FORM 6-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16 of
The Securities Exchange Act of 1934
For July 2011
Commission File Number: 1-32575
Royal Dutch Shell plc
(Exact name of registrant as specified in its charter)
England and Wales
(Jurisdiction of incorporation or organization)
30, Carel van Bylandtlaan, 2596 HR The Hague
The Netherlands
Tel No: (011 31 70) 377 9111
(Address of principal executive officers)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F x Form 40-F ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes ¨ No x
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):82-
Royal Dutch Shell plc (the “Registrant”) is filing the following exhibits on this Report on Form 6-K, each of which is hereby incorporated by reference:
| Exhibit No. |
Description | |
| 99.1 | Regulatory release. | |
| 99.2 | Royal Dutch Shell plc – Three and six month period ended June 30, 2011 Unaudited Condensed Interim Financial Report. | |
This Unaudited Condensed Interim Financial Report contains the Unaudited Condensed Consolidated Interim Financial Statements of the Registrant and its consolidated subsidiaries for the three and six month period ended June 30, 2011 and Business Review in respect of such period. This Report on Form 6-K contains the Unaudited Condensed Interim Financial Report with additional information required to keep current our registration statement on Form F-3.
This Report on Form 6-K is incorporated by reference into:
| a) | the Registration Statement on Form F-3 of Royal Dutch Shell plc and Shell International Finance B.V. (Registration Numbers 333-155201 and 333-155201-01); and |
| b) | the Registration Statements on Forms S-8 of Royal Dutch Shell plc (Registration Numbers 333-126715, 333-141397 and 333-171206). |
| Royal Dutch Shell plc Unaudited Condensed Interim Financial Report 2 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorised.
Royal Dutch Shell plc
(Registrant)
| By: | /s/ Michiel Brandjes | |
| Name: Michiel Brandjes | ||
| Title: Company Secretary |
Date: July 28, 2011
| Royal Dutch Shell plc Unaudited Condensed Interim Financial Report 3 |
Exhibit 99.1
Regulatory release
Three and six month period ended June 30, 2011
Unaudited Condensed Interim Financial Report
On July 28, 2011, Royal Dutch Shell plc released the Unaudited Condensed Interim Financial Report for the three and six month period ended June 30, 2011 of Royal Dutch Shell plc and its consolidated subsidiaries (collectively, “Shell”).
| Contact – Investor Relations |
||||
| Europe: | Tjerk Huysinga | +31 70 377 4540 | ||
| USA: | Ken Lawrence | +1 713 241 1042 | ||
| Contact – Media | ||||
| Europe: | Shell Media Contact | +31 70 377 3600 | ||
| Royal Dutch Shell plc Unaudited Condensed Interim Financial Report 4 |
Exhibit 99.2
Royal Dutch Shell plc
Three and six month period ended June 30, 2011
Unaudited Condensed Interim Financial Report
| Royal Dutch Shell plc Unaudited Condensed Interim Financial Report 5 |
2ND QUARTER AND HALF YEAR 2011 UNAUDITED RESULTS
| • | Royal Dutch Shell’s second quarter 2011 earnings, on a current cost of supplies (CCS) basis (see Note 1), were $8.0 billion compared with $4.5 billion the same quarter a year ago. Basic CCS earnings per share increased by 74% versus the second quarter of 2010. |
| • | Second quarter 2011 CCS earnings, excluding identified items (See page 11), were $6.6 billion compared with $4.2 billion in the second quarter 2010, an increase of 56%. Basic CCS earnings per share excluding identified items increased by 52% versus the same quarter a year ago. |
| • | Cash flow from operating activities for the second quarter 2011 was $10.0 billion. Excluding net working capital movements, cash flow from operating activities in the second quarter 2011 was $12.3 billion, compared with $8.6 billion in the same quarter last year. |
| • | Net capital investment (see Note 1) for the quarter was $6.0 billion. Total cash dividends paid to shareholders during the second quarter 2011 were $1.8 billion. Some 23.9 million Class A shares, equivalent to $0.8 billion, were issued under the Scrip Dividend Programme for the first quarter 2011. |
| • | Gearing at the end of the second quarter 2011 was 12.1%. |
| • | A second quarter 2011 dividend has been announced of $0.42 per ordinary share, unchanged from the US dollar dividend per share for the same period in 2010. |
| SUMMARY OF UNAUDITED RESULTS | ||||||||||||||
| Quarters |
$ million |
Half year | ||||||||||||
| Q2 2011 |
Q1 2011 |
Q2 2010 |
%1 |
2011 |
2010 |
% | ||||||||
| 8,662 | 8,780 | 4,393 | +97 | Income attributable to shareholders | 17,442 | 9,874 | +77 | |||||||
| (667) | (1,855) | 136 | Current cost of supplies (CCS) adjustment for Downstream | (2,522) | (448) | |||||||||
| 7,995 | 6,925 | 4,529 | +77 | CCS earnings | 14,920 | 9,426 | +58 | |||||||
| 1,443 | 637 | 321 | Less: Identified items2 | 2,080 | 396 | |||||||||
| 6,552 | 6,288 | 4,208 | +56 | CCS earnings excluding identified items | 12,840 | 9,030 | +42 | |||||||
| Of which: | ||||||||||||||
| 5,420 | 4,638 | 3,260 | Upstream |
10,058 | 7,565 | |||||||||
| 1,081 | 1,653 | 1,160 | Downstream |
2,734 | 1,938 | |||||||||
| 51 | (3) | (212) | Corporate and Non-controlling interest |
48 | (473) | |||||||||
| 1.29 | 1.12 | 0.74 | +74 | Basic CCS earnings per share ($) | 2.41 | 1.54 | +56 | |||||||
| 1.05 | 1.02 | 0.69 | +52 | Basic CCS earnings per share excl. identified items ($) | 2.07 | 1.47 | +41 | |||||||
| 0.42 | 0.42 | 0.42 | – | Dividend per share ($) | 0.84 | 0.84 | – | |||||||
| 10,040 | 8,621 | 8,096 | +24 | Cash flow from operating activities | 18,661 | 12,878 | +45 | |||||||
|
1 Q2 on Q2 change. 2 See page 11. | ||||||||||||||
| Royal Dutch Shell plc Unaudited Condensed Interim Financial Report 6 |
Royal Dutch Shell Chief Executive Officer Peter Voser commented:
“Our second quarter 2011 earnings were higher than year-ago levels, driven by increased energy prices and Shell’s operating performance. Shell reinvests its profits to meet customer demand for low cost energy, and to pay attractive returns to shareholders.
In Upstream, our volumes increased by 2% excluding asset sales impacts, driven by new growth projects. In Downstream, maintenance activities and weak industry refining margins masked a resilient performance from Oil Products marketing and Chemicals in the quarter.
