Third quarter 2018 results – November 01, 2018
Nov 1, 2018
On Thursday November 1, 2018 at 07.00 GMT (08.00 CET and 03.00 EDT) Royal Dutch Shell plc released its third quarter results and third quarter interim dividend announcement for 2018.
On this page a summarised overview of the Royal Dutch Shell plc third quarter 2018 results and links to the full set of results documents and webcast.
Jessica Uhl, Chief Financial Officer of Royal Dutch Shell plc, comments on the third quarter 2018 results.
Duration: 02:29 minutes
[Jessica Uhl in vision:]
Midshot
“Today we announce a strong set of results for the third quarter of 2018. Our cash flow performance shows that our strategy is working...”
Text: Jessica Uhl, Shell CFO
[Jessica Uhl still in vision:]
Still midshot
“and that we are on track to deliver our world-class investment case. I'm proud of our performance, let me explain why.”
Text: World-class investment case
[Jessica Uhl in vision:]
Close up
“In the third quarter, we've generated cash flow from operations excluding working capital movements of $14.7 billion.”
Text: Q3 2018, Cash flow from operations, $14.7 billion, ex working capital movements
[Jessica Uhl in vision:]
Midshot
“This gives us confidence in the delivery of our 2020 cash flow outlook. Our financial performance is founded on good operational delivery across all of our businesses. And we are able to take benefit from higher prices with our additional production...”
Text: Operational delivery
[Video transition to image:]
Midshot of Jessice Uhl on the left and image of oil rig in ocean on the right
“in the Gulf of Mexico and Brazil.”
[Jessica Uhl in vision:]
Close up
“The cash flow generated this quarter enables us to cover our dividend, interest and share buybacks. The first tranche of our share buyback programme is complete and we've announced a second tranche of a further $2.5 billion. We are on track to complete the $25 billion programme by the end of 2020. Since 2016, we've been transforming the company and reshaping Shell's portfolio through a $30 billion divestment programme.”
Text: Share buyback, $2.5 billion, second tranche
[Jessica Uhl in vision:]
Close up
“Most recently, we announced the sale of our Upstream interests in Denmark.”
Text: Sale of our Upstream interests in Denmark
[Jessica Uhl still in vision:]
Still close up
“We're also delivering growth through a disciplined approach to capital allocation for new projects.”
Text: Disciplined approach to capital allocation
[Image:]
Panning image of Lula Extreme South rigs in ocean with mountains in background
Text: First production, Lula Extreme South
Text: credit: Agência Petrobras
[Jessica Uhl voice over:]
“In October, we reported first production at the Lula Extreme South deep water development in the Santos basin in Brazil.”
[Video simulation:]
Panning video simulation of LNG Canada project design
Text: Final investment decision, LNG Canada
[Jessica Uhl voice over:]
“And together with our partners, we took the final investment decision on LNG Canada.”
[Video transition:]
Wipe to yellow background
Text: Shell Results, Summary Q3 2018
[Jessica Uhl voice over:]
“Let me highlight the key numbers for the third quarter. $14.7 billion cash flow from operations excluding working capital movements.”
Text: $14.7 billion, cash flow from operations ex working capital movements
[Jessica Uhl voice over:]
”$8 billion free cash flow.”
Text: $8 billion, free cash flow
[Jessica Uhl voice over:]
“$5.6 billion of earnings on a current cost of supply basis, excluding identified items. All of this at an oil price of $75 per barrel.”
Text: $5.6 billion, earnings on a CCS basis
[Jessica Uhl voice over:]
“Return on average capital employed was 7.1%.”
Text: 7.1% ROACE
[Jessica Uhl voice over:]
“We reduced gearing to 23.1% at the end of September by bringing down net debt by more than $8 billion over the last four quarters.”
Text: 23.1% gearing
[Text:]
Yellow background with summary of text
Text: Shell Results, Summary Q3 2018, $14.7 billion, cash flow from operations ex working capital movements, $8 billion, free cash flow, $5.6 billion, earnings on a CCS basis, 7.1% ROACE, 23.1% gearing
[Jessica Uhl voice over:]
“Our results today show that our strategy is working and we're on track to where we want to be by 2020.”
[Jessica Uhl in vision:]
Midshot
“We remain committed to our financial framework and focused on capital discipline. With our strong cash flow outlook and our performance track record, Shell's future looks bright.”
