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  • Royal Dutch Shell’s third quarter 2011 earnings, on a current cost of supplies (CCS) basis (see Note 1), were $7.2 billion compared with $3.5 billion the same quarter a year ago. Basic CCS earnings per share increased by 104% versus the third quarter of 2010.
  • Third quarter 2011 CCS earnings, excluding identified items (see page 5), were $7.0 billion compared with $4.9 billion in the third quarter 2010, an increase of 42%. Basic CCS earnings per share excluding identified items increased by 40% versus the same quarter a year ago.
  • Cash flow from operating activities for the third quarter 2011 was $11.6 billion. Excluding net working capital movements, cash flow from operating activities in the third quarter 2011 was $10.6 billion, compared with $8.1 billion in the same quarter last year.
  • Net capital investment (see Note 1) for the quarter was $6.1 billion. Total dividends distributed in the quarter were $2.6 billion of which $0.7 billion were settled under the Scrip Dividend Programme. Some 25.3 million shares, equivalent to $0.8 billion, were bought back for cancellation during the quarter under our share buyback programme.
  • Gearing at the end of the third quarter 2011 was 10.8%.
  • A third quarter 2011 dividend has been announced of $0.42 per ordinary share and $0.84 per American Depositary Share (ADS), unchanged from the US dollar dividend per share and per ADS for the same period in 2010.
Summary OF unaudited results
Quarters
$ million
Nine months
Q3 2011
Q2 2011
Q3 2010
%1
2011
2010
%
6,976
8,662
3,463
+101
Income attributable to shareholders
24,418
13,337
+83
270
(667)
58
Current cost of supplies (CCS) adjustment for Downstream
(2,252)
(390)
7,246
7,995
3,521
+106
CCS earnings
22,166
12,947
+71
245
1,443
(1,412)
Less: Identified items2
2,325
(1,016)
7,001
6,552
4,933
+42
CCS earnings excluding identified items
19,841
13,963
+42
Of which:
5,435
5,420
3,437
Upstream
15,493
11,002
1,818
1,081
1,453
Downstream
4,552
3,391
(252)
51
43
Corporate and Non-controlling interest
(204)
(430)
11,645
10,040
9,016
+29
Cash flow from operating activities
30,306
21,894
+38
1.16
1.29
0.57
+104
Basic CCS earnings per share ($)
3.57
2.11
+69
2.32
2.58
1.14
Basic CCS earnings per ADS ($)
7.14
4.22
1.12
1.05
0.80
+40
Basic CCS earnings per share excl. identified items ($)
3.20
2.28
+40
2.24
2.10
1.60
Basic CCS earnings per ADS excl. identified items ($)
6.40
4.56
0.42
0.42
0.42
-
Dividend per share ($)
1.26
1.26
-
0.84
0.84
0.84
Dividend per ADS ($)
2.52
2.52
1 Q3 on Q3 change.
2 See page 5.


Royal Dutch Shell Chief Executive Officer Peter Voser commented:

“We continue to make good progress with our strategy; improving our competitive performance, delivering a new wave of production growth, and maturing the next generation of growth options for shareholders.

Our profits pay for Shell’s substantial investments in new energy projects, to ensure low-cost, reliable energy supplies for our customers and to create value for our shareholders. Our third quarter results were higher than year-ago levels, driven by higher oil prices and Shell’s performance.

In Upstream, our oil and gas production excluding divestments grew by 2% from year-ago levels, driven by the continued ramp-up of our growth projects, mainly in Qatar and Canada. Shell’s LNG sales volumes increased by 12%, with continued robust demand for gas. Our Downstream results were supported by increased Chemicals earnings, with a resilient performance from Oil Products, despite the more difficult economic environment. We have resumed our share buyback programme, with $0.8 billion of buybacks during the quarter, at a time when financial markets have been weak.

Disposal of non-core assets is an important part of our drive to improve Shell’s competitive position and capital efficiency. We completed $6.2 billion of asset sales this year, with $1.8 billion in the third quarter 2011, including a refinery in the United Kingdom and non-core upstream assets in the Americas. We have delivered on our target for $5 billion of disposals this year, ahead of schedule. Asset sales from non-core positions will continue.

We are delivering on our growth strategy, with the build-up of production from new projects. The Athabasca Oil Sands Project Expansion 1 in Canada and the Pearl Gas-to-Liquids (GTL) Train 1 in Qatar have ramped up and production should stabilise at plateau rates shortly. We expect to start up Train 2 of Pearl GTL before the end of 2011, as planned. These projects in Qatar and Canada are part of a series of over 20 new upstream start-ups planned for 2011-14, as we deliver on our plans for sustainable growth, driving Shell’s financial and operating targets for 2012.