Shell’s strategy is on track; performance focus, delivering a new wave of production growth, and maturing the next generation of growth projects for shareholders.
We continue with company-wide initiatives to reduce costs, and to improve our operating performance. Asset sales are a key driver of Shell’s capital efficiency and portfolio enhancement programme. The company has sold some $4 billion of non-core positions in the first half of 2011, in Upstream and Downstream.
2011 is an important year for Shell’s growth programme, and the first half of 2011 saw the successful start-up of three of the largest-scale projects anywhere in our industry today.
In Canada’s oil sands, the successful start-up of the 100 thousand barrels per day (b/d) expansion of the Scotford Upgrader marked the completion of the AOSP Expansion 1 project which will continue to ramp up across 2011.
In Qatar, the Qatargas 4 project, which came on stream during the first quarter 2011, has now fully ramped up, reaching planned capacity of 7.8 million tonnes per annum (mtpa) of LNG. In the second quarter 2011 the new Pearl Gas-To-Liquids (GTL) project in Qatar sold its first GTL gasoil shipment from Train 1.
In total, these three projects are expected to contribute peak production of over 400 thousand barrels of oil equivalent per day (boe/d) for Shell, after some $30 billion of investment, underpinning our targets for financial and production growth to 2012.”
Voser continued: “We have made important progress with new production in 2011, and the ramp-up of our new projects should drive our financial performance in the coming quarters.
Shell continues to mature new projects for medium-term growth.
In Downstream, we have launched the Raízen joint venture, which will be a leading biofuels producer and fuels retailer in Brazil, underscoring Shell’s commitment to sustainable growth.
In Upstream, we have taken final investment decisions on 9 new projects this year, including the 3.6 mtpa Prelude Floating LNG project, in Australia, which is a first for our industry. These investments are part of Shell’s project flow that underpins Shell’s Upstream production targets of 3.7 million boe/d in 2014, and longer-term growth potential.
Shell’s net capital investment for the first half of 2011 was $8 billion, and spending is anticipated to build across the year as new projects move into construction. Net capital spending for 2011-14 is expected to be at least $100 billion, as previously indicated, underlining Shell’s commitment to medium-term growth in new energy supplies.”
Voser concluded: “Investments such as Pearl, Prelude and Raízen are unique in our industry. They are a great testament to our staff and our stakeholders, and reflect Shell’s core strengths. Shell adds value through innovative technology, sustainable growth, integration across value chains to bring value-added products to our customers and partners, and creating long-life returns for shareholders. Our strategy is competitive and innovative.”
| Royal Dutch Shell plc Unaudited Condensed Interim Financial Report 7 |
SECOND QUARTER 2011 PORTFOLIO DEVELOPMENTS1
Upstream
In Australia, Shell announced the final investment decision on the Prelude Floating LNG (FLNG) project (Shell interest 100%). The Prelude FLNG project is expected to produce some 110 thousand boe/d of natural gas and natural gas liquids, delivering some 3.6 mtpa of LNG, 1.3 mtpa of condensate and 0.4 mtpa of liquefied petroleum gas (LPG).
In Canada, Shell announced the successful start of production from its Scotford Upgrader Expansion project (Shell interest 60%). The 100 thousand b/d expansion takes upgrading capacity at Scotford to 255 thousand b/d of heavy oil from the Athabasca oil sands. In addition, Shell took the final investment decision on a debottlenecking project for the Athabasca Oil Sands Project (AOSP, Shell interest 60%), which is expected to add 10 thousand b/d at peak. This project is the first of multiple debottlenecking opportunities for AOSP.
Also in Canada, Shell signed agreements with the Governments of Alberta and Canada to secure some $0.9 billion in funding for the Quest Carbon Capture and Storage (CCS) Project (Shell interest 60%), which is expected to capture and permanently store more than 1 mtpa of CO2 from Shell’s Scotford Upgrader.
In China, Shell and China National Petroleum Company (CNPC) signed a Global Alliance Agreement emphasising their shared intent to pursue mutually beneficial cooperation opportunities internationally as well as in China. The two parties also signed a Shareholders Agreement to establish a Well Manufacturing joint venture (50% CNPC and 50% Shell) subject to further corporate and government approvals.
In Malaysia, Shell approved investment in the offshore Sabah Gas Kebabangan (KBB) project (Shell interest 30%) with an expected peak production of 130 thousand boe/d of gas for Malaysia LNG and domestic markets. The Kebabangan gas field is part of the Kebabangan Cluster Production Sharing Contract.
In Mexico, Shell agreed to sell its 50% interest in the LNG import and regasification terminal in Altamira for a total consideration of $0.2 billion. The agreement is subject to the conclusion of project financing and government approvals.
In Qatar, Qatar Petroleum and Shell announced that the Pearl GTL project (Shell interest 100%) has sold its first commercial shipment of GTL Gasoil. The project is expected to reach full production capacity by the middle of 2012. Once fully operational, Pearl GTL is expected to produce 1.6 billion standard cubic feet of gas per day (scf/d), delivering 140 thousand b/d of GTL products and 120 thousand b/d of condensate, LPG and ethane.
In Singapore, Shell and CPC Corporation, Taiwan have signed a Heads of Agreement for the long-term supply of 2 mtpa of LNG for 20 years, starting in 2016, from Shell’s global LNG portfolio.
In the United Kingdom, Shell approved investment in the offshore Schiehallion Redevelopment project (Shell interest 36%) with an expected peak production of 145 thousand boe/d.
In the USA, Shell announced a multi-billion dollar investment to develop its major Cardamom oil and gas field in the deep waters of the Gulf of Mexico. The Cardamom project (Shell interest 100%) is expected to produce 50 thousand boe/d at peak production.
On July 5, 2011, Shell agreed to sell its 20% participating interest in the oil and gas exploration block BM-S-8 in the Santos Basin offshore Brazil for a total consideration of $0.4 billion. The agreement is subject to regulatory approvals.
| 1 | See page 23 for first quarter 2011 portfolio developments. |
| Royal Dutch Shell plc Unaudited Condensed Interim Financial Report 8 |
Downstream
In Brazil, Shell and Cosan launched a multi-billion dollar joint venture named Raízen (Shell interest 50%) for the production of ethanol, sugar and power, and the supply, distribution and retail of transportation fuels. Raízen will produce over 2 billion litres (over 34 thousand b/d) a year of biofuels and will distribute over 20 billion litres (over 345 thousand b/d) of biofuels, industrial and transport fuels annually through a combined network of nearly 4,500 Shell-branded service stations.
In the United Kingdom, Shell agreed to acquire 254 retail sites from Rontec Investments LLP (the Snax 24 Consortium) for a total consideration of around $0.4 billion. The agreement is subject to regulatory approvals.
