royal dutch shell plc third quarter 2016 results analyst webcast presentation

Royal Dutch Shell November 1, 2016

Royal Dutch Shell plc November 1, 2016

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

“Let’s make the future”


Simon Henry Chief Financial Officer Royal Dutch Shell

Royal Dutch Shell November 1, 2016 3

Definitions & cautionary note

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. Underlying operating cost is defined as operating cost less identified items. A reconciliation can be found in the quarterly results announcement. 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, November 1, 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.


Summary

Business mix underpins results

Downstream + Integrated Gas offsetting Upstream

Underlying CCS earnings $2.8 billion

CFFO $8.5 billion

Q316 dividend $0.47 per share

Continued drive to re-shape Shell

Consolidating BG into Shell

Updated capital investment guidance

Progressing cost reductions, divestments and

project start-ups

Leader: value + influence

Reducing our carbon intensity

Shared value with society

World-class investment case

FCF/share + ROCE growth

Conservative financial

management


$ billion Q3 2015 Q3 2016

Upstream (0.6) 0.0

Integrated Gas 0.9 0.9

Downstream (CCS) 2.6 2.1

Corporate & non-controlling interest (0.6) (0.2)

CCS net earnings 2.4 2.8

CCS earnings, $ per share 0.38 0.35

Cash flow from operations 11.2 8.5

ROACE (%) 6.1 2.8

Dividends 3.0 3.8

Dividend, $ per share 0.47 0.47

5

Q3 2016

Financial highlights

Earnings and ROACE on CCS basis, excluding identified items

$ billion

Earnings Q3 2015 to Q3 2016

Environment Choice


2.75

3.00

3.50

6

Q3 2016

Oil and gas production

Million boe per day

Upstream + Integrated Gas – oil & gas

Million tonnes

LNG liquefaction volumes

Choice: +28%

3.25

3.75


$ billion Q3 2016 Q3 2016 4 Quarters

Beginning cash 15.2 31.8

Earnings 1.4 4.1

Depreciation 6.2 23.7

Working capital / other 0.9 (11.0)

Divestments 0.3 3.3

Capex / other investment (5.5) (24.6)

BG acquisition cash - (11.4)

Shareholder distributions (2.7) (9.3)

Debt / other financing 4.1 13.3

Ending cash 20.0 20.0

7

Q3 2016

Sources and uses of cash

$ billion

Q3 2016 – 4 Quarters rolling

Dividend Capex / other investment

Debt / other financing Divestments

BG acquisition – cash element

Cash flow from operations

Priorities for cash: Debt reduction Dividends Buybacks + capital

investment


2016-2018 completed + announced $ billion

Completed – MLP 0.8

– Denmark marketing 0.3

– N.Z.: Maui pipeline 0.2

– MGL IPO 0.1

– Others 0.3

Total completed 1.7

Announced – Showa Shell ~1.4

– Western Canada shales ~1.0

– Brutus/Glider ~0.4

– PSPC IPO ~0.3

– Malaysia & Denmark refining

~0.2 – North Sabah EOR PSC

– Anasuria cluster

– Maclure

Total announced ~3.3

TOTAL ~5.0

In progress – Motiva JV end

– N.Z.: upstream strategic review

– Thailand strategic review

– Selective North Sea strategic review

8

Manage down-cycle

Divestments

Integrated Gas split out from Upstream from 2011 onwards

$ billion

Divestment programme

$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

Divestments Reduce capital investment

Reduce operating costs

Deliver new projects

2016-2018 ~$30 billion


Manage down-cycle

Pulling levers to manage financial framework

Operating costs excluding identified items; capital investment 2016 excludes BG purchase price

$ billion

Capital investment

$ billion

Operating costs




Confirming $29 billion capital investment 2016 2016-20 $25-$30 billion range 2017 ~$25 billion Outlook for growth in free cash flow and returns

unchanged

Underlying operating costs <$40 billion Ahead of earlier guidance

-$18 billion

Shell BG Shell + BG C.I. on a cash basis Shell BG

-$9 billion



2016-17 start-ups

2016 start-up production: once fully ramped-up

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




BC-10 Ph3 Shell 50%

Gorgon start-up 15.6 mtpa LNG Shell 25%

Kashagan 300 kboe/d Shell 17%

Stones 50 kboe/d Shell 100%

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

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

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

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

Start-up

Q3 2016

Q3 2016

Forcados Yokri 50 kboe/d Shell 30%

Gbaran Ubie ph2 150 kboe/d Shell 30%

Geismar AO4 425 ktpa alpha olephins Shell 100%

Malikai 60 kboe/d Shell 35%

Pernis – Solvent deasphalting 7.2 kbpd Shell 100%

Schiehallion redevelopment 125 kboe/d Shell 55%

Scotford HCU debottleneck 14 kbpd Shell 100%

Q3 2016 10th FPSO – ‘Lula South’ 150 kboe/d Shell 25%

11th FPSO – ‘Lula North’ 150 kboe/d Shell 25%


LNG supply + demand Million tonnes

LNG – Supply development

Million tonnes

LNG – Demand

Supply growth led by Australia

New buyers


Summary

Business mix underpins results

Downstream + Integrated Gas offsetting Upstream

Underlying CCS earnings $2.8 billion

CFFO $8.5 billion

Q316 dividend $0.47 per share

Continued drive to re-shape Shell

Consolidating BG into Shell

Updated capital investment guidance

Progressing cost reductions, divestments and

project start-ups

Leader: value + influence

Reducing our carbon intensity

Shared value with society

World-class investment case

FCF/share + ROCE growth

Conservative financial

management


Questions & Answers

Maarten Wetselaar

Director - Integrated Gas & new energies

Simon Henry

Chief Financial Officer

13


Q4 2016 Outlook

Q4 – Q4 OUTLOOK: Year-ago baseline reflects Shell’s earnings seasonality

Upstream

Divestment impact: ~-25 kboe/d

Maintenance: ~+25 kboe/d

Security impact Nigeria

Integrated gas

Accounting reclassification Woodside: ~-34 kboe/d

Maintenance: ~+15 kboe/d

Downstream

Refinery availability higher

Divestment impact Marketing volumes: ~-100 kboe/d

PPA - depreciation charge increase: up to $0.2 billion after tax

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


Q3 2016

Prices & margins $/barrel

Shell oil & gas realisations

$/barrel

Industry refining margins

$/tonne

Industry chemicals margins

US ethane Western Europe naphtha NE/SE Asia naphtha

US West Coast US Gulf Coast coking Rotterdam complex Singapore

Oil Gas (RHS)

15


Q3 2016

Upstream results

Earnings on CCS basis, excluding identified items

$ billion


Lower prices Lower costs + higher

volumes

Environment Choice


Q3 2016

Integrated Gas results


$ billion


Lower oil + gas prices Increased volumes + lower

well write-offs

Environment Choice

1.2

0


Q3 2016

Downstream results


$ billion


$ billion

Earnings mix

Lower industry refining margins

Uplift from lower costs Marketing Refining & Trading

Chemicals


Royal Dutch Shell plc November 1, 2016

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

“Let’s make the future”

royal dutch shell plc third quarter 2016 results analyst webcast presentation

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