Second quarter 2021 results – July 29, 2021
Jul 29, 2021
On Thursday July 29, 2021 at 07:00 BST (08:00 CEST and 02:00 EDT) Royal Dutch Shell plc releases its second quarter results and second quarter interim dividend announcement for 2021.
Watch CEO Ben van Beurden's video comment.
Q2 2021 FINANCIAL RESULTS
$ million
|
|
Adj. Earnings ¹
|
Adj. EBITDA (CCS)
|
CFFO ex. WC
|
CFFO
|
Cash capex
|
---|---|---|---|---|---|---|
Integrated Gas
|
1,609
|
3,364
|
4,350
|
3,761
|
880
|
|
Upstream
|
2,469
|
6,714
|
5,444
|
5,056
|
1,696
|
|
Oil Products
|
1,299
|
2,608
|
3,365
|
2,213
|
882
|
|
|
Refining & Trading
|
112
|
676
|
|
|
|
|
Marketing
|
1,187
|
1,932
|
|
|
|
Chemicals
|
670
|
1,036
|
1,225
|
1,133
|
895
|
|
Corporate
|
(399)
|
(101)
|
(208)
|
454
|
30
|
|
Less: Non-controlling interest
|
115
|
115
|
|
|
|
|
|
|
|
|
|
|
|
RDS
|
Q2 2021
|
5,534
|
13,507
|
14,176
|
12,617
|
4,383
|
Q1 2021
|
3,234
|
11,490
|
12,683
|
8,294
|
3,974
|
1 Income/(loss) attributable to shareholders for Q2 2021 is $3.4 billion. Reconciliation of non-GAAP measures can be found in the unaudited results, available on www.shell.com/investors.
QUARTERLY RESULTS PRESENTATION
ROYAL DUTCH SHELL PLC
SECOND QUARTER 2021 RESULTS
BEN VAN BEURDEN, CHIEF EXECUTIVE OFFICER OF ROYAL DUTCH SHELL PLC
Welcome to our second quarter 2021 results presentation. Today, Jessica and I will talk
about how we are delivering on our Powering Progress strategy, we will share an update on
our financial framework and then we will provide insights into our strong Q2 performance.
The past year has proven to be challenging. In this environment, our operations, our supply
chains and our people have shown immense resilience and we have continuously delivered
safe operations, robust business performance and unmatched cash flows. So, although
volatility in commodity prices and demand recovery might still continue for some time, we are
confident in the strength of our cash generation potential.
Therefore, we are moving to the next phase of our capital allocation framework and we are
stepping up distributions to our shareholders. We are rebasing our dividend and launching
share buybacks this quarter, which Jessica will cover in more detail in a moment.
In our Powering Progress strategy, we are moving at pace to a net-zero emissions company
purposefully and profitably. We are providing energy that the world needs today, while also
building the energy business of the future. That is what Powering Progress is about.
So today, I will share the progress we are making in three areas: hydrogen, refining and
carbon capture and storage technology - or CCS.
In hydrogen, we are building on our leading position. By 2035, we aim to achieve a doubledigit
share of sales of clean hydrogen, which is a market poised for growth.
We are currently offering our customers the opportunity to fuel with hydrogen across 50 sites
for light-duty vehicles globally. And recently, we opened the first hydrogen station for trucks
in the United States, and in the Netherlands, buses can refuel within 10 minutes. With a full
tank of 25 kilos of hydrogen, buses can travel over 400 kilometres.
These are the first steps in building an extensive hydrogen network. In Europe, we are
partnering with Daimler to roll out a hydrogen-refuelling network of 1200 kilometres which
will join three green hydrogen production hubs. We have also started up Europe's largest
PEM electrolyser in Germany for the production of green hydrogen with 10 megawatts
capacity and plans are under way to expand it to 100 megawatts.
In refining, our strategy is to concentrate our portfolio into 5 Energy & Chemicals parks by the
end of the decade, and that's from 8 refineries as of today. Our updated target reflects the
sale of the Deer Park refinery. And, even in a challenging environment for refining, we have
been making great progress in rationalising our portfolio and divesting refineries for value.
And, by divesting, closing or converting our refineries, we are reducing Shell's Scope 1 and 2
emissions from refining by around 50% since 2018.
With CCS, as part of our strategy to reduce our own carbon emissions and those of our
customers, we aim to capture and store an additional 25 million tonnes of CO2 a year by
2035.
And we have recently made announcements on two important CCS projects – Polaris at our
Scotford facility in Canada, and the Acorn project in the UK. These will help us deliver lowcarbon
energy solutions to our customers and they make important contributions to our 2035
CCS ambition.
This is tremendous progress across our business pillars in delivering our strategy and while we
transform and build the business of the future, our financial delivery remains strong.
