Royal Dutch Shell Plc: 3rd Quarter 2007 Results
LONDON, October 25 /PRNewswire-FirstCall/ — – Royal Dutch Shell’s third quarter 2007 earnings, on a current cost of supply (CCS) basis, were $6.4 billion compared to $6.9 billion a year ago. Basic CCS earnings per share decreased by 6% versus the same quarter a year ago.
– From 2007 onwards the Group is declaring its dividends in US dollars rather than in euros. A third quarter 2007 dividend has been announced of $0.36 per share, an increase of 14% over the US dollar dividend for the same period in 2006.
– $1.5 billion or 0.6% of Royal Dutch Shell shares were bought back for cancellation during the quarter.
Royal Dutch Shell Chief Executive Jeroen van der Veer commented: “Given the weaker industry refining margins we have seen in the quarter, these are satisfactory results, underpinned by Shell’s operating performance. We continue to rejuvenate our portfolio with sustained investment in new legacy assets, and through disposals. I am pleased with progress during the quarter, with the launch of new refining and liquefied natural gas projects, and further asset sales. The execution of our strategy is on track.”
Summary unaudited results QUARTERS $ million NINE MONTHS Q3 Q2 Q3 %(1) 2007 2007 2006 2007 2006 % 6,916 8,667 5,942 +16 Income attributable to shareholders 22,864 20,159 +13 Estimated CCS adjustment for Oil Products and Chemicals (524) (1,111) 1,006 (see note 2) (1,984) (809) __________ __________ __________ ———- ——– 6,392 7,556 6,948 -8 CCS earnings 20,880 19,350 +8 ========= ========= ========= =========== ======= 1.10 1.38 0.93 Basic earnings per share ($) 3.64 3.13 (0.08) (0.18) 0.16 Estimated CCS adjustment per share ($) (0.31) (0.13) __________ __________ __________ ———- ——– Basic CCS earnings per 1.02 1.20 1.09 -6 share ($) 3.33 3.00 +11 ========= ========= ========= =========== ======= Dividend per ordinary 0.36 0.36 0.315 share ($)(2) 1.08 0.945 (1) Q3 on Q3 change (2) From 2007 onwards dividends are declared in US dollars. 2006 dividends were declared in euros and translated, for comparison purposes, to US dollars (based on the US dollar dividend of American Depositary Receipts in the applicable period converted to ordinary shares). Key features of the third quarter 2007
– Third quarter 2007 CCS earnings were $6,392 million or 8% lower than in the same quarter a year ago.
– Third quarter 2007 reported income was $6,916 million or 16% higher than in the same quarter a year ago.
– Exploration & Production segment earnings were $3,510 million compared with $3,743 million in the third quarter 2006. Earnings, when compared to the third quarter of 2006, were mainly impacted by lower volumes, higher tax charges and higher costs, reflecting current industry conditions, partly offset by the impact of higher oil prices on revenues.
– Gas & Power segment earnings were $568 million compared to $781 million a year ago. Earnings, when compared to the third quarter of 2006, reflected lower marketing and trading results and reduced gas-to-liquids (GTL) sales volumes due to a planned shutdown of the Bintulu GTL plant, which were partly offset by higher revenues from increased equity liquefied natural gas (LNG) sales volumes.
– Oil Products CCS segment earnings were $1,651 million compared to $2,160 million in the third quarter 2006. Earnings, when compared to the third quarter of 2006, were mainly impacted by lower realised refining margins, a lower contribution from trading and higher operating costs, which were partly offset by a gain related to a tax rate change in Germany.
– Chemicals CCS segment earnings were $360 million compared to $335 million in 2006, mainly reflecting improved margins, which were partly offset by a reduced trading contribution.
– Cash flow from operating activities was $9.1 billion compared to $10.1 billion in the third quarter 2006. Excluding working capital movements and taxation effects, cash flow from operating activities was $9.8 billion compared to $9.6 billion a year ago (see note 7).
– Total cash returned to shareholders in the form of dividends and share repurchases in the third quarter 2007 was $3.7 billion.
– Capital investment for the third quarter 2007 was $6.8 billion.
– Return on average capital employed (ROACE), on a reported income basis (see note 3), was 23%.
– Gearing (see note 5) was 12.1% at the end of the third quarter 2007 versus 13.4% at the end of the third quarter 2006.
– As from the fourth quarter 2007, the Oil Sands segment information will be reported as a separate Downstream business segment. The Oil Sands segment information is currently reported under the Upstream Exploration & Production segment.
