Royal Dutch Shell plc: 2nd Quarter and Half Year 2010 Unaudited Results
- Royal Dutch Shell's second quarter 2010 earnings, on a current cost of
supplies (CCS) basis, were $4.5 billion compared to $2.3 billion a year
ago. Basic CCS earnings per share increased by 95% versus the same
quarter a year ago.
- Second quarter 2010 CCS earnings, excluding identified items
(see Key Features of Second Quarter 2010), were $4.2 billion compared to
$3.1 billion in the second quarter 2009.
- Cash flow from operating activities for the second quarter
2010 was $8.1 billion.
- Net capital investment for the quarter was $5.6 billion.
Total dividends paid to shareholders during the second quarter 2010 were
$2.4 billion.
- Gearing at the end of the second quarter 2010 was 16.9%.
- A second quarter 2010 dividend has been announced of $0.42 per ordinary
share. The Board intends to introduce an optional Scrip Dividend
Programme in relation to the third quarter 2010 financial results.
Summary of unaudited results
Quarters $ million Half year
Q2 2010 Q1 2010 Q2 2009 %(1) 2010 2009 %
3,270 4,415 2,091 Upstream 7,685 4,275
1,471 743 (275) Downstream 2,214 728
Corporate and
(212) (261) 524 Non-controlling interest (473) 634
4,529 4,897 2,340 +94 CCS earnings 9,426 5,637 +67
Estimated CCS adjustment for
(136) 584 1,482 Downstream 448 1,673
4,393 5,481 3,822 +15 Income attributable to 9,874 7,310 +35
shareholders
+95 Basic CCS earnings per share +67
0.74 0.80 0.38 ($) 1.54 0.92
(0.02) 0.09 0.24 Estimated CCS adjustment per 0.07 0.27
share ($)
0.72 0.89 0.62 +16 Basic earnings per share ($) 1.61 1.19 +35
Cash flow from operating +52
8,096 4,782 919 +781 activities 12,878 8,478
+780 Cash flow from operating +52
1.32 0.78 0.15 activities per share ($) 2.10 1.38
0.42 0.42 0.42 - Dividend per share ($) 0.84 0.84 -
(1) Q2 on Q2 change.
The information in this results announcement reflects the consolidated
financial position and results of Royal Dutch Shell plc (“Royal Dutch
Shell”). The information in this document also represents Royal Dutch Shell’s
half-yearly financial report for the purposes of the Disclosure and
Transparency Rules made by the UK Financial Services Authority. As such: (1)
the interim management report can be found on pages 3, 6 to 8 and 15 to 16;
(2) the condensed set of financial statements on pages 9 to 14; and (3) the
directors’ responsibility statement and auditors’ independent review can be
found on pages 17 and 18. All amounts shown throughout this report are
unaudited. Company No. 4366849, Registered Office: Shell Centre,
7NA,
Royal Dutch Shell Chief Executive Officer
“We are delivering on our strategy. Shell’s cost programmes have
delivered over
have underpinned a 5% increase in oil and gas production for the quarter, a
34% increase in LNG sales volumes, and an 18% increase in chemicals sales
volumes. This is a good performance from Shell, despite today’s challenging
macro economic conditions. We are on track for growth.
We are making good progress on delivering performance improvement, a new
wave of production growth, and maturing the next generation of growth options
for shareholders.
The corporate restructuring programme we announced a year ago, called
Transition 2009, is now complete. The three new businesses, created in
Transition 2009 – Upstream Americas, Upstream International, and Projects &
Technology – are a powerful platform for a faster implementation of strategy,
clearer accountabilities, and a competitive focus. Transition 2009,
restructuring in corporate functions, and our initiatives in Downstream have
resulted in annualised underlying cost savings of over
exceeding the target by around 15% and some 6 months ahead of schedule.
Approximately 7,000 employees will leave Shell as a result of these changes,
some 18 months earlier than planned.
We have exceeded the targets we set last year for costs and staff
reduction. We are putting new emphasis on “continuous improvement”, which
will drive competitive financial and operating performance through the
business cycle, and build on Shell’s high safety and environmental standards.
Capital efficiency is an important part of our continuous improvement drive.
We will exit from non-core positions, both in Upstream and Downstream as we
refocus our portfolio on material positions with growth potential. We expect
Shell is in a delivery window for new growth. Gbaran-Ubie, on stream at
the end of the second quarter, the 4th of 13 new project start-ups in the
2010-11 timeframe, which underpin Shell’s cash flow and production growth
targets for 2012.”
Turning to longer term opportunities, Voser commented: “We continue to
make good progress generating growth options. During the second quarter, we
announced the acquisition of substantial new positions in US on-shore gas,
with the purchase of East Resources, Inc., which is a leader in the Marcellus
shale, and new acreage in the liquids-rich Eagle Ford shale gas play in
Texas
We continue to see mixed signals in the global economy. Oil prices have
remained firm so far this year, but refining margins, oil products demand and
natural gas spot prices all remain under pressure. Our earnings and cashflow
have rallied from 2009′s lows, but the outlook remains uncertain.”
