Royal Dutch Shell plc 4th Quarter 2018 and Full Year Unaudited Results
THE HAGUE, Netherlands, Jan. 31, 2019 /PRNewswire/ --
SUMMARY OF UNAUDITED RESULTS
Quarters
$ million
Full year
--- ---
Q4 2018 Q3 2018 Q4 2017 % Definition 2018 2017
(1)
%
---
5,590 5,839 3,807 +47 Income/(loss) attributable to shareholders 23,352 12,977 +80
7,334 5,570 3,082 +138 CCS earnings attributable to shareholders
Note 2 23,833 12,081 +97
1,646 (54) (1,221)
Of which: Identified items
A 2,429 (3,683)
---
5,688 5,624 4,303 +32 CCS earnings attributable to shareholders
excluding identified items 21,404 15,764 +36
120 169 94 Add: CCS earnings attributable to non-
controlling interest 531 418
---
5,808 5,793 4,397 +32 CCS earnings excluding identified items 21,935 16,182 +36
Of which:
2,363 2,292 1,636
Integrated Gas 9,399 5,268
1,881 1,886 1,650
Upstream 6,775 3,091
2,131 2,010 1,396
Downstream 7,567 9,082
(567) (395) (285)
Corporate (1,806) (1,259)
---
22,021 12,092 7,275 +203
Cash flow from operating activities 53,085 35,650 +49
(5,312) (4,082) (665)
Cash flow from investing activities (13,659) (8,029)
16,709 8,010 6,610
Free cash flow
H 39,426 27,621
---
0.68 0.70 0.46 +48
Basic earnings per share ($) 2.82 1.58 +78
0.89 0.67 0.37 +141
Basic CCS earnings per share ($)
B 2.88 1.47 +96
0.69 0.68 0.52 +33 Basic CCS earnings per share excl. identified
items ($) 2.58 1.92 +34
---
0.47 0.47 0.47
Dividend per share ($) 1.88 1.88
---
1. Q4 on Q4 change.
Compared with the fourth quarter 2017, CCS earnings attributable to shareholders excluding identified items of $5.7 billion mainly benefited from higher realised oil, gas and LNG prices as well as stronger contributions from crude oil and LNG trading, partly offset by movements in deferred tax positions. Full year earnings of $21.4 billion also reflected higher realised oil, gas and LNG prices, partly offset by movements in deferred tax positions.
Cash flow from operating activities for the fourth quarter 2018 was $22.0 billion, which included positive working capital movements of $9.1 billion, mainly as a result of a fall in crude oil price and lower inventory levels. Excluding working capital movements, cash flow from operations of $12.9 billion mainly reflected increased earnings, compared with the fourth quarter 2017.
Total dividends distributed to shareholders in the quarter were $3.9 billion. In January 2019, the second tranche of the share buyback programme was completed, with 83.5 million A ordinary shares bought back for cancellation for an aggregate consideration of $2.5 billion. Today, Shell launches the next tranche of the share buyback programme, with a maximum aggregate consideration of $2.5 billion in the period up to and including April 29, 2019.
Royal Dutch Shell Chief Executive Officer Ben van Beurden commented:
"Shell delivered a very strong financial performance in 2018, with cash flow from operations of $49.6 billion, excluding working capital movements. We delivered on our promises for the year, including the completion of the $30 billion divestment programme and starting up key growth projects while maintaining discipline on capital investment. We paid our entire dividend in cash, further reduced our debt and launched our share buyback programme, with $4.5 billion in shares repurchased so far.
We will continue with a strong delivery focus in 2019, with a disciplined approach to capital investment and growing both our cash flow and returns. Our strategy to deliver a world-class investment case is working."
ADDITIONAL PERFORMANCE MEASURES
Quarters
$ million
Full year
--- ---
Q4 2018 Q3 2018 Q4 2017 % Definition 2018 2017
(1) %
---
7,995 5,830 6,778 Capital
investment C 24,779 24,006
2,699 613 6,474 Divestments D 7,102 17,340
---
Total
production
available
for sale
(thousand
3,788 3,596 3,756 +1 boe/d) 3,666 3,664
---
Global
liquids
realised
price ($/b)
59.89 68.21 55.28 +8 2 63.85 49.00 +30
Global
natural gas
realised
price
($/thousand
5.75 4.92 4.44 +30 scf) 2 5.13 4.33 +18
---
10,279 9,312 9,776 +5 Operating
expenses G 39,316 38,083 +3
10,147 9,248 9,839 +3 Underlying
operating
expenses G 39,025 37,556 +4
---
9.4% 8.7% 5.8% ROACE E 9.4% 5.8%
ROACE (CCS
basis
excluding
identified
7.6% 7.1% 5.6% items) E 7.6% 5.6%
---
20.3% 23.1% 25.0% Gearing(3) F 20.3% 25.0%
1. Q4 on Q4 change.
2. Following a reassessment, third quarter 2018 (liquids realised price) and the four quarters of 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 December 31, 2017 was 24.8%.
Supplementary financial and operational disclosure for this quarter is available at www.shell.com/investor.
FOURTH QUARTER 2018 PORTFOLIO DEVELOPMENTS
Integrated Gas
In December, Shell announced that wells had been opened at its Prelude floating LNG facility in Australia (Shell interest 67.5%). During this initial phase of production, gas and condensate are produced and moved through the facility. Once this has concluded, the facility will be prepared for reliable production of LNG and LPG.
During the quarter, Shell completed the sale of its shares in Shell entities in New Zealand.
Upstream
During the quarter, Shell completed the sale of its Upstream interests in Ireland, as well as the disposal of its interests in the Draugen and Gjøa fields in Norway.
In December, Shell and its partners renewed a number of onshore oil mining leases in the Niger Delta for 20 years (Shell interest 30%).
Downstream
In January, Shell announced the start of production of the fourth alpha olefins unit at the Geismar chemicals manufacturing site in the USA (Shell interest 100%). Start-up operations began in December 2018. Shell's Geismar plant is the largest producer of alpha olefins in the world.
PERFORMANCE BY SEGMENT
INTEGRATED GAS
Quarters
$ million Full year
--- ---
Q4 Q3 2018 Q4 2017 %(1) 2018 2017
2018
%
---
3,579 2,116 848 +322
Segment earnings 11,444 5,078 +125
1,216 (176) (788) Of which: Identified items
(Definition A) 2,045 (190)
2,363 2,292 1,636 +44 Earnings excluding identified
items 9,399 5,268 +78
---
5,786 3,320 823 +603 Cash flow from operating
activities 14,617 6,467 +126
---
1,483 862 1,043 +42 Capital investment (Definition
C) 4,460 3,827 +17
---
213 208 229 -7 Liquids production available
for sale (thousand b/d) 214 203 +5
4,442 4,156 4,364 +2 Natural gas production
available for sale (million
scf/d) 4,311 3,969 +9
---
979 924 981 Total production available for
sale (thousand boe/d) 957 887 +8
8.78 8.18 8.52 +3 LNG liquefaction volumes
(million tonnes) 34.32 33.24 +3
---
17.39 17.27 17.15 +1 LNG sales volumes (million
tonnes) 71.21 66.04 +8
---
1. Q4 on Q4 change.
Fourth quarter identified items primarily reflected a gain of $1,034 million on sale of assets, mainly related to the divestment of assets in New Zealand as well as revaluation of assets in India. Identified items also included a gain of $321 million related to the fair value accounting of commodity derivatives and impairment charges totalling $190 million, mainly related to investments in Trinidad and Tobago.
