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1st quarter 2013 unaudited results (excerpt)

  • Royal Dutch Shell’s first quarter 2013 earnings, on a current cost of supplies (CCS) basis (see Note 1), were $8.0 billion compared with $7.7 billion for the first quarter 2012.

  • First quarter 2013 CCS earnings excluding identified items (see page 6) were $7.5 billion compared with $7.3 billion for the first quarter 2012, an increase of 3%.

  • Basic CCS earnings per share excluding identified items for the first quarter 2013 increased by 2% versus the same quarter a year ago.

  • Cash flow from operating activities for the first quarter 2013 was $11.6 billion. Excluding working capital movements, cash flow from operating activities for the first quarter 2013 was $11.5 billion.

  • Capital investment for the first quarter 2013 was $8.8 billion. Net capital investment (see Note 1) for the quarter was $8.2 billion.

  • Total dividends distributed in the quarter were some $2.7 billion, of which $0.8 billion were settled under the Scrip Dividend Programme. During the first quarter some 16.1 million shares were bought back for cancellation for a consideration of some $0.5 billion.

  • Gearing at the end of the first quarter 2013 was 9.1%.

  • A first quarter 2013 dividend has been announced of $0.45 per ordinary share and $0.90 per American Depositary Share (“ADS”), an increase of 5% compared with the first quarter 2012.

  • Comparative information in this Report has been restated following the adoption of revised IAS 19 Employee Benefits on January 1, 2013, with retrospective effect (see Note 2). Comparative information was not restated for other accounting policy changes (see Note 1) for which the impacts are not significant, including the adoption of IFRS 11 Joint Arrangementson January 1, 2013, which results in certain previously equity-accounted entities now in effect being proportionately consolidated.



Summary OF unaudited results
$ million
Quarters
Q1 2013
Q4 20121
Q1 20121
% 2
Income attributable to shareholders
8,176
6,728
8,737
-6
Current cost of supplies (CCS) adjustment for Downstream
(225)
623
(1,060)
CCS earnings
7,951
7,351
7,677
+4
Less: Identified items3
431
1,712
380
CCS earnings excluding identified items
7,520
5,639
7,297
+3
Of which:
Upstream
5,648
4,401
6,270
Downstream
1,848
1,190
1,122
Corporate and Non-controlling interest
24
48
(95)
Cash flow from operating activities
11,559
9,913
13,439
- 14
Basic CCS earnings per share ($)
1.26
1.17
1.23
+2
Basic CCS earnings per ADS ($)
2.52
2.34
2.46
Basic CCS earnings per share excl. identified items ($)
1.19
0.90
1.17
+2
Basic CCS earnings per ADS excl. identified items ($)
2.38
1.80
2.34
Dividend per share ($)
0.45
0.43
0.43
+5
Dividend per ADS ($)
0.90
0.86
0.86
1 Restated for accounting policy change (see Note 2)
2 Q1 on Q1 change
3 See page 6

 

Royal Dutch Shell Chief Executive Officer Peter Voser commented:

“Our industry continues to see significant energy price volatility as a result of economic and political developments. Oil prices have fallen recently but Shell is implementing a long-term, competitive and innovative strategy against this volatile backdrop.”

“Shell's underlying CCS earnings were $7.5 billion for the quarter, a 2% increase in CCS earnings per share from the first quarter of 2012. These results were underpinned by Shell's growth projects, an improvement in downstream profitability, and were delivered despite a difficult security environment in Nigeria.”

“Our profits pay for Shell's dividends and investment in new projects to ensure affordable and reliable energy supplies for our customers, and to add value for our shareholders.”

“Shell is investing for profitable growth, whilst maintaining strong capital discipline. We are developing some 30 new projects and maturing a series of further opportunities for investment. So far this year, we’ve seen the growth impact of recent start ups and we took four final investment decisions in petrochemicals, deepwater, and LNG.”

“We continue to take a dynamic approach to portfolio” continued Voser. “Asset sales - $0.6 billion in the first quarter and over $21 billion in the last three years - improve our capital efficiency and can bring in strategic partners. We use selective acquisitions to refresh our opportunity set.”

