our use of the term “resources” in this presentation includes quantities of oil and gas not yet classified as SEC proved oil and gas reserves. Resources are consistent with the Society of Petroleum Engineers (SPE) 2P + 2C definitions. Resources and potential: Our use of the term “resources and potential” are consistent with SPE 2P + 2C + 2U definitions. Organic: Our use of the term Organic includes SEC proved oil and gas reserves excluding changes resulting from acquisitions, divestments and year-average pricing impact. Shales: Our use of the term ‘shales’ refers to tight, shale and coal bed methane oil and gas acreage. The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate legal entities. In this release “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 release 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 release 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 release, 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. There can be no assurance that future dividend payments will match or exceed previous dividend payments. All forward-looking statements contained in this release 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 20-F for the year ended December 31, 2015 (available at www.shell.com/investor and www.sec.gov ). These risk factors also expressly qualify all forward looking statements contained in this release and should be considered by the reader. Each forward-looking statement speaks only as of the date of this release, July 28, 2016. 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 release. With respect to operating costs synergies indicated, such savings and efficiencies in procurement spend include economies of scale, specification standardisation and operating efficiencies across operating, capital and raw material cost areas. We may have used certain terms, such as resources, in this release that 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.

Definitions & cautionary note

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Royal Dutch Shell July 28, 2016 4

Strategy “Let’s make the future”

Leader: value + influence

Reducing our carbon intensity

Shared value with society

World-class investment case

STRATEGIC

Focus portfolio on resilient positions

Invest in advantaged projects

Value chain integration

FCF/share + ROCE growth

Conservative financial

management

OPERATIONAL

Reset cost and capital spending

First class execution projects +

operations

Unrelenting focus on HSSE and

licence to operate


Re-shape Shell Driving strategy in multiple time horizons

Relentless portfolio high-grading

Strong free cash flow and returns

Cash engines: today Growth priorities: 2016+ Future opportunities: 2020+

Competitive + resilient

Funds dividends + balance sheet

FCF + ROACE pathway

Affordable growth in advantaged positions

Material value + upside

Managed exposure

Path to profitability

Cash engines 2020+

CONVENTIONAL OIL + GAS

CHEMICALS

OIL PRODUCTS

DEEP WATER INTEGRATED GAS

OIL SANDS MINING

SHALES NEW ENERGIES

5


Thousand boe/d Thousand boe/d Unit costs $/boe

6

Operating costs exclude identified items; deep water excludes idle rig costs

Re-shape Shell H1 2016 delivery

Reducing costs + improving uptime Delivering growth projects HSSE priority

Cash engines: today Growth priorities: 2016+ Future opportunities: 2020+

Conventional oil and gas Deep water Shales Unit costs $/boe Unit costs $/boe

Unit operating costs Production (RHS)

Thousand boe/d


Competitive financial data as published. Free cash flow: cash flow from operations less cash used in investing activities. $/ADR for European companies.

ROACE underlying: European companies: CCS basis excluding identified items. US companies: reported earnings excluding special non-operating items. Capital employed on gross debt

basis.

Financial dashboard

%

Gearing

%

ROACE

$/share

Free cash flow per share

%

Total shareholder return

Shell Peer group

3 years to Q2 2016 12 months to Q2 2016

Simon Henry Chief Financial Officer Royal Dutch Shell


Earnings and ROACE on CCS basis, excluding identified items

$ billion

Earnings Q2 2015 to Q2 2016

Q2 2016 Financial highlights $ billion Q2 2015 Q2 2016

Upstream (0.5) (1.3)

Integrated Gas 1.4 0.9

Downstream (CCS) 3.0 1.8

Corporate & minorities (0.1) (0.3)

