Third quarter 2019 results – October 31, 2019
Oct 31, 2019
On Thursday October 31, 2019 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 2019.
This page provides a summarised overview of the Royal Dutch Shell plc third quarter 2019 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 2019 results.
(transcript of CFO video comment)
[Audio]
Theme music begins
[Vison]
Jessica Uhl stands in front of a white background
[Animation footage]
Graphic on screen reads: Jessica Uhl Shell CFO
[Jessica to Camera]
Today we are announcing our results
for the third quarter 2019. Before I go through the numbers,
let me share the key messages for the quarter.
We continue to deliver strong cash flow and earnings,
despite sustained lower oil and gas prices, and chemicals margins.
[Animation footage]
Strong cash flow and earnings
[Jessica
to Camera]
Our earnings reflect the resilience of our market-facing businesses
and their ability to capitalise on market conditions, including very strong trading
and optimisation results this quarter.
[Animation footage]
Resilience of our market-facing businesses
[Jessica to Camera]
Our intention to buy back $25 billion in shares and reduce net debt remains unchanged.
The prevailing weak macroeconomic conditions and challenging outlook inevitably create uncertainty about the pace of reducing gearing to 25% and completing the share buyback programme within the 2020 timeframe.
[Animation footage]
Weak macroeconomic conditions
[Jessica to Camera]
Let’s look at the progress we made in our portfolio.
In August, we made an offer to acquire ERM Power,
[Jessica Voice-over]
Australia’s leading commercial and industrial electricity retailer.
ERM will become our core power and energy solutions platform in country,
maintaining our global ambition to expand our integrated power business.
[Footage]
Picture of ERM worker in front of installation with orange helmet and suit.
Picture of solar panels on a roof. Picture of man holding mobile device with data graph on it.
[Jessica to Camera]
In Retail, one of our key market-facing businesses, we are progressing towards our 2025 growth outlook.
[Jessica Voice-over]
Since 2017, we have added around 1,000 new sites in our priority growth markets.
[Footage]
Several wide shots of Shell retail stations
[Jessica Voice-over]
In China, Shell now occupies the leading retail position amongst international energy companies. To grow our revenues, we've added more than 1,500 new convenience stores
across our global network.
[Vision]
Medium shot of female Chinese retail worker handing customer a receit.
Medium shot of female Chinese retail worker guiding car to the gas station.
[Jessica to Camera]
To grow our revenues,
[Jessica Voice-over]
we've added more than 1,500 new convenience stores
across our global network. Compared to last year, we saw a 10% margin increase in Non-Fuel Retail, which includes convenience products and lubricants.
[Vision]
Wide shot of a man walking toward a Shell Select venue. Panning medium shot of a price chart of the DeliCafe in the venue. Shot of worker of Delicafe giving a co-worker of the station some product. Tilt overview shot of the Shell select store. Medium shot of coffee being made by the Deli2go coffee machine and someone putting a lid on the cup when it is finished. Shot of the coffeecup being put in front of a bottle of ShellHelix Ultar racing oil and V- Power energy drink.
[Jessica to Camera]
Our retail business also continues to offer more customers the opportunity to drive carbon neutral.
[Jessica Voice-over]
In the UK, Shell is now the first retailer to offer drivers the chance to offset CO2 emissions from their fuel purchases at no extra cost.
[Vision]
Medium shot of a billboard in front of a retail station saying “GO CARBON NEUTRAL”.
Close-up of a mobile phone being scanned by the Shell retailer. Shot of the male retailer smiling towards customer. Shot of the female customer smiling back. Medium shot of 4 flags in front of a parking lot saying “GO CARBON NEUTRAL ON YOUR JOURNEY”. Drone shot of a car driving through Glengarry where Shell planted trees.
[Jessica to Camera]
Now let me highlight the key numbers for the third quarter.