Shell also completed the sale of its Downstream businesses in Chile and the Dominican Republic in separate transactions for a total combined consideration of $0.7 billion.
| Royal Dutch Shell plc Unaudited Condensed Interim Financial Report 9 |
KEY FEATURES OF THE SECOND QUARTER 2011
| • | Second quarter 2011 CCS earnings (see Note 1) were $7,995 million, 77% higher than in the same quarter a year ago. |
| • | Second quarter 2011 CCS earnings, excluding identified items (See page 11), were $6,552 million compared with $4,208 million in the second quarter 2010. |
| • | Basic CCS earnings per share increased by 74% versus the same quarter a year ago. |
| • | Basic CCS earnings per share excluding identified items increased by 52% versus the same quarter a year ago. |
| • | Cash flow from operating activities for the second quarter 2011 was $10.0 billion, compared with $8.1 billion in the same quarter last year. Excluding net working capital movements, cash flow from operating activities in the second quarter 2011 was $12.3 billion, compared with $8.6 billion in the same quarter last year. |
| • | Total cash dividends paid to shareholders during the second quarter 2011 were $1.8 billion. During the second quarter 2011, some 23.9 million Class A shares, equivalent to $0.8 billion, were issued under the Scrip Dividend Programme for the first quarter 2011. |
| • | Net capital investment (see Note 1) for the second quarter 2011 was $6.0 billion. Capital investment for the second quarter 2011 was $7.3 billion. |
| • | Return on average capital employed (ROACE) (see Note 6) at the end of the second quarter 2011, on a reported income basis, was 14.8%. |
| • | Gearing was 12.1% at the end of the second quarter 2011 versus 16.9% at the end of the second quarter 2010. |
Upstream
| • | Oil and gas production for the second quarter 2011 was 3,046 thousand boe/d, 2% lower than in the second quarter 2010. Production for the second quarter 2011 excluding the impact of divestments was 2% higher than in the same quarter last year. |
New field start-ups and the continuing ramp-up of fields contributed some 285 thousand boe/d to production in the second quarter 2011, which more than offset the impact of field declines.
| • | LNG sales volumes of 4.81 million tonnes in the second quarter 2011 were 24% higher than in the same quarter a year ago. |
Downstream
| • | Oil Products sales volumes for the second quarter 2011 were 8% lower than in the second quarter 2010. Excluding the impact of divestments, sales volumes were 4% lower than in the same period last year. Chemical product sales volumes in the second quarter 2011 decreased by 13% compared with the second quarter 2010. |
| • | Oil Products refinery availability in the second quarter 2011 was 90%, compared with 94% in the second quarter 2010. Chemicals manufacturing plant availability was 87%, compared with 92% in the same period last year. |
| • | Supplementary financial and operational disclosure for the second quarter 2011 is available at www.shell.com/investor. |
| Royal Dutch Shell plc Unaudited Condensed Interim Financial Report 10 |
SUMMARY OF IDENTIFIED ITEMS
CCS earnings in the second quarter 2011 reflected the following items, which in aggregate amounted to a net gain of $1,443 million (compared with a net gain of $321 million in the second quarter 2010), as summarised in the table below:
| • | Upstream earnings included a net gain of $641 million, mainly reflecting tax credits, a gain related to the estimated fair value accounting of commodity derivatives (see Note 5) and divestment gains, partly offset by environmental provisions. Earnings for the second quarter 2010 included a net gain of $10 million. |
| • | Downstream earnings included a net gain of $802 million, mainly reflecting a gain related to the estimated fair value accounting of commodity derivatives (see Note 5), divestment gains and a gain related to the contribution of assets into a joint venture, partly offset by redundancy and decommissioning provisions. Earnings for the second quarter 2010 included a net gain of $311 million. |
SUMMARY OF IDENTIFIED ITEMS
| Quarters1 | $ million |
Half year | ||||||||||||||||||
| Q2 2011 |
Q1 2011 | Q2 2010 | 2011 | 2010 | ||||||||||||||||
| Identified items: | ||||||||||||||||||||
| 641 | 1,120 | 10 | Upstream | 1,761 | 120 | |||||||||||||||
| 802 | (483 | ) | 311 | Downstream | 319 | 276 | ||||||||||||||
| – | – | – | Corporate and Non-controlling interest | – | – | |||||||||||||||
| 1,443 | 637 | 321 | CCS earnings impact | 2,080 | 396 | |||||||||||||||
| 1 | See page 23 for first quarter 2011 identified items description. |
These identified items generally relate to events with an impact of more than $50 million on Royal Dutch Shell’s CCS earnings and are shown to provide additional insight into segment earnings and income attributable to shareholders. Further comments on the business segments are provided in the section ‘Earnings by Business Segment’ on pages 12 to 15.
| Royal Dutch Shell plc Unaudited Condensed Interim Financial Report 11 |
EARNINGS BY BUSINESS SEGMENT
UPSTREAM
| Quarters | $ million |
Half year | ||||||||||||||||||||||||||
| Q2 2011 |
Q1 2011 | Q2 2010 | %1 | 2011 | 2010 | % | ||||||||||||||||||||||
| 5,420 | 4,638 | 3,260 | +66 | Upstream earnings excluding identified items | 10,058 | 7,565 | +33 | |||||||||||||||||||||
| 6,061 | 5,758 | 3,270 | +85 | Upstream earnings | 11,819 | 7,685 | +54 | |||||||||||||||||||||
| 8,902 | 6,672 | 5,411 | +65 | Upstream cash flow from operating activities | 15,574 | 13,137 | +19 | |||||||||||||||||||||
| 4,049 | 1,727 | 5,664 | -29 | Upstream net capital investment | 5,776 | 11,146 | -48 | |||||||||||||||||||||
| 1,668 | 1,678 | 1,655 | +1 | Crude oil production available for sale (thousand b/d) | 1,673 | 1,694 | -1 | |||||||||||||||||||||
| 7,996 | 10,593 | 8,440 | -5 | Natural gas production available for sale (million scf/d) | 9,287 | 9,611 | -3 | |||||||||||||||||||||
| 3,046 | 3,504 | 3,110 | -2 | Barrels of oil equivalent (thousand boe/d) | 3,274 | 3,351 | -2 | |||||||||||||||||||||
| 4.81 | 4.42 | 3.88 | +24 | LNG sales volumes (million tonnes) | 9.23 | 8.11 | +14 | |||||||||||||||||||||
| 1 | Q2 on Q2 change |
Second quarter Upstream earnings excluding identified items were $5,420 million compared with $3,260 million a year ago. Identified items were a net gain of $641 million, compared with a net gain of $10 million in the second quarter 2010 (See page 11).
Upstream earnings excluding identified items, compared with the second quarter 2010, reflected higher crude oil and natural gas realisations, higher trading contributions and increased oil production volumes. The earnings also reflected significantly higher LNG sales volumes as well as higher realised LNG prices and increased dividends from an LNG venture. These were partly offset by lower natural gas production volumes, higher taxes and increased operating expenses, reflecting the start-up of new projects.