Commenting on the industry situation in the
“The BP Macondo blow-out and the related
tragedy for everyone affected. We were all shocked by the loss of life there,
and the on-going and wide-spread impacts from the spill. World-wide deep
water production has an important role to play in the global energy supply
equation, with potential for production growth with supply diversity, and
sustained investment in technology, jobs and services. The recent
announcement of Shell’s participation in a new,
spill containment system, is an example of where we are working with
governments and partners to improve the industry’s capabilities. “
Voser concluded: “I am pleased with the results in the second quarter
2010. We are putting the priority on a sharper delivery of our strategy,
aiming for profitable growth and a more competitive performance from Shell.”
SECOND QUARTER 2010 portfolio developments(1)
Upstream
In the
Resources, Inc. for a cash consideration of
focus on the Marcellus shale, in the northeast
2,600 square kilometres (650,000 net acres) of highly contiguous acreage and
4,250 square kilometres (1.05 million net acres) of acreage overall. In
addition, as part of its on-going acreage build strategy, Shell has acquired
some 1,000 square kilometres (250,000 net acres) of mineral rights in the
Eagle Ford shale play, in
to yield over 16 trillion cubic feet of gas equivalent (tcfe).
In
in the Niger Delta (Shell share 30%). When fully operational next year, it
will be capable of producing 1 billion standard cubic feet of gas per day
(scf/d) and some 70 thousand barrels of oil per day (b/d).
Also in
(SPDC, Shell share 30%) is working on a series of projects that will lead to
more than three quarters of its production potential being covered by
associated gas gathering (AGG) facilities. Work has now restarted at many
projects previously delayed by funding or security problems. The projects,
which will cost more than
Niger Delta. The gas will then be available for use in power stations and by
industry.
In
(EPSA) for Qatar Block D. Under the agreement, the partners will jointly
explore for natural gas in an area of 8,089 square kilometres onshore and
offshore
a five-year First Exploration Period.
In
Development (SSPD), previously 100% owned, to China National Petroleum
Corporation (CNPC). SSPD has interests in three production licences covering
some 40 oil fields, with production in 2009 of approximately 20 thousand
barrels of oil equivalent per day (boe/d; Shell share).
During the second quarter 2010, Shell participated in 2 exploration
discoveries, and one appraisal, all in
strong results from exploration and appraisal drilling in the North American
Haynesville tight-gas area. Shell also increased its overall acreage
position, completing acquisitions of new exploration licences in
licences in
Downstream
In
agreement for the continued use of the Shell brand in the Greek market, for a
final sale price of around
commercial fuels, bitumen, chemicals, supply and distribution, and liquefied
petroleum gas (LPG) businesses, as well as a lubricants oil blending plant.
(1) See below for first quarter 2010 portfolio developments.
Key features of the SECOND quarter 2010
- Second quarter 2010 CCS earnings were $4,529 million, 94% higher than
in the same quarter a year ago.
- Second quarter 2010 CCS earnings, excluding identified items (see
below), were $4,208 million compared to $3,150 million in the second
quarter 2009.
- Second quarter 2010 reported earnings were $4,393 million compared to
$3,822 million in the same quarter a year ago.
- Basic CCS earnings per share increased by 95% versus the same quarter
a year ago.
- Cash flow from operating activities for the second quarter 2010 was
$8.1 billion, compared to $0.9 billion in the same quarter last year.
Excluding net working capital movements, cash flow from operating
activities in the second quarter 2010 was $8.6 billion, compared to $3.8
billion in the same quarter last year.
- Total dividends paid to shareholders during the second quarter 2010
were $2.4 billion.
- Capital investment for the second quarter 2010 was $6.8 billion. Net
capital investment (capital investment, less divestment proceeds) for
the second quarter 2010 was $5.6 billion.
- Return on average capital employed (ROACE), on a reported income basis,
was 9.1%.
- Gearing was 16.9% at the end of the second quarter 2010
versus 12.6% at the end of the second quarter 2009.
Upstream
- Oil and gas production for the second quarter 2010 was 3,110
thousand boe/d, 5% higher than in the second quarter 2009.
Production for the second quarter 2010 excluding the impact of
divestments, production sharing contracts (PSC) pricing effects and OPEC
quota restrictions was 6% higher compared to the same period last year.
Underlying production in the second quarter increased by some
160 thousand boe/d from new field start-ups and the continuing ramp-up
of fields, more than offsetting the impact of field declines.
- LNG sales volumes of 3.88 million tonnes in the second
quarter 2010 were 34% higher than in the same quarter a year ago.
Downstream
- Oil Products sales volumes were 7% higher than in the second
quarter 2009. Chemical product sales volumes in the second quarter 2010
increased by 18% compared to the second quarter 2009.
- Oil Products refinery availability was 94% compared to 95%
in the second quarter 2009. Chemicals manufacturing plant availability
was 95%, 7 percentage points higher than in the second quarter 2009.
- Supplementary financial and operational disclosure for the
second quarter 2010 is available at www.shell.com/investor.
Summary of identified items
Earnings in the second quarter 2010 reflected the following items, which
in aggregate amounted to a net gain of
of
- Upstream earnings included a net gain of $10 million, reflecting
revisions to redundancy provisions and tax credits, which were partly
offset by a net loss related to changes in the mark-to-market valuation
and accounting of certain gas contracts, cost impacts from the US
offshore drilling moratorium and an asset impairment. Earnings for the
second quarter 2009 included a net charge of $115 million.
- Downstream earnings included a net gainof $311 million, reflecting a
gain from a divestment, a gain related to the estimated fair value
accounting of commodity derivatives (see Note 5) and revisions to
redundancy provisions, partly offset by an impairment charge. Earnings for
the second quarter 2009 included a net charge of $678 million.
