Royal Dutch Shell Plc Second Quarter 2020 Press Release

Source Press Release
Company Royal Dutch Shell 
Tags Strategy - Chemicals, Strategy - Downstream, LNG & Gas Storage/Processing, Production/Development, Upstream Activities, Capital Spending, Guidance, Financial & Operating Data, Strategy - Corporate
Date July 30, 2020

DECISIVE ACTIONS AND STRONG PERFORMANCE DELIVER CASH

  • Robust operational delivery across the portfolio. Very strong crude and oil products trading and optimisation results and resilient Marketing performance.
  • On track to deliver cost reduction targets:
    • Underlying opex reduced by $1.1 billion compared with Q1 2020; delivering reduction target of $3 - $4 billion.
    • Cash capex reduced by $1.4 billion compared with Q1 2020; manage cash capex to $20 billion or lower in 2020.
  • Impairments of $16.8 billion post-tax (6.1% of average capital employed), reflecting revised price and margin assumptions.

$ billion  IFRS earnings1  Adjusted earnings  CFFO ex WC  Cash capex  Organic FCF 
Integrated Gas  (8.0)  0.4  2.9  0.7  1.9 
Upstream  (6.7)  (1.5)  0.5  1.9  (0.7) 
Oil Products  (3.0)  2.4  2.4  0.6  (1.0) 
Refining & Trading  (3.9)  1.5       
Marketing  0.9  0.9       
Chemicals  0.2  0.2  0.3  0.4  0.4 
Corporate  (0.8)  (0.8)  0.4  —  (0.8) 
Non-controlling interest  —  —       
RDS   Q2 2020  (18.1)  0.6  6.5  3.6  (0.3) 
Q2 2019  3.0  3.5  10.5  5.3  6.2 

1 Income/(loss) attributable to shareholders. See reconciliation of Alternative performance (non-GAAP) measures on 

  Q2 2020  Q1 2020  Q2 2019   
ROACE  5.3%  6.1%  8.2% 
  • Gearing increase includes 2.8% impact from impairments and pension remeasurement.
  • Net debt increase includes additional leases of $0.8 billion.
  • Gearing and Net debt impacted by negative working capital movements of $4.0 billion.
 
Dividends  $1.2 billion  $3.5 billion  $3.8 billion 
Gearing  32.7%  28.9%  27.6% 
Net debt  $77.8 billion  $74.4 billion  $74.9 billion 






Q2 2020 FINANCIAL PERFORMANCE DRIVERS

INTEGRATED GAS AND NEW ENERGIES
  • COVID-19 pandemic-related demand decline led to lower LNG and gas-to-liquids revenues, mostly due to lower realised prices.
  • LNG trading and optimisation results marginally below average.
  • Additional well write-offs and deferred tax charges had a negative impact of $0.6 billion on Adjusted earnings, but no cash impact.
 
 OUTLOOK FOR Q3 2020

Production: 820 - 880 thousand boe/d. Liquefaction: 7.6 - 8.2 million tonnes. Due to price lag in oil-linked LNG term contracts, the impact of low oil prices is expected to become more significant in the third quarter. 


UPSTREAM
  • Weak macroeconomic environment driving lower Upstream Adjusted earnings.
  • Despite strong Upstream operational performance, production 7% lower compared with Q2 2019 due to divestments and OPEC+ curtailments.
  • Upstream sales volumes up due to timing of liftings mainly in Brazil.
 
 OUTLOOK FOR Q3 2020

Production: 2,100 - 2,400 thousand boe/d.
Outlook reflects expected OPEC+ and economic curtailments for entire quarter. 


OIL PRODUCTS
  • Earnings underpinned by very strong crude and oil products trading and optimisation as well as lower opex spend.
  • Lower Oil Products and Marketing sales volumes when compared with Q2 2019 due to weak macro and COVID-19, some recovery in June.
  • Oil Products sales volumes ~39% lower. Largest declines in Aviation, Retail and Refining & Trading.
 
 OUTLOOK FOR Q3 2020

Sales volumes: 4,000 - 5,000 thousand b/d.
Refinery utilisation: 68% - 76%. 


CHEMICALS
  • Chemicals downcycle conditions compounded by COVID-19 driving overall lower volumes and margins.
  • Most end market segments negatively impacted but increased demand primarily in cleaning and disinfectant products.
  • Lower operating expenses compared with Q2 2019 due to structural improvements and maintenance scheduling.
 
 OUTLOOK FOR Q3 2020

Sales volumes: 3,600 - 3,900 thousand tonnes.
Manufacturing plant utilisation: 78% - 88%. 


CORPORATE
  • Gearing increased in Q2 by 3.8%. Impairments represent 2.1% and pension remeasurement 0.7%.
  • Net debt increased in Q2 by $3.4 billion to $77.8 billion.
  • Long-term debt issuance in Q2 of $9.1 billion equivalent. Shell also signed a new $12 billion revolving credit facility in April 2020.
 
 OUTLOOK FOR 2020

Adjusted earnings: net expense of $3,200 - $3,500 million for the full year 2020. This excludes the impact of currency exchange rate effects. 



Q2 2020 PORTFOLIO DEVELOPMENTS

  • Nigeria: all conditions met for Final Investment Decision (FID) and contracts awarded on a new LNG processing unit, known as Train 7, at Nigeria LNG (Shell interest 25.6%), which will add 8 million tonnes per annum (mtpa) of capacity to the Bonny Island facility.
  • USA: agreement to sell Appalachia shale gas position for $541 million, with an effective date of January 1, 2020 and expected to complete in Q3 2020.
  • Impairments: $16.8 billion ($22.3 billion pre-tax), of which Integrated Gas $8.2 billion ($11.2 billion pre-tax), mainly relating to the QGC Integrated Gas project in Australia and Prelude floating LNG in Australia; Upstream $4.7 billion ($6.3 billion pre-tax), mainly relating to unconventional assets in North America, offshore assets in Brazil and Europe, a project in Nigeria (OPL245), and an asset in the US Gulf of Mexico; Oil Products $4.0 billion ($4.9 billion pre-tax), mainly relating to refineries in Europe and North America; and Corporate $5 million ($9 million pre-tax).
Source: EvaluateEnergy® ©2020 EvaluateEnergy Ltd