Compared with the fourth quarter 2017, Integrated Gas earnings excluding identified items benefited from higher realised oil, gas and LNG prices, as well as higher contributions from LNG trading. These were partly offset by movements in deferred tax positions.
Total production remained largely unchanged compared with the fourth quarter 2017, while LNG liquefaction was 3% higher, mainly due to lower maintenance and increased feedgas availability, partly offset by divestments.
Cash flow from operating activities of $5,786 million included negative working capital movements of $811 million, compared with negative movements of $1,895 million[i] in the same quarter a year ago. Cash flow from operating activities excluding working capital movements increased compared with the same quarter a year ago, mainly as a result of higher earnings and cash margining receipts on derivatives.
Full year identified items primarily reflected a gain of $1,937 million on sale of assets, mainly related to the divestment of assets in Thailand, New Zealand and India. Identified items also comprised a gain of $481 million related to the fair value accounting of commodity derivatives and impairment charges of $371 million, mainly related to investments in Trinidad and Tobago and Shell's investment in a joint venture.
Compared with the full year 2017, Integrated Gas earnings excluding identified items benefited from higher realised oil, gas and LNG prices, increased contributions from LNG trading and higher volumes, partly offset by increased operating expenses.
Production volumes were up by 8% compared to the full year 2017, mainly reflecting lower maintenance activity and additional wells from existing fields. LNG liquefaction volumes were 3% higher, largely driven by increased feedgas availability and lower maintenance activities. This more than offset the impact of divestments.
Cash flow from operating activities of $14,617 million included negative working capital movements of $1,664 million, compared with negative movements of $2,192 million[ii] in 2017. Cash flow from operating activities excluding working capital movements increased compared with the full year 2017, mainly as a result of higher earnings and cash margining receipts on derivatives.
UPSTREAM
Quarters
$ million Full year
---
Q4 Q3 2018 Q4 2017 %(1) 2018 2017
2018
%
--- ---
1,601 2,249 2,050 -22
Segment earnings 6,798 1,551 +338
(280) 363 400 Of which: Identified items
(Definition A) 23 (1,540)
1,881 1,886 1,650 +14 Earnings excluding identified
items 6,775 3,091 +119
---
6,869 6,663 3,765 +82 Cash flow from operating
activities 22,661 16,337 +39
---
3,988 3,037 3,485 +14 Capital investment (Definition
C) 12,525 13,648 -8
---
1,672 1,602 1,542 +8 Liquids production available
for sale (thousand b/d) 1,589 1,622 -2
6,593 6,206 7,154 -8 Natural gas production
available for sale (million
scf/d) 6,494 6,699 -3
---
2,809 2,672 2,775 +1 Total production available for
sale (thousand boe/d) 2,709 2,777 -2
1. Q4 on Q4 change.
Fourth quarter identified items primarily reflected a loss of $420 million on sale of assets, mainly related to a negative non-cash cumulative currency translation difference in connection with the divestment in Ireland, partly offset by a gain of $176 million related to the fair value accounting of commodity derivatives.
Compared with the fourth quarter 2017, Upstream earnings excluding identified items reflected higher realised oil and gas prices as well as lower well write-offs, partly offset by less favourable movements in deferred tax positions. Total production increased by 1% compared with the same quarter a year ago, mainly driven by new field start-ups and ramp-ups, partly offset by divestments. Excluding portfolio impacts, production was 5% higher.
Cash flow from operating activities of $6,869 million included positive working capital movements of $1,720 million, compared with positive movements of $412 million[iii] in the same quarter a year ago. Cash flow from operating activities excluding working capital movements increased compared with the fourth quarter 2017 as a result of higher earnings and cash margining receipts on derivatives related to the divestment in Denmark, partly offset by higher tax payments.
Full year identified items included a net gain of $886 million on sale of assets, mainly related to the divestments in Iraq, Malaysia, Oman and Ireland, as well as a gain of $149 million related to the fair value accounting of commodity derivatives. Identified items also included a $561 million charge related to the impact of the weakening Brazilian real on a deferred tax position and a net impairment charge of $350 million, mainly related to assets in North America and deep-water rig joint ventures.
Compared with the full year 2017, Upstream earnings excluding identified items benefited from higher realised oil and gas prices and lower well write-offs, partly offset by movements in deferred tax positions and lower volumes. Total production was 2% lower compared with the full year 2017, mainly due to divestments and field decline, partly offset by new field start-ups and ramp-ups as well as improved field performance. Excluding portfolio impacts, production was 5% higher than in 2017.
Cash flow from operating activities of $22,661 million included positive working capital movements of $745 million, compared with negative movements of $2 million[iv] in 2017. Cash flow from operating activities excluding working capital movements increased compared with 2017, mainly as a result of higher earnings, partly offset by higher tax payments.
DOWNSTREAM
Quarters
$ million Full year
---
Q4 2018 Q3 2018 Q4 2017 %(1) 2018 2017
%
--- ---
2,918 1,709 1,116 +161
Segment earnings2 7,601 8,258 -8
787 (301) (280) Of which: Identified items (Definition A) 34 (824)
2,131 2,010 1,396 +53 Earnings excluding identified items(2) 7,567 9,082 -17
Of which:
1,835 1,473 884 +108
Oil Products 5,491 6,460 -15
834 424 96 +769
Refining & Trading 1,513 2,462 -39
1,001 1,049 788 +27
Marketing 3,978 3,998 -1
296 537 512 -42
Chemicals 2,076 2,622 -21
---
8,794 1,037 2,649 +232
Cash flow from operating activities 13,928 12,429 +12
2,427 1,860 2,208 +10
Capital investment (Definition C) 7,564 6,416 +18
2,723 2,675 2,589 +5 Refinery processing intake (thousand b/d) 2,648 2,572 +3
6,906 6,697 6,861 +1 Oil Products sales volumes (thousand b/d) 6,783 6,599 +3
4,110 4,145 4,688 -12 Chemicals sales volumes (thousand tonnes) 17,644 18,239 -3
1. Q4 on Q4 change.
2. Earnings are presented on a CCS basis (See Note 2).
Fourth quarter identified items primarily reflected a gain of $670 million related to the fair value accounting of commodity derivatives and a gain of $297 million on sale of assets, mainly related to the divestment in Argentina. This was partly offset by impairment charges of $160 million, mainly related to assets in Singapore and the UK.
Compared with the fourth quarter 2017, Downstream earnings excluding identified items benefited from increased contributions from crude oil trading and stronger refining and marketing margins, partly offset by higher operating expenses and lower base chemicals and intermediates margins.
Cash flow from operating activities of $8,794 million included positive working capital movements of $7,570 million, compared with negative movements of $334 million[v] in the same quarter a year ago, mainly as a result of a fall in crude oil price and lower inventory levels. Cash flow from operating activities excluding working capital movements decreased compared with the same quarter a year ago as higher cash cost of sales more than offset the increase in CCS earnings.
Oil Products
-- Refining & Trading earnings excluding identified items reflected
increased contributions from crude oil trading and improved operational
performance. Earnings also benefited from stronger refining margins
mainly in Canada, despite lower refining margins in other parts of the
portfolio, compared with the fourth quarter 2017. This was partly offset
by higher operating expenses.
Refinery availability increased to 94% compared with 89% in the fourth quarter 2017, mainly due to lower downtime.
-- Marketing earnings excluding identified items were higher compared with
the fourth quarter 2017, mainly as a result of increased margins.
Compared with the fourth quarter 2017, Oil Products sales volumes increased by 1%, reflecting increased refining and trading volumes.
