Royal Dutch Shell: 3rd Quarter 2009 Unaudited Results
LONDON, October 29 /PRNewswire-FirstCall/ --
- Royal Dutch Shell's Third Quarter 2009 Earnings, on a
Current Cost of Supplies (CCS) Basis, Were $3.0 Billion Compared to
$10.9 Billion a Year Ago. Basic CCS Earnings per Share Decreased by 72%
Versus the Same Quarter a Year Ago.
- Cash Flow From Operating Activities for the Third Quarter
2009 was $7.3 Billion, and Excluding net Working Capital Movements, was
$7.7 billion.
- Net Capital Investment for the Quarter was $7.4 Billion.
Total Dividends Paid to Shareholders During the Third Quarter 2009 Were
$2.7 Billion.
- Gearing at the end of the Third Quarter 2009 was 13.7%.
- A Third Quarter 2009 Dividend has been Announced of $0.42
per Share, an Increase of 5% Over the US Dollar Dividend per Share for
the Same Period in 2008.
Summary of unaudited results
Quarters $ million Nine Months
Q3 2009 Q2 2009 Q3 2008 %[1] 2009 2008 %
1,543 2,091 8,647 Upstream 5,818 21,843
1,292 (275) 2,419 Downstream 2,020 4,748
Corporate and Minority
155 524 (163) interest 789 (10)
2,990 2,340 10,903 -73 CCS earnings 8,627 26,581 -68
Estimated CCS adjustment for
257 1,482 (2,455) Downstream (see Note 2) 1,930 2,506
3,247 3,822 8,448 -62 Income attributable to 10,557 29,087 -64
shareholders
Basic CCS earnings per
0.49 0.38 1.77 -72 share($) 1.41 4.31 -67
0.04 0.24 (0.40) Estimated CCS adjustment per 0.31 0.40
share ($)
0.53 0.62 1.37 -61 Basic earnings per share ($) 1.72 4.71 -63
Cash flow from operating
7,350 919 12,601 -42 activities 15,828 33,631 -53
Cash flow from operating
1.20 0.15 2.05 -41 activities per share ($) 2.58 5.45 -53
0.42 0.42 0.40 +5 Dividend per share ($) 1.26 1.20 +5
[1] Q3 on Q3 change
“Our third quarter results were affected by the weak global economy.
Upstream and Downstream profitability has been sharply reduced compared to
year-ago levels. We see some indications that energy demand and pricing are
improving, but the outlook remains very uncertain, and we are not expecting a
quick recovery. Despite Shell’s good operating performance in this difficult
environment, we have embarked on an ambitious programme of stringent measures
to further improve our performance.”
“We continue to focus on improving our competitive cost position,
simplifying Shell, and increasing personal accountabilities. The Transition
2009 programme, which I announced earlier this year, is progressing well, and
will be completed by the end of 2009. Some 5,000 employees are leaving Shell
as a result of these changes. This represents around a 10% reduction in
employees in the redesigned divisions and corporate functions.”
“We have reduced operating costs by some
months of 2009 compared to the same period in 2008. This reduction excludes
the impact of exchange rate movements and non-cash pension costs.”
“I am pleased with the portfolio progress in the third quarter. In
ahead of schedule. In
will supply global LNG markets for decades to come.”
Voser concluded: “Our strategy remains on track, although the near-term
industry outlook remains challenging. We are taking steps to improve our
performance, to bridge the company, and our shareholders, into a period of
significant growth in the coming years.”
Third quarter portfolio developments
In
for the Gorgon LNG project (Shell share 25%). Gorgon will supply global gas
markets to at least 2050, with capacity of 15 million tonnes (100% basis) of
Liquefied Natural Gas (LNG) per year and a major carbon capture and storage
(CCS) scheme.
Shell has announced a Front-End Engineering and Design (FEED) study for a
Floating Liquefied Natural Gas (FLNG) project, with the potential to deploy
these facilities at the Prelude offshore gas discovery in
share 100%).