CCS net earnings 3.8 1.0

CCS earnings, $ per share 0.60 0.13

Cash flow from operations 6.1 2.3

ROACE (%) 7.6 2.5

Dividends 3.0 3.7

Dividend, $ per share 0.47 0.47


Earnings on CCS basis, excluding identified items

$ billion


Q2 2016 Financial highlights

Environment Choice


Cash investment: Cash flow from investing activities

Cash performance + payout

$ billion

Cash flow

$ billion

Dividend, buyback + gearing

$ billion, 2016 Q2 4Q rolling

Cash generation

Priorities for cash: Debt reduction Dividends Buybacks + capital investment

CFFO Cash investment Free cash flow (RHS)

Cash investment

BG acquisition – cash element Dividend and buyback

Downstream + Corporate

Dividend declared Buyback

End period gearing (RHS)

$ billion

%

Integrated Gas Upstream

~20

43

Gearing range

CFFO CFFI


Integration with BG BG performance

Thousand boe per day

Queensland LNG

Thousand boe per day

Brazil pre-salt

$ billion

Synergies: BG

Production Number of cargoes delivered in the quarter (RHS)

1st LNG Train 1 Dec 2014

T2 start up Nov 2015 #

Cidade Itaguaí Q3 2015

FPSO Cidade de Maricá Q1 2016

Actions taken for ~50% of synergies capture: Staff + contractors Offices Exploration Procurement + others

2.5

4 4.5

Exploration Costs


* $60 oil price scenario 2018 (2016 RT Brent)

Manage down-cycle Pulling levers to manage financial framework

2016-18 levers

Divestments Reduce capital

investment

Reduce operating

costs

Deliver new projects

Reducing our cash break-even

Further options available

+/- $10 Brent = ~5 billion CFFO

$ billion 2015 baseline:

Shell + BG 2016 2017-2018 potential

Operating costs 46 Trend to 40 (underlying) Multi-billion p.a.

Capital investment 36 ~29 25-30

Divestments 6 + 5 6-8 in progress

30 over 2016-18

Projects start-up post-2014 (CFFO) n/a ~$2 billion ~10 billion

by 2018*


Manage down-cycle Divestments

Integrated gas split out from Upstream from 2011 onwards

$ billion

Divestment program

$30 billion 2016-18 Progressing $6-8 billion 2016 5-10 countries; ~10% of production

Downstream/Corporate High grading ‘tail’ Infrastructure + mature positions Refocus portfolio

Upstream Integrated Gas

2016-2018 completed + announced $ billion

Completed – MLP 0.8

– Denmark marketing 0.3

– N.Z.: Maui pipeline 0.2

– MGL IPO 0.1

– Others 0.1

Total completed 1.5

Announced – Showa Shell ~1.4

– Malaysia refining

~0.2 – Anasuria cluster

– Maclure

Total announced ~1.6

TOTAL ~3.1

In progress – Motiva JV end

– N.Z.: upstream strategic review – Thailand strategic review – Selective North Sea strategic review

Divestments Reduce capital investment

Reduce operating costs



25-30

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2016 excludes BG purchase price

$ billion

Capital investment

Manage down-cycle Lower & more predictable capital investment

Planning for $25-$30 billion range

$30 billion/year ceiling

Trending lower in range today

Options to further reduce below $25 billion if warranted

Shell BG

-25%




Shell + BG C.I. on a cash basis

58

47 41

36

53

43 37

33 31 ~29 29 ~26


Manage down-cycle Reduce operating cost

Excluding identified items

$ billion

Operating cost

Shell BG




Substantial reductions delivered

“Lower for ever” mindset + BG synergies

Staff, supply chain + contractors

Divestments, growth, FX impacts

-$4 bn

~40

49 46

44 42


BC-10 Ph3 Shell 50%

Gorgon start-up 15.6 mtpa LNG Shell 25%

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Deliver new projects 2016 investment decisions and planned start-ups