Global liquids realisations were 49% higher than in the second quarter 2010. Global natural gas realisations were 25% higher than in the same quarter a year ago.
Second quarter 2011 production was 3,046 thousand boe/d compared with 3,110 thousand boe/d a year ago. Crude oil production increased by 1% and natural gas production decreased by 5% compared with the second quarter 2010. Excluding the impact of divestments, second quarter 2011 production was 2% higher than in the same period last year.
New field start-ups and the continuing ramp-up of fields contributed some 285 thousand boe/d to production in the second quarter 2011, in particular from Qatargas 4 LNG and Pearl GTL in Qatar, Gbaran Ubie in Nigeria and the expansion of AOSP in Canada, which more than offset the impact of field declines.
LNG sales volumes of 4.81 million tonnes were 24% higher than in the same quarter a year ago, reflecting the successful ramp-up of Qatargas 4 LNG to full capacity during the quarter as well as higher volumes from Nigeria LNG.
| Royal Dutch Shell plc Unaudited Condensed Interim Financial Report 12 |
Half year Upstream earnings excluding identified items were $10,058 million compared with $7,565 million in the first half year 2010. Identified items were a net gain of $1,761 million, compared with a net gain of $120 million in the first half year 2010 (See page 11).
Upstream earnings excluding identified items, compared with the first half year 2010, reflected higher crude oil and natural gas realisations and increased trading contributions. The earnings also reflected higher LNG sales volumes and higher realised LNG prices as well as increased dividends from an LNG venture. These were partly offset by lower natural gas and crude oil production volumes, higher taxes and increased operating expenses, reflecting the start-up of new projects.
Global liquids realisations were 40% higher than in the first half year 2010. Global natural gas realisations were 17% higher than in the first half year 2010.
Half year 2011 production was 3,274 thousand boe/d compared with 3,351 thousand boe/d for the same period a year ago. Crude oil production was down 1% and natural gas production was down 3% compared with the first half year 2010 production. Excluding the impact of divestments, production in the first half year of 2011 was 1% higher than in the same period last year.
LNG sales volumes of 9.23 million tonnes were 14% higher than in the first half year 2010. Volumes reflected the successful ramp-up of Qatargas 4 LNG during the first half year 2011 as well as higher volumes from Nigeria LNG.
|
|
DOWNSTREAM |
| ||||||||||||||||||||||||||
| Quarters | $ million |
Half year | ||||||||||||||||||||||||||
| Q2 2011 |
Q1 2011 | Q2 2010 | %1 | 2011 | 2010 | % | ||||||||||||||||||||||
| 1,081 | 1,653 | 1,160 | -7 | Downstream CCS earnings excluding identified items | 2,734 | 1,938 | +41 | |||||||||||||||||||||
| 1,883 | 1,170 | 1,471 | +28 | Downstream CCS earnings | 3,053 | 2,214 | +38 | |||||||||||||||||||||
| 2,077 | 451 | 3,197 | -35 | Downstream cash flow from operating activities | 2,528 | 356 | +610 | |||||||||||||||||||||
| 1,949 | (118 | ) | (21 | ) | – | Downstream net capital investment | 1,831 | 666 | +175 | |||||||||||||||||||
| 2,834 | 3,030 | 3,296 | -14 | Refinery processing intake (thousand boe/d) | 2,931 | 3,148 | -7 | |||||||||||||||||||||
| 6,088 | 6,167 | 6,615 | -8 | Oil products sales volumes (thousand b/d) | 6,127 | 6,390 | -4 | |||||||||||||||||||||
| 4,549 | 5,010 | 5,254 | -13 | Chemicals sales volumes (thousand tonnes) | 9,559 | 10,023 | -5 | |||||||||||||||||||||
| 1 | Q2 on Q2 change |
Second quarter Downstream earnings excluding identified items were $1,081 million compared with $1,160 million in the second quarter 2010. Identified items were a net gain of $802 million, compared with a net gain of $311 million in the second quarter 2010 (See page 11).
Downstream earnings excluding identified items, compared with the second quarter 2010, reflected higher Oil Products marketing earnings as well as higher Chemicals earnings, offset by lower Oil Products refining results.
| Royal Dutch Shell plc Unaudited Condensed Interim Financial Report 13 |
Oil Products marketing earnings increased compared with the second quarter 2010, mainly reflecting higher contributions from trading as well as higher B2B and retail earnings.
Oil products sales volumes decreased by 8% compared with the same period a year ago. Excluding the impact of divestments, sales volumes were 4% lower than in the second quarter of 2010.
Oil Products refining results decreased compared with the second quarter 2010. Results reflected lower refining margins, which declined significantly in Europe and Asia, and lower refinery intake volumes.
Refinery intake volumes decreased by 14% compared with the second quarter of 2010, mainly as a result of divestments and a refinery closure as well as increased maintenance activities. Excluding portfolio impacts, refinery intake volumes were 6% lower than in the same period a year ago. As a result of increased maintenance activities, refinery availability decreased to 90% compared with 94% in the second quarter 2010.
Chemicals earnings excluding identified items increased to $530 million compared with $444 million in the second quarter 2010, reflecting higher realised chemicals margins and higher income from equity-accounted investments.
Chemicals sales volumes decreased by 13% compared with the same quarter last year. Chemicals manufacturing plant availability decreased to 87% compared with 92% in the second quarter 2010, as a result of increased maintenance activities.
Half year Downstream earnings excluding identified items were $2,734 million compared with $1,938 million in the first half year 2010. Identified items were a net gain of $319 million, compared with a net gain of $276 million in the first half year 2010 (See page 11).
Downstream earnings excluding identified items compared with the first half year 2010 reflected higher Oil Products marketing earnings as well as higher Chemicals earnings, partly offset by slightly lower Oil Products refining results.
Oil Products marketing earnings increased compared with the first half year 2010, mainly reflecting higher contributions from trading and B2B, which were partly offset by lower retail and lubricants earnings.
Oil products sales volumes decreased by 4% compared with the same period last year. Excluding impacts of divestments, sales volumes were 1% lower compared with the first half year of 2010.
Oil Products refining results were slightly lower than in the first half year 2010, reflecting lower refining margins and lower refinery intake volumes, mainly as a result of divestments and a refinery closure.
Refinery intake volumes decreased by 7% compared with the first half year 2010. Excluding portfolio impacts, refinery intake volumes increased by 2%. Refinery availability was 91% compared with 92% in the first half year 2010.
Chemicals earnings excluding identified items increased to $1,019 million compared with $757 million in the first half year 2010, reflecting higher realised chemicals margins and increased income from equity-accounted investments.