In the
Vito well (Shell share 55%), in sub-salt Miocene reservoirs. In offshore
western
share 25%). In the North America Haynesville and Groundbirch tight gas areas
there is ongoing encouragement from exploration and appraisal well test
results.
In
announced their intent to contribute
Quest CCS project. Quest, which is at the feasibility study stage, could
capture CO2 from the Athabasca Oil Sands Project at the Scotford Upgrader,
for underground storage.
In
production of some 400 thousand barrels of oil equivalent per day (boe/d),
and successfully ramped up production at the two LNG trains, ahead of
schedule.
Shell continues with its strategy to refocus its Downstream footprint,
and to make selective new investments in its larger, integrated refining
sites and growth markets. Some 15% of Shell’s worldwide refining capacity, or
some 600 thousand barrels per day, is earmarked for possible disposal or
conversion to oil terminals.
In
hydrodesulphurisation plant at the Pernis refinery to manufacture
cleaner-burning oil products.
In
Downstream portfolio, agreed to sell its activities for some
The retail network will continue to operate under the Shell brand. This
transaction is subject to regulatory approvals.
Key features of the THIRD quarter 2009
Third quarter 2009 CCS earnings were
the same quarter a year ago.
Third quarter 2009 reported earnings were
earnings of
Basic CCS earnings per share decreased by 72% versus the same quarter a
year ago.
Cash flow from operating activities for the third quarter 2009 was
billion
net working capital movements of
activities was
billion
Total dividends paid to shareholders during the third quarter 2009 were
Capital investment for the third quarter 2009 was
capital investment (capital investment, less divestment proceeds) for the
third quarter 2009 was
Return on average capital employed (ROACE), on a reported income basis
(see Note 3), was 4.9%.
Gearing was 13.7% at the end of the third quarter 2009 versus 6.0% at the
end of the third quarter 2008.
Upstream
Oil and gas production for the third quarter 2009 was 2,926 thousand
boe/d, in line with the same quarter last year. Underlying production
increased, compared to the third quarter 2008, with new field start-ups and
the continuing ramp-up of fields more than offsetting the impact of field
declines.
LNG sales volumes of 3.49 million tonnes were 13% higher than in the same
quarter a year ago.
Downstream
The weak global economy continued to impact downstream volumes. Oil
Products marketing sales volumes were 4% lower than in the third quarter
2008. Chemical product sales volumes in the third quarter 2009 decreased by
5% compared to the third quarter 2008.
Oil Products refinery availability was 94% compared to 88% in the third
quarter 2008. Chemicals manufacturing plant availability was 95%, 9% higher
than in the third quarter 2008. Third quarter 2008 availability, in both Oil
Products and Chemicals, was adversely impacted by hurricanes in the
Supplementary financial and operational disclosure for the third quarter
2009 is available at http://www.shell.com/investor.
Summary of identified items
Earnings in the third quarter 2009 reflected the following items, which
in aggregate amounted to a net gain of
of
below:
Upstream earnings included a net charge of
charges related to asset impairments and restructuring provisions. These were
partly offset by gains related to tax credits, mark-to-market valuation of
certain gas contracts and the estimated fair value accounting of commodity
derivatives (see Note 7). Earnings for the third quarter 2008 included a net
gain of
Downstream earnings included a net gainof
related to the estimated fair value accounting of commodity derivatives (see
Note 7) and tax credits, which were partly offset by charges related to asset
impairments and restructuring provisions. Earnings for the third quarter 2008
included a gain of
Corporate and Minority interest earnings included a charge of
million
SUMMARY OF IDENTIFIED ITEMS[1]
Quarters $ million Nine Months
Q3 2009 Q2 2009 Q3 2008 2009 2008
Segment earnings impact of
identified items:
(123) (115) 2,368 Upstream 92 2,089
536 (678) 445 Downstream (347) (30)
(42) (17) - Corporate and Minority interest 103 -
371 (810) 2,813 CCS earnings impact (152) 2,059
[1] As from the second quarter 2009, the summary of identified
items includes the estimated fair value accounting of commodity
derivatives related to operational activities (see Note 7). For
comparison purposes, the third quarter 2008 was reclassified by a
gain of $400 million in the Upstream segment and by a gain of
$350 million in the Downstream segment.
