Second quarter 2018 results – July 26, 2018
Jul 26, 2018
On Thursday July 26, 2018 at 07.00 BST (08.00 CEST and 02.00 EDT) Royal Dutch Shell plc released its second quarter results and second quarter interim dividend announcement for 2018.
On this page a summarised overview of the Royal Dutch Shell plc second quarter 2018 results and links to the full set of results documents and webcast.
Shell CEO Ben van Beurden on the second quarter 2018 results
Duration: 02:43 minutes
[Ben van Beurden midshot in vision:]
“Today marks another important step towards delivering our world-class investment case.”
Text: Ben van Beurden, CEO Royal Dutch Shell
[Ben van Beurden close up in vision:]
“Since the completion of the BG acquisition in 2016, we have been delivering on our intentions.”
[Ben van Beurden midshot in vision:]
“We have been reshaping our portfolio through a $30 billion divestment programme and new projects,”
Text: Reshaping our portfolio, $30 billion divestment programme, New projects
[Ben van Beurden midshot in vision:]
“We have reduced debt, and we have turned off the scrip dividend.”
Text: Reduced debt, Turned off scrip dividend
[Ben van Beurden close up in vision:]
“It’s a big day for us as we announce”
[Text screen:]
Text: Launch share buyback programme
[Ben van Beurden voice over:]
“the launch of our share buyback programme.”
[Image:]
Zooming in image of birds eye view of an oil rig
[Ben van Beurden voice over:]
“This quarter, our cash flow from operations, excluding working capital movements, is the strongest since the first quarter of 2014 when oil price was above $100 a barrel.”
Text: Q2 2018 cash flow strongest since Q1 2014
[Ben van Beurden close up in vision:]
“Over the past four quarters, at an average oil price of just under $65 a barrel,”
[Image:]
Panning shot of Shell plants with mountains in the background
[Ben van Beurden voice over:]
“we have delivered close to $25 billion of free cash flow, we have reduced debt by $6 billion and distributed almost $16 billion in dividends to our shareholders.”
Text: Past four quarters: $25 billion free cash flow, $6 billion net dept reduced, $16 billion in dividends
[Ben van Beurden close up in vision:]
“Our free cash flow outlook and the progress we have made to strengthen our financial framework gives us the confidence to start a buyback programme.”
[Ben van Beurden midshot in vision:]
“Our intention remains to buy back at least $25 billion of our shares over the period 2018-2020 subject to further progress with debt reduction and oil price conditions.”
Text: Share buyback programme, $25 billion
[Ben van Beurden close up in vision:]
“Let me highlight the main numbers for this quarter”
[Text screen:]
Text: Q2 2018 results, $4.7 billion, Earnings on a CCS basis
[Ben van Beurden voice over:]
$4.7 billion earnings on a current cost of supplies basis excluding identified items
[Text screen:]
Text: Q2 2018 results, $9.5 billion, cash flow from operations
[Ben van Beurden voice over:]
“$9.5 billion cash flow from operations”
[Text screen:]
Text: Q2 2018 results, $9.5 billion, free cash flow
[Ben van Beurden voice over:]
“$9.5 billion free cash flow and all of this at an oil price of $74 per barrel.”
[Text screen:]
Text: Q2 2018 results, 6.5% ROACE
[Ben van Beurden voice over:]
“Return on average capital employed reached 6.5%.”
[Ben van Beurden midshot in vision:]
“Since the beginning of the year we reduced net debt by some $4 billion”
Text: $4 billion, net debt reduction
[Ben van Beurden midshot in vision:]
“and gearing was 23.6% at the end of the second quarter.”
Text: 23.6%, Gearing
[Ben van Beurden close up in vision:]
“This performance builds upon the strong results delivered in 2017. We came into 2018 with momentum and have accelerated it with sustained performance and higher oil prices in the first half of the year.”
[Ben van Beurden midshot in vision:]
“Let me summarise. Today we launch our share buyback programme. We decided this on the basis of our strong performance track-record, our cash generation outlook and the strengthened financial framework, our focus on capital discipline and our confidence in the longevity, and the competitiveness of our portfolio. We are delivering on our commitments.”
Text: Share buyback programme, Strong track-record, Cash generation outlook, Strong financial framework, Capital discipline, Confidence in portfolio
[Ben van Beurden close up in vision:]
“I’m proud of what we have achieved and I’m confident we have what it takes to deliver a world-class investment case.”
[Shell logo graphic:]
Text: #ShellResults, © SHELL INTERNATIONAL LIMITED 2018
[Text screen:]
Text: Thank you for visiting our site. Please understand that an investment in Royal Dutch Shell plc securities carries with it the risk that you could sustain losses as a result of your investment. Therefore, an investment in Royal Dutch Shell plc securities may not be appropriate for all investors. Accordingly, before investing in our securities we urge you to read our Annual Report and Form 20-F and consider the risks discussed within. You can find out Annual report and Form 20-F on the link next to this presentation. Again, thank you for your interest in Royal Dutch Shell plc.