- Corporate earnings and Non-controlling interest for the second quarter
2009 included a charge of $17 million.
Summary OF IDENTIFIED ITEMS
Quarters(1) $ million Half year
Q2 2010 Q1 2010 Q2 2009 2010 2009
Segment earnings impact of
identified items:
10 110 (115) Upstream 120 215
311 (35) (678) Downstream 276 (883)
- - (17) Corporate and Non-controlling - 145
interest
321 75 (810) CCS earnings impact 396 (523)
(1) See below for first quarter 2010 identified items description.
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’.
Earnings BY BUSINESS segment
Upstream
Quarters $ million Half year
Q2 2010 Q1 2010 Q2 2009 %(1) 2010 2009 %
3,270 4,415 2,091 +56 Upstream earnings 7,685 4,275 +80
5,411 7,726 4,006 +35 Upstream cash flow from 13,137 9,784 +34
operations
5,664 5,482 5,139 +10 Net capital investment 11,146 10,975 +2
1,655 1,733 1,648 - Crude oil production 1,694 1,682 +1
(thousand b/d)
8,440 10,795 7,544 +12 Natural gas production 9,611 8,606 +12
available for sale (million
scf/d)
+5 Barrels of oil equivalent 3,351 3,166 +6
3,110 3,594 2,949 (thousand boe/d)
3.88 4.23 2.89 +34 LNG sales volumes (million 8.11 5.95 +36
tonnes)
(1) Q2 on Q2 change
Second quarter Upstream earnings were
million
identified items, compared to a net charge of
quarter 2009 (see page 5).
Upstream earnings compared to the second quarter 2009 reflected the
effect of higher realised crude oil and natural gas prices on revenues,
higher LNG realisations, higher natural gas production volumes and increased
LNG sales volumes, which were partially offset by increased production taxes
and the impact of maintenance activities on oil production volumes. In
addition, a generally weak environment for trading activities affected the
second quarter 2010 earnings.
Global liquids realisations were 41% higher than in the second quarter
2009. Global gas realisations were 15% higher than in the same quarter a year
ago. In the Americas, gas realisations increased by 22%. Outside the
Americas, gas realisations increased by 13% whereas European gas realisations
decreased by 9%.
Second quarter 2010 production was 3,110 thousand boe/d compared to 2,949
thousand boe/d a year ago. Crude oil production was in line and natural gas
production was up 12% compared to the second quarter 2009. Second quarter
2010 oil production volumes compared to the same quarter in 2009 were some
100 thousand boe/d lower as a consequence of maintenance activities mainly at
the Athabasca Oil Sands project in
of Mexico and the EA Field in
Underlying production, compared to the second quarter 2009, increased by
some 160 thousand boe/d from new field start-ups and the continuing ramp-up
of fields over the past 12 months, more than offsetting field declines.
LNG sales volumes of 3.88 million tonnes were 34% higher than in the same
quarter a year ago. Volumes reflected the continued ramp-up in sales volumes
from the Sakhalin II LNG project and improved volumes from Nigeria LNG.
Half year Upstream earnings were
million
identified items, compared to a net gain of
2009 (see page 5).
Upstream earnings compared to the half year 2009 reflected the effect of
significantly higher realised oil prices on revenues, increased LNG sales
volumes and realisations, and higher natural gas production volumes. These
were partially offset by the impact of lower natural gas prices on revenues,
higher production taxes and reduced trading contributions compared to the
half year 2009.
Global liquids realisations were 56% higher than in the half year 2009.
Global gas realisations were 5% lower than in the half year 2009. In the
Americas, gas realisations increased by 22% whereas outside the Americas, gas
realisations decreased by 10%.
Half year 2010 production was 3,351 thousand boe/d compared to 3,166
thousand boe/d for the same period a year ago. Crude oil production was up 1%
and natural gas production was up 12% compared to the half year 2009
production.
LNG sales volumes of 8.11 million tonnes were 36% higher than in the half
year 2009. Volumes reflected the continued ramp-up in sales volumes from the
Sakhalin II LNG project and improved volumes from Nigeria LNG.
DOWNSTREAM
Quarters $ million Half year
Q2 2010 Q1 2010 Q2 2009 %(1) 2010 2009 %
1,471 743 (275) - Downstream CCS earnings 2,214 728 +204
(142) 584 1,539 Estimated CCS adjustment 442 1,735
1,329 1,327 1,264 +5 Downstream earnings 2,656 2,463 +8
3,197 (2,841) (1,754) - Downstream cash flow from 356 (1,344) -
operations
(21) 687 2,407 - Net capital investment 666 3,347 -80
3,296 2,998 3,136 +5 Refinery plant intake 3,148 3,144 -
(thousand boe/d)
6,615 6,163 6,174 +7 Oil Products sales volumes 6,390 6,102 +5
(thousand b/d)
5,254 4,769 4,459 +18 Chemicals sales volumes 10,023 8,753 +15
(thousand tonnes)
(1) Q2 on Q2 change
Second quarter Downstream CCS earnings were
loss of
of
million
Downstream CCS earnings compared to the second quarter 2009 reflected
higher Oil Products marketing earnings, improved refining contributions and
significantly improved Chemicals earnings.