We continue to mature new investment options for medium-term growth, taking final investment decision on the Clair Phase 2 development in the United Kingdom, and the Wheatstone LNG project in Australia, confirming a new oil discovery in French Guiana, and also building new acreage positions for exploration drilling in the future.

Voser concluded: “We are making good progress against our targets, to deliver a more competitive performance.”


Third quarter 2011 portfolio developments

Upstream

In Australia, Arrow Energy Holdings Pty Ltd (“Arrow”), a joint venture (Shell share 50%) between Shell and PetroChina, announced the front-end engineering and design (FEED) for the Arrow Liquefied Natural Gas (LNG) project on Curtis Island.

Arrow also confirmed that it has entered into a Scheme Implementation Agreement (“SIA”) with coal bed methane company Bow Energy Ltd (“Bow”) under which Arrow has agreed to acquire all of the shares in Bow. The offer values Bow at some $0.5 billion. The acquisition of Bow contributes to Arrow’s opportunity to expand each of the two trains of its proposed LNG project on Curtis Island from 4.0 million tonnes per annum (mtpa) currently planned. The transaction is expected to be implemented in January 2012, subject to Bow shareholder approvals.

Also in Australia, final investment decision was taken on the Wheatstone LNG foundation project (Shell share 6.4%). The foundation project includes two LNG trains with a combined capacity of 8.9 mtpa.

In Canada, Shell announced investment in a LNG-for-transport project Green Corridor (Shell share 100%). The Green Corridor project includes a 0.3 mtpa capacity LNG production facility and downstream infrastructure.

In Mexico, Shell completed the sale of the LNG import and regasification terminal in Altamira for a total consideration of $0.2 billion.

In Norway, Shell agreed to sell its interests in the natural gas transport infrastructure joint venture Gassled for some $0.7 billion. The transaction is subject to regulatory approval and to consent of joint venture partners.

During the third quarter of 2011, Shell participated in two exploration discoveries including the frontier deepwater oil discovery Zaedyus (Shell share 45%) offshore French Guiana, which has the potential to open up an entirely new oil play for the industry, and a gas discovery at Acme West (Shell share 33%) offshore Australia. Also during the quarter, as part of our global exploration programme, Shell built new acreage positions onshore in the Americas and the Ukraine as well as offshore New Zealand and Tanzania.

On October 13, in the United Kingdom, Shell announced the final investment decision for the offshore project Claire Phase 2 (Shell share 28%), with an expected peak production of 120 thousand barrels of oil equivalent per day (boe/d).

Downstream

In the United Kingdom, Shell completed the sale of the Stanlow refinery for a total consideration of some $1.2 billion (including some $0.9 billion for working capital).


Key features of the Third quarter 2011

  • Third quarter 2011 CCS earnings (see Note 1) were $7,246 million, 106% higher than in the same quarter a year ago.
  • Third quarter 2011 CCS earnings, excluding identified items (see page 5), were $7,001 million compared with $4,933 million in the third quarter 2010.
  • Basic CCS earnings per share increased by 104% versus the same quarter a year ago.
  • Basic CCS earnings per share excluding identified items increased by 40% versus the same quarter a year ago.
  • Cash flow from operating activities for the third quarter 2011 was $11.6 billion, compared with $9.0 billion in the same quarter last year. Excluding net working capital movements, cash flow from operating activities in the third quarter 2011 was $10.6 billion, compared with $8.1 billion in the same quarter last year.
  • Total cash dividends paid to shareholders during the third quarter 2011 were $1.9 billion. During the third quarter 2011, some 22.3 million Class A shares, equivalent to $0.7 billion, were issued under the Scrip Dividend Programme for the second quarter 2011. Some 25.3 million Class B shares, equivalent to $0.8 billion, were bought back for cancellation during the quarter under our share buyback programme commenced to offset dilution created by shares issued under the Scrip Dividend Programme.
  • Net capital investment (see Note 1) for the third quarter 2011 was $6.1 billion. Capital investment for the third quarter 2011 was $7.9 billion.
  • Return on average capital employed (ROACE) (see Note 6) at the end of the third quarter 2011, on a reported income basis, was 16.4%.
  • Gearing was 10.8% at the end of the third quarter 2011 versus 19.0% at the end of the third quarter 2010.