Basic earnings per share (see notes 1, 2 and 8) QUARTERS NINE MONTHS Q3 Q2 Q3 2007 2007 2006 2007 2006 1.10 1.38 0.93 Earnings per share 3.64 3.13 ($) 1.02 1.20 1.09 CCS earnings per 3.33 3.00 share ($) Diluted earnings per share (see notes 1, 2 and 8) QUARTERS NINE MONTHS Q3 Q2 Q3 2007 2007 2006 2007 2006 1.10 1.38 0.93 Earnings per share 3.63 3.12 ($) 1.02 1.20 1.09 CCS earnings per 3.32 2.99 share ($) Summary segment earnings (see notes 2 and 4) QUARTERS $ million NINE MONTHS Q3 Q2 Q3 2007 2007 2006 %(1) 2007 2006 % Segment earnings Exploration & 3,510 3,301 3,743 Production 10,319 11,485 Gas & 568 779 781 Power(2) 2,150 2,054 Oil Products 1,651 2,936 2,160 (CCS basis) 6,075 5,558 Chemicals 360 494 335 (CCS basis) 1,334 822 413 177 266 Corporate(2) 1,391 45 Minority (110) (131) (337) interest (389) (614) ——– ——– —– ———– ———– 6,392 7,556 6,948 -8 CCS earnings 20,880 19,350 +8 ======== ======== ====== =========== =========== (1) Q3 on Q3 change (2) As from 2007, the segment Other Industry and Corporate has been renamed as Corporate. Its earnings no longer include the results generated by the Wind and Solar businesses, which were previously reported as part of Other Industry segments, but continue to include some non-material businesses. The Wind and Solar businesses earnings are, as from 2007, reported under the Gas & Power segment. For comparison purposes, the third quarter 2006 and the nine months period of 2006 results were reclassified and are impacted by $(6) million and $(14) million in the Gas & Power segment and by $6 million and $14 million in the Corporate segment, respectively. Summary segment earnings – continued
Earnings in the third quarter 2007 reflected the following items, which in aggregate amounted to a net income of $265 million (compared to a net charge of $77 million in the third quarter 2006) as summarised in the table below:
– Exploration & Production earnings included a net income of $130 million. Earnings for the third quarter 2007 included a gain of $143 million related to an impairment reversal and a combined gain of $228 million related to tax impacts and the benefit of a tax rate change in Germany. These gains were partly offset by charges of $93 million related to the mark-to-market valuation impact of certain UK gas contracts, the write-off of exploration costs in Alaska of $77 million and a $71 million charge related to a one-time pension liability impact (see below). Earnings for the third quarter 2006 included a net charge of $163 million reflecting a gain of $147 million related to the mark-to-market valuation of certain UK gas contracts, more than offset by charges of $310 million related to a UK tax increase effective as from January 1, 2006.
– Gas & Power earnings included a net charge of $4 million, reflecting a gain of $11 million related to a tax rate change in Germany, which was more than offset by charges of $10 million related to a one-time pension liability impact (see below) and $5 million related to the mark-to-market valuation impact of certain gas contracts.
– Oil Products earnings included a net income of $121 million, reflecting a gain of $149 million related to a tax rate change in Germany, which was partly offset by a charge of $28 million related to a one-time pension liability impact (see below).
– Chemicals earnings included a net income of $18 million, reflecting a gain of $19 million related to a tax rate change in Germany, which was partly offset by a charge of $1 million related to a one-time pension liability impact (see below).
– Corporate earnings did not include any identified items for the third quarter 2007. Earnings for the third quarter 2006 included $86 million related to tax credits.
The Shell Group earnings included a combined charge of $110 million related to a one-time impact on past-service pension liabilities due to implementation of a revised structure for certain employees’ remuneration, of which the major elements arose in the Exploration & Production and Oil Products segment earnings.
Summary table: QUARTERS $ million NINE MONTHS Q3 Q2 Q3 2007 2007 2006 2007 2006 Segment earnings impact of identified items: 130 153 (163) Exploration & 387 254 Production (4) 247 – Gas & Power 282 – 121 205 – Oil Products 150 (65) (CCS basis) 18 – – Chemicals 18 (30) (CCS basis) – 55 86 Corporate 459 (314) – – – Minority – (41) interest ___________ ___________ ___________ ___________ ___________ 265 660 (77) CCS earnings 1,296 (196) impact ========== ========== ========== ========== ==========
These items generally relate to events with an impact of greater than $50 million on Shell Group earnings and are shown to provide additional insight in the segment earnings, CCS earnings and income attributable to shareholders. Further additional comments are provided in the section ‘Earnings per industry segment’ on page 5 and onwards.
Earnings per industry segment Upstream QUARTERS NINE MONTHS Q3 Q2 Q3 2007 2007 2006 2007 2006 Realised Oil Prices $/bbl (period average) $/bbl 70.74 64.41 65.60 WOUSA 63.32 62.35 70.34 61.06 62.57 USA 60.72 60.77 70.69 63.92 65.13 Global 62.95 62.15 Realised Gas Prices $/thousand scf (period average) $/thousand scf 6.69 5.95 6.43 Europe 6.86 6.72 4.07 4.01 4.05 WOUSA (including Europe) 4.27 4.35 6.53 7.78 7.31 USA 7.16 8.04 4.57 4.74 4.77 Global 4.84 5.09 Oil and gas marker industry prices (period average) 74.84 68.86 69.63 Brent ($/bbl) 67.15 66.97 75.24 64.89 70.44 WTI ($/bbl) 66.06 68.06 6.14 7.56 6.05 Henry Hub ($/MMBtu) 6.94 6.80 UK National Balancing 30.68 20.20 33.77 Point (pence/therm) 24.39 45.93 Exploration & Production QUARTERS $ million NINE MONTHS Q3 Q2 Q3 2007 2007 2006 %(1) 2007 2006 % 3,510 3,301 3,743 -6 Segment earnings 10,319 11,485 -10 Crude oil production 1,874 1,908 2,054 -9 (thousand b/d) 1,914 1,973 -3 7,329 7,367 6,942 +6 Natural gas production 7,886 8,365 -6 available for sale (million scf/d) Barrels of oil equivalent (thousand 3,137 3,178 3,251 -4 boe/d) 3,273 3,415 -4 (1) Q3 on Q3 change
Third quarter Exploration & Production segment earnings were $3,510 million compared to $3,743 million a year ago.