Chemicals sales volumes decreased by 5% compared with the first half year 2010. Chemicals manufacturing plant availability was 89% compared with 90% in the first half year 2010.
| Royal Dutch Shell plc Unaudited Condensed Interim Financial Report 14 |
CORPORATE AND NON-CONTROLLING INTEREST
| Quarters | $ million |
Half year | ||||||||||||||||||
| Q2 2011 |
Q1 2011 | Q2 2010 | 2011 | 2010 | ||||||||||||||||
| 51 | (3 | ) | (212 | ) | Corporate and Non-controlling interest excl. identified items | 48 | (473 | ) | ||||||||||||
| 51 | (3 | ) | (212 | ) | Corporate and Non-controlling interest | 48 | (473 | ) | ||||||||||||
| Of which: | ||||||||||||||||||||
| 141 | 99 | (112 | ) | Corporate | 240 | (288 | ) | |||||||||||||
| (90) | (102 | ) | (100 | ) | Non-controlling interest | (192 | ) | (185 | ) | |||||||||||
Second quarter Corporate results and Non-controlling interest excluding identified items were a gain of $51 million compared with a loss of $212 million in the same period last year.
Corporate results excluding identified items, compared with the second quarter 2010, mainly reflected currency exchange gains, which were partly offset by increased net interest expense.
Half year Corporate results and Non-controlling interest excluding identified items were a gain of $48 million compared with a loss of $473 million in the first half year 2010.
Corporate results excluding identified items, compared with the first half year 2010, mainly reflected currency exchange gains, which were partly offset by increased net interest expense.
FORTHCOMING EVENTS
Third quarter 2011 results and third quarter 2011 dividend are scheduled to be announced on October 27, 2011.
| Royal Dutch Shell plc Unaudited Condensed Interim Financial Report 15 |
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME
| Quarters | $ million |
Half year | ||||||||||||||||||||||||||
| Q2 2011 |
Q1 2011 | Q2 2010 | %1 | 2011 | 2010 | % | ||||||||||||||||||||||
| 121,261 | 109,923 | 90,568 | Revenue | 231,184 | 176,630 | |||||||||||||||||||||||
| 2,126 | 2,337 | 1,308 | Share of profit of equity-accounted investments | 4,463 | 2,954 | |||||||||||||||||||||||
| 1,175 | 2,582 | (16 | ) | Interest and other income | 3,757 | 301 | ||||||||||||||||||||||
| 124,562 | 114,842 | 91,860 | Total revenue and other income | 239,404 | 179,885 | |||||||||||||||||||||||
| 95,275 | 84,810 | 69,759 | Purchases | 180,085 | 134,760 | |||||||||||||||||||||||
| 6,791 | 5,913 | 5,925 | Production and manufacturing expenses | 12,704 | 11,112 | |||||||||||||||||||||||
| 3,749 | 3,364 | 3,433 | Selling, distribution and administrative expenses | 7,113 | 7,526 | |||||||||||||||||||||||
| 249 | 219 | 180 | Research and development | 468 | 394 | |||||||||||||||||||||||
| 379 | 401 | 403 | Exploration | 780 | 780 | |||||||||||||||||||||||
| 2,865 | 3,317 | 3,237 | Depreciation, depletion and amortisation | 6,182 | 6,163 | |||||||||||||||||||||||
| 360 | 395 | 191 | Interest expense | 755 | 452 | |||||||||||||||||||||||
| 14,894 | 16,423 | 8,732 | +71 | Income before taxation | 31,317 | 18,698 | +67 | |||||||||||||||||||||
| 6,135 | 7,498 | 4,245 | Taxation | 13,633 | 8,645 | |||||||||||||||||||||||
| 8,759 | 8,925 | 4,487 | +95 | Income for the period | 17,684 | 10,053 | +76 | |||||||||||||||||||||
| 97 | 145 | 94 | Income attributable to non-controlling interest | 242 | 179 | |||||||||||||||||||||||
| 8,662 | 8,780 | 4,393 | +97 | Income attributable to Royal Dutch Shell plc shareholders | 17,442 | 9,874 | +77 | |||||||||||||||||||||
EARNINGS PER SHARE
| Quarters | $ |
Half year | ||||||||||||||||||
| Q2 2011 |
Q1 2011 | Q2 2010 | 2011 | 2010 | ||||||||||||||||
| 1.39 | 1.42 | 0.72 | Basic earnings per share | 2.82 | 1.61 | |||||||||||||||
| 1.39 | 1.42 | 0.72 | Diluted earnings per share | 2.81 | 1.61 | |||||||||||||||
|
|
SHARES2 |
|||||||||||||||||||
| Quarters | Millions |
Half year | ||||||||||||||||||
| Q2 2011 |
Q1 2011 | Q2 2010 | 2011 | 2010 | ||||||||||||||||
| Weighted average number of shares as the basis for: | ||||||||||||||||||||
| 6,216.5 | 6,163.3 | 6,134.0 | Basic earnings per share | 6,189.9 | 6,130.3 | |||||||||||||||
| 6,227.2 | 6,174.0 | 6,143.7 | Diluted earnings per share | 6,200.6 | 6,139.7 | |||||||||||||||
| 6,241.8 | 6,207.4 | 6,132.5 | Shares outstanding at the end of the period | 6,241.8 | 6,132.5 | |||||||||||||||
| 1 | Q2 on Q2 change. |
| 2 | Royal Dutch Shell plc ordinary shares of €0.07 each. |
Notes 1 to 6 are an integral part of these Condensed Consolidated Interim Financial Statements.