Upstream

  • Liquids and natural gas production for the third quarter 2011 was 3,012 thousand boe/d, 2% lower than in the third quarter 2010. Production for the third quarter 2011 excluding the impact of divestments of some 100 thousand boe/d was 2% higher than in the same quarter last year.
  • New field start-ups and the continuing ramp-up of fields contributed some 270 thousand boe/d to production in the third quarter 2011, which more than offset the impact of field declines.
  • LNG sales volumes of 4.76 million tonnes in the third quarter 2011 were 12% higher than in the same quarter a year ago.

Downstream

  • Oil Products sales volumes for the third quarter 2011 were in line with the third quarter 2010. Excluding the impact of divestments and the effects of the formation of the Raízen joint venture, of some 110 thousand b/d, sales volumes were 2% higher than in the same period last year. Chemical product sales volumes in the third quarter 2011 decreased by 9% compared with the third quarter 2010.
  • Oil Products refinery availability in the third quarter 2011 was 94%, compared with 93% in the third quarter 2010. Chemicals manufacturing plant availability was 90%, compared with 94% in the same period last year.
  • Supplementary financial and operational disclosure for the third quarter 2011 is available at www.shell.com/investor.


Summary of identified items

CCS earnings in the third quarter 2011 reflected the following items, which in aggregate amounted to a net gain of $245 million (compared with a net charge of $1,412 million in the third quarter 2010), as summarised in the table below:

  • Upstream earnings included a net gain of $636 million, reflecting gains related to the estimated fair value accounting of commodity derivatives (see Note 5), divestment gains and net tax credits. These items were partly offset by asset impairments and decommissioning provisions. Earnings for the third quarter 2010 included a net charge of $284 million.
  • Downstream earnings included a net charge of $338 million, reflecting an asset impairment as well as redundancy and decommissioning provisions. These items were partly offset by a gain related to the estimated fair value accounting of commodity derivatives (see Note 5) and divestment gains. Earnings for the third quarter 2010 included a net charge of $1,128 million.
  • Corporate and Non-controlling interest earnings included a net charge of $53 million, reflecting a tax charge.

Summary OF IDENTIFIED ITEMS
Quarters
$ million
Nine months
Q3 2011
Q2 2011
Q3 2010
2011
2010
Identified items:
636
641
(284)
Upstream
2,397
(164)
(338)
802
(1,128)
Downstream
(19)
(852)
(53)
-
-
Corporate and Non-controlling interest
(53)
-
245
1,443
(1,412)
CCS earnings impact
2,325
(1,016)

These identified items generally relate to events with an impact of more than $50 million on Royal Dutch Shell’s CCS earnings and are shown to provide additional insight into segment earnings and income attributable to shareholders. Further comments on the business segments are provided in the section ‘Earnings by Business Segment’ on pages 6 to 8.


Earnings BY BUSINESS segment

upstream
Quarters
$ million
Nine months
Q3 2011
Q2 2011
Q3 2010
%1
2011
2010
%
5,435
5,420
3,437
+58
Upstream earnings excluding identified items
15,493
11,002
+41
6,071
6,061
3,153
+93
Upstream earnings
17,890
10,838
+65
8,520
8,902
6,139
+39
Upstream cash flow from operating activities
24,094
19,276
+25
5,944
4,049
9,554
-38
Upstream net capital investment
11,720
20,700
-43
1,676
1,668
1,709
-2
Liquids production available for sale (thousand b/d)
1,674
1,699
-1
7,749
7,996
7,823
-1
Natural gas production available for sale (million scf/d)
8,769
9,008
-3
3,012
3,046
3,058
-2
Barrels of oil equivalent (thousand boe/d)
3,186
3,252
-2
4.76
4.81
4.26
+12
LNG sales volumes (million tonnes)
13.99
12.37
+13
1 Q3 on Q3 change

Third quarter Upstream earnings excluding identified items were $5,435 million compared with $3,437 million a year ago. Identified items were a net gain of $636 million, compared with a net charge of $284 million in the third quarter 2010 (see page 5).

Upstream earnings excluding identified items increased compared with the third quarter 2010. Earnings reflected higher liquids and natural gas realisations. The earnings also reflected higher LNG realisations, sales volumes and trading contributions. These items were partly offset by increased taxes and higher operating expenses, reflecting the start-up of new projects and increased maintenance activities.

Global liquids realisations were 48% higher than in the third quarter 2010. Global natural gas realisations were 31% higher than in the same quarter a year ago. Natural gas realisations in the Americas increased by 1%, whereas natural gas realisations outside the Americas increased by 40%.