Oil Products marketing CCS earnings compared to the same period a year
ago reflected higher retail earnings and reduced B2B and lubricants
contributions. In addition, a generally weak environment for trading
activities affected the second quarter 2010 earnings.
Oil Products sales volumes increased by 7% compared to the same quarter
last year.
Refining CCS results benefited from higher realised refining margins
reflecting improved worldwide industry refining margins compared to the same
period a year ago. Results also benefited from higher refinery plant intake
volumes, which increased by 5%. Refinery availability was 94% compared to 95%
in the second quarter 2009.
Chemicals CCS earnings improved from a loss in the second quarter 2009,
reflecting higher realised chemicals margins and higher chemicals sales
volumes, which were partly offset by reduced income from equity-accounted
investments and higher operating costs.
Chemicals sales volumes increased by 18% compared to the same quarter
last year. Chemicals manufacturing plant availability increased to 95%, some
7 percentage points higher than in the second quarter 2009.
Half year Downstream CCS earnings were
million
million
included a net gain of
a net charge of
Downstream reported earnings, excluding the impact of rising oil prices
on inventory costs, reflected higher Oil Products marketing earnings,
improved refining contributions and significantly improved Chemicals earnings.
Oil Products marketing earnings compared to the half year 2009 increased
mainly due to higher retail and lubricants earnings, which were partly offset
by lower B2B earnings. In addition, a generally weak environment for trading
activities affected the first half 2010 earnings.
Oil Products sales volumes increased by 5% compared to the same period
last year.
Industry refining margins for the half year 2010 were lower globally
compared to the same period 2009, except for the European region. However,
refining earnings for the half year 2010 benefited from improved realised
refining margins in all regions, except in the US West Coast. Compared to the
same period in 2009, refinery plant intake volumes were in line and refinery
availability was 92% compared to 93%.
Chemicals earnings, excluding the impact of rising oil prices on
inventory, reflected higher realised chemicals margins, higher chemicals
sales volumes, higher income from equity-accounted investments and lower
operating costs compared to the half year 2009.
Chemicals sales volumes increased by 15% compared to the half year 2009.
Chemicals manufacturing plant availability increased to 93%, some 3
percentage points higher than in the same period last year.
CORPORATE AND Non-controlling Interest
Quarters $ million Half year
Q2 2010 Q1 2010 Q2 2009 2010 2009
(112) (176) 548 Corporate (288) 681
(100) (85) (24) Non-controlling interest (185) (47)
Corporate and Non-controlling
(212) (261) 524 interest (473) 634
Second quarter Corporate results and Non-controlling interest were a loss
of
year. Earnings for the second quarter 2009 included a charge of
related to identified items (see page 5). Currency exchange losses in the
second quarter 2010 were
the second quarter 2009.
Half year Corporate results and Non-controlling interest were a loss of
Earnings for the half year 2009 included a net gain of
to identified items (see page 5). Currency exchange losses in the half year
2010 were
2009.
Corporate earnings for the second quarter and half year 2010 mainly
reflected currency exchange losses and lower net interest result compared to
the same periods in 2009.
FORTHCOMING EVENTS
Third quarter 2010 results and third quarter 2010 dividend are scheduled
to be announced on
optional Scrip Dividend Programme in relation to the third quarter 2010
financial results. Further details are available at www.shell.com/dividend.
Unaudited Condensed Consolidated Interim Financial Statements
CONSOLIDATED Statement of income
Quarters $ million Half year
Q2 2010 Q1 2010 Q2 2009 %(1) 2010 2009 %
90,568 86,062 63,882 Revenue 176,630 122,104
1,308 1,646 1,535 Share of profit of 2,954 2,463
equity-accounted
investments
(16) 317 826 Interest and other
income(3) 301 1,117
91,860 88,025 66,243 Total revenue and other 179,885 125,684
income
69,759 65,001 46,127 Purchases 134,760 86,415
5,925 5,187 6,092 Production and 11,112 12,034
manufacturing expenses
3,433 4,093 3,943 Selling, distribution and 7,526 7,592
administrative expenses
180 214 269 Research and development 394 476
403 377 524 Exploration 780 872
3,237 2,926 3,279 Depreciation, depletion 6,163 6,369
and amortisation
191 261 166 Interest expense 452 349
8,732 9,966 5,843 +49 Income before taxation 18,698 11,577 +62
4,245 4,400 1,940 Taxation 8,645 4,158
4,487 5,566 3,903 +15 Income for the period 10,053 7,419 +36
94 85 81 Income attributable to 179 109
non-controlling interest
4,393 5,481 3,822 +15 Income attributable to 9,874 7,310 +35
Royal Dutch Shell plc
shareholders
Earnings per share
Quarters Half year
Q2 2010 Q1 2010 Q2 2009 2010 2009
0.72 0.89 0.62 Basic earnings per share ($) 1.61 1.19
0.72 0.89 0.62 Diluted earnings per share ($) 1.61 1.19
SHARES(2)
Millions Half year
Q2 2010 Q1 2010 Q2 2009 2010 2009
Weighted average number of shares
as the basis for:
6,134.0 6,126.5 6,126.7 Basic earnings per share 6,130.3 6,124.2
6,143.7 6,132.8 6,129.4 Diluted earnings per share 6,139.7 6,126.9
(1) Q2 on Q2 change.
(2) Royal Dutch Shell plc ordinary shares of EUR 0.07 each.