Jessica, over to you.
JESSICA UHL, CHIEF FINANCIAL OFFICER OF ROYAL DUTCH SHELL PLC
Thank you, Ben.
With strong results in the previous quarters and outstanding cash generation from our
businesses, we have reduced net debt by $12 billion since Q2 last year. This resilient
performance gives us the confidence to move to the next phase of our capital allocation
framework.
We committed to increase shareholder distributions once we reduced net debt. And today
we are delivering on that commitment. Starting from Q2 2021, we are rebasing our dividend
to 24 US cents per share, an increase of 38% from Q1 2021. This rebased dividend is now at
a more meaningful level, and more in line with our cash generation track record. In addition,
we will buy back up to $2 billion of our shares in the second half of 2021. As a result, we
expect the full year 2021 shareholder distributions to be around the middle of the 20 to 30%
range of our cash flow from operations. And, from 2022, we plan to announce distributions
on a quarterly basis.
As we move into the next phase of our capital allocation, let me emphasise that our cash
priorities remain unchanged.
The first priority is disciplined base Cash capex and paying ordinary progressive dividends to
our shareholders. Base Cash capex is the minimum spend that allows us to sustain our
strategy… balancing between maintaining our assets, sustaining cash flows and investing for
growth. We expect base Cash capex to be between $19 and 22 billion per year. And we
will also grow our dividend per share by about 4% a year, subject to Board approval, in line
with our progressive dividend policy.
The second priority is ensuring we have a strong balance sheet. For that, we will target AA
credit metrics through the cycle.
That brings me to the third priority of our financial framework: additional shareholder
distributions. These incremental distributions may be in the form of share buybacks and/or
dividends. Every quarter, the Board will decide the amount of distributions above the ordinary
dividend level, looking to optimise capital allocation between shareholder returns, balance
sheet strength and accretive growth. The total distribution amount will then be tested to
ensure it falls within the 20 to 30% range of the previous four-quarter rolling CFFO, rather
than being determined by a target percentage within this range.
And finally, our fourth priority any cash surplus will be allocated in a balanced way between
additional Cash capex and continued strengthening of the balance sheet. We will allocate
the additional Cash capex in a measured and disciplined manner, and we expect to spend
more than half of it on our Growth pillar.
This brings me to our performance in Q2 2021. Once again, we delivered strong financial
results for the quarter. Our Adjusted Earnings increased to $5.5 billion, from $3.2 billion in
Q1. Our Adjusted EBITDA, was $13.5 billion on a current cost of supplies basis. And we
delivered $14.2 billion of cash flow from operations excluding working capital movements...
one of the highest levels of cash generation on record. This shows we are well positioned to
benefit from the global economic recovery. Our performance was particularly strong in
Marketing, boosted by outstanding performance in Retail. Good margin management and
growing convenience retail resulted in one of the best quarterly results for Retail in the last
decade. And our cash conversion was once again robust, across all businesses, which shows
the quality of our portfolio.
To demonstrate our strategy in action, I will highlight an important achievement from our
Upstream joint venture BGC, in Basrah, Iraq. BGC will bring energy to around a million more
homes than today, by capturing, processing and selling gas that companies in the region
would otherwise flare. And, to support this development, the IFC of the World Bank, together
with 8 international banks, is providing essential funding, a first of its kind in the Iraqi oil and
gas sector, helping the country to access international capital markets. This funding will
increase BGC’s ability to reduce greenhouse gas emissions by around 10 million tons per
annum, while materially improving local air quality. This is a great example of how our
businesses contribute to our goals of Powering Lives, by providing energy and Respecting
Nature, by reducing emissions.
And with that, let's return to Ben.
BEN VAN BEURDEN, CHIEF EXECUTIVE OFFICER OF ROYAL DUTCH SHELL PLC
Thank you, Jessica.
Today, I hope we have shown you how Shell is changing, progressing on the goals of our
strategy and delivering value. Value today. Value tomorrow and value for decades to come.
To shareholders and to wider society. Helping society heading towards net-zero emissions.
That is our strategy. That is Powering Progress.
Thank you.