These identified items generally relate to events with an impact of more
than
additional insight into its segment earnings, CCS earnings and income
attributable to shareholders. Further additional comments on the business
segments are provided in the section ‘Earnings by Business Segment’ on page 5
and onwards.
EARNINGS BY BUSINESS SEGMENT
UPSTREAM
Quarters $ million Nine Months
Q3 2009 Q2 2009 Q3 2008 %[1] 2009 2008 %
1,543 2,091 8,647 -82 Upstream earnings 5,818 21,843 -73
4,168 4,006 12,496 -67 Upstream cash flow from 13,952 34,482 -60
operations
5,879 5,497 11,614 -49 Capital investment 17,269 25,215 -32
1,648 1,647 1,689 -2 Crude oil production 1,670 1,770 -6
(thousand b/d)[2]
Natural gas production
available for sale
7,411 7,614 7,207 +3 (million scf/d) 8,250 8,246 -
Barrels of oil equivalent
2,926 2,960 2,931 - (thousand boe/d) 3,092 3,192 -3
3.49 2.89 3.10 +13 LNG sales volumes (million 9.44 9.69 -3
tonnes)
[1] Q3 on Q3 change
[2] Includes oil sands bitumen production
Third quarter Upstream earnings were
million
identified items, compared to a net gain of
quarter 2008 (see page 4).
Upstream earnings compared to the third quarter 2008 reflected the impact
of significantly lower oil and gas prices. These impacts were partially
offset by increased gas sales volumes, including the effect of the successful
start-up of the Sakhalin II project, and lower royalty and tax expenses
compared to the third quarter 2008.
Third quarter 2009 oil prices increased from second quarter 2009 levels.
However mainly due to contractual time lag effects the third quarter 2009
global natural gas realisations remained similar to second quarter 2009
levels. A generally weak environment for natural gas marketing and trading
activities also affected the third quarter 2009 earnings.
Global liquids realisations were 43% lower than in the third quarter
2008. Global gas realisations were 42% lower than a year ago. In the
Americas, gas realisations decreased by 64% whereas outside the Americas, gas
realisations decreased by 29%. LNG realised prices compared to the third
quarter 2008 decreased following trends in LNG price markers.
Third quarter 2009 production was 2,926 thousand boe/d compared to 2,931
thousand boe/d a year ago. Crude oil production was down 2% and natural gas
production increased by 3% compared to the third quarter 2008.
Underlying production, compared to the third quarter 2008, increased by
some 180 thousand boe/d from new field start-ups and the continuing ramp-up
of fields over the last 12 months, more than offsetting field declines.
LNG sales volumes of 3.49 million tonnes were 13% higher than in the same
quarter a year ago. Volumes reflected the ramp-up in sales volumes from the
Sakhalin II LNG project and Train 5 at the North West Shelf project, which
were partly offset by lower volumes from Nigeria LNG and reduced Asia Pacific
LNG demand.
DOWNSTREAM
Quarters $ million Nine Months
Q3 2009 Q2 2009 Q3 2008 %1 2009 2008 %
1,292 (275) 2,419 -47 Downstream CCS earnings 2,020 4,748 -57
251 1,539 (2,543) Estimated CCS adjustment 1,986 2,540
(see Note 2)
1,543 1,264 (123) - Downstream earnings 4,006 7,288 -45
3,157 (1,754) 2,234 +41 Downstream cash flow from 1,813 1,206 +50
operations
1,819 2,492 1,598 +14 Capital investment 5,432 3,931 +38
2,997 3,136 3,273 -8 Refinery plant intake 3,095 3,476 -11
(thousand boe/d)
6,121 6,174 6,403 -4 Oil Products sales volumes 6,109 6,625 -8
(thousand b/d)
4,723 4,459 4,989 -5 Chemicals sales volumes 13,476 15,844 -15
(thousand tonnes)
[1] Q3 on Q3 change
Third quarter Downstream CCS earnings were
million
the third quarter 2008 (see page 4).