| Royal Dutch Shell plc Unaudited Condensed Interim Financial Report 16 |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| Quarters | $ million |
Half year | ||||||||||||||||||||||||||
| Q2 2011 |
Q1 2011 | Q2 2010 | %1 | 2011 | 2010 | % | ||||||||||||||||||||||
| 8,759 | 8,925 | 4,487 | +95 | Income for the period | 17,684 | 10,053 | +76 | |||||||||||||||||||||
| Other comprehensive income, net of tax: | ||||||||||||||||||||||||||||
| 490 | 2,134 | (3,051 | ) | Currency translation differences |
2,624 | (4,618 | ) | |||||||||||||||||||||
| 9 | (19 | ) | 64 | Unrealised gains/(losses) on securities |
(10 | ) | 20 | |||||||||||||||||||||
| 19 | 22 | 14 | Cash flow hedging gains/(losses) |
41 | 12 | |||||||||||||||||||||||
| (29 | ) | 99 | (18 | ) | Share of other comprehensive income/(loss) of equity-accounted investments |
70 | (29 | ) | ||||||||||||||||||||
| 489 | 2,236 | (2,991 | ) | Other comprehensive income/(loss) for the period | 2,725 | (4,615 | ) | |||||||||||||||||||||
| 9,248 | 11,161 | 1,496 | Comprehensive income for the period | 20,409 | 5,438 | |||||||||||||||||||||||
| 128 | 173 | 58 | Comprehensive income/ (loss) attributable to non-controlling interest | 301 | 138 | |||||||||||||||||||||||
| 9,120 | 10,988 | 1,438 | Comprehensive income attributable to Royal Dutch Shell plc shareholders |
20,108 | 5,300 | |||||||||||||||||||||||
| 1 | Q2 on Q2 change. |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
| Equity attributable to Royal Dutch Shell plc shareholders |
||||||||||||||||||||||||||||
| $ million |
Ordinary share capital |
Shares held in trust |
Other reserves |
Retained earnings |
Total | Non- controlling interest |
Total equity | |||||||||||||||||||||
| At January 1, 2011 |
529 | (2,789 | ) | 10,094 | 140,179 | 148,013 | 1,767 | 149,780 | ||||||||||||||||||||
| Comprehensive income for the period |
– | – | 2,666 | 17,442 | 20,108 | 301 | 20,409 | |||||||||||||||||||||
| Capital contributions from and other changes in non-controlling interest |
– | – | – | 44 | 44 | (40 | ) | 4 | ||||||||||||||||||||
| Dividends paid |
– | – | – | (5,231 | ) | (5,231 | ) | (199 | ) | (5,430 | ) | |||||||||||||||||
| Scrip dividends1 |
6 | – | (6 | ) | 1,907 | 1,907 | – | 1,907 | ||||||||||||||||||||
| Shares held in trust: net sales/ (purchases) and dividends received |
– | 977 | – | 66 | 1,043 | – | 1,043 | |||||||||||||||||||||
| Share-based compensation |
– | – | (336 | ) | (61 | ) | (397 | ) | – | (397 | ) | |||||||||||||||||
| At June 30, 2011 |
535 | (1,812 | ) | 12,418 | 154,346 | 165,487 | 1,829 | 167,316 | ||||||||||||||||||||
| 1 | During the first half of 2011 some 55.1 million Class A shares, equivalent to $1.9 billion, were issued under the Scrip Dividend Programme. The fair value of the shares issued in connection with the Scrip Dividend Programme is reflected in retained earnings. |
| Equity attributable to Royal Dutch Shell plc shareholders |
||||||||||||||||||||||||||||
| $ million |
Ordinary share capital |
Shares held in trust |
Other reserves |
Retained earnings |
Total | Non- controlling interest |
Total equity | |||||||||||||||||||||
| At January 1, 2010 |
527 | (1,711 | ) | 9,982 | 127,633 | 136,431 | 1,704 | 138,135 | ||||||||||||||||||||
| Comprehensive income for the period |
– | – | (4,574 | ) | 9,874 | 5,300 | 138 | 5,438 | ||||||||||||||||||||
| Capital contributions from and other changes in non-controlling interest |
– | – | – | 294 | 294 | 22 | 316 | |||||||||||||||||||||
| Dividends paid |
– | – | – | (5,003 | ) | (5,003 | ) | (189 | ) | (5,192 | ) | |||||||||||||||||
| Shares held in trust: net sales/ (purchases) and dividends received |
– | 428 | – | – | 428 | – | 428 | |||||||||||||||||||||
| Share-based compensation |
– | – | (174 | ) | 212 | 38 | – | 38 | ||||||||||||||||||||
| At June 30, 2010 |
527 | (1,283 | ) | 5,234 | 133,010 | 137,488 | 1,675 | 139,163 | ||||||||||||||||||||
Notes 1 to 6 are an integral part of these Condensed Consolidated Interim Financial Statements.
| Royal Dutch Shell plc Unaudited Condensed Interim Financial Report 17 |
| CONDENSED CONSOLIDATED BALANCE SHEET |
| |||||||||||
| $ million | ||||||||||||
| June 30, 2011 | Mar 31, 2011 | Dec 31, 2010 | ||||||||||
| Assets |
||||||||||||
| Non-current assets: |
||||||||||||
| Intangible assets |
4,668 | 4,725 | 5,039 | |||||||||
| Property, plant and equipment |
148,057 | 144,835 | 142,705 | |||||||||
| Equity-accounted investments |
39,033 | 35,558 | 33,414 | |||||||||
| Investments in securities |
3,920 | 3,971 | 3,809 | |||||||||
| Deferred tax |
5,612 | 5,661 | 5,361 | |||||||||
| Prepaid pension costs |
11,171 | 10,874 | 10,368 | |||||||||
| Trade and other receivables |
9,450 | 9,360 | 8,970 | |||||||||
| 221,911 | 214,984 | 209,666 | ||||||||||
| Current assets: |
||||||||||||
| Inventories |
33,955 | 33,632 | 29,348 | |||||||||
| Trade and other receivables |
75,493 | 78,103 | 70,102 | |||||||||
| Cash and cash equivalents |
19,465 | 16,608 | 13,444 | |||||||||
| 128,913 | 128,343 | 112,894 | ||||||||||
| Total assets |
350,824 | 343,327 | 322,560 | |||||||||
| Liabilities |
||||||||||||
| Non-current liabilities: |
||||||||||||
| Debt |
31,477 | 31,788 | 34,381 | |||||||||
| Trade and other payables |
5,335 | 4,417 | 4,250 | |||||||||
| Deferred tax |
16,626 | 15,573 | 13,388 | |||||||||
| Retirement benefit obligations |
6,126 | 6,105 | 5,924 | |||||||||
| Decommissioning and other provisions |
15,063 | 14,321 | 14,285 | |||||||||
| 74,627 | 72,204 | 72,228 | ||||||||||
| Current liabilities: |
||||||||||||
| Debt |
11,022 | 10,839 | 9,951 | |||||||||
| Trade and other payables |
79,344 | 82,270 | 76,550 | |||||||||
| Taxes payable |
14,798 | 14,794 | 10,306 | |||||||||
| Retirement benefit obligations |
395 | 393 | 377 | |||||||||
| Decommissioning and other provisions |
3,322 | 3,144 | 3,368 | |||||||||
| 108,881 | 111,440 | 100,552 | ||||||||||
| Total liabilities |
183,508 | 183,644 | 172,780 | |||||||||
| Equity attributable to Royal Dutch Shell plc shareholders |
165,487 | 157,805 | 148,013 | |||||||||
| Non-controlling interest |
1,829 | 1,878 | 1,767 | |||||||||
| Total equity |
167,316 | 159,683 | 149,780 | |||||||||
| Total liabilities and equity |
350,824 | 343,327 | 322,560 | |||||||||
Notes 1 to 6 are an integral part of these Condensed Consolidated Interim Financial Statements.