[Video transition:]
Fade to white
Graphic: Shell logo
Text: # ShellResults, © Shell International Limited 2018
[Disclaimer:]
Summary of unaudited results
$ million
| Q3 2018 | Q2 2018 | Q3 2017 | % (1) | | Definition | Nine months 2018 | Nine months 2017 | % |
|---|---|---|---|---|---|---|---|---|
| 5,839 | 6,024 | 4,087 | +43 | Income/(loss) attributable to shareholders | | 17,762 | 9,170 | +94 |
| 5,570 | 5,226 | 3,698 | +51 | CCS earnings attributable to shareholders | Note 2 | 16,499 | 8,999 | +83 |
| (54) | 535 | (405) | | Of which: Identified items | A | 783 | (2,462) | |
| 5,624 | 4,691 | 4,103 | +37 | CCS earnings attributable to shareholders excluding identified items | | 15,716 | 11,461 | +37 |
| 169 | 121 | 105 | | Add: CCS earnings attributable to non-controlling interest | | 411 | 324 | |
| 5,793 | 4,812 | 4,208 | +38 | CCS earnings excluding identified items | | 16,127 | 11,785 | +37 |
| | | | | Of which: | | | | |
| 2,292 | 2,305 | 1,282 | | Integrated Gas | | 7,036 | 3,632 | |
| 1,886 | 1,457 | 562 | | Upstream | | 4,894 | 1,441 | |
| 2,010 | 1,660 | 2,668 | | Downstream | | 5,436 | 7,686 | |
| (395) | (610) | (304) | | Corporate | | (1,239) | (974) | |
| 12,092 | 9,500 | 7,582 | +59 | Cash flow from operating activities | | 31,064 | 28,375 | +9 |
| (4,082) | 29 | (3,912) | | Cash flow from investing activities | | (8,347) | (7,364) | |
| 8,010 | 9,529 | 3,670 | | Free cash flow | H | 22,717 | 21,011 | |
| 0.70 | 0.72 | 0.50 | +40 | Basic earnings per share ($) | | 2.14 | 1.12 | +91 |
| 0.67 | 0.63 | 0.45 | +49 | Basic CCS earnings per share ($) | B | 1.99 | 1.10 | +81 |
| 0.68 | 0.56 | 0.50 | +36 | Basic CCS earnings per share excl. identified items ($) | | 1.89 | 1.40 | +35 |
| 0.47 | 0.47 | 0.47 | - | Dividend per share ($) | | 1.41 | 1.41 | - |
| | | | | | | | | |
(1) Q3 on Q3 change.
CCS earnings attributable to shareholders excluding identified items were $5.6 billion, compared with $4.1 billion in the third quarter 2017. Earnings primarily benefited from increased realised oil, gas and LNG prices as well as higher contributions from trading in Integrated Gas, partly offset by lower margins in Downstream, higher deferred tax charges in Upstream and adverse currency exchange effects.
Cash flow from operating activities for the third quarter 2018 was $12.1 billion, which included negative working capital movements of $2.6 billion, compared with $7.6 billion in the third quarter 2017, which included negative working capital movements of $1.3 billioni. Excluding working capital movements, cash flow from operations of $14.7 billion mainly reflected increased earnings and higher dividends received.
Total dividends distributed to shareholders in the quarter were $3.9 billion. In October, the first tranche of the share buyback programme was completed, with almost 61 million A ordinary shares bought back for cancellation for an aggregate consideration of $2.0 billion. Today, Shell launches the second tranche of the share buyback programme, with a maximum aggregate consideration of $2.5 billion in the period up to and including January 28, 2019.
i Revised from negative working capital movements of $2.5 billion. See Note 7 and Definition I.
Additional performance measures
$ million
| Q3 2018 | Q2 2018 | Q3 2017 | % (1) | | Definition | Nine months 2018 | Nine months 2017 | % |
|---|---|---|---|---|---|---|---|---|
| 5,830 | 5,771 | 5,742 | | Capital investment | C | 16,784 | 17,228 | |
| 613 | 2,502 | 1,365 | | Divestments | D | 4,403 | 10,866 | |
| 3,596 | 3,442 | 3,657 | -2 | Total production available for sale (thousand boe/d) | | 3,625 | 3,634 | - |
| 68.38 | 66.24 | 47.06 | +45 | Global liquids realised price ($/b) (2) | | 65.19 | 47.03 | +39 |
| 4.92 | 4.86 | 4.25 | +16 | Global natural gas realised price ($/thousand scf) (2) | | 4.91 | 4.30 | +14 |
| 9,312 | 10,006 | 9,477 | -2 | Operating expenses | G | 29,037 | 28,307 | +3 |
| 9,248 | 9,844 | 9,197 | +1 | Underlying operating expenses | G | 28,878 | 27,717 | +4 |
| 8.7% | 8.1% | 5.0% | | ROACE | E | 8.7% | 5.0% | |
| 7.1% | 6.5% | 4.6% | | ROACE (CCS basis excluding identified items) | E | 7.1% | 4.6% | |
| 23.1% | 23.6% | 25.7% | | Gearing (3) | F | 23.1% | 25.7% | |
(1) Q3 on Q3 change.
(2) Following a reassessment, second and first quarter 2018 (liquids realised price) and the four quarters 2017 (natural gas realised price) have been revised.
(3) With effect from 2018, the net debt calculation has been amended (see Definition F). Gearing as previously published at September 30, 2017 was 25.4%.
CEO statement
Royal Dutch Shell Chief Executive Officer Ben van Beurden commented:
“Good operational delivery across all Shell businesses produced one of our strongest-ever quarters, with cash flow from operations of $14.7 billion, excluding working capital movements. Our strong financial performance allowed us to cover the cash dividend, interest payments, share buybacks and to further pay down debt.
Our strategy remains on track. We have completed the first tranche of share buybacks, in line with our intention to purchase $25 billion of our shares by the end of 2020, and today I’m pleased to announce the second tranche. Meanwhile, the transformation of our portfolio continued, with further divestments of non-strategic assets and the final investment decision on LNG Canada.”