Chemicals
-- Chemicals earnings excluding identified items reflected lower base
chemicals and intermediates margins, mainly in Asia, compared with the
fourth quarter 2017.
Chemicals manufacturing plant availability was 93%, remaining at a similar level as in the fourth quarter 2017.
Full year identified items included a gain of $233 million related to the fair value accounting of commodity derivatives and a gain of $225 million on sale of assets, mainly related to the divestment in Argentina. This was partly offset by impairment charges totalling $386 million, mainly related to assets in Singapore and the UK.
Compared with the full year 2017, Downstream earnings excluding identified items reflected higher operating expenses, adverse currency exchange rate effects and lower base chemicals and refining margins, partly offset by improved marketing margins.
Cash flow from operating activities of $13,928 million included positive working capital movements of $3,164 million, compared with negative movements of $148 million([vi]) in the full year 2017. Excluding working capital movements, cash flow from operating activities reflected lower earnings and higher cash cost of sales.
Oil Products
-- Refining & Trading earnings excluding identified items reflected higher
operating expenses, adverse currency exchange rate effects and lower
contributions from oil products trading, partly offset by higher
contributions from crude oil trading, compared with the full year 2017.
Refinery availability was 91%, remaining at a similar level as in the full year 2017.
-- Marketing earnings excluding identified items were at a similar level as
in the full year 2017, since the impacts of higher operating expenses
and adverse currency exchange rate effects were almost fully offset by
improved margins.
Compared with the full year 2017, Oil Products sales volumes increased by 3% as a result of higher refining and trading volumes.
Chemicals
-- Chemicals earnings excluding identified items reflected lower base
chemicals margins and higher operating expenses, partly offset by higher
intermediates margins, compared with the full year 2017.
Chemicals manufacturing plant availability increased to 93% compared with 92% in 2017.
CORPORATE
Quarters
$ million Full year
--- ---
Q4 2018 Q3 2018 Q4 2017 2018 2017
--- ---
(644) (335) (838)
Segment earnings (1,479) (2,416)
(77) 60 (553) Of which: Identified items
(Definition A) 327 (1,157)
(567) (395) (285) Earnings excluding identified items (1,806) (1,259)
---
572 1,072 38 Cash flow from operating activities 1,879 417
---
Fourth quarter identified items primarily reflected a tax charge of $74 million related to the impact of the strengthening Brazilian real on financing positions.
Compared with the fourth quarter 2017, Corporate earnings excluding identified items mainly reflected lower tax credits.
Full year identified items primarily reflected a tax credit of $325 million related to the impact of the weakening Brazilian real on financing positions.
Compared with the full year 2017, Corporate earnings excluding identified items mainly reflected lower tax credits and adverse currency exchange effects, partly offset by higher net interest income.
PRELIMINARY RESERVES UPDATE
When final volumes are reported in the 2018 Annual Report and Form 20-F, Shell expects that SEC proved oil and gas reserves additions before taking into account production will be around 0.7 billion boe, and 2018 production to be 1.4 billion boe. As a result, total proved reserves on an SEC basis are expected to be 11.6 billion boe. Acquisitions and divestments of 2018 reserves are expected to account for a net reduction of 0.2 billion boe.
The proved Reserves Replacement Ratio on an SEC basis is expected to be 53% for the year and 96% for the 3-year average. Excluding the impact of acquisitions and divestments, the reserves replacement ratio is expected to be 66% for the year.
Further information will be provided in the 2018 Annual Report and Form 20-F, which is expected to be filed in March 2019.
OUTLOOK FOR THE FIRST QUARTER 2019
Compared with the first quarter 2018, Integrated Gas production is expected to decrease by some 140 - 170 thousand boe/d, mainly due to divestments, the transfer of some activities into the Upstream segment as of 2019 and higher maintenance activities. LNG liquefaction volumes are expected to be 0.4 - 0.7 million tonnes lower, mainly as a result of divestments and higher maintenance activities.
Compared with the first quarter 2018, Upstream production is expected to be 10 - 50 thousand boe/d lower, mainly due to divestments and field decline, partly offset by ramp-ups of existing fields. This includes the impact of additional activities previously reported in the Integrated Gas segment in 2018.
Refinery availability is expected to decrease in the first quarter 2019 compared with the same period a year earlier as a result of higher maintenance activity.
Oil Products sales volumes are expected to be 40 - 70 thousand boe/d lower compared with the same period a year earlier, mainly as a result of the divestment in Argentina.
Chemicals manufacturing plant availability in the first quarter 2019 is expected to be at a similar level as in the first quarter 2018.
Corporate earnings excluding identified items are expected to be a net charge of $400 - 450 million in the first quarter 2019 and a net charge of $1,700 - 1,900 million for the full year 2019. This excludes the impact of currency exchange rate effects and the impact of IFRS 16 Leases.
The results and outlook reported in this announcement do not include the impact of the application of the new standard IFRS 16, which is effective as of January 1, 2019. The quantitative impact at transition date will be disclosed in the 2018 Annual Report and Form 20-F.
FORTHCOMING EVENTS
The LNG Outlook will be held on February 25, 2019 in London.
Shell will host a webcast covering the impact of IFRS 16 Leases on March 28, 2019.
The Annual General Meeting is scheduled to be held on May 21, 2019.
Shell will host Management Day events on June 4, 2019 in London, and on June 5, 2019 in New York.
First quarter 2019 results and dividends are scheduled to be announced on May 2, 2019. Second quarter 2019 results and dividends are scheduled to be announced on August 1, 2019. Third quarter 2019 results and dividends are scheduled to be announced on October 31, 2019.