(3) Other income includes dividend income, net gains on sale of assets
and net foreign exchange effects on financing activities.
Consolidated Statement of Comprehensive Income
Quarters $ million Half year
Q2 2010 Q1 2010 Q2 2009 %(1) 2010 2009 %
4,487 5,566 3,903 +15 Income for the period 10,053 7,419 +36
Other comprehensive income,
net of tax:
(3,051) (1,567) 5,859 Currency translation (4,618) 3,583
differences
64 (44) (44) Unrealised gains/(losses) 20 105
on securities
14 (2) 204 Cash flow hedging 12 140
gains/(losses)
(18) (11) 22 Share of other (29) 57
comprehensive income/(loss)
of equity-accounted
investments
(2,991) (1,624) 6,041 - Other comprehensive (4,615) 3,885 -
income/(loss) for the
period
1,496 3,942 9,944 -85 Comprehensive income for 5,438 11,304 -52
the period
(58) (80) (168) Comprehensive income/(loss) (138) (112)
attributable to
non-controlling interest
1,438 3,862 9,776 -85 Comprehensive income 5,300 11,192 -53
attributable to Royal Dutch
Shell plc shareholders
(1) Q2 on Q2 change.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
$ million Ordinary Treasury Other
share shares reserves
capital
At December 31, 2009 527 (1,711) 9,982
Income for the period - - -
Other comprehensive - - (4,574)
income
Capital contributions/ - - -
(repayments) from/to
minority shareholders
and other changes in
non-controlling
interest
Dividends paid - - -
Treasury shares: net - 428 -
sales/(purchases) and
dividends received
Share-based - - (174)
compensation
At June 30, 2010 527 (1,283) 5,234
(Table continued)
$ million Retained Total Non-controlling Total
earnings interest equity
At December 31, 2009 127,633 136,431 1,704 138,135
Income for the period 9,874 9,874 179 10,053
Other comprehensive - (4,574) (41) (4,615)
income
Capital contributions/ 294 294 22 316
(repayments) from/to
minority shareholders
and other changes in
non-controlling
interest
Dividends paid (5,003) (5,003) (189) (5,192)
Treasury shares: net - 428 - 428
sales/(purchases) and
dividends received
Share-based 212 38 - 38
compensation
At June 30, 2010 133,010 137,488 1,675 139,163
$ million Ordinary Treasury Other
share shares reserves
capital
At December 31, 2008 527 (1,867) 3,178
Income for the period - - -
Other comprehensive - - 3,882
income
Capital contributions/ - - -
(repayments) from/to
minority shareholders
and other changes in
non-controlling
interest
Dividends paid - - -
Treasury shares: net - 234 -
sales/(purchases) and
dividends received
Share-based - - (175)
compensation
At June 30, 2009 527 (1,633) 6,885
(Table continued)
$ million Retained Total Non-controlling Total equity
earnings interest
At December 31, 125,447 127,285 1,581 128,866
2008
Income for the 7,310 7,310 109 7,419
period
Other - 3,882 3 3,885
comprehensive
income
Capital 3 3 19 22
contributions/
(repayments)
from/to minority
shareholders and
other changes in
non-controlling
interest
Dividends paid (5,257) (5,257) (99) (5,356)
Treasury shares: - 234 - 234
net
sales/(purchases)
and dividends
received
Share-based 227 52 - 52
compensation
At June 30, 2009 127,730 133,509 1,613 135,122
CONDENSED CONSOLIDATED balance sheet
$ million
June 30, Mar 31, Dec 31,
2010 2010 2009
Assets
Non-current assets:
Intangible assets 5,171 5,296 5,356
Property, plant and equipment 133,179 133,669 131,619
Equity-accounted investments 31,128 31,751 31,175
Investments in securities 3,860 3,832 3,874
Deferred tax 4,480 4,563 4,533
Pre-paid pension costs 9,316 9,705 10,009
Other 7,528 8,350 9,158
194,662 197,166 195,724
Current assets:
Inventories 27,972 28,714 27,410
Accounts receivable 62,615 62,874 59,328
Cash and cash equivalents 12,008 8,448 9,719
102,595 100,036 96,457
Total assets 297,257 297,202 292,181
Liabilities
Non-current liabilities:
Debt 35,796 34,889 30,862
Deferred tax 13,802 14,184 13,838
Retirement benefit obligations 5,873 5,925 5,923
Other provisions 13,322 13,535 14,048
Other 4,869 4,579 4,586
73,662 73,112 69,257
Current liabilities:
Debt 4,505 2,422 4,171
Accounts payable and accrued 64,553 65,603 67,161
liabilities
Taxes payable 12,096 12,504 9,189
Retirement benefit obligations 388 405 461
Other provisions 2,890 3,419 3,807
84,432 84,353 84,789
Total liabilities 158,094 157,465 154,046
Equity attributable to Royal Dutch 137,488 138,010 136,431
Shell plc shareholders
Non-controlling interest 1,675 1,727 1,704
Total equity 139,163 139,737 138,135
Total liabilities and equity 297,257 297,202 292,181
CONDENSED CONSOLIDATED statement of cash flows
Quarters $ million Half year
Q2 2010 Q1 2010 Q2 2009 2010 2009
Cash flow from operating
activities:
4,487 5,566 3,903 Income for the period 10,053 7,419
Adjustment for:
4,210 4,114 2,367 - Current taxation 8,324 4,211
161 231 370 - Interest (income)/expense 392 700
- Depreciation, depletion and
3,237 2,926 3,279 amortisation 6,163 6,369
- Net (gains)/losses on sale of
(28) (223) (138) assets (251) (285)
- Decrease/(increase) in net
(482) (5,630) (2,835) working capital (6,112) (3,200)