[Jessica Voice-over]
$12.1 billion of cash flow from operations
excluding working capital movements
[Animation footage]
SA full frame graphics reads:
Shell Results Summary Q3 2019
$12.1 billion of cash flow from operations
excluding working capital movements
$12.3 billion
cash flow from operations
[Jessica Voice-over]
$10.1 billion of free cash flow
[Animation footage]
SA full frame graphics reads:
Shell Results Summary Q3 2019
$10.1 billion of free cash flow
[Jessica
Voice-over]
$4.8 billion of earnings on a current cost of supplies basis excluding identified items.
[Animation footage]
SA full frame graphics reads:
Shell Results Summary Q3 2019
$4.8 billion of earnings on a current cost of supplies basis excluding identified items.
$6.1 billion earnings on a CCS basis
[Jessica to Camera]
All of this at an average oil price of $62 per barrel this quarter.
[Jessica Voice-over]
Return on average capital employed was 8.1 %.
[Animation footage]
SA full frame graphics reads:
Shell Results Summary Q3 2019
8.1 %
ROACE
[Jessica Voice-over]
And our gearing is now 27.9%.
[Animation footage]
SA full frame graphics reads:
Shell Results Summary Q3 2019
27.9 %
GEARING
[Jessica to Camera]
Our quarterly results have been influenced by challenging macro conditions and some operational shortfalls. But with the progress we’re making to reshape our portfolio, we continue to increase the resilience of our business. Despite the circumstances, we delivered resilient earnings in our marketing business and our trading and optimisation teams have clearly performed well this quarter.
Thank you.
[Audio]
Theme music fades out
[Graphic]
Shell logo
#ShellResults
©Shell International Limited 2019
[Graphic]
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[Graphic]
A graphic appears titled Definitions and cautionary note, relevant to the video.
Summary of unaudited results
$ million
| Q3 2019 (1) | Q2 2019 (1) | Q3 2018 | % (2) | | Reference | Nine months 2019 (1) | Nine months 2018 | % |
|---|---|---|---|---|---|---|---|---|
| 5,879 | 2,998 | 5,839 | +1 | Income/(loss) attributable to shareholders | | 14,878 | 17,762 | -16 |
| 6,081 | 3,025 | 5,570 | +9 | CCS earnings attributable to shareholders | Note 2 | 14,399 | 16,499 | -13 |
| 1,313 | (437) | (54) | | Of which: Identified items | A | 868 | 783 | |
| 4,767 | 3,462 | 5,624 | -15 | CCS earnings attributable to shareholders excluding identified items | | 13,530 | 15,716 | -14 |
| 149 | 130 | 169 | | Add: CCS earnings attributable to non-controlling interest | | 410 | 411 | |
| 4,917 | 3,592 | 5,793 | -15 | CCS earnings excluding identified items | | 13,940 | 16,127 | -14 |
| | | | | Of which: | | | | |
| 2,674 | 1,726 | 2,292 | | Integrated Gas | | 6,968 | 7,036 | |
| 907 | 1,335 | 1,886 | | Upstream | | 3,967 | 4,894 | |
| 2,153 | 1,338 | 2,010 | | Downstream | | 5,313 | 5,436 | |
| (817) | (806) | (395) | | Corporate | | (2,307) | (1,239) | |
| 12,252 | 11,031 | 12,092 | +1 | Cash flow from operating activities | | 31,913 | 31,064 | +3 |
| (2,130) | (4,166) | (4,082) | | Cash flow from investing activities | | (10,918) | (8,347) | |
| 10,122 | 6,865 | 8,010 | | Free cash flow | H | 20,995 | 22,717 | |
| 0.73 | 0.37 | 0.70 | +4 | Basic earnings per share ($) | | 1.84 | 2.14 | -14 |
| 0.76 | 0.37 | 0.67 | +13 | Basic CCS earnings per share ($) | B | 1.78 | 1.99 | -11 |
| 0.59 | 0.43 | 0.68 | -13 | Basic CCS earnings per share excl. identified items ($) | | 1.67 | 1.89 | -12 |
| 0.47 | 0.47 | 0.47 | - | Dividend per share ($) | | 1.41 | 1.41 | - |
(1) IFRS 16 Leases (IFRS 16) was adopted with effect from January 1, 2019. See Note 8 “Adoption of IFRS 16 Leases”.