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME
Quarters
$ million Full year
Q4 2018 Q3 2018 Q4 2017 2018 2017
102,228 100,151 85,422
Revenue(1) 388,379 305,179
1,351 1,000 1,034 Share of profit of joint ventures and
associates 4,106 4,225
1,047 397 1,668
Interest and other income 4,071 2,466
104,626 101,548 88,124 Total revenue and other income 396,556 311,870
78,680 76,070 64,095
Purchases 294,399 223,447
6,803 6,256 6,563 Production and manufacturing expenses 26,970 26,652
3,162 2,829 2,953 Selling, distribution and
administrative expenses 11,360 10,509
314 227 260
Research and development 986 922
545 322 921
Exploration 1,340 1,945
6,244 5,198 5,796 Depreciation, depletion and
amortisation 22,135 26,223
971 909 984
Interest expense 3,745 4,042
96,719 91,811 81,572
Total expenditure 360,935 293,740
7,907 9,737 6,552 Income/(loss) before taxation 35,621 18,130
2,261 3,696 2,615
Taxation charge/(credit) 11,715 4,695
5,646 6,041 3,937 Income/(loss) for the period(1) 23,906 13,435
56 202 130 Income/(loss) attributable to non-
controlling interest 554 458
5,590 5,839 3,807 Income/(loss) attributable to Royal
Dutch Shell plc shareholders 23,352 12,977
0.68 0.70 0.46 Basic earnings per share ($)(2) 2.82 1.58
0.67 0.70 0.46 Diluted earnings per share ($)(2) 2.80 1.56
1. See Note 2 "Segment information".
2. See Note 3 "Earnings per share".
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Quarters
$ million Full year
Q4 2018 Q3 2018 Q4 2017 2018 2017
5,646 6,041 3,937 Income/(loss) for
the period 23,906 13,435
Other comprehensive
income/(loss) net
of tax:
Items that may be
reclassified to
income in later
periods:
(354) (500) 355 - Currency
translation
differences (3,172) 5,156
258 - Unrealised gains/
(losses) on
securities(1) 593
(1) - Debt instruments
remeasurements(1) (15)
1,499 (69) (484) - Cash flow hedging
gains/(losses) 730 (552)
(61) 43 - Deferred cost of
hedging(1) (209)
- Share of other
comprehensive
income/(loss) of
joint ventures and
17 8 46 associates (10) 170
1,101 (519) 175
Total (2,676) 5,367
Items that are not
reclassified to
income in later
periods:
426 615 (2,056) - Retirement
benefits
remeasurements 3,588 604
50 84 - Equity
instruments
remeasurements(1) (153)
- Share of other
comprehensive
income/(loss) of
joint ventures and
194 (2) associates 193
670 697 (2,056)
Total 3,628 604
1,771 178 (1,881) Other comprehensive
income/(loss) for
the period 952 5,971
7,417 6,219 2,056 Comprehensive
income/(loss) for
the period 24,858 19,406
Comprehensive
income/(loss)
attributable to
non-controlling
34 173 133 interest 383 578
Comprehensive
income/(loss)
attributable to
Royal Dutch Shell
7,383 6,046 1,923 plc shareholders 24,475 18,828
1. See Note 1 "Basis of preparation" regarding IFRS 9 Financial Instruments.
CONDENSED CONSOLIDATED BALANCE SHEET
$ million
---
December 31,
2018 December 31, 2017
Assets
Non-current assets
Intangible assets 23,586 24,180
Property, plant and equipment 223,175 226,380
Joint ventures and associates 25,329 27,927
Investments in securities 3,074 7,222
Deferred tax 12,097 13,791
Retirement benefits 6,051 2,799
Trade and other receivables 7,826 8,475
Derivative financial instruments(1) 574 919
301,712 311,693
Current assets
Inventories 21,117 25,223
Trade and other receivables 42,431 44,565
Derivative financial instruments(1) 7,193 5,304
Cash and cash equivalents 26,741 20,312
---
97,482 95,404
Total assets 399,194 407,097
---
Liabilities
Non-current liabilities
Debt 66,690 73,870
Trade and other payables 2,735 3,447
Derivative financial instruments(1) 1,399 981
Deferred tax 14,837 13,007
Retirement benefits 11,653 13,247
Decommissioning and other provisions 21,533 24,966
---
118,847 129,518
Current liabilities
Debt 10,134 11,795
Trade and other payables 48,888 51,410
Derivative financial instruments(1) 7,184 5,253
Taxes payable 7,497 7,250
Retirement benefits 451 594
Decommissioning and other provisions 3,659 3,465
---
77,813 79,767
Total liabilities 196,660 209,285
---
Equity attributable to Royal Dutch Shell plc shareholders 198,646 194,356
Non-controlling interest 3,888 3,456
---
Total equity 202,534 197,812
---
Total liabilities and equity 399,194 407,097
---
1. See Note 6 "Derivative financial instruments and debt excluding finance lease liabilities".
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Equity attributable to Royal Dutch Shell plc
shareholders
$ million Share capital(1) Shares Other reserves(2) Retained earnings Total
Non- Total
held in controlling
trust interest equity
---
At January 1, 2018 (as
previously published) 696 (917) 16,932 177,645 194,356 3,456 197,812
Impact of IFRS 9(3) - (138) 88 (50) (50)
At January 1, 2018 (as
revised) 696 (917) 16,794 177,733 194,306 3,456 197,762
Comprehensive income/
(loss) - 1,123 23,352 24,475 383 24,858
for the period
Transfer from other
comprehensive income4 - (971) 971
Dividends - (15,675) (15,675) (586) (16,261)
Repurchases of shares5 (11) 11 (4,519) (4,519) (4,519)
Share-based
compensation6, 7 - (343) (342) 693 8 8
Other changes in - 51 51 635 686
non-controlling interest
---
At December 31, 2018 685 (1,260) 16,615 182,606 198,646 3,888 202,534
---
At January 1, 2017 683 (901) 11,298 175,566 186,646 1,865 188,511
Comprehensive income/
(loss) - 5,851 12,977 18,828 578 19,406
for the period
Dividends - (15,628) (15,628) (406) (16,034)
Scrip dividends 13 (13) 4,751 4,751 4,751
Share-based
compensation - (16) (204) (74) (294) (294)
Other changes in - 53 53 1,419 1,472
non-controlling interest
---
At December 31, 2017 696 (917) 16,932 177,645 194,356 3,456 197,812
---
1. See Note 4 "Share capital".
2. See Note 5 "Other reserves".
3. See Note 1 "Basis of preparation".
4. In accordance with IFRS 9 Financial Instruments, the transfer mainly relates to the sale of Shell's shareholding in Malaysia LNG Tiga Sdn Bhd ($617 million) and the sale of shares in Canadian Natural
Resources Limited ($481 million).
5. The repurchase of shares recognised through retained earnings in the quarter represents the aggregate maximum consideration Shell is contractually bound to under the current tranche of the buyback
programme, plus associated stamp duty.
6. The amendments to IFRS 2 Share-based Payment became effective January 1, 2018. Following adoption of the amendments, components of share-based payments that were previously classified as cash-settled
are now classified as equity-settled. This resulted in an increase of $172 million in the share plan reserve within other reserves and a net increase of $125 million in retained earnings.
7. Includes a reclassification of $503 million between Other reserves and Retained earnings, which relates to the unwinding of expired share options.
CONSOLIDATED STATEMENT OF CASH FLOWS
Quarters
$ million Full year
---
Q4 2018 Q3 2018 Q4 2017 2018 2017
---
5,646 6,041 3,937
Income/(loss) for the period 23,906 13,435
Adjustment for:
2,804 2,694 1,467
- Current tax 10,475 6,591
717 690 817
- Interest expense (net) 2,878 3,365
6,244 5,198 5,796 -Depreciation, depletion and amortisation 22,135 26,223
145 149 541
- Exploration well write-offs(1) 449 897
(927) (163) (1,319) - Net (gains)/losses on sale and revaluation
of non-current assets and businesses (3,265) (1,640)
(1,351) (1,000) (1,034) -Share of (profit)/loss of joint ventures and
associates (4,106) (4,225)
1,535 1,374 1,647 -Dividends received from joint ventures and
associates 4,903 4,998
7,694 (1,693) (1,368)
- (Increase)/decrease in inventories 2,823 (2,079)
8,421 (2,722) (2,544) -(Increase)/decrease in current receivables(1) 1,955 (2,577)
(7,014) 1,788 2,040 -Increase/(decrease) in current payables(1) (1,336) 2,406
1,626 560 (140) -Derivative financial instruments(1) 799 (1,039)
(1,075) 711 167 -Deferred tax, retirement benefits,
decommissioning and other provisions(1) 219 (4,300)
454 299 (367)
- Other(1) 921 (98)
(2,898) (1,834) (2,365)
Tax paid (9,671) (6,307)
22,021 12,092 7,275 Cash flow from operating activities 53,085 35,650
(7,147) (5,800) (5,861)
Capital expenditure (23,011) (20,845)
(208) (78) (202) Investments in joint ventures and associates (880) (595)
1,966 231 2,866 Proceeds from sale of property, plant and
equipment and businesses 4,366 8,808
475 935 221 Proceeds from sale of joint ventures and
associates 1,594 2,177
221 236 157
Interest received 823 724
(619) 394 2,154
Other(2) 3,449 1,702
(5,312) (4,082) (665) Cash flow from investing activities (13,659) (8,029)
20 (155) 543 Net increase/(decrease) in debt with maturity
period (396) (869)
within three months
Other debt:
3,189 424 120
- New borrowings 3,977 760
(4,680) (2,260) (4,103)
- Repayments (11,912) (11,720)
(926) (864) (840)
Interest paid (3,574) (3,550)
5 (1) 6
Change in non-controlling interest 678 293
Cash dividends paid to:
(3,869) (3,949) (2,266)
- Royal Dutch Shell plc shareholders (15,675) (10,877)
(98) (134) (97)
- Non-controlling interest (584) (406)
(2,533) (1,414)
Repurchases of shares (3,947) -
(27) (2) (443) Shares held in trust: net sales/(purchases)
and dividends received (1,115) (717)
(8,919) (8,355) (7,080) Cash flow from financing activities (32,548) (27,086)
(161) (11) 83 Currency translation differences relating to
cash and (449) 647
cash equivalents
7,629 (356) (387) Increase/(decrease) in cash and cash
equivalents 6,429 1,182
19,112 19,468 20,699 Cash and cash equivalents at beginning of
period 20,312 19,130
26,741 19,112 20,312 Cash and cash equivalents at end of period 26,741 20,312
(1. )Prior period comparatives within Cash flow from operating activities have been revised to conform with current year presentation. See Note 7 "Change in presentation of Consolidated Statement of Cash Flows".