[Text screen:]
Definitions and cautionary note
Summary of unaudited results
$ million
| Q2 2018 | Q1 2018 | Q2 2017 | % 1 | Definition | Half year 2018 | Half year 2017 | % | |
|---|---|---|---|---|---|---|---|---|
| 6,024 | 5,899 | 1,545 | +290 | Income/(loss) attributable to shareholders | 11,923 | 5,083 | +135 | |
| 5,226 | 5,703 | 1,920 | +172 | CCS earnings attributable to shareholders | Note 2 | 10,929 | 5,301 | +106 |
| 535 | 302 | (1,684) | Of which: Identified items2 | A | 837 | (2,057) | ||
| 4,691 | 5,401 | 3,604 | +30 | CCS earnings attributable to shareholders excluding identified items | 10,092 | 7,358 | +37 | |
| 121 | 121 | 110 | Add: CCS earnings attributable to non-controlling interest | 242 | 219 | |||
| 4,812 | 5,522 | 3,714 | +30 | CCS earnings excluding identified items | 10,334 | 7,577 | +36 | |
| Of which: | ||||||||
| 2,305 | 2,439 | 1,169 | Integrated Gas | 4,744 | 2,350 | |||
| 1,457 | 1,551 | 339 | Upstream | 3,008 | 879 | |||
| 1,660 | 1,766 | 2,529 | Downstream | 3,426 | 5,018 | |||
| (610) | (234) | (323) | Corporate | (844) | (670) | |||
| 9,500 | 9,427 | 11,285 | -16 | Cash flow from operating activities | 18,927 | 20,793 | -9 | |
| 29 | (4,249) | 872 | Cash flow from investing activities | (4,220) | (3,452) | |||
| 9,529 | 5,178 | 12,157 | Free cash flow | H | 14,707 | 17,341 | ||
| 0.72 | 0.71 | 0.19 | +279 | Basic earnings per share ($) | 1.44 | 0.62 | +132 | |
| 0.63 | 0.69 | 0.23 | +174 | Basic CCS earnings per share ($) | B | 1.32 | 0.65 | +103 |
| 0.56 | 0.65 | 0.44 | +27 | Basic CCS earnings per share excl. identified items ($) | 1.21 | 0.90 | +34 | |
| 0.47 | 0.47 | 0.47 | - | Dividend per share ($) | 0.94 | 0.94 | - |
1 Q2 on Q2 change.
2 As revised for first quarter 2018, see Definition A.
Compared with the second quarter 2017, CCS earnings attributable to shareholders excluding identified items of $4.7 billion reflected increased contributions from Integrated Gas and Upstream, partly offset by lower earnings in Downstream.
Cash flow from operating activities for the second quarter 2018 was $9.5 billion, which included negative working capital movements of $2.1 billion, compared with $11.3 billion in the second quarter 2017, which included positive working capital movements of $2.5 billioni.
Total dividends distributed to shareholders in the quarter were $3.9 billion. Today, Shell starts a share buyback programme of at least $25 billion in the period 2018-2020, subject to further progress with debt reduction and oil price conditions. In the first tranche of this programme Shell enters into an irrevocable, non-discretionary arrangement to enable the purchase of A ordinary shares and/or B ordinary shares up to the maximum aggregate consideration of $2 billion over a period of 3 months.
i Revised from positive working capital movements of $2.3 billion. See Note 7 and Definition I.
Additional performance measures
$ million
| Q2 2018 | Q1 2018 | Q2 2017 | %1 | Definition | Half year 2018 | Half year 2017 | % | |
|---|---|---|---|---|---|---|---|---|
| 5,771 | 5,183 | 6,766 | Capital investment | C | 10,954 | 11,486 | ||
| 2,502 | 1,288 | 9,472 | Divestments | D | 3,790 | 9,501 | ||
| 3,442 | 3,839 | 3,495 | -2 | Total production available for sale (thousand boe/d) | 3,639 | 3,622 | - | |
| 66.09 | 60.66 | 45.62 | +45 | Global liquids realised price ($/b) | 63.38 | 47.02 | +35 | |
| 4.86 | 4.95 | 4.30 | +13 | Global natural gas realised price ($/thousand scf)2 | 4.91 | 4.32 | +14 | |
| 10,006 | 9,719 | 9,548 | +5 | Operating expenses | G | 19,725 | 18,830 | +5 |
| 9,844 | 9,786 | 9,339 | +5 | Underlying operating expenses | G | 19,630 | 18,520 | +6 |
| 8.1% | 6.4% | 4.0% | ROACE | E | 8.1% | 4.0% | ||
| 6.5% | 6.1% | 4.2% | ROACE (CCS basis excluding identified items) | E | 6.5% | 4.2% | ||
| 23.6% | 24.7% | 25.8% | Gearing3 | F | 23.6% | 25.8% |
1 Q2 on Q2 change.
2 First quarter 2018 and the four quarters of 2017 have been revised following a reassessment.
3 With effect from 2018, the net debt calculation has been amended (see Definition F). Gearing as previously published at June 30, 2017 was 25.3%.
Changes to the Interim Financial Statements are described in Notes 1, 6 and 7, while revised definitions are explained in Definitions A, F and I. Please refer to the full quarterly results announcement for Definitions A through I, Note 1 and Note 2.
CEO statement
Royal Dutch Shell Chief Executive Officer Ben van Beurden commented:
“Today we are taking another important step towards the delivery of our world-class investment case, with the launch of a $25 billion share buyback programme.
This move complements the progress we have made since the completion of the BG acquisition in 2016, to reshape our portfolio through a $30 billion divestment programme and new projects, to reduce net debt, and to turn off the scrip dividend.
Our financial framework remains unchanged. Our free cash flow outlook and the progress we have made to strengthen our balance sheet give us the confidence to start our share buyback programme.”