Voser commented “We distributed $11 billion of dividends over the last year, the highest in our industry, and today we confirm a 5% rise in our dividend to $0.45 per share.”

He concluded “Dividends are Shell’s main route for returning cash to shareholders. Our improving cash flow also enables us to accelerate our share buyback programme, this year so far we have repurchased some $1.2 billion of shares by the end of April. In the current environment we would expect to more than offset the scrip dividend issue this year, and we are determined to implement the policy to offset dilution over the business cycle. This underlines our commitment to shareholder returns.”


FIRST QUARTER 2013 PORTFOLIO DEVELOPMENTS

Upstream

In Canada, the first debottlenecking project for the Athabasca Oil Sands Project (Shell interest 60%) was completed. The project is expected to add some 10 thousand barrels per day (“b/d”) of capacity.

In Nigeria, Shell took the final investment decision for the development of the deep-water project Erha North Phase 2 (Shell interest 44%), part of oil mining lease 133, located over 100 kilometres off the Nigerian coast. The project is expected to produce some 60 thousand barrels of oil equivalent per day (“boe/d”) of mainly oil at peak production and improve utilisation of the existing Erha floating production, storage and offloading (“FPSO”) vessel.

In Oman, the Amal Steam enhanced oil recovery project (Shell interest 34%) was brought on stream. The project is expected to ramp up over a number of years and produce some 20 thousand b/d of oil at peak production.

Shell entered into an agreement to acquire part of Repsol S.A.’s LNG portfolio outside of North America, including supply positions in Peru and Trinidad & Tobago, for a cash consideration of $4.4 billion. Under the terms of the agreement, Shell will assume finance lease obligations of the businesses acquired, predominantly reflecting leases for LNG ship charters, provisionally estimated at $1.8 billion. The acquisition is expected to add some 7.2 million tonnes per annum (“mtpa”) of LNG volumes through long-term offtake agreements, including 4.2 mtpa of equity LNG plant capacity. The transaction, which has an effective date of October 1, 2012, is expected to close in the second half of 2013 or early 2014, subject to regulatory approvals and other conditions precedent.

In the United Kingdom, Shell completed the acquisition of an additional 5.9% interest in the offshore Schiehallion field, increasing Shell’s interest to 55%. Shell also completed the acquisition of additional interests in the Beryl area fields and SAGE infrastructure, lifting Shell's production in the Beryl area fields from 9 thousand boe/d to 20 thousand boe/d. Further investment in Schiehallion and Beryl is expected to extend the production life of the fields.

In the United States, Shell and Kinder Morgan affiliates announced their intent to form a company to develop a natural gas liquefaction plant in two phases at the existing Elba Island LNG terminal to export LNG. The total project is expected to have a liquefaction capacity of approximately 2.5 mtpa. Shell will own 49% of the entity and subscribe to 100% of the liquefaction capacity. The agreement is subject to corporate and regulatory approvals.

In North America, Shell took the final investment decision for two 0.25 mtpa natural gas liquefaction units (Shell interest 100%) in Louisiana, United States and Ontario, Canada. These units will form the basis of two new LNG transport corridors in the Gulf Coast and Great Lakes regions, fuelling marine vessels and heavy-duty trucking fleets.

Upstream divestment proceeds totalled some $0.4 billion for the first quarter 2013 and included proceeds from the divestment of a 5% interest in the Prelude floating LNG project to CPC Corporation as announced in 2012, reducing Shell’s interest in the project to 67.5%.

During the first quarter 2013, Shell participated in the Kentish Knock South-1 gas discovery (Shell interest 50%) offshore Western Australia. As part of its global exploration programme Shell added new acreage positions during the first quarter 2013, including liquids-rich acreage positions in Canada, offshore positions in Norway and the United Kingdom North Sea, along with successful bidding results in the Gulf of Mexico, United States. Shell also signed a production sharing contract (“PSC”) for tight gas in the Yuzivska area in the Ukraine and, in China, Shell received government approval for the tight gas PSC for the Fushun-Yongchuan block in the Sichuan basin.