(2. )Full year 2018 includes $3,307 million from the sale of shares in Canadian Natural Resources Limited, which were received in connection with the oil sands divestment.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of preparation
These unaudited Condensed Consolidated Financial Statements of Royal Dutch Shell plc ("the Company") and its subsidiaries (collectively referred to as "Shell") have been prepared on the basis of the same accounting principles as those used in the Annual Report and Form 20-F for the year ended December 31, 2017 (pages 142 to 148) as filed with the US Securities and Exchange Commission, except for the adoption of IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers on January 1, 2018, and should be read in conjunction with that filing.
IFRS 9 sets out the requirements for recognising and measuring financial assets, financial liabilities and certain contracts to buy or sell non-financial items. Furthermore, this standard facilitates the use of hedge accounting and results in different income recognition upon the sale of certain investments in securities. The adoption of IFRS 9 resulted in a decrease of $83 million in equity at January 1, 2018, mainly representing the recognition of additional provisions for impairment of receivables under the expected loss model. In addition, changing the measurement basis from amortised cost to fair value for certain financial assets resulted in an increase of $33 million in equity at January 1, 2018. Furthermore, a reclassification within equity between other reserves and retained earnings, primarily representing deferred cost of hedging, was recognised.
IFRS 15 provides a single model of accounting for revenue arising from contracts with customers based on the identification and satisfaction of performance obligations, and revenue from contracts with customers that is distinguished from other sources. Shell has adopted IFRS 15 with effect from January 1, 2018 and has elected to apply the modified retrospective transition approach. Although IFRS 15 does not generally represent a change from Shell's current practice, the accounting for certain contracts, such as those with provisional pricing or take-or-pay arrangements, and underlifts and overlifts, has been identified as an area of change. However, these do not have a significant effect on Shell's accounting or disclosures, and therefore no transition adjustment is presented.
IFRS 16 Leases will be applied by Shell with effect from January 1, 2019. Under the new standard, all lease contracts, with limited exceptions, are recognised in the financial statements by way of right-of-use assets and corresponding lease liabilities. Shell will apply the modified retrospective transition approach without restating comparative information.
Compared with the existing accounting for operating leases under IAS 17, application of the new standard will have a significant impact on the classification of expenditures and consequently the classification of cash flow from operating activities, cash flow from investing activities and cash flow from financing activities. It will also impact the timing of expenses recognised in the statement of income.
Differences between the operating lease commitments under the current standard and the additional lease liabilities recognised on balance sheet at January 1, 2019 are expected to be mainly driven by the impact of discounting lease payments, short-term leases, the use of hindsight to assess options to extend or terminate leases and commencement of lease contracts after January 1, 2019. The detailed analysis, which will determine the impact upon application of the new standard, is close to completion. The quantitative impact at transition date will be disclosed in the 2018 Annual Report and Form 20-F. No impact is expected in relation to lease contracts previously classified as finance leases.
The financial information presented in the unaudited Condensed Consolidated Financial Statements does not constitute statutory accounts within the meaning of section 434(3) of the Companies Act 2006 ("the Act"). Statutory accounts for the year ended December 31, 2017 were published in Shell's Annual Report and Form 20-F and a copy was delivered to the Registrar of Companies for England and Wales. The auditor's report on those accounts was unqualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report and did not contain a statement under sections 498(2) or 498(3) of the Act.
2. Segment information
Segment earnings are presented on a current cost of supplies basis ("CCS earnings"), which is the earnings measure used by the Chief Executive Officer for the purposes of making decisions about allocating resources and assessing performance. On this basis, the purchase price of volumes sold during the period is based on the current cost of supplies during the same period after making allowance for the tax effect. CCS earnings therefore exclude the effect of changes in the oil price on inventory carrying amounts. Sales between segments are based on prices generally equivalent to commercially available prices.
INFORMATION BY SEGMENT
Quarters
$ million Full year
---
Q4 2018 Q3 2018 Q4 2017 2018 2017
---
Third-party
revenue
11,902 10,848 8,205 Integrated Gas 43,764 32,674
3,205 1,769 2,644 Upstream 9,892 7,723
87,117 87,518 74,561 Downstream 334,680 264,731
4 16 12 Corporate 43 51
102,228 100,151 85,422 Total third-
party
revenue(1) 388,379 305,179
---
Inter-segment
revenue
1,252 1,242 1,199 Integrated Gas 4,853 3,978
8,917 10,526 8,258 Upstream 37,841 32,469
1,078 1,559 1,281 Downstream 5,358 4,248
Corporate -
---
CCS earnings
3,579 2,116 848 Integrated Gas 11,444 5,078
1,601 2,249 2,050 Upstream 6,798 1,551
2,918 1,709 1,116 Downstream 7,601 8,258
(644) (335) (838) Corporate (1,479) (2,416)
7,454 5,739 3,176 Total 24,364 12,471
---
1. Includes revenue from sources other than from contracts with customers, which mainly comprises the impact of fair value accounting of commodity
derivatives. Fourth quarter 2018 includes income of $4,938 million (Q3 2018: $1,078 million charge; full year 2018: $3,348 million income).
RECONCILIATION OF INCOME FOR THE PERIOD to CCS EARNINGS
Quarters
$ million Full year
---
Q4 2018 Q3 2018 Q4 2017 2018 2017
---
Income/(loss)
attributable
to Royal Dutch
Shell plc
5,590 5,839 3,807 shareholders 23,352 12,977
Income/(loss)
attributable
to non-
controlling
56 202 130 interest 554 458
5,646 6,041 3,937 Income/(loss)
for the period 23,906 13,435
Current cost of
supplies
adjustment:
2,319 (381) (1,022) Purchases 559 (1,252)
(551) 95 287 Taxation (116) 349
Share of
profit/(loss)
of joint
ventures and
40 (16) (26) associates 15 (61)
---
1,808 (302) (761) Current cost of
supplies
adjustment(1) 458 (964)
---
7,454 5,739 3,176 CCS earnings 24,364 12,471
of which:
CCS earnings
attributable
to Royal Dutch
Shell plc
7,334 5,570 3,082 shareholders 23,833 12,081
CCS earnings
attributable
to non-
controlling
120 169 94 interest 531 390
---
1. The adjustment attributable to Royal Dutch Shell plc
shareholders is a positive $1,744 million in the fourth
quarter 2018 (Q3 2018: negative $269 million; Q4 2017:
negative $725 million; full year 2018: positive $481
million; full year 2017: negative $896 million).