Downstream CCS earnings compared to the third quarter 2008 reflected
substantially lower realised refining margins and lower refinery plant intake
volumes, and lower marketing and chemicals margins which were partly offset
by lower costs.
Oil Products marketing CCS earnings compared to the same period a year
ago increased due to higher lubricants contributions and higher retail
earnings, which were partly offset by lower B2B and trading contributions.
Oil Products sales volumes decreased by 4% compared to the same quarter
last year, mainly because of lower B2B volumes, partly offset by increased
retail sales volumes, mostly in the Americas and in the
Industry refining margins significantly declined on a worldwide basis
compared to the same period a year ago resulting in reduced realised margins.
Reduced demand for refined products led to lower refinery plant intake
volumes. Refinery plant intake volumes decreased by 8% compared to the same
quarter last year.
Refinery availability was 94% compared to 88% in the third quarter 2008,
which was impacted by hurricanes in the
Chemicals CCS earnings compared to the third quarter 2008 reflected
improved income from equity accounted investments and lower realised
chemicals margins.
Chemicals sales volumes decreased by 5% compared to the same quarter last
year. Chemicals manufacturing plant availability increased to 95%, some 9%
higher than in the third quarter 2008, which was impacted by hurricanes in
the
CORPORATE AND MINORITY INTEREST
Quarters $ million Nine Months
Q3 2009 Q2 2009 Q3 2008 2009 2008
202 548 (43) Corporate 883 304
(47) (24) (120) Minority interest (94) (314)
155 524 (163) Corporate and Minority interest 789 (10)
Third quarter Corporate earnings and Minority interest were
compared to a loss of
for the third quarter 2009 included a charge of
identified items (see page 4).
Corporate earnings compared to the third quarter 2008 reflected mainly
currency exchange gains, which were partly offset by lower net interest
income. Currency exchange gains in the third quarter 2009 were
compared to losses of
FORTHCOMING EVENTS
Fourth quarter and full year 2009 results, and fourth quarter 2009
dividend, are expected to be announced on
2010 results and first quarter 2010 dividend, are expected to be announced on
are expected to be announced on
third quarter 2010 dividend, are expected to be announced on
2010
APPENDIX: ROYAL DUTCH SHELL FINANCIAL REPORT AND TABLES
Statement of income[3]
Quarters $ million Nine Months
Q3 2009 Q2 2009 Q3 2008 %[1] 2009 2008 %
75,009 63,882 131,567 Revenue 197,113 377,288
Share of profit of
equity-accounted
746 1,535 2,000 investments 3,209 7,096
Interest and other
271 826 1,911 income[5] 1,388 3,854
Total revenue and other
76,026 66,243 135,478 income 201,710 388,238
55,781 46,127 104,658 Purchases[6] 142,196 292,644
Production and
5,885 6,092 6,619 manufacturing expenses 17,919 18,819
Selling, distribution and
4,306 3,943 4,123 administrative expenses 11,898 12,471
318 269 289 Research and development 794 846
637 524 731 Exploration 1,509 1,360
Depreciation, depletion
4,341 3,279 3,387 and amortisation[4] 10,710 9,972
189 166 204 Interest expense 538 836
4,569 5,843 15,467 -70 Income before taxation 16,146 51,290 -69
1,281 1,940 6,987 Taxation 5,439 21,855
3,288 3,903 8,480 -61 Income for the period 10,707 29,435 -64
Income attributable to
41 81 32 minority interest 150 348
3,247 3,822 8,448 -62 Income attributable to 10,557 29,087 -64
Royal Dutch Shell plc
shareholders