| Royal Dutch Shell plc Unaudited Condensed Interim Financial Report 18 |
| CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS |
||||||||||||||||||||
| Quarters | $ million |
Half year | ||||||||||||||||||
| Q2 2011 |
Q1 2011 | Q2 2010 | 2011 | 2010 | ||||||||||||||||
| Cash flow from operating activities: | ||||||||||||||||||||
| 8,759 | 8,925 | 4,487 | Income for the period | 17,684 | 10,053 | |||||||||||||||
| Adjustment for: | ||||||||||||||||||||
| 5,546 | 5,901 | 4,210 | - Current taxation | 11,447 | 8,324 | |||||||||||||||
| 284 | 356 | 161 | - Interest expense (net) | 640 | 392 | |||||||||||||||
| 2,866 | 3,316 | 3,237 | - Depreciation, depletion and amortisation | 6,182 | 6,163 | |||||||||||||||
| (796) | (2,192 | ) | (28 | ) | - Net (gains)/losses on sale of assets | (2,988 | ) | (251 | ) | |||||||||||
| (2,283) | (4,511 | ) | (482 | ) | - Decrease/(increase) in net working capital | (6,794 | ) | (6,112 | ) | |||||||||||
| (2,126) | (2,337 | ) | (1,308 | ) | - Share of profit of equity-accounted investments | (4,463 | ) | (2,954 | ) | |||||||||||
| 2,560 | 1,523 | 1,425 | - Dividends received from equity-accounted investments | 4,083 | 2,969 | |||||||||||||||
| 553 | 1,578 | 182 | - Deferred taxation and other provisions | 2,131 | 475 | |||||||||||||||
| (72) | 213 | 425 | - Other | 141 | 772 | |||||||||||||||
| 15,291 | 12,772 | 12,309 | Net cash from operating activities (pre-tax) | 28,063 | 19,831 | |||||||||||||||
| (5,251) | (4,151 | ) | (4,213 | ) | Taxation paid | (9,402 | ) | (6,953 | ) | |||||||||||
| 10,040 | 8,621 | 8,096 | Net cash from operating activities | 18,661 | 12,878 | |||||||||||||||
| Cash flow from investing activities: | ||||||||||||||||||||
| (4,980) | (4,146 | ) | (6,513 | ) | Capital expenditure | (9,126 | ) | (11,760 | ) | |||||||||||
| (669) | (703 | ) | (136 | ) | Investments in equity-accounted investments | (1,372 | ) | (761 | ) | |||||||||||
| 1,110 | 3,111 | 1,007 | Proceeds from sale of assets | 4,221 | 1,373 | |||||||||||||||
| 172 | 53 | 136 | Proceeds from sale of equity-accounted investments | 225 | 167 | |||||||||||||||
| – | 1 | 26 | (Additions to)/proceeds from sale of securities | 1 | 19 | |||||||||||||||
| 73 | 37 | 13 | Interest received | 110 | 51 | |||||||||||||||
| (4,294) | (1,647 | ) | (5,467 | ) | Net cash used in investing activities | (5,941 | ) | (10,911 | ) | |||||||||||
| Cash flow from financing activities: | ||||||||||||||||||||
| 119 | (2,637 | ) | 1,017 | Net (decrease)/increase in debt with maturity period within three months | (2,518 | ) | 1,167 | |||||||||||||
| 286 | 481 | 3,323 | Other debt: New borrowings | 767 | 7,530 | |||||||||||||||
| (1,299) | (236 | ) | (414 | ) | Repayments |
(1,535 | ) | (2,361 | ) | |||||||||||
| (522) | (500 | ) | (379 | ) | Interest paid | (1,022 | ) | (897 | ) | |||||||||||
| (9) | 9 | 330 | Change in non-controlling interest | – | 318 | |||||||||||||||
| Dividends paid to: | ||||||||||||||||||||
| (1,766) | (1,558 | ) | (2,448 | ) | - Royal Dutch Shell plc shareholders | (3,324 | ) | (5,003 | ) | |||||||||||
| (128) | (71 | ) | (150 | ) | - Non-controlling interest | (199 | ) | (189 | ) | |||||||||||
| 259 | 144 | 86 | Shares held in trust: net sales/(purchases) and dividends received | 403 | 204 | |||||||||||||||
| (3,060) | (4,368 | ) | 1,365 | Net cash from/(used in) financing activities | (7,428 | ) | 769 | |||||||||||||
| 171 | 558 | (434 | ) | Currency translation differences relating to cash and cash equivalents | 729 | (447 | ) | |||||||||||||
| 2,857 | 3,164 | 3,560 | Increase/(decrease) in cash and cash equivalents | 6,021 | 2,289 | |||||||||||||||
| 16,608 | 13,444 | 8,448 | Cash and cash equivalents at beginning of period | 13,444 | 9,719 | |||||||||||||||
| 19,465 | 16,608 | 12,008 | Cash and cash equivalents at end of period | 19,465 | 12,008 | |||||||||||||||
Notes 1 to 6 are an integral part of these Condensed Consolidated Interim Financial Statements.
| Royal Dutch Shell plc Unaudited Condensed Interim Financial Report 19 |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. Basis of preparation
These Condensed Consolidated Interim Financial Statements (“Interim Statements”) of Royal Dutch Shell plc and its subsidiaries (collectively “Shell”) are prepared in accordance with IAS 34 ‘Interim Financial Reporting’ as adopted by the European Union and on the basis of the same accounting principles as, and should be read in conjunction with, the Annual Report / Form 20-F for the year ended December 31, 2010 (pages 102 to 107) as filed with the US Securities and Exchange Commission. The Directors consider that, taking into account Shell’s assets and income, Shell has adequate resources to continue in operational existence for the foreseeable future. For this reason the Directors adopt the going concern basis for the financial statements contained in this report.
The financial information presented in the Interim Statements does not comprise statutory accounts for the purposes of section 435 of the Companies Act 2006. Statutory accounts for the year ended December 31, 2010 were published in Shell’s Annual Report / Form 20-F, copies of which were 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.
The Interim Statements are unaudited; however, in the opinion of management, the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim period.
Segment information
Segment earnings are presented on a current cost of supplies basis (CCS earnings). On this basis, the purchase price of 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. CCS earnings thus exclude the effect of changes in the oil price on inventory carrying amounts. Net capital investment information is presented as measured based on capital expenditure as reported in the Condensed Consolidated Statement of Cash Flows, adjusted for: proceeds from divestments; exploration expenses excluding exploration wells written off; investments in equity-accounted investments; and leases and other items.
CCS earnings and net capital investment information are the dominant measures used by the Chief Executive Officer for the purposes of making decisions about allocating resources and assessing performance.