Third quarter 2011 production was 3,012 thousand boe/d compared with 3,058 thousand boe/d a year ago. Liquids production decreased by 2% and natural gas production decreased by 1% compared with the third quarter 2010. Excluding the impact of divestments of some 100 thousand boe/d, third quarter 2011 production was 2% higher than in the same period last year.

New field start-ups and the continuing ramp-up of fields contributed some 270 thousand boe/d to production in the third quarter 2011, in particular from Pearl GTL and Qatargas 4 LNG in Qatar as well as AOSP Expansion 1 in Canada and Gbaran Ubie in Nigeria, which more than offset the impact of field declines.

LNG sales volumes of 4.76 million tonnes were 12% higher than in the same quarter a year ago, mainly reflecting the contribution of Qatargas 4 LNG.



DOWNSTREAM
Quarters
$ million
Nine months
Q3 2011
Q2 2011
Q3 2010
%1
2011
2010
%
1,818
1,081
1,453
+25
Downstream CCS earnings excluding identified items
4,552
3,391
+34
1,480
1,883
325
+355
Downstream CCS earnings
4,533
2,539
+79
2,069
2,077
1,953
+6
Downstream cash flow from operating activities
4,597
2,309
+99
149
1,949
701
-79
Downstream net capital investment
1,980
1,367
+45
2,854
2,834
3,292
-13
Refinery processing intake (thousand boe/d)
2,905
3,196
-9
6,374
6,088
6,385
-
Oil products sales volumes (thousand b/d)
6,210
6,389
-3
4,832
4,549
5,333
-9
Chemicals sales volumes (thousand tonnes)
14,391
15,356
-6
1 Q3 on Q3 change

Third quarter Downstream earnings excluding identified items were $1,818 million compared with $1,453 million in the third quarter 2010. Identified items were a net charge of $338 million, compared with a net charge of $1,128 million in the third quarter 2010 (see page 5).

Downstream earnings excluding identified items increased compared with the third quarter 2010. Earnings reflected higher Chemicals earnings while Oil Products earnings were in line with the same period a year ago.

Oil Products marketing earnings were in line with the third quarter 2010. Earnings reflected higher contributions from trading as well as earnings from the Raízen joint venture in Brazil. These items were offset by lower contributions from retail, B2B and lubricants as a result of the weakening global economic environment, as well as portfolio divestments.

Oil products sales volumes were in line with the same period a year ago. Excluding the impact of divestments and the effects of the formation of the Raízen joint venture, of some 110 thousand b/d, sales volumes were 2% higher than in the same period last year.

Oil Products refining results were in line with the third quarter 2010 and reflected increased refining realisations and higher contributions from equity-accounted investments, despite a weaker global refining environment. These items were offset by unfavourable currency exchange rate effects.

Refinery intake volumes decreased by 13% compared with the third quarter of 2010, mainly as a result of divestments and a refinery closure. Excluding portfolio impacts, refinery intake volumes were 1% lower than in the same period a year ago. Refinery availability increased to 94% compared with 93% in the third quarter 2010.

Chemicals earnings excluding identified items increased to $674 million compared with $315 million in the third quarter 2010. Higher realised chemicals margins and higher income from equity-accounted investments reflected favourable market conditions in the USA and Europe.

Chemicals sales volumes decreased by 9% compared with the same quarter last year. Chemicals manufacturing plant availability decreased to 90% compared with 94% in the third quarter 2010, as a result of increased maintenance activities.

CORPORATE AND Non-controlling Interest
Quarters
$ million
Nine months
Q3 2011
Q2 2011
Q3 2010
2011
2010
(252)
51
43
Corporate and Non-controlling interest excl. identified items
(204)
(430)
Of which:
(201)
141
148
Corporate
39
(140)
(51)
(90)
(105)
Non-controlling interest
(243)
(290)
(305)
51
43
Corporate and Non-controlling interest
(257)
(430)

Third quarter Corporate results and Non-controlling interest excluding identified items (see page 5) were a loss of $252 million compared with a gain of $43 million in the same period last year. Identified items in the third quarter 2011 were a net charge of $53 million (see page 5).

Corporate results excluding identified items were lower compared with the third quarter 2010, mainly as a result of unfavourable currency exchange rate effects of some $270 million in the third quarter 2011. Results also reflected higher net interest expense.