Estimated CCS adjustment
(257) (1,482) 2,455 for Downstream (1,930) (2,506)
2,990 2,340 10,903 -73 CCS earnings 8,627 26,581 -68
Basic earnings per share[3]
Quarters Nine Months
Q3 2009 Q2 2009 Q3 2008 2009 2008
0.53 0.62 1.37 Earnings per share ($) 1.72 4.71
0.49 0.38 1.77 CCS earnings per share ($) 1.41 4.31
Diluted earnings per share[3]
Quarters Nine Months
Q3 2009 Q2 2009 Q3 2008 2009 2008
0.53 0.62 1.37 Earnings per share ($) 1.72 4.70
0.49 0.38 1.77 CCS earnings per share ($) 1.41 4.30
SHARES[2,3]
Millions Nine Months
Q3 2009 Q2 2009 Q3 2008 2009 2008
Weighted average number of shares
as the basis for:
6,127.0 6,126.7 6,147.3 Basic earnings per share 6,125.1 6,171.0
6,131.0 6,129.4 6,159.8 Diluted earnings per share 6,128.2 6,186.2
Basic shares outstanding at the 6,125.2 6,133.4
6,125.2 6,127.4 6,133.4 end of the period
[1] Q3 on Q3 change.
[2] Royal Dutch Shell ordinary shares of EUR0.07 each.
[3] See notes 1, 2 and 6, where applicable.
[4] Includes impairment charges of $1,208 million for the third
quarter 2009, $310 million for the second quarter 2009 and $144
million for the third quarter 2008.
[5] Includes gains/(losses) on sale of assets.
[6] Includes inventory movements.
Summarised balance sheet (see notes 1 and 5)
$ million
Sept 30, Jun 30, Sept 30,
2009 2009 2008
Assets
Non-current assets:
Intangible assets 5,288 5,197 5,541
Property, plant and equipment 127,207 121,708 114,193
Investments:
- equity-accounted investments 30,265 29,986 31,630
- financial assets 4,187 4,130 2,952
Deferred tax 4,309 4,144 3,978
Pre-paid pension costs 9,691 9,640 6,205
Other 9,646 8,886 6,219
190,593 183,691 170,718
Current assets:
Inventories 25,420 24,921 33,442
Accounts receivable 66,966 72,529 90,100
Cash and cash equivalents 14,275 10,596 7,821
106,661 108,046 131,363
Total assets 297,254 291,737 302,081
Liabilities
Non-current liabilities:
Debt 31,522 25,469 10,742
Deferred tax 13,917 13,726 14,688
Retirement benefit obligations 5,918 5,787 5,961
Other provisions 13,523 13,259 13,499
Other 4,719 4,619 4,088
69,599 62,860 48,978
Current liabilities:
Debt 4,774 4,621 5,984
Accounts payable and
accrued liabilities 69,489 76,298 88,387
Taxes payable 11,879 10,205 15,632
Retirement benefit obligations 435 410 369
Other provisions 2,566 2,221 2,356
89,143 93,755 112,728
Total liabilities 158,742 156,615 161,706
Equity attributable to Royal
Dutch Shell plc shareholders 136,863 133,509 138,469
Minority interest 1,649 1,613 1,906
Total equity 138,512 135,122 140,375
Total liabilities and equity 297,254 291,737 302,081
Summarised statement of cash flows (see note 1)
Quarters $ million Nine Months
Q3 2009 Q2 2009 Q3 2008 2009 2008
Cash flow from operating
activities:
3,288 3,903 8,480 Income for the period 10,707 29,435
Adjustment for:
1,677 2,367 6,935 - Current taxation 5,888 22,041
157 370 178 - Interest (income)/expense 857 625
- Depreciation, depletion and
4,341 3,279 3,387 amortisation[1] 10,710 9,972
- (Gains)/losses on sale of
(81) (138) (1,799) assets (366) (2,837)
- Decrease/(increase) in net
(384) (2,835) 2,215 working capital (3,584) (6,752)
- Share of profit of
(746) (1,535) (2,000) equity-accounted investments (3,209) (7,096)
993 1,242 2,604 - Dividends received from 3,212 6,803
equity-accounted
investments
- Deferred taxation and other
(401) (951) (95) provisions (987) 75
332 (1,931) (618) - Other (1,458) (514)
Cash flow from operating
9,176 3,771 19,287 activities (pre-tax) 21,770 51,752
(1,826) (2,852) (6,686) Taxation paid (5,942) (18,121)