Third quarter Exploration & Production earnings included a net income of $130 million, comprising a gain of $143 million related to an impairment reversal and a combined gain of $228 million related to tax impacts and the benefit of a tax rate change in Germany. These gains were partly offset by charges of $93 million related to the mark-to-market valuation impact of certain UK gas contracts, exploration write-offs in Alaska of $77 million and a $71 million charge related to a one-time pension liability impact. Earnings for the third quarter 2006 included a net charge of $163 million reflecting a gain of $147 million related to the mark-to-market valuation of certain UK gas contracts, more than offset by charges of $310 million related to a UK tax increase effective as from January 1, 2006.
Earnings, when compared to the third quarter 2006, were mainly impacted by lower volumes, higher tax charges and higher costs, reflecting current industry conditions, partly offset by the impact of higher oil prices on revenues. In addition, higher exploration expenses, and lower profits from the Sakhalin project, as a consequence of the partial divestment in the second quarter 2007, impacted earnings when compared to the third quarter 2006.
Liquids realisations were 9% higher than in the third quarter 2006, following marker crudes Brent and WTI which were both up 7%. Gas realisations were 4% lower than a year ago. Outside the USA gas realisations were relatively unchanged whereas in the USA gas realisations decreased by 11%.
Third quarter 2007 production was 3,137 thousand barrels of oil equivalent per day compared to 3,251 thousand barrels of oil equivalent per day a year ago. Total crude oil production (including oil sands) was down 9% and total natural gas production was up 6% when compared to the third quarter 2006. Third quarter 2007 production was mainly impacted by field decline rates and divested volumes, which were partly offset by new fields production and ramp-up volumes when compared to the same quarter last year.
Production compared to the third quarter 2006 included increased volumes from E8 and B12 (Shell share 50%) in Malaysia, Pohokura (Shell share 48%) in New Zealand, West Salym (Shell share 50%) in Russia, Changbei (Shell share 50%) in China, Erha (Shell share 44%) in Nigeria, Merganser (Shell share 44%) in the UK, Enfield in Australia (Shell share 21%, indirect) and Deimos (Shell share 71.5%) in the USA.
Third quarter portfolio developments:
In Austria, Shell announced that it has signed a Sale and Purchase Agreement for the sale of its 25% equity holding in Austrian oil and gas producer, Rohol-Aufsuchungs AG (RAG) with completion expected late 2007 or early 2008.
In Norway, Shell announced that it has entered into an agreement with E.ON Ruhrgas Norge AS to sell its 28% equity interests in the undeveloped Skarv and Idun fields for $893 million. The sale is subject to the relevant regulatory approval and is expected to be completed by end 2007.
In Russia, Shell and Rosneft Open Joint Stock Company have concluded an agreement on Strategic Cooperation, which provides for a joint implementation of upstream and downstream oil and gas projects both in Russia and elsewhere.
Also in Russia, Shell and JSC Tatneft concluded an agreement for a Strategic Partnership to devise a programme for heavy oil development in Tatarstan as well as other potential joint activities, including the acquisition of new licenses for hydrocarbon exploration in Tatarstan and elsewhere in Russia.
In the United States, Shell announced first production from the Deimos (Shell share 71.5%) discovery in the Gulf of Mexico Mars Basin with a peak production capacity for Phase I of 30 thousand barrels of oil equivalent per day.
In Norway, first gas was produced from the Ormen Lange field (Shell share 17%) with a peak production capacity of some 420 thousand barrels of oil equivalent per day.
Gas & Power QUARTERS $ million NINE MONTHS Q3 Q2 Q3 2007 2007 2006 %(1) 2007 2006 % 568 779 781 -27 Segment earnings(2) 2,150 2,054 +5 Equity LNG sales volume 3.29 3.25 2.94 +12 (million tonnes) 9.84 8.78 +12 (1) Q3 on Q3 change (2) As from 2007, the Gas & Power earnings include earnings generated by the Wind and Solar businesses, which were previously reported as part of Other Industry segments. For comparison purposes, the third quarter 2006 and nine months period of 2006 results were reclassified and were impacted by $(6) million and $(14) million respectively.
Third quarter Gas & Power segment earnings were $568 million compared to $781 million a year ago. Third quarter 2007 earnings included a net charge of $4 million, reflecting a gain of $11 million related to a tax rate change in Germany, which was more than offset by charges of $10 million related to a one-time pension liability impact and $5 million related to the mark-to-market valuation impact of certain gas contracts.
Earnings, when compared to the third quarter 2006, reflected lower marketing and trading results and reduced gas-to-liquids (GTL) sales volumes due to a planned shutdown of the Bintulu GTL plant, which were partly offset by higher earnings from increased equity liquefied natural gas (LNG) sales volumes.