FORTHCOMING EVENTS

Fourth quarter 2011 results and fourth quarter 2011 dividend are scheduled to be announced on February 2, 2012. First quarter 2012 results and first quarter 2012 dividend are scheduled to be announced on April 26, 2012. Second quarter 2012 results and second quarter 2012 dividend are scheduled to be announced on July 26, 2012. Third quarter 2012 results and third quarter 2012 dividend are scheduled to be announced on November 1, 2012.

Unaudited Condensed Consolidated Interim Financial Statements

CONSOLIDATED Statement of income
Quarters
$ million
Nine months
Q3 2011
Q2 2011
Q3 2010
%1
2011
2010
%
123,412
121,261
90,712
Revenue
354,596
267,342
2,041
2,126
1,020
Share of profit of equity-accounted investments
6,504
3,974
504
1,175
1,010
Interest and other income
4,261
1,311
125,957
124,562
92,742
Total revenue and other income
365,361
272,627
98,094
95,275
70,278
Purchases
278,179
205,038
6,761
6,791
6,052
Production and manufacturing expenses
19,465
17,164
3,516
3,749
3,701
Selling, distribution and administrative expenses
10,629
11,227
253
249
203
Research and development
721
597
661
379
610
Exploration
1,441
1,390
3,803
2,865
6,196
Depreciation, depletion and amortisation
9,985
12,359
331
360
317
Interest expense
1,086
769
12,538
14,894
5,385
+133
Income before taxation
43,855
24,083
+82
5,505
6,135
1,820
Taxation
19,138
10,465
7,033
8,759
3,565
+97
Income for the period
24,717
13,618
+82
57
97
102
Income attributable to non-controlling interest
299
281
6,976
8,662
3,463
+101
Income attributable to Royal Dutch Shell plc shareholders
24,418
13,337
+83
270
(667)
58
Current cost of supplies (CCS) adjustment for Downstream
(2,252)
(390)
7,246
7,995
3,521
+106
CCS earnings
22,166
12,947
+71
245
1,443
(1,412)
Less: Identified items
2,325
(1,016)
7,001
6,552
4,933
+42
CCS earnings excluding identified items
19,841
13,963
+42

Basic earnings per share
Quarters
Nine months
Q3 2011
Q2 2011
Q3 2010
$
2011
2010
1.12
1.39
0.56
Earnings per share
3.93
2.18
1.16
1.29
0.57
CCS earnings per share
3.57
2.11
1.12
1.05
0.80
CCS earnings per share excl. identified items
3.20
2.28
Diluted earnings per share
Quarters
Nine months
Q3 2011
Q2 2011
Q3 2010
$
2011
2010
1.12
1.39
0.56
Earnings per share
3.93
2.17
1.16
1.28
0.57
CCS earnings per share
3.57
2.11
1.12
1.05
0.80
CCS earnings per share excl. identified items
3.19
2.28

SHARES2
Quarters
Millions
Nine months
Q3 2011
Q2 2011
Q3 2010
2011
2010
Weighted average number of shares as the basis for:
6,238.1
6,216.5
6,132.6
Basic earnings per share
6,206.2
6,131.1
6,247.1
6,227.2
6,138.3
Diluted earnings per share
6,216.2
6,137.1
6,236.5
6,241.8
6,132.0
Shares outstanding at the end of the period
6,236.5
6,132.0
1 Q3 on Q3 change.
2 Royal Dutch Shell plc ordinary shares of €0.07 each.

Notes 1 to 6 are an integral part of these Condensed Consolidated Interim Financial Statements.

Consolidated Statement of Comprehensive Income
Quarters
$ million
Nine months
Q3 2011
Q2 2011
Q3 2010
2011
2010
7,033
8,759
3,565
Income for the period
24,717
13,618
Other comprehensive income, net of tax:
(4,642)
490
4,500
Currency translation differences
(2,018)
(118)
23
9
(136)
Unrealised gains/(losses) on securities
13
(116)
(130)
19
2
Cash flow hedging gains/(losses)
(89)
14
29
(29)
35
Share of other comprehensive income/(loss) of equity-accounted investments
99
6
(4,720)
489
4,401
Other comprehensive income/(loss) for the period
(1,995)
(214)
2,313
9,248
7,966
Comprehensive income for the period
22,722
13,404
(46)
128
200
Comprehensive income/(loss) attributable to non-controlling interest
255
338
2,359
9,120
7,766
Comprehensive income attributable to Royal Dutch Shell plc shareholders
22,467
13,066

