First quarter 2016 results – May 4, 2016
May 4, 2016
On Wednesday, May 4, 2016 at 07.00 BST (08.00 CEST and 02.00 EDT) Royal Dutch Shell plc released its first quarter results and first quarter interim dividend announcement for 2016.
On this page a summarised overview of the Royal Dutch Shell plc fourth quarter 2015 results and links to the full set of results documents and webcast.
CFO video comment
Simon Henry, the Chief Financial Officer of Royal Dutch Shell, comments on the Q1 2016 results
Hello, I am Simon Henry, the Chief Financial Officer of Royal Dutch Shell.
Today we announced our quarterly financial results. These results included for the first time 2 months of contribution from BG, following the completion of the acquisition on the 15th of February this year.
Shell’s integrated activities differentiate us, with our Downstream and our Integrated Gas businesses delivering good results…
…and underpinning our financial performance despite the continued low oil and gas prices.
At the same time, we are continuing to reduce costs and our spending overall, and we have material opportunities to do so in this down-cycle.
During the quarter, we have announced several project deferrals including LNG Canada and the Browse floating LNG project in Australia, and also our exit from the Bab Sour gas project, in Abu Dhabi.
Capital investment for 2016 is clearly trending towards $30 billion.
We are looking in detail at the combined portfolio, taking costs out of projects and projects out of the development funnel.
We continue to reduce operating costs, both in the supply chain, and in reducing our headcount.
As a result of these actions, and the expected cost savings from BG,
We expect to reach a run rate of around $40 billion for our underlying operating costs by the end of 2016.
This would represent around $10 billion, or 20%, reduction compared with the pre-combination baseline of 2014.
Excluding identified items, our first quarter 2016 earnings were $1.6 billion on a Current Cost of Supplies basis.
..and earnings per share decreased by 64% from first quarter 2015.
Cash flow generated from operations was around $650 million, or $4.6 billion excluding working capital movements.
We continue to improve the underlying operational performance of our assets, production volumes are up substantially, 16% higher than 2015.
Costs are falling across the company and overall these improvements are now contributing materially to the bottom line.
We are already seeing positive effects from our acquisition of BG.
BG asset volumes were up 22% points and that growing portfolio added earnings and cash flow in the quarter.
We are now very busy with combining the two companies, to add more value for shareholders.
This will likely result in accelerated delivery of the synergies from the acquisition, and at a lower cost than we originally set out.
It’s still early days, but we very pleased with what we are seeing so far from the acquisition.
Thank you for watching.
- Following completion of the acquisition on February 15, 2016, BG Group plc (“BG”) has been consolidated within Royal Dutch Shell’s results. For practical purposes, this includes February and March 2016, as the impact for the first half of February is deemed immaterial.
- Royal Dutch Shell’s first quarter 2016 CCS earnings attributable to shareholders (see Note 3) were $0.8 billion compared with $4.8 billion for the same quarter a year ago.
- First quarter 2016 CCS earnings attributable to shareholders excluding identified items (see page 6) were $1.6 billion compared with $3.7 billion for the first quarter 2015, a decrease of 58%.
- Compared with the first quarter 2015, CCS earnings attributable to shareholders excluding identified items were impacted by the decline in oil, gas and LNG prices and weaker refining industry conditions. Earnings benefited from lower operating expenses, as steps taken by Shell to reduce costs more than offset the increase in operating expenses associated with BG.
- First quarter 2016 basic CCS earnings per share excluding identified items decreased by 63% versus the first quarter 2015.
- Cash flow from operating activities for the first quarter 2016 was $0.7 billion, which included negative working capital movements of $3.9 billion.
- Total dividends distributed to shareholders in the quarter were $3.7 billion, of which $1.5 billion were settled by issuing 65.7 million A shares under the Scrip Dividend Programme.
- Gearing at the end of the first quarter 2016 was 26.1% versus 12.4% at the end of the first quarter 2015. This increase mainly reflects the impact of the acquisition of BG.
- A first quarter 2016 dividend has been announced of $0.47 per ordinary share and $0.94 per American Depositary Share (“ADS”).
“Shell's integrated activities differentiate us, with our Downstream and Integrated Gas businesses delivering strong results and underpinning our financial performance despite continued low oil and gas prices.
We continue to reduce our spending levels, to capture cost opportunities and manage the financial framework in today’s lower oil price environment. The combination with BG is off to a strong start, as a result of detailed forward planning before the completion of the transaction. This will likely result in accelerated delivery of the synergies from the acquisition, and at a lower cost than we originally set out.
Putting all of this together, capital investment in 2016 is clearly trending toward $30 billion, compared to previous guidance of $33 billion, and some 36% lower than combined Shell and BG investment in 2014.
Annual operating expenses excluding identified items are trending towards a run rate of $40 billion compared with 2014 combined spend of around $53 billion.
In practice, we expect to absorb BG’s capital investment and operating expenses during 2016, with no net increase overall, compared with Shell stand alone in 2015.
We will continue to manage spend, through dynamic decision-making across the organisation, taking advantage of opportunities from both the deflating market and the two companies coming together.
The completion of the BG deal has reinforced our strategy and strength against the backdrop of hugely challenging times for our industry. For Shell and our shareholders, this is a unique opportunity to reshape and simplify the company.”