LNG equity sales volumes of 3.29 million tonnes were 12% higher than in the same quarter a year ago, driven by additional sales mainly at Nigeria LNG (Shell interest 26%) due to increased feedgas supply.
Marketing and trading earnings benefited from storage optimisation in the third quarter 2007. Earnings, when compared to the same period last year, were lower due to less favourable overall trading conditions in both Europe and North America.
Third quarter portfolio developments:
In Qatar, Shell and Qatar Petroleum announced the formation of Qatar Liquefied Gas Company Limited (4), a joint venture of Qatar Petroleum (70%) and Shell (30%), which signed a Sale and Purchase Agreement with Shell as the buyer of all the LNG volumes produced by the joint venture. An agreement was also signed with Qatargas Transport Company Limited (Nakilat), in which Shell was appointed as the shipping and maritime services provider for Nakilat’s fleet of at least 25 newly built liquefied natural gas carriers.
In Australia, the final investment decision was taken by Woodside Petroleum Ltd. (Shell interest 34.27%) for the development of the Pluto LNG project in North-West Australia. The Australian Federal Ministry for the Environment issued government approval for the Pluto project in October.
Shell and Petrochina concluded a binding Heads of Agreement for the supply of 1 million tonnes per annum of LNG, for 20 years, from the Gorgon project in North-West Australia, conditional on a final investment decision being taken by the Gorgon Joint Venture partners. Gorgon received State and Federal environmental approval during the quarter.
Downstream QUARTERS NINE MONTHS Q3 Q2 Q3 2007 2007 2006 2007 2006 Refining marker industry gross margins $/bbl (period average) $/bbl ANS US West Coast 8.05 23.10 13.25 coking margin 17.75 16.15 WTS US Gulf Coast 15.40 27.05 14.70 coking margin 18.45 16.00 Rotterdam Brent 3.50 6.30 3.45 complex 4.50 3.50 Singapore 80/20 Arab 2.50 3.60 0.95 light/Tapis complex 3.05 2.05 Oil Products QUARTERS $ million NINE MONTHS Q3 Q2 Q3 2007 2007 2006 %(1) 2007 2006 % Segment 2,153 3,928 1,214 earnings 7,883 6,334 Estimated CCS adjustment – see note (502) (992) 946 2 (1,808) (776) __________ __________ __________ __________ _______ 1,651 2,936 2,160 -24 Segment CCS earnings 6,075 5,558 +9 ========= ========= ========= ========= ======= Refinery intake (thousand 3,887 3,806 3,907 -1 b/d) 3,768 3,852 -2 Total Oil products sales (thousand 6,756 6,490 6,521 +4 b/d) 6,552 6,491 +1 (1) Q3 on Q3 change
Third quarter Oil Products segment earnings were $2,153 million compared to $1,214 million for the same period last year.
Third quarter Oil Products CCS segment earnings were $1,651 million compared to $2,160 million in the third quarter of 2006. Earnings for the third quarter 2007 included a net income of $121 million, reflecting a gain of $149 million related to a tax rate change in Germany, which was partly offset by charges of $28 million related to a one-time pension liability impact.
CCS earnings, when compared to the third quarter of 2006, were mainly impacted by lower realised refining margins, a lower contribution from trading and higher operating costs, which were partly offset by a gain related to a tax rate change in Germany.
In Manufacturing, Supply and Distribution industry refining margins, when compared to the same period a year ago, were higher in the eastern hemisphere and in US Gulf Coast, whilst US West Coast margins declined. Refining margins in Europe were essentially unchanged when compared to the levels of the third quarter of 2006. Despite the hurricane impact in the US Gulf Coast, refinery availability remained relatively stable at 93%, compared to 94% in the third quarter of 2006.
In marketing, when compared to the same period a year ago, earnings were relatively stable due to continued strong retail, lubricants and B2B earnings.
Marketing sales volumes were in line with volumes in the third quarter 2006. Excluding the impact of divestments, volumes were 2.2% higher than in the third quarter 2006, mainly because of higher retail sales.
Third quarter portfolio developments:
In the USA, Shell announced, through Motiva Enterprises (Shell share 50%), the final investment decision to proceed with a 325,000 barrels per day capacity expansion at the Port Arthur Refinery, making this the largest refinery in the USA with a total crude oil throughput capacity of 600,000 barrels per day.
In France, Shell has signed a Letter of Intent for the possible sale of its Petit Couronne and Reichstett Vendenheim refineries. The sale, amounting to some $875 million, with completion to be expected during 2008, is subject to staff consultation and regulatory approval.
Also in France, Shell has received an offer for the sale of its Berre-l’Etang refinery site complex and associated infrastructure and businesses. A purchase price of $700 million has been agreed with completion to be expected in early 2008. The sale is subject to staff consultation and regulatory approval.
In Scandinavia, Shell has signed an agreement, which will result in the rebranding of a planned 269 service stations across Norway, Sweden and Denmark.
Chemicals QUARTERS $ million NINE MONTHS Q3 Q2 Q3 2007 2007 2006 %(1) 2007 2006 % Segment 397 626 251 earnings 1,550 880 Estimated CCS adjustment – see note (37) (132) 84 2 (216) (58) ___________ ___________ ___________ ________ _______ Segment CCS 360 494 335 +7 earnings 1,334 822 +62 ========= ========= ========= ========= ====== Sales volumes (thousand 5,702 5,653 5,636 +1 tonnes) 16,922 17,447 -3 (1) Q3 on Q3 change
Third quarter Chemicals segment earnings were $397 million compared to $251 million for the same period last year.