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Equity attributable to Royal Dutch Shell plc shareholders
$ million
Ordinary share capital
Shares held in trust
Other reserves
Retained earnings
Total
Non-controlling interest
Total equity
At January 1, 2011
529
(2,789)
10,094
140,179
148,013
1,767
149,780
Comprehensive income for the period
-
-
(1,951)
24,418
22,467
255
22,722
Capital contributions from and other changes in non-controlling interest
-
-
-
48
48
(46)
2
Dividends paid
-
-
-
(7,816)
(7,816)
(374)
(8,190)
Scrip dividends1
9
-
(9)
2,627
2,627
-
2,627
Shares held in trust: net sales/ (purchases) and dividends received
-
961
-
99
1,060
-
1,060
Share repurchases for cancellation2
(3)
-
3
(1,501)
(1,501)
-
(1,501)
Share-based compensation
-
-
(230)
(67)
(297)
-
(297)
At September 30, 2011
535
(1,828)
7,907
157,987
164,601
1,602
166,203
1 During the first nine months of 2011 some 77.3 million Class A shares, equivalent to $2.6 billion, were issued under the Scrip Dividend Programme. The fair value of the shares issued in connection with the Scrip Dividend Programme is reflected in retained earnings.
2 Includes shares repurchased during the period, and at September 30, 2011, shares committed to repurchase and repurchases subject to settlement.

Equity attributable to Royal Dutch Shell plc shareholders

$ million
Ordinary share capital
Shares held in trust
Other reserves
Retained earnings
Total
Non-controlling interest
Total equity
At January 1, 2010
527
(1,711)
9,982
127,633
136,431
1,704
138,135
Comprehensive income for the period
-
-
(271)
13,337
13,066
338
13,404
Capital contributions from and other changes in non-controlling interest
-
-
-
294
294
16
310
Dividends paid
-
-
-
(7,586)
(7,586)
(357)
(7,943)
Shares held in trust: net sales/ (purchases) and dividends received
-
368
-
-
368
-
368
Share-based compensation
-
-
(52)
223
171
-
171
At September 30, 2010
527
(1,343)
9,659
133,901
142,744
1,701
144,445

Notes 1 to 6 are an integral part of these Condensed Consolidated Interim Financial Statements.


CONDENSED CONSOLIDATED balance sheet
$ million
Sept 30, 2011
Jun 30, 2011
Sept 30, 2010
Assets
Non-current assets:
Intangible assets
4,500
4,668
5,171
Property, plant and equipment
147,027
148,057
139,863
Equity-accounted investments
38,321
39,033
34,015
Investments in securities
3,915
3,920
3,968
Deferred tax
5,512
5,612
5,372
Prepaid pension costs
11,132
11,171
10,383
Trade and other receivables
9,040
9,450
8,909
219,447
221,911
207,681
Current assets:
Inventories
30,250
33,955
28,922
Trade and other receivables
78,529
75,493
62,769
Cash and cash equivalents
19,256
19,465
11,282
128,035
128,913
102,973
Total assets
347,482
350,824
310,654
Liabilities
Non-current liabilities:
Debt
31,092
31,477
35,148
Trade and other payables
5,415
5,335
4,696
Deferred tax
15,814
16,626
13,179
Retirement benefit obligations
5,988
6,126
6,048
Decommissioning and other provisions
15,442
15,063
14,352
73,751
74,627
73,423
Current liabilities:
Debt
8,268
11,022
9,932
Trade and other payables
80,357
79,344
65,980
Taxes payable
15,305
14,798
13,431
Retirement benefit obligations
374
395
397
Decommissioning and other provisions
3,224
3,322
3,046
107,528
108,881
92,786
Total liabilities
181,279
183,508
166,209
Equity attributable to Royal Dutch Shell plc shareholders
164,601
165,487
142,744
Non-controlling interest
1,602
1,829
1,701
Total equity
166,203
167,316
144,445
Total liabilities and equity
347,482
350,824
310,654

Notes 1 to 6 are an integral part of these Condensed Consolidated Interim Financial Statements.