Cash flow from operating
7,350 919 12,601 activities 15,828 33,631
Cash flow from investing
activities:
(6,219) (6,806)(12,392) Capital expenditure (19,010) (27,173)
Investments in
(448) (1,418) (555) equity-accounted investments (2,302) (1,692)
327 274 1,087 Proceeds from sale of assets 805 3,558
Proceeds from sale of
267 203 1,160 equity-accounted investments 487 1,493
Proceeds from sale of
/(additions to) financial
(16) (58) (25) assets (68) 260
118 69 267 Interest received 288 821
Cash flow from investing
(5,971) (7,736)(10,458) activities (19,800) (22,733)
Cash flow from
financing
activities:
Net increase/(decrease) in
debt with maturity period
(57) (2,046) 215 within three months (5,691) 191
5,353 7,044 238 Other debt: New borrowings 19,281 554
(241) (430) (166) Repayments (2,057) (2,309)
(86) (262) (295) Interest paid (610) (962)
23 7 (18) Change in minority interest 42 9
- - (848) Repurchase of shares - (3,271)
Dividends paid to:
- Royal Dutch Shell plc
(2,656) (2,852) (2,290) shareholders (7,913) (7,108)
(65) (69) (105) - Minority interest (164) (271)
Treasury shares:
- Net sales/(purchases) and
(17) (49) 36 dividends received 70 478
Cash flow from financing
2,254 1,343 (3,233) activities 2,958 (12,689)
Currency translation
differences relating to cash
46 109 (79) and cash equivalents 101 (44)
Increase/(decrease) in cash
3,679 (5,365) (1,169) and cash equivalents (913) (1,835)
Cash and cash equivalents at
10,596 15,961 8,990 beginning of period 15,188 9,656
Cash and cash equivalents at
14,275 10,596 7,821 end of period 14,275 7,821
[1] Includes impairment charges of $1,208 million for the third
quarter 2009, $310 million for the second quarter 2009 and $144
million for the third quarter 2008.
EQUITY (see note 5)
$ million Ordinary Treasury Other Retained Total Minority Total
share shares reserves earnings interest equity
capital
At December 31, 527 (1,867) 3,178 125,447 127,285 1,581 128,866
2008
Income for the
period - - - 10,557 10,557 150 10,707
Other
comprehensive
income - - 6,562 - 6,562 49 6,611
Capital
contributions/
(repayments)
from/to minority
shareholders and
other changes in
minority interest - - - 3 3 33 36
Dividends paid - - - (7,913) (7,913) (164) (8,077)
Treasury shares:
net sales/
(purchases) and
dividends received - 201 - - 201 - 201
Repurchases of
shares - - - - - - -
Share-based
compensation - - (22) 190 168 - 168
At September 30,
2009 527 (1,666) 9,718 128,284 136,863 1,649 138,512
$ million Ordinary Treasury Other Retained Total Minority Total
share shares reserves earnings interest equity
capital
At December 31, 536 (2,392) 14,148 111,668 123,960 2,008 125,968
2007
Income for the
period - - - 29,087 29,087 348 29,435
Other
comprehensive
income - - (4,906) - (4,906) (204) (5,110)
Capital
contributions/
(repayments)
from/to minority
shareholders and
other changes in
minority interest - - - 59 59 25 84
Dividends paid - - - (7,108) (7,108) (271) (7,379)
Treasury shares:
net sales/
(purchases) and
dividends
received - 478 - - 478 - 478
Repurchases of
shares (7) - 7 (3,085) (3,085) - (3,085)
Share-based
compensation - - (58) 42 (16) - (16)
At September 30,
2008 529 (1,914) 9,191 130,663 138,469 1,906 140,375
EXPLANATORY Notes
1. Accounting policies and basis of presentation
The quarterly financial report and tables are prepared in accordance with
the accounting policies set out in Note 2 to the Consolidated Financial
Statements of
the year ended
are in accordance with IFRS as adopted by the European Union.