Third quarter Chemicals CCS segment earnings were $360 million compared to $335 million in the same quarter last year. Earnings for the third quarter 2007 included a net income of $18 million, reflecting a gain of $19 million related to a tax rate change in Germany, which was partly offset by a charge of $1 million related to a one-time pension liability impact.
Earnings reflected improved margins, which were mostly offset by a reduced trading contribution.
Chemicals manufacturing plant availability increased to 94%, some 6% points higher than in the third quarter 2006, which was impacted by a heavy planned maintenance programme in the USA and Europe.
Corporate QUARTERS $ million NINE MONTHS Q3 Q2 Q3 2007 2007 2006 2007 2006 413 177 266 Segment earnings(1) 1,391 45
(1) As from 2007, the segment Other Industry and Corporate has been renamed as Corporate. Its earnings no longer include the results generated by the Wind and Solar businesses, which were previously reported as part of Other Industry segments, but continue to include some non-material businesses. For comparison purposes, the third quarter 2006 and the nine months period of 2006 results were reclassified and are impacted by $6 million and $14 million respectively.
Third quarter Corporate segment earnings were $413 million compared to an income of $266 million for the same period last year. Earnings for the third quarter 2006 included $86 million related to tax credits.
Earnings, when compared to the third quarter 2006, reflected higher insurance underwriting income, improved net interest income and positive results from exchange rate movements which were partly offset by lower tax credits.
Note All amounts shown throughout this report are unaudited.
Fourth quarter results for 2007 are expected to be announced on January 31, 2008. First quarter results for 2008 are expected to be announced on April 29, 2008, second quarter results are expected to be announced on July 31, 2008 and third quarter results are expected to be announced on October 30, 2008. There will be a Group strategy update on March 17, 2008.
In this Report “Group” is defined as Royal Dutch Shell together with all of its consolidated subsidiaries. The expressions “Shell”, “Group”, “Shell Group” and “Royal Dutch Shell” are sometimes used for convenience where references are made to the Group or Group companies in general. Likewise, the words “we”, “us” and “our” are also used to refer to Group companies in general or to those who work for them. These expressions are also used where no useful purpose is served by identifying the particular company or companies. The expression “Group companies” as used in this Report refers to companies in which Royal Dutch Shell either directly or indirectly has control, by having either a majority of the voting rights or the right to exercise a controlling influence. The companies in which the Group has significant influence but not control are referred to as “associated companies” or “associates” and companies in which the Group has joint control are referred to as “jointly controlled entities”. In this Report, associates and jointly controlled entities are also referred to as “equity accounted investments”.
This document contains forward-looking statements 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 ”anticipate”, ”believe”, ”could”, ”estimate”, ”expect”, ”intend”, ”may”, ”plan”, ”objectives”, ”outlook”, ”probably”, ”project”, ”will”, ”seek”, ”target”, ”risks”, ”goals”, ”should” 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 Report, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for the Group’s products; (c) currency fluctuations; (d) drilling and production results; (e) reserve estimates; (f) loss of market 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 potential litigation and regulatory effects arising from recategorisation of reserves; (k) economic and financial market conditions in various countries and regions; (l) political risks, project delay or advancement, approvals and cost estimates; and (m) changes in trading conditions. All forward-looking statements contained in this Report 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. Each forward-looking statement speaks only as of the date of this Report. Neither Royal Dutch Shell 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 Report.
Please refer to the Annual Report and Form 20-F for the year ended December 31, 2006 for a description of certain important factors, risks and uncertainties that may affect Shell’s businesses.
Cautionary Note to US Investors:
The United States Securities and Exchange Commission (SEC) permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We may use certain terms in this announcement that the SEC’s guidelines strictly prohibit us from including in filings with the SEC. US Investors are urged to consider closely the disclosure in our Form 20-F, File No 1-32575 and disclosure in our Forms 6-K, File No 1-32575, available on the SEC’s website http://www.sec.gov/. You can also obtain these forms from the SEC by calling 1-800-SEC-0330.