Downstream

In Singapore, Shell announced the final investment decisions for additional capacity at its Jurong Island petrochemicals facility. The investments (Shell interest 100%) are expected to add 140 thousand tonnes per annum (“tpa”) of high-purity ethylene oxide capacity, 140 thousand tpa of ethoxylation capacity and more than 100 thousand tpa of polyols capacity.

Downstream divestment proceeds totalled some $0.1 billion for the first quarter 2013 and included proceeds from the divestment of Shell’s interest in a pipeline business in the United States, Shell’s LPG business in Vietnam and the majority of Shell’s shareholding in its downstream business in Uganda.

In April, Shell announced that its 120 thousand b/d Geelong refinery in Australia is for sale and that it is considering the sale of selected downstream marketing businesses in Italy.

Also in April, Shell finalised an agreement with TravelCenters of America in the United States to develop a nationwide network of LNG fuelling centres for heavy -duty road transport customers at up to 100 existing sites.

 

KEY FEATURES OF THE FIRST QUARTER 2013

  • First quarter 2013 CCS earnings (see Note 1) were $7,951 million, 4% higher than for the same quarter a year ago.

  • First quarter 2013 CCS earnings excluding identified items (see page 6) were $7,520 million compared with $7,297 million for the first quarter 2012, an increase of 3%.

  • Basic CCS earnings per share increased by 2% versus the same quarter a year ago.

  • Basic CCS earnings per share excluding identified items increased by 2% compared with the first quarter 2012.

  • Cash flow from operating activities for the first quarter 2013 was $11.6 billion, compared with $13.4 billion in the same quarter last year. Excluding working capital movements, cash flow from operating activities for the first quarter 2013 was $11.5 billion, compared with $12.7 billion in the same quarter last year.

  • Net capital investment (see Note 1) for the first quarter 2013 was $8.2 billion. Capital investment for the first quarter 2013 was $8.8 billion and divestment proceeds were $0.6 billion.

  • Total dividends distributed in the first quarter 2013 were some $2.7 billion of which $0.8 billion were settled by issuing some 25.6 million A shares under the Scrip Dividend Programme for the fourth quarter 2012.

  • Under our share buyback programme some 16.1 million B shares were bought back for cancellation during the first quarter 2013 for a consideration of some $0.5 billion.

  • Return on average capital employed (see Note 9) on a reported income basis was 13.0% at the end of the first quarter 2013.

  • Gearing was 9.1% at the end of the first quarter 2013 versus 10.5% at the end of the first quarter 2012 (see Note 2).

  • Oil and gas production for the first quarter 2013 was 3,559 thousand boe/d. Excluding the impact of divestments, PSC price effects and security impacts onshore Nigeria, first quarter 2013 production was 2% higher than in the same period last year.

  • Equity LNG sales volumes of 5.15 million tonnes for the first quarter 2013 were broadly similar to the same quarter a year ago.

  • Oil products sales volumes were 1% higher than for the first quarter 2012. Chemicals sales volumes for the first quarter 2013 decreased by 11% compared with the same quarter a year ago.


  • Supplementary financial and operational disclosure for the first quarter 2013 is available at www.shell.com/investor.

 

SUMMARY OF IDENTIFIED ITEMS

Earnings for the first quarter 2013 reflected the following items, which in aggregate amounted to a net gain
of $431 million (compared with a net gain of $380 million in the first quarter 2012), as summarised in the table below:

  • Upstream earnings included a net gain of $173 million, mainly reflecting the revaluation of a deferred tax asset of $199 million and net divestment gains of $107 million, both predominantly related to Australia, partly offset by the net impact of fair value accounting of commodity derivatives and certain gas contracts of $103 million. Earnings for the first quarter 2012 included a net gain of $453 million.

  • Downstream earnings included a net charge of $160 million, mainly reflecting impairments of $155 million, predominantly in Australia, and the net impact of fair value accounting of commodity derivatives of $30 million, partly offset by net divestment gains of $24 million. Earnings for the first quarter 2012 included a net gain of $198 million.

  • Corporate and Non-controlling interest earnings included a net gain of $ 418 million, mainly reflecting a tax credit of $407 million related to prior years. Earnings for the first quarter 2012 included a net charge of $271 million.