(2) Q3 on Q3 change.
Please refer to the full quarterly results announcement for Notes 1 through 8 and Alternative performance measures A through I.
Compared with the third quarter 2018, CCS earnings attributable to shareholders excluding identified items were $4.8 billion, reflecting lower realised oil, LNG and gas prices, as well as weaker realised refining and chemicals margins. This was partly offset by significantly stronger contributions from LNG and oil products trading and optimisation as well as higher realised margins in retail and global commercial.
Compared with the third quarter 2018, cash flow from operating activities excluding working capital movements was $12.1 billion, reflecting lower earnings, higher pension contributions and lower dividends received.
Total dividends distributed to shareholders in the quarter were $3.8 billion. Today, Shell launches the next tranche of the share buyback programme, with a maximum aggregate consideration of $2.75 billion in the period up to and including January 27, 2020. Since the launch of the programme, Shell has bought back $12 billion in shares for cancellation.
Additional performance measures
$ million
| Q3 2019 | Q2 2019 | Q3 2018 | % (1) | | Reference | Nine months 2019 | Nine months 2018 | % |
|---|---|---|---|---|---|---|---|---|
| 6,098 | 5,337 | 5,902 | | Cash capital expenditure (2) | C | 17,036 | 16,648 | |
| 7,759 | 6,341 | 5,717 | | Capital investment (3) | C | 20,785 | 16,999 | |
| 3,563 | 3,583 | 3,596 | -1 | Total production available for sale (thousand boe/d) | | 3,632 | 3,625 | - |
| 55.99 | 61.26 | 68.21 | -18 | Global liquids realised price ($/b) | | 58.18 | 65.13 | -11 |
| 4.19 | 4.21 | 4.92 | -15 | Global natural gas realised price ($/thousand scf) | | 4.63 | 4.91 | -6 |
| 8,650 | 9,941 | 9,312 | -7 | Operating expenses | G | 27,509 | 29,037 | -5 |
| 8,657 | 9,477 | 9,248 | -6 | Underlying operating expenses | G | 27,000 | 28,878 | -7 |
| 8.6% | 8.4% | 8.7% | | ROACE (Net income basis) | E | 8.6% | 8.7% | |
| 8.1% | 8.2% | 8.1% | | ROACE (CCS basis excluding identified items) (4) | E | 8.1% | 8.1% | |
| 27.9% | 27.6% | 23.1% | | Gearing | F | 27.9% | 23.1% | |
(1) Q3 on Q3 change.
(2) With effect from 2019, Cash capital expenditure has been introduced as a capital spent performance measure (see Reference C).
(3) With effect from 2019, the definition has been amended (see Reference C). Comparative information has been revised.
(4) With effect from 2019, the definition has been amended (see Reference E). Comparative information has been revised.
Please refer to the full quarterly results announcement for Notes 1 through 8 and Alternative performance measures A through I.
Supplementary financial and operational disclosure for this quarter is available at www.shell.com/investor.
The IFRS 16 impact on net debt in the third quarter 2019 was an increase of $15,566 million. Third quarter 2019 reported Gearing was 27.9% on an IFRS 16 basis, comparable with 23.5% on an IAS 17 basis.
The impact of IFRS 16 is presented in Note 8 “Adoption of IFRS 16 Leases” and not addressed in the performance analysis sections of this results announcement.
CEO statement
Royal Dutch Shell Chief Executive Officer Ben van Beurden commented:
“This quarter we continued to deliver strong cash flow and earnings, despite sustained lower oil and gas prices, and chemicals margins. Our earnings reflect the resilience of our market-facing businesses and their ability to capitalise on market conditions, including very strong trading and optimisation results this quarter.
Our intention to buy back $25 billion in shares and reduce net debt remains unchanged. The prevailing weak macroeconomic conditions and challenging outlook inevitably create uncertainty about the pace of reducing gearing to 25% and completing the share buyback programme within the 2020 timeframe.”