3. Earnings per share
EARNINGS PER SHARE
Quarters Full year
---
Q4
2018 Q3 2018 Q4 2017 2018 2017
---
Income/
(loss)
attributable
to Royal
Dutch Shell
plc
5,590 5,839 3,807 shareholders 23,352 12,977
($ million)
Weighted
average
number of
shares used
as the basis
for
determining:
8,227.8 8,290.3 8,274.6 Basic
earnings per
share
(million) 8,282.8 8,223.4
8,289.4 8,353.1 8,354.5 Diluted
earnings per
share
(million) 8,348.7 8,299.0
---
4. Share capital
ISSUED AND FULLY PAID ORDINARY SHARES OF EUR0.07 EACH(1)
Number of shares Nominal value (
$
million)
A
B A B Total
---
At January 1, 2018 4,597,136,050 3,745,486,731 387 309 696
Repurchases of
shares (125,246,754) (11) (11)
---
At December 31,
2018 4,471,889,296 3,745,486,731 376 309 685
---
At January 1, 2017 4,428,903,813 3,745,486,731 374 309 683
Scrip dividends 168,232,237 13 13
At December 31,
2017 4,597,136,050 3,745,486,731 387 309 696
---
1. Share capital at December 31, 2018 also included 50,000 issued and fully paid sterling deferred shares of BPS1 each.
At Royal Dutch Shell plc's Annual General Meeting on May 22, 2018, the Board was authorised to allot ordinary shares in Royal Dutch Shell plc, and to grant rights to subscribe for, or to convert, any security into ordinary shares in Royal Dutch Shell plc, up to an aggregate nominal amount of EUR194 million (representing 2,771 million ordinary shares of EUR0.07 each), and to list such shares or rights on any stock exchange. This authority expires at the earlier of the close of business on August 22, 2019, and the end of the Annual General Meeting to be held in 2019, unless previously renewed, revoked or varied by Royal Dutch Shell plc in a general meeting.
5. Other reserves
OTHER RESERVES
$ million Merger Share premium reserve Capital redemption reserve Share plan reserve Accumulated other comprehensive income Total
reserve
--- ---
At January 1, 2018 (as
previously published) 37,298 154 84 1,440 (22,044) 16,932
Impact of IFRS 9 - (138) (138)
At January 1, 2018 (as
revised) 37,298 154 84 1,440 (22,182) 16,794
Other comprehensive
income/(loss)
attributable to Royal
Dutch Shell plc
shareholders - 1,123 1,123
Transfer from other
comprehensive income - (971) (971)
Repurchases of shares - 11 11
Share-based
compensation - (342) (342)
--- ---
At December 31, 2018 37,298 154 95 1,098 (22,030) 16,615
---
At January 1, 2017 37,311 154 84 1,644 (27,895) 11,298
Other comprehensive
income/(loss)
attributable to Royal
Dutch Shell plc
shareholders - 5,851 5,851
Scrip dividends (13) (13)
Share-based
compensation - (204) (204)
--- ---
At December 31, 2017 37,298 154 84 1,440 (22,044) 16,932
---
The merger reserve and share premium reserve were established as a consequence of Royal Dutch Shell plc becoming the single parent company of Royal Dutch Petroleum Company and The "Shell" Transport and Trading Company, p.l.c., now The Shell Transport and Trading Company Limited, in 2005. The merger reserve increased in 2016 following the issuance of shares for the acquisition of BG Group plc. The capital redemption reserve was established in connection with repurchases of shares of Royal Dutch Shell plc. The share plan reserve is in respect of equity-settled share-based compensation plans.
6. Derivative financial instruments and debt excluding finance lease liabilities
As disclosed in the Consolidated Financial Statements for the year ended December 31, 2017, presented in the Annual Report and Form 20-F for that year, Shell is exposed to the risks of changes in fair value of its financial assets and liabilities. The fair values of the financial assets and liabilities are defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Methods and assumptions used to estimate the fair values at December 31, 2018 are consistent with those used in the year ended December 31, 2017, and the carrying amounts of derivative financial instruments measured using predominantly unobservable inputs have not changed materially since that date.
With effect from 2018, current and non-current derivative assets and liabilities are no longer presented as part of "Trade and other receivables" and "Trade and other payables", but separately disclosed on the Balance Sheet to provide more insight.
The table below provides the comparison of the fair value with the carrying amount of debt excluding finance lease liabilities, disclosed in accordance with IFRS 7 Financial Instruments: Disclosures.
DEBT EXCLUDING FINANCE LEASE LIABILITIES
$ million December 31, 2018 December 31, 2017
---
Carrying
amount 62,798 70,141
Fair
value(1) 64,708 74,650
1. Mainly determined from the prices quoted for these
securities.
7. Change in presentation of Consolidated Statement of Cash Flows
With effect from 2018, the reconciliation from "Income for the period" to "Cash flow from operating activities" has been revised to provide more insight and improve correlation with the Balance Sheet and Statement of Income. "Cash flow from operating activities" itself remains unchanged.
Exploration well write-offs, previously presented under "Other", are shown separately. Changes in current and non-current derivative financial instruments, previously presented under "Decrease/(increase) in working capital" and "Other", are presented under a new line item "Derivative financial instruments". Changes in current retirement benefits and decommissioning provisions, previously included in "Increase/(decrease) in payables", are presented under "Deferred tax, retirement benefits, decommissioning and other provisions", together with changes in non-current balances. The impact of these changes is presented below.
$ million
Quarters
---
Q1 2017 Q2 2017 Q3 2017 Q4 2017 Full year 2017
Working capital movements (as
previously published) (1,828) 2,258 (2,467) (1,121) (3,158)
Impact of working capital
definition changes on:
-(Increase)/decrease in current
receivables (1,087) (238) 1,018 (585) (892)
-Increase/(decrease) in
current payables 1,350 444 172 (166) 1,800
Working capital movements (as
revised) (I) (1,565) 2,464 (1,277) (1,872) (2,250)
---
Cash flow from operating
activities excluding working
capital movements (as
previously published) 11,336 9,027 10,049 8,396 38,808
Impact of working capital
definition changes on:
- Exploration well write-offs 284 25 47 541 897
-Derivative financial
instruments 49 128 (1,076) (140) (1,039)
-Deferred tax, retirement
benefits, decommissioning and
other provisions (104) (129) (161) 12 (382)
- Other (492) (230) 338 (384)
Cash flow from operating
activities excluding working
capital movements (as revised)
(II) 11,073 8,821 8,859 9,147 37,900
Cash flow from operating
activities (unchanged) (I + II) 9,508 11,285 7,582 7,275 35,650
DEFINITIONS
A. Identified items
Identified items comprise: divestment gains and losses, impairments, fair value accounting of commodity derivatives and certain gas contracts, redundancy and restructuring, the impact of exchange rate movements on certain deferred tax balances, and other items. These items, either individually or collectively, can cause volatility to net income, in some cases driven by external factors, which may hinder the comparative understanding of Shell's financial results from period to period. The impact of identified items on Shell's CCS earnings is shown below.