Royal Dutch Shell plc
July 29, 2021
www.shell.com/investors
DEFINITIONS AND CAUTIONARY NOTE
Adjusted Earnings is the income attributable to RDS plc shareholders for the period, adjusted for the after-tax effect of oil price changes on
inventory and for identified items. In this presentation, “earnings” refers to “Adjusted Earnings” unless stated otherwise. Adjusted EBITDA
(FIFO basis) is the income/(loss) attributable to Royal Dutch Shell plc shareholders adjusted for identified items; tax charge/(credit);
depreciation, amortisation and depletion; exploration well write-offs and net interest expense. Adjusted EBITDA on a CCS basis is used to
remove the impact of price changes on our inventories in our Oil Products and Chemicals segments, therefore enabling comparisons over
time. In this presentation, “operating expenses”, “costs” and “underlying costs” refer to “Underlying operating expenses” unless stated
otherwise. Underlying operating expenses represent “operating expenses excluding identified items”. Operating expenses consist of the
following lines in the Consolidated Statement of Income: (i) production and manufacturing expenses; (ii) selling, distribution and
administrative expenses; and (iii) research and development expenses. Cash flow from operating activities excluding working capital
movements is defined as “Cash flow from operating activities” less the sum of the following items in the Consolidated Statement of Cash
Flows: (i) (increase)/decrease in inventories, (ii) (increase)/decrease in current receivables, and (iii) increase/(decrease) in current payables.
In this presentation, “capex” refers to “Cash capital expenditure” unless stated otherwise. Cash capital expenditure comprises the following
lines from the Consolidated Statement of Cash Flows: Capital expenditure, Investments in joint ventures and associates and Investments in
equity securities. Free cash flow is defined as the sum of “Cash flow from operating activities” and “Cash flow from investing activities”.
Organic free cash flow is defined as free cash flow excluding inorganic cash capital expenditure, divestment proceeds and tax paid on
divestments. In this presentation, “divestments” refers to “divestment proceeds” unless stated otherwise. Divestment proceeds are defined as
the sum of (i) proceeds from sale of property, plant and equipment and businesses, (ii) proceeds from sale of joint ventures and associates,
and (iii) proceeds from sale of equity securities. Net debt is defined as the sum of current and non-current debt, less cash and cash
equivalents, adjusted for the fair value of derivative financial instruments used to hedge foreign exchange and interest rate risks relating to
debt, and associated collateral balances. Reconciliations of the above non-GAAP measures are included in the Royal Dutch Shell plc
Unaudited Condensed Financial Report for the second quarter and half year ended June 30, 2021.
This presentation contains the following forward-looking non-GAAP measures: Cash capital expenditure and Underlying operating
expenses. We are unable to provide a reconciliation of the above forward-looking non-GAAP measures to the most comparable GAAP
financial measures because certain information needed to reconcile the above non-GAAP measures to the most comparable GAAP financial
measures is dependent on future events some of which are outside the control of the company, such as oil and gas prices, interest rates and
exchange rates. Moreover, estimating such GAAP measures with the required precision necessary to provide a meaningful reconciliation is
extremely difficult and could not be accomplished without unreasonable effort. Non-GAAP measures in respect of future periods which
cannot be reconciled to the most comparable GAAP financial measures are estimated in a manner which is consistent with the accounting
policies applied in Royal Dutch Shell plc’s consolidated financial statements.
The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate legal entities. In this presentation
“Shell”, “Shell Group” and “Group” 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 Royal Dutch Shell plc and its subsidiaries in
general or to those who work for them. These terms are also used where no useful purpose is served by identifying the particular entity or
entities. “Subsidiaries”, “Shell subsidiaries” and “Shell companies” as used in this presentation refer to entities over which Royal Dutch Shell
plc either directly or indirectly has control. Entities and unincorporated arrangements over which Shell has joint control are generally
referred to as “joint ventures” and “joint operations”, respectively. Entities over which Shell has significant influence but neither control nor
joint control are referred to as “associates”. The term “Shell interest” is used for convenience to indicate the direct and/or indirect ownership
interest held by Shell in an entity or unincorporated joint arrangement, after exclusion of all third-party interest.
This presentation contains forward-looking statements (within the meaning of the U.S. Private Securities Litigation Reform Act of 1995)
concerning the financial condition, results of operations and businesses of 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 “aim”, “ambition”, “anticipate”, “believe”, “could”, “estimate”, “expect”, “goals”, “intend”, “may”,
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and phrases. There are a number of factors that could affect the future operations of Shell and could cause those results to differ materially
from those expressed in the forward-looking statements included in this presentation, 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; (m) risks associated with the impact of
pandemics, such as the COVID-19 (coronavirus) outbreak; and (n) changes in trading conditions. No assurance is provided that future
dividend payments will match or exceed previous dividend payments. All forward-looking statements contained in this presentation 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 Shell’s plc’s Form 20-F for the
year ended December 31, 2020 (available at www.shell.com/investors and www.sec.gov). These risk factors also expressly qualify all
forward-looking statements contained in this presentation and should be considered by the reader. Each forward-looking statement speaks
only as of the date of this presentation, July 29, 2021. 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 presentation.
The content of websites referred to in this announcement do not form part of this announcement. We may have used certain terms, such as
resources, in this presentation that the United States Securities and Exchange Commission (SEC) strictly prohibits us from including in our
filings with the SEC. 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.