CONDENSED CONSOLIDATED statement of cash flows
Quarters
$ million
Nine months
Q3 2011
Q2 2011
Q3 2010
2011
2010
Cash flow from operating activities:
7,033
8,759
3,565
Income for the period
24,717
13,618
Adjustment for:
5,746
5,546
3,545
- Current taxation
17,193
11,869
249
284
264
- Interest expense (net)
889
656
3,803
2,866
6,196
- Depreciation, depletion and amortisation
9,985
12,359
(347)
(796)
(681)
- Net (gains)/losses on sale of assets
(3,335)
(932)
1,011
(2,283)
937
- Decrease/(increase) in net working capital
(5,783)
(5,175)
(2,041)
(2,126)
(1,020)
- Share of profit of equity-accounted investments
(6,504)
(3,974)
2,402
2,560
1,486
- Dividends received from equity-accounted investments
6,485
4,455
(204)
553
(1,941)
- Deferred taxation and other provisions
1,927
(1,466)
(540)
(72)
(86)
- Other
(399)
686
17,112
15,291
12,265
Net cash from operating activities (pre-tax)
45,175
32,096
(5,467)
(5,251)
(3,249)
Taxation paid
(14,869)
(10,202)
11,645
10,040
9,016
Net cash from operating activities
30,306
21,894
Cash flow from investing activities:
(7,261)
(4,980)
(9,609)
Capital expenditure
(16,387)
(21,369)
(199)
(669)
(1,179)
Investments in equity-accounted investments
(1,571)
(1,940)
1,594
1,110
666
Proceeds from sale of assets
5,815
2,039
200
172
44
Proceeds from sale of equity-accounted investments
425
211
6
-
(37)
(Additions to)/proceeds from sale of securities
7
(18)
75
73
51
Interest received
185
102
(5,585)
(4,294)
(10,064)
Net cash used in investing activities
(11,526)
(20,975)
Cash flow from financing activities:
(365)
119
3,232
Net (decrease)/increase in debt with maturity period
within three months
(2,883)
4,399
477
286
199
Other debt: New borrowings
1,244
7,729
(2,529)
(1,299)
(491)
Repayments
(4,064)
(2,852)
(173)
(522)
(307)
Interest paid
(1,195)
(1,204)
(3)
(9)
(3)
Change in non-controlling interest
(3)
315
Dividends paid to:
(1,865)
(1,766)
(2,583)
- Royal Dutch Shell plc shareholders
(5,189)
(7,586)
(175)
(128)
(168)
- Non-controlling interest
(374)
(357)
(817)
-
-
Repurchase of shares
(817)
-
10
259
(34)
Shares held in trust: net sales/(purchases) and dividends received
413
170
(5,440)
(3,060)
(155)
Net cash from/(used in) financing activities
(12,868)
614
(829)
171
477
Currency translation differences relating to cash and
cash equivalents
(100)
30
(209)
2,857
(726)
(Decrease)/increase in cash and cash equivalents
5,812
1,563
19,465
16,608
12,008
Cash and cash equivalents at beginning of period
13,444
9,719
19,256
19,465
11,282
Cash and cash equivalents at end of period
19,256
11,282

Notes 1 to 6 are an integral part of these Condensed Consolidated Interim Financial Statements.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of preparation

These Condensed Consolidated Interim Financial Statements (“Interim Statements”) of Royal Dutch Shell plc and its subsidiaries (collectively “Shell”) are prepared on the basis of the same accounting principles as, and should be read in conjunction with, the Annual Report / Form 20-F for the year ended December 31, 2010 (pages 102 to 107) as filed with the US Securities and Exchange Commission.

The financial information presented in the Interim Statements does not comprise statutory accounts for the purposes of section 435 of the Companies Act 2006. Statutory accounts for the year ended December 31, 2010 were published in Shell’s Annual Report / Form 20-F, copies of which were delivered to the Registrar of Companies. 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 Interim Statements are unaudited; however, in the opinion of management, 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

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 Condensed Consolidated Statement of Cash Flows, adjusted for: proceeds from divestments; exploration expenses excluding exploration wells written off; investments in equity-accounted investments; and leases and other items.

CCS earnings and net capital investment information are the dominant measures used by the Chief Executive Officer for the purposes of making decisions about allocating resources and assessing performance.

2. Information by business segment

Quarters
$ million
Nine months
Q3 2011
Q3 2010
2011
2010
Third-party revenue
10,888
7,417
Upstream
30,659
24,083
112,516
83,286
Downstream
323,907
243,212
8
9
Corporate
30
47
123,412
90,712
Total third-party revenue
354,596
267,342
Inter-segment revenue
12,929
9,040
Upstream
37,304
25,866
125
96
Downstream
545
249
-
-
Corporate
-
-
Segment earnings
6,071
3,153
Upstream
17,890
10,838
1,480
325
Downstream
4,533
2,539
(254)
148
Corporate
(14)
(140)
7,297
3,626
Total segment earnings
22,409
13,237

Quarters
$ million
Nine months
Q3 2011
Q3 2010
2011
2010
7,297
3,626
Total segment earnings
22,409
13,237
Current cost of supplies adjustment:
(260)
(44)
Purchases
2,787
556
75
12
Taxation
(794)
(170)
(79)
(29)
Share of profit of equity-accounted investments
315
(5)
7,033
3,565
Income for the period
24,717
13,618