IDENTIFIED ITEMS
Quarters
$ million Full year
---
Q4 2018 Q3 2018 Q4 2017 2018 2017
---
Identified items before tax
927 163 1,220
- Divestment gains/(losses) 3,283 1,542
(438) 253 (426)
- Impairments (1,020) (4,214)
1,639 (239) (652) - Fair value accounting of commodity
derivatives and certain gas contracts 1,145 (416)
(32) (68) (135)
- Redundancy and restructuring (203) (508)
(167) (9) 356
- Other (116) (585)
1,929 100 363 Total identified items before tax 3,089 (4,181)
---
Tax impact
(12) (41) 55
- Divestment gains/(losses) (219) 115
22 (143) 105
- Impairments (92) 1,172
(472) 70 111 - Fair value accounting of commodity
derivatives and certain gas contracts (282) 81
(4) 10 28
- Redundancy and restructuring 53 129
19 (52) (111) - Impact of exchange rate movements on
tax balances (338) 622
164 2 (1,772)
- Other 218 (1,649)
---
(283) (154) (1,584)
Total tax impact (660) 470
---
Identified items after tax
915 122 1,275
- Divestment gains/(losses) 3,064 1,657
(416) 110 (321)
- Impairments (1,112) (3,042)
1,167 (169) (541) - Fair value accounting of commodity
derivatives and certain gas contracts 863 (335)
(36) (58) (107)
- Redundancy and restructuring (150) (379)
19 (52) (111) - Impact of exchange rate movements on
tax balances (338) 622
(3) (7) (1,416)
- Other 102 (2,234)
---
1,646 (54) (1,221) Impact on CCS earnings 2,429 (3,711)
---
Of which:
1,216 (176) (788)
Integrated Gas 2,045 (190)
(280) 363 400
Upstream 23 (1,540)
787 (301) (280)
Downstream 34 (824)
(77) 60 (553)
Corporate 327 (1,157)
---
Impact on CCS earnings attributable to non-
controlling interest (28)
---
1,646 (54) (1,221) Impact on CCS earnings attributable to
shareholders 2,429 (3,683)
---
The categories above represent the nature of the items identified irrespective of whether the items relate to Shell subsidiaries or joint ventures and associates. The after-tax impact of identified items of joint ventures and associates is fully reported within "Share of profit of joint ventures and associates" in the Consolidated Statement of Income, and fully reported as "identified items before tax" in the table above. Identified items related to subsidiaries are consolidated and reported across appropriate lines of the Consolidated Statement of Income. Only pre-tax identified items reported by subsidiaries are taken into account in the calculation of "underlying operating expenses" (Definition G).
Fair value accounting of commodity derivatives and certain gas contracts: In the ordinary course of business, Shell enters into contracts to supply or purchase oil and gas products, as well as power and environmental products. Shell also enters into contracts for tolling, pipeline and storage capacity. Derivative contracts are entered into for mitigation of resulting economic exposures (generally price exposure) and these derivative contracts are carried at period-end market price (fair value), with movements in fair value recognised in income for the period. Supply and purchase contracts entered into for operational purposes, as well as contracts for tolling, pipeline and storage capacity, are, by contrast, recognised when the transaction occurs; furthermore, inventory is carried at historical cost or net realisable value, whichever is lower. As a consequence, accounting mismatches occur because: (a) the supply or purchase transaction is recognised in a different period, or (b) the inventory is measured on a different basis. In addition, certain contracts are, due to pricing or delivery conditions, deemed to contain embedded derivatives or written options and are also required to be carried at fair value even though they are entered into for operational purposes. The accounting impacts are reported as identified items.
Impacts of exchange rate movements on tax balances represent the impact on tax balances of exchange rate movements arising on (a) the conversion to dollars of the local currency tax base of non-monetary assets and liabilities, as well as losses (this primarily impacts the Integrated Gas and Upstream segments) and (b) the conversion of dollar-denominated inter-segment loans to local currency, leading to taxable exchange rate gains or losses (this primarily impacts the Corporate segment).
Other identified items represent other credits or charges Shell's management assesses should be excluded to provide additional insight, such as the impact arising from changes in tax legislation and certain provisions for onerous contracts or litigation.
B. Basic CCS earnings per share
Basic CCS earnings per share is calculated as CCS earnings attributable to Royal Dutch Shell plc shareholders (see Note 2), divided by the weighted average number of shares used as the basis for basic earnings per share (see Note 3).
C. Capital investment
Capital investment is a measure used to make decisions about allocating resources and assessing performance. It comprises capital expenditure, new investments in joint ventures and associates, exploration expense excluding well write-offs, new finance leases and investments in Integrated Gas, Upstream and Downstream equity securities, all of which are recognised on an accruals basis.
The reconciliation of "Capital expenditure" to "Capital investment" is as follows.
Quarters
$ million Full year
--- ---
Q4 2018 Q3 2018 Q4 2017 2018 2017
--- ---
7,147 5,800 5,861
Capital expenditure 23,011 20,845
208 78 202 Investments in joint ventures and associates 880 595
400 172 380 Exploration expense, excluding exploration
wells written off 889 1,048
49 184 330
Finance leases 452 1,074
191 (404) 5
Other(1) (453) 444
---
7,995 5,830 6,778
Capital investment 24,779 24,006
Of which:
1,483 862 1,043
Integrated Gas 4,460 3,827
3,988 3,037 3,485
Upstream 12,525 13,648
2,427 1,860 2,208
Downstream 7,564 6,416
97 71 42
Corporate 230 115
---
1. Third quarter 2018 includes an adjustment of $541 million to negate the impact of an internal restructuring related to
Upstream Brazil operations.
D. Divestments
Divestments is a measure used to monitor the progress of Shell's divestment programme. This measure comprises proceeds from sale of property, plant and equipment and businesses, joint ventures and associates, and other Integrated Gas, Upstream and Downstream investments in equity securities, reported in "Cash flow from investing activities", adjusted onto an accruals basis and for any share consideration received or contingent consideration initially recognised upon the related divestment, as well as proceeds from the sale of interests in entities while retaining control (for example, proceeds from sale of interest in Shell Midstream Partners, L.P.), which are included in "Change in non-controlling interest" within "Cash flow from financing activities".
In future periods, the proceeds from any disposal of shares received as divestment consideration, and proceeds from realisation of contingent consideration, will be included in "Cash flow from investing activities".
The reconciliation of "Proceeds from sale of property, plant and equipment and businesses" to "Divestments" is as follows.
Quarters
$ million Full year
--- ---
Q4 2018 Q3 2018 Q4 2017 2018 2017
--- ---
1,966 231 2,866 Proceeds from sale of property, plant and
equipment and businesses 4,366 8,808
---
475 935 221 Proceeds from sale of joint ventures and
associates 1,594 2,177
56 217 Share and contingent consideration(1) 194 3,046
- Proceeds from sale of interests in entities
while retaining control 673 278
258 (609) 3,170
Other(2) 275 3,031
---
2,699 613 6,474
Divestments 7,102 17,340
Of which:
798 317 3,021
Integrated Gas 3,124 3,077
916 222 3,254
Upstream 2,198 11,542
977 20 199
Downstream 1,718 2,703
8 54
Corporate 62 18
---
1. This is valued at the date of the related divestment, instead of when these shares are disposed of or the contingent
consideration is realised.
2. Third quarter 2018 includes an adjustment of $883 million to negate the impact of an internal restructuring related to
Upstream Brazil operations.
E. Return on average capital employed
Return on average capital employed (ROACE) measures the efficiency of Shell's utilisation of the capital that it employs. In this calculation, ROACE is defined as income for the current and previous three quarters, adjusted for after-tax interest expense, as a percentage of the average capital employed for the same period. Capital employed consists of total equity, current debt and non-current debt.