- Share of profit of
(1,308) (1,646) (1,535) equity-accounted investments (2,954) (2,463)
1,425 1,544 1,242 - Dividends received from 2,969 2,219
equity-accounted
investments
- Deferred taxation and other
182 293 (951) provisions 475 (586)
425 347 (1,931) - Other 772 (1,790)
Cash flow from operating
12,309 7,522 3,771 activities (pre-tax) 19,831 12,594
(4,213) (2,740) (2,852) Taxation paid (6,953) (4,116)
Cash flow from operating
8,096 4,782 919 activities 12,878 8,478
Cash flow from investing
activities:
(6,513) (5,247) (6,806) Capital expenditure (11,760) (12,791)
Investments in equity-accounted
(136) (625) (1,418) investments (761) (1,854)
1,007 366 274 Proceeds from sale of assets 1,373 478
Proceeds from sale of
136 31 203 equity-accounted investments 167 220
26 (7) (58) (Additions to)/proceeds from 19 (52)
sale of securities
13 38 69 Interest received 51 170
Cash flow from investing
(5,467) (5,444) (7,736) activities (10,911) (13,829)
Cash flow from
financing activities:
1,017 150 (2,046) Net (decrease)/increase in debt 1,167 (5,634)
with maturity period
within three months
3,323 4,207 7,044 Other debt: New borrowings 7,530 13,928
(414) (1,947) (430) Repayments (2,361) (1,816)
(379) (518) (262) Interest paid (897) (524)
Change in non-controlling
330 (12) 7 interest 318 19
Dividends paid to:
- Royal Dutch Shell plc
(2,448) (2,555) (2,852) shareholders (5,003) (5,257)
(150) (39) (69) - Non-controlling interest (189) (99)
Treasury shares:
- Net sales/(purchases) and
86 118 (49) dividends received 204 87
Cash flow from financing
1,365 (596) 1,343 activities 769 704
(434) (13) 109 Currency translation (447) 55
differences relating to cash
and
cash equivalents
(Decrease)/increase in cash and
3,560 (1,271) (5,365) cash equivalents 2,289 (4,592)
Cash and cash equivalents at
8,448 9,719 15,961 beginning of period 9,719 15,188
Cash and cash equivalents at
12,008 8,448 10,596 end of period 12,008 10,596
Notes to the Condensed Consolidated Interim Financial Statements
1. Basis of preparation
These Condensed Consolidated Interim Financial Statements of Royal Dutch
Shell plc and its subsidiaries (collectively known as “Shell”) are prepared
on the same accounting principles as, and should be read in conjunction with,
the Annual Report on Form 20-F for the year ended
101 to 106) as filed with the US Securities and Exchange Commission.
With effect from
accounted for in accordance with revised IFRS 3 Business Combinations and IAS
27 Consolidated and Separate Financial Statements. The revised standards
apply with prospective effect to the acquisition of a business or for certain
types of transactions involving an additional investment or a partial
disposal, requiring for example the recognition in income of certain
transaction costs, the recognition at fair value of contingent consideration
payable and the re-measurement of existing interests held or retained. The
exact impact depends on the individual transaction concerned, with
potentially different amounts being recognised in the Consolidated Financial
Statements than would previously have been the case.
The Condensed Consolidated Interim Financial Statements of Royal Dutch
Shell plc and its subsidiaries for the six month period ended
have been prepared in accordance with IAS 34 Interim Financial Reporting as
adopted by the European Union.
These Condensed Consolidated Interim Financial Statements are unaudited;
however, in the opinion of Shell, the interim data includes all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
statement of the results for the interim periods.
In accordance with DTR 4.2.9(2) of the UK Disclosure and Transparency
Rules (DTRs), it is confirmed that this publication has not been audited.
The information for the period ended
statutory accounts as defined in section 435 of the Companies Act 2006.
Statutory accounts for the year ended
Board of Directors and delivered to the Registrar of 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 498(2) or (3) of the Companies Act 2006.
2. Other reserves
$ million Merger Capital Share Share Accumulated Total
reserve(1) redemption premium plan other
reserve(2) reserve reserve compre-
(1) hensive
income
At December 31, 3,444 57 154 1,373 4,954 9,982
2009
Other - - - - (4,574) (4,574)
comprehensive
income/(loss)
attributable to
Royal Dutch
Shell plc
shareholders
Share-based - - - (174) - (174)
compensation
At June 30, 3,444 57 154 1,199 380 5,234
2010
At December 31,
2008 3,444 57 154 1,192 (1,669) 3,178
Other comprehensive - - - - 3,882 3,882
income/(loss)
attributable to Royal
Dutch Shell plc
shareholders
Share-based - - - (175) - (175)
compensation
At June 30, 2009 3,444 57 154 1,017 2,213 6,885
1 The merger reserve and share premium reserves were established as a
consequence of Royal Dutch Shell plc becoming the single parent company of
Royal Dutch Petroleum Company and of The Shell Transport and Trading Company
Limited in 2005.