SUMMARY OF OF IDENTIFIED ITEMS
$ million
Quarters
Q1 2013
Q4 2012
Q1 2012
Segment earnings impact of identified items:
Upstream
173
1,801
453
Downstream
(160)
(89)
198
Corporate and Non-controlling interest
418
-
(271)
Earnings impact
431
1,712
380


These identified items are shown to provide additional insight into segment earnings and income attributable to shareholders. From the first quarter 2013 onwards, identified items include the full impact on Shell’s CCS earnings of the following items:

  • Divestment gains and losses

  • Impairments

  • Fair value accounting of commodity derivatives and certain gas contracts (see Note 8)

  • Redundancy and restructuring

Further items may be identified in addition to the above. Prior period comparatives have not been restated.


EARNINGS BY BUSINESS SEGMENT

UPSTREAM
$ million
Quarters
Q1 2013
Q4 2012
Q1 2012
% 2
Upstream earnings excluding identified items1
5,648
4,401
6,270
-10
Upstream earnings1
5,821
6,202
6,723
-13
Upstream cash flow from operating activities
9,705
6,165
8,788
+10
Upstream net capital investment
7,370
9,323
3,772
+95
Liquids production available for sale (thousand b/d)
1,640
1,640
1,682
-2
Natural gas production available for sale (million scf/d)
11,132
10,288
10,844
+3
Total production available for sale (thousand boe/d)
3,559
3,414
3,552
-
Equity LNG sales volumes (million tonnes)
5.15
5.49
5.17
-
1 Fourth quarter 2012 and first quarter 2012 comparatives restated for accounting policy change (see Note 2).
2 Q1 on Q1 change


First quarter Upstream earnings excluding identified items were $5,648 million compared with $6,270 million a year ago. Identified items were a net gain of $173 million, compared with a net gain of $453 million for the first quarter 2012 (see page 6).

Compared with the first quarter 2012, Upstream earnings excluding identified items benefited from the ramp-up of Pearl GTL, increased trading contributions, higher gas realisations and tax credits. These items were more than offset by lower liquids realisations, higher depreciation, increased operating and exploration expenses, as well as lower earnings from LNG ventures.

Global liquids realisations were 7% lower than for the first quarter 2012. In Canada, synthetic crude oil realisations were 8% lower than for the same period last year. Global natural gas realisations were 8% higher than for the same quarter a year ago, with a 19% increase in the Americas and a 6% increase outside the Americas.

First quarter 2013 production was 3,559 thousand boe/d compared with 3,552 thousand boe/d a year ago. Liquids production decreased by 2% and natural gas production increased by 3% compared with the first quarter 2012. Excluding the impact of divestments, PSC price effects and security impacts onshore Nigeria, first quarter 2013 production was 2% higher than for the same period last year.

New field start-ups and the continuing ramp-up of fields, in particular Pearl GTL in Qatar, Eagle Ford in the United States and Pluto LNG in Australia, contributed some 175 thousand boe/d to production for the first quarter 2013, which more than offset the impact of field declines.

Equity LNG sales volumes of 5.15 million tonnes were broadly similar compared with the same quarter a year ago, reflecting the contribution from Pluto LNG, which was offset by lower volumes from Nigeria LNG due to reduced feedgas supply.

DOWNSTREAM
$ MILLION
Quarters
Q1 2013
Q4 2012
Q1 2012
%2
Downstream CCS earnings excluding identified items1
1,848
1,190
1,122
+65
Downstream CCS earnings1
1,688
1,101
1,320
+28
Downstream cash flow from operating activities
365
4,303
3,208
- 89
Downstream net capital investment
820
1,471
786
+4
Refinery processing intake (thousand b/d)
2,890
2,804
2,782
+4
Oil products sales volumes (thousand b/d)
6,004
6,367
5,960
+1
Chemicals sales volumes (thousand tonnes)
4,143
4,620
4,679
-11
1 Fourth quarter 2012 and first quarter 2012 comparatives restated for accounting policy change (see Note 2).
2 Q1 on Q1 change


First quarter Downstream earnings excluding identified items were $1,848 million compared with $1,122 million for the first quarter 2012. Identified items were a net charge of $160 million, compared with a net gain of $198 million for the first quarter 2012 (see page 6).