$ million Quarters
--- ---
Q4 2018 Q3 2018 Q4 2017
---
Income for current and
previous three quarters 23,906 22,197 13,435
Interest expense after tax 2,513 2,435 2,995
---
Income before interest
expense 26,419 24,632 16,430
---
Capital employed - opening 283,477 286,889 280,988
Capital employed - closing 279,358 279,864 283,477
---
Capital employed - average 281,417 283,376 282,233
---
ROACE 9.4% 8.7% 5.8%
---
Return on average capital employed on a CCS basis excluding identified items is defined as the sum of CCS earnings attributable to shareholders excluding identified items for the current and previous three quarters, as a percentage of the average capital employed for the same period.
$ million Quarters
---
Q4 2018 Q3 2018 Q4 2017
CCS earnings excluding
identified items 21,404 20,019 15,764
Capital employed - average 281,417 283,376 282,233
ROACE on a CCS basis
excluding identified items 7.6% 7.1% 5.6%
---
F. Gearing
Gearing is a key measure of Shell's capital structure and is defined as net debt as a percentage of total capital. With effect from 2018, the net debt calculation includes the fair value of derivative financial instruments used to hedge foreign exchange and interest rate risks relating to debt, and associated collateral balances. Management believes this amendment is useful, because it reduces the volatility of net debt caused by fluctuations in foreign exchange and interest rates, and eliminates the potential impact of related collateral payments or receipts. Debt-related derivative financial instruments are a subset of the derivative financial instrument assets and liabilities presented on the Balance Sheet. Collateral balances are reported under "Trade and other receivables" or "Trade and other payables" as appropriate. Prior period comparatives have been revised to reflect the change in net debt calculation.
$ million
Quarters
--- ---
December
31, 2018 September 30, 2018 December 31, 2017
Current debt 10,134 13,923 11,795
Non-current
debt 66,690 64,455 73,870
---
Total debt(1) 76,824 78,378 85,665
---
Add: Debt-
related
derivative
financial
instruments:
net liability/
(asset) 1,273 1,247 591
Add: Collateral
on debt-
related
derivatives:
net liability/
(asset) 72
Less: Cash and
cash
equivalents (26,741) (19,112) (20,312)
---
Net debt 51,428 60,513 65,944
---
Add: Total
equity 202,534 201,486 197,812
---
Total capital 253,962 261,999 263,756
---
Gearing
(2) 20.3% 23.1% 25.0%
---
1. Includes finance lease liabilities of $14,026 million at December 31, 2018, $14,277 million at
September 30, 2018, and $15,524 million at December 31, 2017.
2. Gearing as previously published at December 31, 2017 was 24.8%. Gearing as previously published at
December 31, 2016, was 28.0% (29.1% as per revised net debt calculation).
G. Operating expenses
Operating expenses is a measure of Shell's cost management performance, comprising the following items from the Consolidated Statement of Income: production and manufacturing expenses; selling, distribution and administrative expenses; and research and development expenses. Underlying operating expenses measures Shell's total operating expenses performance excluding identified items.
Quarters
$ million Full year
--- ---
Q4
2018 Q3 2018 Q4 2017 2018 2017
--- ---
6,803 6,256 6,563
Production and manufacturing expenses 26,970 26,652
3,162 2,829 2,953
Selling, distribution and administrative expenses 11,360 10,509
314 227 260
Research and development 986 922
---
10,279 9,312 9,776
Operating expenses 39,316 38,083
---
Of which identified items:
(28) (64) (152)
(Redundancy and restructuring charges)/reversal (187) (565)
(104) - 215
(Provisions)/reversal (104) 38
-
Other
(132) (64) 63 (291) (527)
---
10,147 9,248 9,839
Underlying operating expenses 39,025 37,556
---
H. Free cash flow
Free cash flow is used to evaluate cash available for financing activities, including dividend payments, after investment in maintaining and growing our business. It is defined as the sum of "Cash flow from operating activities" and "Cash flow from investing activities" as shown on page 1.
I. Cash flow from operating activities excluding working capital movements
Working capital movements are defined as 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.
Cash flow from operating activities excluding working capital movements is a measure used by Shell to analyse its operating cash generation over time excluding the timing effects of changes in inventories and operating receivables and payables from period to period.
Quarters
$ million Full year
--- ---
Q4
2018 Q3 2018 Q4 2017 2018 2017
--- ---
22,021 12,092 7,275 Cash flow from operating activities 53,085 35,650
7,694 (1,693) (1,368)
- (Increase)/decrease in inventories 2,823 (2,079)
8,421 (2,722) (2,544) -(Increase)/decrease in current receivables(1) 1,955 (2,577)
(7,014) 1,788 2,040 -Increase/(decrease) in current payables(1) (1,336) 2,406
9,101 (2,627) (1,872) (Increase)/decrease in working capital(2) 3,442 (2,250)
---
12,920 14,719 9,147 Cash flow from operating activities excluding
working capital movements(2) 49,643 37,900
---
1. See Note 7 "Change in presentation of Consolidated Statement of Cash Flows".
2. As previously published, working capital increased by $1,121 million in the fourth quarter 2017, and by $3,158 million for
the full year 2017. Cash flow from operating activities excluding working capital movements, as previously published, was $8,396
million in the fourth quarter 2017, and $38,808 million for the full year 2017.
CAUTIONARY STATEMENT
All amounts shown throughout this announcement are unaudited. All peak production figures in Portfolio Developments are quoted at 100% expected production.
The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate legal entities. In this announcement "Shell", "Shell group" and "Royal Dutch Shell" 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 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 announcement 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 announcement contains forward-looking statements (within the meaning of the US Private Securities Litigation Reform Act of 1995) concerning the financial condition, results of operations and businesses of Royal Dutch 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'', ''objectives'', ''outlook'', ''plan'', ''probably'', ''project'', ''risks'', "schedule", ''seek'', ''should'', ''target'', ''will'' and similar terms and phrases. There are a number of factors that could affect the future operations of Royal Dutch Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this announcement, 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; and (m) 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 announcement 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 Royal Dutch Shell's Form 20-F for the year ended December 31, 2017 (available at www.shell.com/investor and www.sec.gov). These risk factors also expressly qualify all forward-looking statements contained in this announcement and should be considered by the reader. Each forward-looking statement speaks only as of the date of this announcement, January 31, 2019. 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 announcement.
This Report contains references to Shell's website. These references are for the readers' convenience only. Shell is not incorporating by reference any information posted on www.shell.com.
We may have used certain terms, such as resources, in this announcement that the United States Securities and Exchange Commission (SEC) strictly prohibits us from including in our filings with the SEC. US 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.
This announcement contains inside information.
January 31, 2019
The information in this Report reflects the unaudited consolidated financial position and results of Royal Dutch Shell plc. Company No. 4366849, Registered Office: Shell Centre, London, SE1 7NA, England, UK.
Contacts:
- Linda Szymanski, Company Secretary
- Investor Relations: International + 31(0) 70-377-4540; North America +1-832-337-2034
- Media: International +44(0)207-934 -5550; USA +1-832-337-4355
LEI number of Royal Dutch Shell plc: 21380068P1DRHMJ8KU70
Classification: Inside Information
<hr/>
(([i])) Revised from negative working capital movements of $894 million. See Note 7 and Definition I.
(([ii])) Revised from negative working capital movements of $2,149 million. See Note 7 and Definition I.
(([iii])) Revised from positive working capital movements of $275 million. See Note 7 and Definition I.
(([iv])) Revised from negative working capital movements of $482 million. See Note 7 and Definition I.
(([v])) Revised from negative working capital movements of $402 million. See Note 7 and Definition I.
(([vi])) Revised from negative working capital movements of $325 million. See Note 7 and Definition I.
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SOURCE Royal Dutch Shell plc