2 The capital redemption reserve was established in connection with
repurchases of shares of Royal Dutch Shell plc.
3. Information by business segment
$ million Upstream Downstream Corporate Total
Six months ended June
30, 2010:
Revenue
Third party 16,666 159,926 38 176,630
Inter-segment 16,826 153 -
Segment earnings 7,685 2,656 (288) 10,053
$ million Upstream Downstream Corporate Total
Six months ended June
30, 2009:
Revenue
Third party 14,063 108,003 38 122,104
Inter-segment 11,481 96 -
Segment earnings 4,275 2,463 681 7,419
4. Ordinary share capital
Authorised
Number of shares June 30, 2010 Dec 31, 2009
Class A shares of
EUR0.07 each 4,077,359,886 4,077,359,886
Class B shares of
EUR0.07 each 2,759,360,000 2,759,360,000
Unclassified shares of
EUR0.07 each 3,163,280,114 3,163,280,114
Sterling deferred
shares of GBP1 each 50,000 50,000
Ordinary shares issued and fully paid
shares of shares of
EUR0.07 each GBP 1 each
Number of shares Class A Class B Sterling
deferred
At June 30, 2010 3,545,663,973 2,695,808,103 50,000
At December 31, 2009 3,545,663,973 2,695,808,103 50,000
Ordinary shares nominal value
$ million Class A Class B Total
At June 30, 2010 300 227 527
At December 31, 2009 300 227 527
The total nominal value of sterling deferred shares is less than
million
5. Impacts of Accounting for Derivatives
IFRS requires derivative instruments to 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.
LIQUIDITY AND CAPITAL RESOURCES
Net cash from operating activities in the first half 2010 was
billion
Total current and non-current debt increased to
2010
issued
periods ranging from 2012 through 2040.
Net capital investment (capital investment, less divestment proceeds) in
the first half 2010 was
Upstream and
period of 2009 was
Upstream,
Dividends of
the second quarter. These dividends are payable on
case of the Class B shares, the dividends will be payable through the
dividend access mechanism and are expected to be treated as UK-source rather
than Dutch-source. See the Annual Report on Form 20-F for the year ended
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties affecting Shell are described in
the Risk Factors section of the Annual Report and Form 20-F for the year
ended
no material changes in those Risk Factors.
A summary of the Risk Factors described in the Annual Report and Form
20-F for the year ended
- Shell's operating results and financial condition are exposed to
fluctuating prices of crude oil, natural gas, oil products and chemicals.
- Shell's future hydrocarbon production depends on the delivery of large
and complex projects, as well as the ability to replace oil and gas
reserves.
- Shell's ability to achieve its strategic objectives depends on our
reaction to competitive forces.
- An erosion of Shell's business reputation would have a negative impact
on our licence to operate, our brand, our ability to secure new resources
and our financial performance.
- Rising climate change concerns could lead to additional regulatory
measures that may result in project delays and higher costs.
- The nature of Shell's operations exposes us to a wide range of
significant health, safety, security and environment (HSSE) risks.
- Shell operates in over 90 countries, with differing degrees
of political, legal and fiscal stability. This exposes us to a wide range
of political developments and resulting changes to laws and regulations.
- Shell's international operations expose us to social instability,
terrorism and acts of war or piracy that could significantly impact our
business.
- Our investment in joint ventures and associated companies may reduce
our degree of control as well as our ability to identify and manage
risks.
- Reliable information technology (IT) systems are a critical enabler of
our operations.
- Shell's future performance depends on successful development and
deployment of new technologies.
- The general macro-economic environment as well as financial
and commodity market conditions influence Shell's operating results and
financial condition as our business model involves trading, treasury,
interest rate and foreign exchange risks.
- The estimation of reserves is a process that involves
subjective judgements based on available information, so subsequent
downward adjustments are possible. If actual production from such
reserves is lower than current estimates indicate, our profitability and
financial condition could be negatively impacted.
- Royal Dutch Shell plc's Articles of Association determine the
jurisdiction for shareholder disputes. This might limit shareholder
remedies.
- Violations of antitrust and competition law pose a financial
risk for Shell and expose Shell or our employees to criminal sanctions.
- An erosion of the business and operating environment in
Nigeria could adversely impact our earnings and financial position.
- Shell has investments in Iran and Syria, countries against
which the US government imposed sanctions. We could be subject to
sanctions or other penalties in connection with these activities.
- Shell has substantial pension commitments, whose funding is subject to
capital market risks.
- Shell companies face the risk of litigation and disputes worldwide.
- Shell is currently under investigation by the United States
Securities and Exchange Commission and the United States Department of
Justice for violations of the US Foreign Corrupt Practices Act.
GLOSSARY
1. Current Cost of Supplies (CCS)
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 estimated current 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.
2. 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.
PORTFOLIO DEVELOPMENTS – FIRST quarter 2010
Upstream
In
Arrow Energy Limited (Arrow) for the proposed acquisition, together with our
partner PetroChina, of all of the shares in Arrow, representing a total
consideration of some
Arrow’s shareholder approval.
In
produce tight gas under a 30-year production sharing contract in an area of
approximately 4,000 square kilometres in the Jinqiu block of central
Province
the Fushun block that covers another area of also approximately 4,000 square
kilometres.
In
in three production leases (oil mining leases 4, 38 and 41) and related
equipment in the Niger Delta to a consortium led by two Nigerian companies.