Kashagan 300 kboe/d Shell 17%

Stones 50 kboe/d Shell 100%

Pennsylvania FID 1.6 mtpa polyethylene plant Shell 100%

Nanhai 2nd cracker FID 1.2 mtpa ethylene plant Shell 50%

7th FPSO 1st oil – ‘Maricá’ 150 kboe/d Shell 25%

8th FPSO – ‘Saquarema’ 150 kboe/d Shell 25%

LNG Canada delay of FID 13 mtpa LNG Shell 50%

9th FPSO – ‘Caraguatauba’ 100 kboe/d Shell 30%

ML South start-up 35 kboe/d Shell 35%

FID

Lake Charles delay of FID ~15 mtpa LNG Shell capacity interest 100%

2016 start-ups: >250 kboe/d ; 3.9 mtpa LNG

New chemicals investment

LNG FIDs postponed

Start-up


Deliver new projects Conventional exploration: progress H1 2016

Million boe

Fort Sumter discovery

GoM: cumulative resources added (2010-2016)

Added ~1.3 billion boe in GoM 2010+ Heartland + near field focus; vicinity to infrastructure; deep geological basin knowledge




Appomattox Vito

Cardamom South Deimos

Vicksburg Vito appraisal

Appomattox appraisal

Rydberg Kaikias

Powernap

Kaikias appraisal Powernap appraisal

Kepler North Fort Sumter

Oil discovery in Gulf of Mexico heartland; Norphlet play

>125 million boe resources added, with follow-up wells in 2016 and 2017

Shell 100 %

Shell lease Discovery

Fort Sumter

Rydberg

Vicksburg Appomattox

future Appo TLP

Mississippi canyon Desoto canyon

TLP

Ben van Beurden Chief Executive Officer Royal Dutch Shell plc


Transformation

CREATE A WORLD CLASS INVESTMENT CASE

Improved capital efficiency: reduced investment/FCF ratio

Energy transition: CO2 footprint & new energies strategy

Simpler company: Exit ~10% production; 5-10 countries

Less cost + fewer people with BG than Shell stand-alone: 12,500 fewer staff

Capital efficiency: 2013 spending halved & $45 billion mitigated

Improving our metrics: FCF/share; ROCE; net debt

$30bn divestments: Innovative deals like Motiva, Showa and MLP

Portfolio growth: 1 mboe/d adds $10 bln cash flow

2019-2021 average

2013-2015 average

Brent

ROACE

~$60

~10%

~$90

8%

Organic free cash flow $20-25 billion p.a. $5 billion p.a.

$60 oil price scenario (2016 RT Brent)

Questions & Answers


Q3 2016 Outlook Q3 – Q3 OUTLOOK: Year-ago baseline reflects Shell’s earnings seasonality

Upstream

Nigeria SPDC security impact: ~-35 kboe/d

Integrated gas

Maintenance: ~-15 kboe/d

Downstream

Refinery availability marginally increase

Chemicals availability increase

Divestment impact Marketing volumes: ~-200 kboe/d

PPA - depreciation charge: up to $0.3 billion

Shell + BG earnings sensitivity (2016):

Brent: $10/bbl Brent +/- ~$5 billion earnings per annum, of which:

Upstream +/- ~$3 billion

Integrated Gas +/- ~$2 billion (4-6 month LNG price lag versus Brent)

Henry Hub: $1/mmbtu +/- ~$250 million earnings per annum

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$ billion


Q2 2016 Upstream results

Environment Choice



$ billion


Q2 2016 Integrated gas results

Environment Choice


Choice: +30%

25

Q2 2016 Oil and gas production

Million boe per day

Upstream + Integrated Gas – oil & gas

Million tonnes

LNG liquefaction volumes

3.00

3.25

3.50

3.75

2.75

2.50



Q2 2016 Downstream results

$ billion


$ billion

Earnings mix

Marketing Refining & Trading Chemicals


$/barrel

Shell oil & gas realisations

$/barrel

Industry refining margins

$/tonne

Industry chemicals margins

Q2 2016 Prices & margins

$/mmbtu

US ethane Western Europe naphtha NE/SE Asia naphtha

US West Coast US Gulf Coast coking Rotterdam complex Singapore

Oil Gas (RHS)

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Royal Dutch Shell plc July 28, 2016

Second quarter 2016 results Re-shaping Shell, to create a world-class investment case

“Let’s make the future”

royal dutch shell plc second quarter 2016 results webcast presentation

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