3. Ordinary share capital

Issued and fully paid

shares of €0.07 each
shares of £1 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
77,320,884
-
-
Shares bought back for cancellation
-
(25,289,589)
-
At September 30, 2011
3,641,273,423
2,670,518,514
50,000

Nominal value

$ million
Class A
Class B
Total
At January 1, 2011
302
227
529
Scrip dividends
9
-
9
Shares bought back for cancellation
-
(3)
(3)
At September 30, 2011
311
224
535
The total nominal value of sterling deferred shares is less than $1 million.

At Royal Dutch Shell plc’s Annual General Meeting held on May 17, 2011, the Board was authorised to allot shares in Royal Dutch Shell plc, to grant rights to subscribe for or to convert any security into shares in Royal Dutch Shell plc, in either case up to a nominal amount of €146 million. This authority expires at the earlier of August 17, 2012, and the conclusion of the Annual General Meeting held in 2012, unless previously revoked or varied by Royal Dutch Shell plc in a General Meeting of Shareholders.

4. Other reserves

$ million
Merger reserve1
Share premium reserve1
Capital redemption reserve2
Share plan reserve
Accumulated other comprehensive income
Total
At January 1, 2011
3,442
154
57
1,483
4,958
10,094
Other comprehensive income/(loss) attributable to Royal Dutch Shell plc shareholders
-
-
-
-
(1,951)
(1,951)
Scrip dividends
(9)
-
-
-
-
(9)
Share repurchases
3
3
Share-based compensation
-
-
-
(230)
-
(230)
At September 30, 2011
3,433
154
60
1,253
3,007
7,907

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
-
-
-
-
(271)
(271)
Share-based compensation
-
-
-
(52)
-
(52)
At September 30, 2010
3,444
154
57
1,321
4,683
9,659

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.

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 the Upstream business 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.

6. Return on average capital employed (ROACE)

ROACE 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.

LIQUIDITY AND CAPITAL RESOURCES

Third quarter Net cash from operating activities in the third quarter 2011 was $11.6 billion compared with $9.0 billion for the same period last year.

Total current and non-current debt decreased to $39.4 billion at September 30, 2011 from $42.5 billion at June 30, 2011 while cash and cash equivalents decreased to $19.3 billion at September 30, 2011, from $19.5 billion at June 30, 2011. During the third quarter 2011 no new debt was issued under the US shelf registration programme.

Net capital investment in the third quarter 2011 was $6.1 billion, of which $5.9 billion was invested in Upstream and $0.2 billion in Downstream. Net capital investment in the same period of 2010 was $10.3 billion, of which $9.6 billion was invested in Upstream and $0.7 billion in Downstream.

Dividends of $0.42 per share are declared on October 27, 2011 in respect of the third quarter. These dividends are payable on December 16, 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 / 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.

Nine months Net cash from operating activities in the first nine months 2011 was $30.3 billion compared with $21.9 billion for the same period last year.

Total current and non-current debt decreased to $39.4 billion at September 30, 2011 from $44.3 billion at December 31, 2010 while cash and cash equivalents increased to $19.3 billion at September 30, 2011, from $13.4 billion at December 31, 2010. During the first nine months 2011 no new debt was issued under the US shelf registration programme.

Net capital investment in the first nine months 2011 was $13.8 billion, of which $11.7 billion was invested in Upstream, $2.0 billion in Downstream and $0.1 billion in Corporate. Net capital investment in the same period of 2010 was $22.1 billion, of which $20.7 billion was invested in Upstream and $1.4 billion in Downstream.


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 report “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 report 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 report, 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 report 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’’, “scheduled”, ‘‘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 report, 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. All forward-looking statements contained in this report 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 / Form 20-F for the year ended December 31, 2010 (available at www.shell.com/investor and www.sec.gov - opens in new window). These factors also should be considered by the reader. Each forward-looking statement speaks only as of the date of this report, October 27, 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 report.

October 27, 2011

Contacts:

Investor Relations: Europe: + 31 (0)70 377 4540; USA: +1 713 241 1042

Media: Europe: + 31 (0)70 377 3600; USA +1 713 241 4544

The information in these quarterly results reflects the consolidated financial position and results of Royal Dutch Shell plc (“Royal Dutch Shell”). All amounts shown throughout this report are unaudited. Company No. 4366849, Registered Office: Shell Centre, London, SE1 7NA, England, UK