Appendix 1: Royal Dutch Shell financial report and tables Statement of income (see note 1) QUARTERS $ million NINE MONTHS Q3 Q2 Q3 2007 2007 2006 %(1) 2007 2006 % 90,703 84,896 84,254 Revenue(2) 249,079 243,345 76,713 68,715 70,383 Cost of sales 206,094 200,143 13,990 16,181 13,871 +1 Gross profit 42,985 43,202 -1 Selling, distribution and administrative 3,843 4,120 4,126 expenses 11,741 11,968 Exploration 608 450 401 expenses 1,330 932 Share of profit of equity accounted 1,912 2,138 1,358 investments 5,858 5,010 Net finance costs and other (38) (477) (60) (income) /expense (1,416) (168) Income before 11,489 14,226 10,762 +7 taxation 37,188 35,480 +5 4,448 5,415 4,507 Taxation 13,895 14,682 Income for the 7,041 8,811 6,255 +13 period 23,293 20,798 +12 Income attributable to minority 125 144 313 interest 429 639 Income attributable to 6,916 8,667 5,942 +16 shareholders 22,864 20,159 +13 (1) Q3 on Q3 change (2) Revenue is stated after deducting sales taxes, excise duties and similar levies of $20,830 million in Q3 2007, $18,993 million in Q2 2007, $17,305 million in Q1 2007, $18,472 million in Q3 2006, $17,984 million in Q2 2006 and $16,709 million in Q1 2006. Earnings by industry segment (see notes 2 and 4) QUARTERS $ million NINE MONTHS Q3 Q2 Q3 2007 2007 2006 %(1) 2007 2006 % Exploration & Production: 2,650 2,385 2,650 0 World outside 7,691 8,459 -9 USA 860 916 1,093 -21 USA 2,628 3,026 -13 3,510 3,301 3,743 -6 10,319 11,485 -10 Gas & Power(2): 500 494 588 -15 World outside 1,676 1,763 -5 USA 68 285 193 -65 USA 474 291 +63 568 779 781 -27 2,150 2,054 +5 Oil Products (CCS basis): 1,316 1,827 1,665 -21 World outside 4,301 4,068 +6 USA 335 1,109 495 -32 USA 1,774 1,490 +19 1,651 2,936 2,160 -24 6,075 5,558 +9 Chemicals (CCS basis): 368 454 348 +6 World outside 1,291 830 +56 USA (8) 40 (13) USA 43 (8) 360 494 335 +7 1,334 822 +62 6,089 7,510 7,019 -13 TOTAL OPERATING 19,878 19,919 SEGMENTS Corporate(2): 122 158 37 Interest and 863 75 investment income/(expense) 57 20 (19) Currency 123 20 exchange gains/(losses) 234 (1) 248 Other – 405 (50) including taxation 413 177 266 1,391 45 Minority (110) (131) (337) interest (389) (614) 6,392 7,556 6,948 -8 CCS EARNINGS 20,880 19,350 +8 Estimated CCS adjustment for Oil Products and 524 1,111 (1,006) Chemicals 1,984 809 Income attributable to shareholders of Royal Dutch 6,916 8,667 5,942 +16 Shell plc 22,864 20,159 +13 (1) Q3 on Q3 change
(2) As from 2007, the segment Other Industry and Corporate has been renamed as Corporate. Its earnings no longer include the results generated by the Wind and Solar businesses, which were previously reported as part of Other Industry segments, but continue to include some non-material businesses. The Wind and Solar businesses earnings are, as from 2007, reported under the Gas & Power segment. For comparison purposes, the third quarter 2006 and the nine months period of 2006 results were reclassified and are impacted by $(6) million and $(14) million in the Gas & Power segment and by $6 million and $14 million in the Corporate segment, respectively.
Summarised balance sheet (see notes 1 and 6) $ million Sep 30 Jun 30 Sep 30 ASSETS 2007 2007 2006 Non-current assets: Intangible assets 5,307 5,126 4,697 Property, plant and equipment 96,611 90,584 96,133 Investments: equity accounted investments 28,717 27,185 19,453 financial assets 2,987 2,954 3,914 Deferred tax 3,375 3,108 2,664 Prepaid pension costs 5,045 4,772 3,459 Other 5,903 5,548 4,598 ______________ ______________ _____________ 147,945 139,277 134,918 ______________ ______________ _____________ Current assets: Inventories 27,906 26,497 23,391 Accounts receivable 61,636 60,649 63,895 Cash and cash equivalents 14,092 15,117 11,240 ______________ ______________ _____________ 103,634 102,263 98,526 ______________ ______________ _____________ TOTAL ASSETS 251,579 241,540 233,444 ============= ============= ============ LIABILITIES Non-current liabilities: Debt 12,660 12,236 7,665 Deferred tax 13,665 13,159 12,485 Retirement benefit 6,449 6,282 6,298 obligations Other provisions 12,467 10,877 8,793 Other 3,797 3,784 4,346 ______________ ______________ _____________ 49,038 46,338 39,587 ______________ ______________ ______________ Current liabilities Debt 4,683 5,266 6,395 Accounts payable and accrued 63,224 61,978 64,445 liabilities Taxes payable 12,144 11,214 10,679 Retirement benefit 338 324 284 obligations Other provisions 2,126 2,076 1,763 ______________ ______________ _____________ 82,515 80,858 83,566 ______________ ______________ _____________ TOTAL LIABILITIES 131,553 127,196 123,153 ______________ ______________ _____________ Equity attributable to 118,194 112,621 101,604 shareholders of Royal Dutch Shell