Compared with the first quarter 2012, Downstream earnings excluding identified items benefited from higher realised refining margins, reflecting the industry environment and Shell’s operating performance, as well as increased contributions from trading and marketing. Chemicals earnings were higher as a result of improved realised margins. Adverse currency exchange rate effects, increased depreciation and higher taxation impacted Downstream earnings.

Oil products sales volumes increased by 1% compared with the same period a year ago, as a result of higher trading volumes and an accounting policy change (see Note 1b), partly offset by lower marketing volumes.

Chemicals sales volumes decreased by 11% compared with the same quarter last year, mainly as a result of an accounting policy change (see Note 1b) and lower trading volumes. Chemicals manufacturing plant availability decreased to 92% from 94% for the first quarter 2012, as a result of higher planned maintenance.

Refinery intake volumes were 4% higher compared with the same quarter last year, mainly as a result of an accounting policy change (see Note 1b). Refinery availability decreased to 91% from 94% for the first quarter 2012, as a result of higher planned maintenance.

CORPORATE AND Non-controlling interest
$ million
Quarters
Q1 2013
Q4 2012
Q1 2012
Corporate and Non-controlling interest excluding identified items1
24
48
(95)
Of which:
Corporate1
88
82
(30)
Non-controlling interest
(64)
(34)
(65)
Corporate and Non-controlling interest1
442
48
(366)
1 Fourth quarter 2012 and first quarter 2012 comparatives restated for accounting policy change (see Note 2).

First quarter Corporate results and Non-controlling interest excluding identified items were $24 million, compared with a loss of $95 million in the same period last year. Identified items for the first quarter of 2013 were a net gain of $418 million, compared with a net charge of $271 million for the first quarter of 2012 (see page 6).

Compared with the first quarter of 2012, Corporate results excluding identified items reflected lower net interest expense and higher tax credits. In the first quarter 2013, adverse currency exchange rate effects impacted earnings by $20 million, compared with favourable currency exchange rate effects of $185 million in the same period last year.

FORTHCOMING EVENTS

Second quarter 2013 results and second quarter 2013 dividend are scheduled to be announced on August 1, 2013. Third quarter 2013 results and third quarter 2013 dividend are scheduled to be announced on October 31, 2013. The Annual General Meeting will be held on May 21, 2013.

CAUTIONARY STATEMENT

All amounts shown throughout this Report are unaudited.

The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate entities. In this document “Shell”, “Shell group” and “Royal Dutch Shell” are sometimes used for convenience where references are made to Royal Dutch Shell plc and its subsidiaries in general. Likewise, the words “we”, “us” and “our” are also used to refer to subsidiaries in general or to those who work for them. These expressions are also used where no useful purpose is served by identifying the particular company or companies. ‘‘Subsidiaries’’, “Shell subsidiaries” and “Shell companies” as used in this document refer to companies over which Royal Dutch Shell plc either directly or indirectly has control. Companies over which Shell has joint control are generally referred to “joint ventures” and companies over which Shell has significant influence but neither control nor joint control are referred to as “associates”. In this document, joint ventures and associates may also be 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 23% shareholding in Woodside Petroleum Ltd.) ownership interest held by Shell in a venture, partnership or company, after exclusion of all third-party interest.

This document contains forward-looking statements concerning the financial condition, results of operations and businesses of Royal Dutch Shell. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of Royal Dutch Shell to market risks and statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of terms and phrases such as ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘estimate’’, ‘‘expect’’, ‘‘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 document, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for Shell’s products; (c) currency fluctuations; (d) drilling and production results; (e) reserves estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and regulatory developments including 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 document are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Additional risk factors that may affect future results are contained in Royal Dutch Shell’s Form 20-F for the year ended December 31, 2012 (available at www.shell.com/investor and www.sec.gov). These risk factors also expressly qualify all forward-looking statements contained in this document and should be considered by the reader. Each forward-looking statement speaks only as of the date of this document, May 2, 2013. 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 document.

We may have used certain terms, such as resources, in this document 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. You can also obtain this form from the SEC by calling 1-800-SEC-0330.

May 2, 2013

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.

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