This publication is unaudited and does not comprise statutory accounts.
Statutory accounts for the year ended
Board of Directors on
Companies. The report of the auditors on those accounts was unqualified, did
not include a reference to any matters to which the auditors drew attention
by way of emphasis without qualifying the report, and did not contain any
statement under sections 237(2) or (3) of the Companies Act 1985.
The presentation of the Statement of Income has been changed to provide
additional information for the evaluation of Shell’s performance. This change
provides additional information in relation to our costs and more alignment
with industry practice. The main changes are the disclosure of purchases,
production and manufacturing expenses and research and development separately
(previously disclosed within cost of sales). Depreciation, depletion and
amortisation charges previously included in cost of sales, selling,
distribution and administrative expenses and exploration are now disclosed
separately. Gains and losses on sale of assets are now included in interest
and other income.
Purchases are all costs related to the acquisition of supplies, including
those used for conversion into finished or intermediary products. Production
and manufacturing expenses are the costs of operating, maintaining and
managing production and manufacturing assets. Selling, distribution and
administrative expenses include direct and indirect costs of marketing and
selling products.
2. Earnings on an estimated current cost of supplies (CCS) basis
To facilitate a better understanding of underlying business performance,
the financial results are also analysed on an estimated current cost of
supplies (CCS) basis as applied for the Downstream segment earnings. Earnings
on an estimated current cost of supplies basis provides useful information
concerning the effect of changes in the cost of supplies on Shell’s results
of operations and is a measure to manage the performance of the Downstream
segment but is not a measure of financial performance under IFRS.
On this basis, the purchase price of the volumes sold during the period
is based on the cost of supplies during the same period after making
allowance for the estimated tax effect, instead of the first-in, first-out
(FIFO) method of inventory accounting. Earnings calculated on this basis do
not represent an application of the last-in, first-out (LIFO) inventory basis
and do not reflect any inventory drawdown effects.
3. Return on average capital employed (ROACE)
ROACE is defined as the sum of the current and previous three quarters’
income adjusted for interest expense, after tax, divided by the average
capital employed for the period.
4. Segmental reporting
Segmental reporting has been changed with effect from the third quarter
2009, in line with the change in the way Shell’s businesses are managed.
Shell now reports its business through three (previously six) reporting
segments, Upstream (previously Exploration & Production, Gas & Power and Oil
Sands), Downstream (previously Oil Products and Chemicals) and Corporate.
Corporate represents the key support functions, comprising holdings and
treasury, headquarters, central functions and Shell insurance companies.
Prior period financial information has been reclassified accordingly.
Upstream and Downstream results are presented before deduction of
minority interest and also exclude interest and other income of a
non-operational nature, interest expense, non-trading currency exchange
effects and tax on these items, which are included in the Corporate results.
With effect from the third quarter 2009, insurance premium costs (excluding
external insurance) and self insured claims are reported within the Corporate
segment; previously they were reported within the relevant business segments.
The impact of this change in allocation is a reduction of
(pre-tax) of the Corporate result in the third quarter 2009, with no effect
on Shell’s income for the period. Prior period segment results are not
reclassified (the insurance costs were
quarter 2009 and
results include equity-accounted investments and are after tax.