plc Minority interest 1,832 1,723 8,687 ______________ ______________ _____________ TOTAL EQUITY 120,026 114,344 110,291 ______________ ______________ _____________ TOTAL LIABILITIES AND EQUITY 251,579 241,540 233,444 ============= ============= ============ Summarised statement of cash flows (see notes 1 and 7) $ million NINE MONTHS Q3 Q2 Q3 2007 2007 2006 2007 2006 CASH FLOW FROM OPERATING ACTIVITIES: Income for the 7,041 8,811 6,255 period 23,293 20,798 Adjustment for: 4,798 5,460 4,403 Current taxation 14,525 14,181 Interest 126 130 145 (income)/expense 454 498 Depreciation, depletion and 2,842 3,238 3,365 amortisation 9,340 9,309 (Profit)/loss on (55) (1,133) (86) sale of assets (1,550) (279) Decrease/(increase) in net working (728) (1,704) 560 capital (2,831) (4,695) Share of profit of equity accounted (1,912) (2,138) (1,358) investments (5,858) (5,010) Dividends received from equity accounted 1,567 1,519 1,450 investments 4,673 4,066 Deferred taxation (109) 214 133 and other provisions (47) 1,614 346 (676) (299) Other (777) (317) Cash flow from operating activities 13,916 13,721 14,568 (pre-tax) 41,222 40,165 (4,777) (4,873) (4,489) Taxation paid (12,054) (14,428) Cash flow from 9,139 8,848 10,079 operating activities 29,168 25,737 CASH FLOW FROM INVESTING ACTIVITIES: (5,550) (5,652) (5,408) Capital expenditure (16,563) (15,857) Investments in equity accounted (644) (319) (126) investments (1,333) (534) Proceeds from sale 174 6,270 289 of assets 6,824 1,006 Proceeds from sale of equity accounted 57 279 37 investments 451 81 Proceeds from sale of / (additions to) financial 35 585 (22) assets 1,175 (33) 292 295 285 Interest received 872 759 Cash flow from (5,636) 1,458 (4,945) investing activities (8,574) (14,578) CASH FLOW FROM FINANCING ACTIVITIES: Net increase/(decrease) in debt with maturity period 554 (1,185) (732) within three months (290) (49) Other debt: New – 1,634 191 borrowings 4,396 2,073 (1,235) (274) (302) Repayments (3,122) (1,360) (282) (290) (330) Interest paid (923) (952) Change in minority (10) (3,585) 287 interests (6,705) 1,070 Net issue/(repurchase) (1,463) (900) (2,801) of shares (2,849) (6,657) Dividends paid to: Shareholders of Royal Dutch Shell (2,283) (2,300) (2,083) plc (6,683) (6,012) (67) (77) (53) Minority interest (186) (258) Treasury shares: Net sales/(purchases) and dividends 200 568 149 received 752 375 Cash flow from (4,586) (6,409) (5,674) financing activities (15,610) (11,770) Currency translation differences relating to cash and 58 36 6 cash equivalents 106 121 INCREASE/(DECREASE) IN CASH AND CASH (1,025) 3,933 (534) EQUIVALENTS 5,090 (490) Cash and cash equivalents at 15,117 11,184 11,774 beginning of period 9,002 11,730 Cash and cash equivalents at end 14,092 15,117 11,240 of period 14,092 11,240 Operational data – Upstream QUARTERS NINE MONTHS Q3 Q2 Q3 2007 2007 2006 %(1) 2007 2006 % CRUDE OIL thousand b/d PRODUCTION thousand b/d 406 442 433 Europe 432 484 333 305 346 Africa 326 335 Asia 214 235 254 Pacific 227 239 Middle East, Russia, 445 428 489 CIS 431 446 314 328 353 USA 328 313 Other Western 80 79 81 Hemisphere 80 82 Total crude oil production excluding 1,792 1,817 1,956 oil sands 1,824 1,899 Production from oil 82 91 98 sands 90 74 Total crude oil production including 1,874 1,908 2,054 -9 oil sands 1,914 1,973 -3 NATURAL GAS million scf/d2 PRODUCTION million scf/d(2) AVAILABLE FOR SALE 2,231 2,496 2,125 Europe 2,939 3,521 623 601 475 Africa 581 467 Asia 2,587 2,414 2,356 Pacific 2,486 2,408 Middle East, Russia, 248 251 273 CIS 253 299 1,131 1,091 1,186 USA 1,128 1,160 Other Western 509 514 527 Hemisphere 499 510 7,329 7,367 6,942 +6 7,886 8,365 -6 TOTAL PRODUCTION IN BARRELS OF OIL thousand boe/d3 EQUIVALENT thousand boe/d(3) 790 872 800 Europe 939 1,091 440 409 428 Africa 426 416 Asia 660 651 660 Pacific 656 654 Middle East, Russia, 488 471 536 CIS 474 497 509 516 557 USA 522 513 Other Western 168 168 172 Hemisphere 166 170 Total production excluding 3,055 3,087 3,153 oil sands 3,183 3,341 82 91 98 Oil sands 90 74 Total production including 3,137 3,178 3,251 -4 oil sands 3,273 3,415 -4 (1) Q3 on Q3 change (2) scf/d = standard cubic feet per day; 1 standard cubic foot = 0.0283 cubic metre (3) Natural gas converted to oil equivalent at 5.8 million scf/d = thousand boe/d Operational data – Downstream QUARTERS NINE MONTHS Q3 Q2 Q3 2007 2007 2006 %(1) 2007 2006 % thousand b/d thousand b/d REFINERY PROCESSING INTAKE 1,813 1,713 1,758 Europe 1,705 1,708 Other Eastern 852 810 797 Hemisphere 808 814 851 905 965 USA 883 964 Other Western 371 378 387 Hemisphere 372 366 _________ _________ _________ _________ _________ 3,887 3,806 3,907 -1 3,768 3,852 -2 _________ _________ _________ _________ _________ OIL SALES 2,176 2,224 2,256 Gasolines 2,221 2,198 768 731 750 Kerosenes 740 754 2,396 2,238 2,074 Gas/Diesel oils 2,250 2,113 699 667 729 Fuel oil 682 757 717 630 712 Other products 659 669 _________ _________ _________ _________ _________ Total oil 6,756 6,490 6,521 products (*) 6,552 6,491 2,477 2,673 2,442 Crude oil 2,601 2,482 _________ _________ _________ _________ _________ 9,233 9,163 8,963 +3 Total oil sales 9,153 8,973 +2 _________ _________ _________ _________ _________ (*)Comprising: 1,903 1,826 1,948 Europe 1,855 1,973 Other Eastern 1,279 1,238 1,215 Hemisphere 1,254 1,220 1,544 1,518 1,506 USA 1,488 1,495 Other Western 676 679 658 Hemisphere 669 658 1,354 1,229 1,194 Export sales 1,286 1,145 CHEMICAL SALES VOLUMES BY MAIN PRODUCT CATEGORY thousand tonnes (2)(**) thousand tonnes 3,302 3,222 3,430 Base chemicals 9,804 10,648 First line 2,399 2,429 2,200 derivatives 7,110 6,776 1 2 6 Other 8 23 _________ _________ _________ _________ _________ 5,702 5,653 5,636 +1 16,922 17,447 -3 _________ _________ _________ _________ _________ (**)Comprising: 2,225 2,220 2,232 Europe 6,718 7,128 Other Eastern 1,376 1,380 1,385 Hemisphere 4,009 4,199 1,923 1,873 1,851 USA 5,667 5,639 Other Western 178 180 168 Hemisphere 528 481 (1) Q3 on Q3 change (2) Excluding volumes sold by equity accounted investments, chemical feedstock trading and by-products. Capital investment QUARTERS $ million NINE MONTHS Q3 Q2 Q3 2007 2007 2006 2007 2006 Capital expenditure: Exploration & Production: World 2,956 2,702 3,425 outside USA 8,898 11,020 721 774 519 USA 2,082 1,312 ___________ ___________ ___________ ____________ ________ 3,677 3,476 3,944 10,980 12,332 ___________ ___________ ___________ ____________ ________ Gas & Power1: World 706 711 600 outside USA 2,074 1,245 1 2 6 USA 4 15 ___________ ___________ ___________ ____________ ________ 707 713 606 2,078 1,260 ___________ ___________ ___________ ____________ ________ Oil Products: Refining: World 247 355 251 outside USA 862 866 49 109 75 USA 339 193 ___________ ___________ ___________ ____________ ________ 296 464 326 1,201 1,059 ___________ ___________ ___________ ____________ ________ Marketing: World 523 285 569 outside USA 1,022 1,072 31 23 36 USA 68 80 ___________ ___________ ___________ ____________ ________ 554 308 605 1,090 1,152 ___________ ___________ ___________ ____________ ________ Chemicals: World 312 184 166 outside USA 649 265 65 96 53 USA 244 150 ___________ ___________ ___________ ____________ ________ 377 280 219 893 415 ___________ ___________ ___________ ____________ ________ 101 75 (4) Corporate1: 221 15 ___________ ___________ ___________ ____________ ________ TOTAL CAPITAL 5,712 5,316 5,696 EXPENDITURE 16,463 16,233 ___________ ___________ ___________ ____________ ________ Exploration costs: World 183 143 161 outside USA 453 414 211 46 67 USA 299 194 ___________ ___________ ___________ ____________ ________ 394 189 228 752 608 ___________ ___________ ___________ ____________ ________ New equity in equity accounted investments World 615 308 112 outside USA 1,170 311 5 3 3 USA 25 12 ___________ ___________ ___________ ____________ ________ 620 311 115 1,195 323 ___________ ___________ ___________ ____________ ________ New loans to equity accounted 24 8 11 investments 138 211 ___________ ___________ ___________ ____________ ________ TOTAL CAPITAL 6,750 5,824 6,050 INVESTMENT*2 18,548 17,375 ___________ ___________ ___________ ____________ ________ *Comprising: Exploration 4,427 3,884 4,214 & Production 12,571 13,204 901 808 658 Gas & Power1 2,441 1,411 942 777 962 Oil Products 2,418 2,279 378 280 219 Chemicals 896 465 102 75 (3) Corporate1 222 16 ___________ ___________ ___________ ____________ ________ 6,750 5,824 6,050 18,548 17,375 ___________ ___________ ___________ ____________ ________
(1) As from 2007, the segment Other Industry and Corporate has been renamed as Corporate. Its financial information no longer includes data related to the Wind and Solar businesses, which were previously reported as part of Other Industry segments, but continues to include some non-material businesses. The Wind and Solar businesses financial data are, as from 2007, reported under the Gas & Power segment. For comparison purposes, the third quarter 2006 and the nine months period of 2006 capital investment data were reclassified and are impacted by $13 million and $38 million in the Gas & Power segment and by $(13) million and $(38) million in the Corporate segment, respectively.
(2) In addition to the above amounts, see Note 6 regarding accounting impacts related to the Shell Canada minority interest acquisition. Additional segmental information1 QUARTERS $ million NINE MONTHS Q3