In the
first oil and natural gas from the Perdido Development (Shell share 35.4%),
in the deep water
expected annual peak production of more than 100 thousand barrels of oil
equivalent per day (boe/d).
During the first quarter 2010, Shell participated in 3 exploration
discoveries, and one appraisal, all in the US Gulf of Mexico. Shell also
increased its overall acreage position, completing acquisitions of new
exploration licences in
and was the apparent high bidder for new licences in the US Gulf of Mexico.
Downstream
In
(MoU), with the intention to form a joint venture (Shell share 50%) for the
production of ethanol, sugar and power, and the supply, distribution and
retail of transportation fuels. Under the terms of the MoU, Shell will
contribute its Downstream assets in
payment of
In
downstream business, including its 17.1% shareholding in the 104 thousand
barrels per day refinery at Marsden Point, for a total amount of some
billion
In
cracker at its Shell Eastern Petrochemicals Complex project. The 100%
Shell-owned ethylene cracker complex has a capacity of 800,000 tonnes of
ethylene per annum, as well as 450,000 tonnes of propylene and 230,000 tonnes
of benzene per annum.
Summary of identified items – FIRST quarter 2010
Earnings in the first quarter 2010 reflected the following items, which
in aggregate amounted to a net gain of
- Upstream earnings included a net gain of $110 million, reflecting a
gain related to the estimated fair value accounting of commodity
derivatives (see Note 5), a divestment gain and a gain related to the
mark-to-market valuation of certain gas contracts, which were partly
offset by tax charges. Earnings for the first quarter 2009 included a net
gain of $330 million.
- Downstream earnings included a net charge of $35 million, reflecting
an asset impairment charge and asset restructuring provisions, which were
partly offset by a divestment gain. Earnings for the first quarter
2009 included a net charge of $205 million.
- Corporate earnings and Minority interest for the first
quarter 2009 included a gain of $162 million.
Responsibility statement
It is confirmed that to the best of our knowledge: (a) the condensed
consolidated interim financial statements have been prepared in accordance
with IAS 34 ‘Interim Financial Reporting’ as adopted by the European Union;
(b) the interim management report includes a fair review of the information
required by DTR 4.2.7R (indication of important events during the first six
months of the financial year and description of principal risks and
uncertainties for the remaining six months of the financial year); and (c)
the interim management report includes a fair review of the information
required by DTR 4.2.8R (disclosure of related parties transactions and
changes thereto).
The Directors of Royal Dutch Shell plc are as listed in the Annual Report
and Form 20-F for the year ended
Sir
Lawrence Ricciardi stepped down as a Director on May 18, 2010, and
Charles O. Holliday was appointed as a Director with effect from September 1,
2010.
Peter Voser Simon Henry
Chief Executive Officer Chief Financial Officer
July 29, 2010 July 29, 2010
<end_table.
Independent review report to Royal Dutch Shell plc
Introduction
We have been engaged by the company to review the condensed
consolidated interim financial statements in the half-yearly financial report
for the six months ended
Statement of Income, the Consolidated Statement of Comprehensive Income, the
Consolidated Statement of Changes in Equity, the Condensed Consolidated
Balance Sheet and the Condensed Consolidated Statement of Cash Flows and
related notes. We have read the other information contained in the
half-yearly financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the
condensed consolidated interim financial statements.
Directors’ responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible for
preparing the half-yearly financial report in accordance with the Disclosure
and Transparency Rules of the
As disclosed in note 1, the annual financial statements of the
Shell group are prepared in accordance with IFRSs as adopted by the European
Union. The condensed consolidated interim financial statements included in
this half-yearly financial report have been prepared in accordance with
International Accounting Standard 34, “Interim Financial Reporting”, as
adopted by the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion
on the condensed consolidated interim financial statements in the half-yearly
financial report based on our review. This report, including the conclusion,
has been prepared for and only for the company for the purpose of the
Disclosure and Transparency Rules of the Financial Services Authority and for
no other purpose. We do not, in producing this report, accept or assume
responsibility for any other purpose or to any other person to whom this
report is shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and
Financial Information Performed by the Independent Auditor of the Entity’
issued by the Auditing Practices Board for use in the
review of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting matters, and
applying analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with International
Standards on Auditing (UK and
obtain assurance that we would become aware of all significant matters that
might be identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed consolidated interim financial
statements in the half-yearly financial report for the six months ended
30, 2010
International Accounting Standard 34 as adopted by the European Union and the
Disclosure and Transparency Rules of the
Authority.
PricewaterhouseCoopers LLP
Chartered Accountants
London
July 29, 2010
- The maintenance and integrity of the Royal Dutch Shell plc website
(http://www.shell.com) is the responsibility of the Directors; the work
carried out by the auditors does not involve consideration of these
matters and, accordingly, the auditors accept no responsibility for any
changes that may have occurred to the financial statements since they
were initially presented on the website.
- Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in
other jurisdictions.
CAUTIONARY STATEMENT
All amounts shown throughout this Report are unaudited.
Third quarter 2010 results and third quarter 2010 dividend are
scheduled to be announced on
The companies in which Royal Dutch Shell plc directly and
indirectly owns investments are separate entities. In this document “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
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 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 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 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”, “scheduled” 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 document, 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) 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 Royal Dutch Shell’s Annual Report and Form 20-F for the year 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 Royal Dutch Shell plc