5. Equity
Total equity comprises equity attributable to
shareholders and to the minority interest. Other reserves comprise the
capital redemption reserve, share premium reserve, merger reserve, share plan
reserve and accumulated comprehensive income (currency translation
differences, unrealised gains/(losses) on securities and unrealised
gains/(losses) on cash flow hedges).
6. Earnings per share
Basic earnings per share is calculated by dividing the income
attributable to
weighted average number of Class A and B ordinary shares outstanding during
the period. To calculate the diluted earnings per share the weighted average
number of shares outstanding is adjusted for the number of shares related to
share option schemes.
7. Accounting for Derivatives
IFRS require that derivative instruments be recognised in the financial
statements at fair value. Any change in the current period between the
period-end market price and the contract settlement price is recognised in
income where hedge accounting is either not permitted or not applied to these
contracts.
The physical crude oil and related products held by the Downstream
business as inventory are recorded at historical cost or net realisable
value, whichever is lower, as required under IFRS. Consequently, any increase
in value of the inventory over cost is not recognised in income until the
sale of the commodity occurs in subsequent periods.
In the Downstream business, the buying and selling of commodities
includes transactions conducted through the forward markets using commodity
derivatives to reduce economic exposure. Some derivatives are associated with
a future physical delivery of the commodities.
Differences in the accounting treatment for physical inventory (at cost
or net realisable value, whichever is lower) and derivative instruments (at
fair value) have resulted in timing differences in the recognition of gains
or losses between reporting periods.
Similarly, earnings from long-term contracts held in the Upstream
business are recognised in income upon realisation. Associated commodity
derivatives are recognised at fair value as of the end of each quarter.
These differences in accounting treatment for long-term contracts (on
accrual basis) and derivative instruments (at fair value) have resulted in
timing differences in the recognition of gains or losses between the
reporting periods.
The aforementioned timing differences for Downstream and Upstream are
reported as identified items in the quarterly results and are estimates
derived from the overall portfolio of derivatives.
Certain UK gas contracts held by Upstream contain embedded derivatives or
written options, for which IFRS requires recognition at fair value, even
though they are entered into for operational purposes. The impact of the
mark-to-market calculation is also reported as an identified item in the
quarterly results.
CAUTIONARY STATEMENT
All amounts shown throughout this Report are unaudited.
Fourth quarter and full year 2009 results are expected to be announced on
The companies in which
investments are separate entities. In this document “Shell”, “Shell group”
and “Royal Dutch Shell” are sometimes used for convenience where references
are made to
the words “we”, “us” and “our” are also used to refer to subsidiaries 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. “Subsidiaries”, “Shell subsidiaries” and “Shell companies” as used
in this document refer to companies in which
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 Shell has significant influence but not control are referred to as
“associated companies” or “associates” and companies in which Shell has joint
control are referred to as “jointly controlled entities”. In this document,
associates and jointly controlled entities are also referred to as
“equity-accounted investments”. The term “Shell interest” is used for
convenience to indicate the direct and/or indirect (for example, through our
34% shareholding in Woodside Petroleum Ltd.) ownership interest held by Shell
in a venture, partnership or company, after exclusion of all third-party
interest.
This document contains forward-looking statements concerning the
financial condition, results of operations and businesses of
Shell
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
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
results to differ materially from those expressed in the forward-looking
statements included in this document, 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 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 potential litigation and regulatory effects arising from
recategorisation of reserves; (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.
All forward-looking statements contained in this document 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 factors that may affect future results
are contained in
ended
http://www.sec.gov). These factors also should be considered by the reader.
Each forward-looking statement speaks only as of the date of this document,
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
document.
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 use certain terms in this document that
SEC’s guidelines strictly prohibit us from including in filings with the SEC.
U.S. Investors are urged to consider closely the disclosure in our Form 20-F,
File No 1-32575, available on the SEC website http://www.sec.gov. You can
also obtain these forms from the SEC by calling 1-800-SEC-0330.
SOURCE