2. Information by Business Segment
| Quarters | $ million |
Half year | ||||||||||||||
| Q2 2011 |
Q2 2010 | 2011 | 2010 | |||||||||||||
| Third-party revenue | ||||||||||||||||
| 10,119 | 7,218 | Upstream |
19,771 | 16,666 | ||||||||||||
| 111,132 | 83,323 | Downstream |
211,391 | 159,926 | ||||||||||||
| 10 | 27 | Corporate |
22 | 38 | ||||||||||||
| 121,261 | 90,568 | Total third-party revenue | 231,184 | 176,630 | ||||||||||||
| Inter-segment revenue | ||||||||||||||||
| 12,377 | 8,512 | Upstream |
24,375 | 16,826 | ||||||||||||
| 240 | 69 | Downstream |
420 | 153 | ||||||||||||
| – | – | Corporate |
– | – | ||||||||||||
| Segment earnings | ||||||||||||||||
| 6,061 | 3,270 | Upstream |
11,819 | 7,685 | ||||||||||||
| 1,883 | 1,471 | Downstream |
3,053 | 2,214 | ||||||||||||
| 141 | (112 | ) | Corporate |
240 | (288 | ) | ||||||||||
| 8,085 | 4,629 | Total segment earnings | 15,112 | 9,611 | ||||||||||||
| Current cost of supplies adjustment: | ||||||||||||||||
| 824 | (128 | ) | Purchases |
3,047 | 600 | |||||||||||
| (236) | 27 | Taxation |
(869 | ) | (182 | ) | ||||||||||
| 86 | (41 | ) | Share of profit of equity-accounted investments |
394 | 24 | |||||||||||
| 8,759 | 4,487 | Income for the period | 17,684 | 10,053 | ||||||||||||
| Royal Dutch Shell plc Unaudited Condensed Interim Financial Report 20 |
3. Ordinary share capital
Issued and fully paid
| shares of €0.07 each | shares of £1 each |
|||||||||||
| Number of shares |
Class A | Class B | Sterling deferred |
|||||||||
| At January 1, 2011 |
3,563,952,539 | 2,695,808,103 | 50,000 | |||||||||
| Scrip dividends |
55,054,930 | – | – | |||||||||
| At June 30, 2011 |
3,619,007,469 | 2,695,808,103 | 50,000 | |||||||||
Nominal value
| $ million |
Class A | Class B | Total | |||||||||
| At January 1, 2011 |
302 | 227 | 529 | |||||||||
| Scrip dividends |
6 | – | 6 | |||||||||
| At June 30, 2011 |
308 | 227 | 535 | |||||||||
The total nominal value of sterling deferred shares is less than $1 million.
At Royal Dutch Shell plc’s Annual General Meeting held on May 17, 2011, the Board was authorised to allot shares in Royal Dutch Shell plc, to grant rights to subscribe for or to convert any security into shares in Royal Dutch Shell plc, in either case up to a nominal amount of €146 million. This authority expires at the earlier of August 17, 2012, and the conclusion of the Annual General Meeting held in 2012, unless previously revoked or varied by Royal Dutch Shell plc in general meeting.
4. Other reserves
| $ million |
Merger reserve1 |
Share premium reserve1 |
Capital redemption reserve2 |
Share plan reserve |
Accumulated other comprehensive income |
Total | ||||||||||||||||||
| At January 1, 2011 |
3,442 | 154 | 57 | 1,483 | 4,958 | 10,094 | ||||||||||||||||||
| Other comprehensive income/(loss) attributable to Royal Dutch Shell plc shareholders |
– | – | – | – | 2,666 | 2,666 | ||||||||||||||||||
| Scrip dividends |
(6 | ) | – | – | – | – | (6 | ) | ||||||||||||||||
| Share-based compensation |
– | – | – | (336 | ) | – | (336 | ) | ||||||||||||||||
| At June 30, 2011 |
3,436 | 154 | 57 | 1,147 | 7,624 | 12,418 | ||||||||||||||||||
| At January 1, 2010 |
3,444 | 154 | 57 | 1,373 | 4,954 | 9,982 | ||||||||||||||||||
| Other comprehensive income/(loss) attributable to Royal Dutch Shell plc shareholders |
– | – | – | – | (4,574 | ) | (4,574 | ) | ||||||||||||||||
| Share-based compensation |
– | – | – | (174 | ) | – | (174 | ) | ||||||||||||||||
| At June 30, 2010 |
3,444 | 154 | 57 | 1,199 | 380 | 5,234 | ||||||||||||||||||
| 1 | The merger reserve and share premium reserve were established as a consequence of Royal Dutch Shell plc becoming the single parent company of Royal Dutch Petroleum Company and 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. |
5. Impacts of Accounting for Derivatives
In the ordinary course of business Shell enters into contracts to supply or purchase oil and gas products, and also enters into derivative contracts to mitigate resulting economic exposures (generally price exposure). Derivative contracts are carried at period-end market price (fair value), with movements in fair value recognised in income for the period. Supply and purchase contracts entered into for operational purposes are, by contrast, recognised when the transaction occurs (see also below); furthermore, inventory is carried at historical cost or net realisable value, whichever is lower.
As a consequence, accounting mismatches occur because: (a) the supply or purchase transaction is recognised in a different period; or (b) the inventory is measured on a different basis.
In addition, certain UK gas contracts held by the Upstream business are, due to pricing or delivery conditions, deemed to contain embedded derivatives or written options and are also required to be carried at fair value even though they are entered into for operational purposes.
The accounting impacts of the aforementioned are reported as identified items in the quarterly results.
| Royal Dutch Shell plc Unaudited Condensed Interim Financial Report 21 |
6. Return on average capital employed (ROACE)
ROACE measures the efficiency of Shell’s utilisation of the capital that it employs. In this calculation, ROACE is defined as the sum of income for the current and previous three quarters adjusted for after-tax interest expense as a percentage of the average capital employed for the same period. Capital employed consists of total equity, current debt and non-current debt. The tax rate is derived from calculations at the published segment level.
LIQUIDITY AND CAPITAL RESOURCES
Second quarter Net cash from operating activities in the second quarter 2011 was $10.0 billion compared with $8.1 billion for the same period last year.
Total current and non-current debt decreased to $42.5 billion at June 30, 2011 from $42.6 billion at March 31, 2011 while cash and cash equivalents increased to $19.5 billion at June 30, 2011, from $16.6 billion at March 31, 2011. During the second quarter 2011 no new debt was issued under the US shelf registration programme.
Net capital investment in the second quarter 2011 was $6.0 billion of which $4.1 billion was invested in Upstream and $1.9 billion in Downstream. Net capital investment in Downstream includes the investment in the Raízen joint venture, of which $1.1 billion remains to be paid. Net capital investment in the same period of 2010 was $5.6 billion, which was all invested in Upstream.
Dividends of $0.42 per share are declared on July 28, 2011 in respect of the second quarter. These dividends are payable on September 19, 2011. In the 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 / Form 20-F for the year ended December 31, 2010 for additional information on the dividend access mechanism.
Shell provides shareholders with a choice to receive dividends in cash or in shares via a Scrip Dividend Programme. Under the Scrip Dividend Programme shareholders can increase their shareholding in Shell by choosing to receive new shares instead of cash dividends. Only new Class A shares will be issued under the Programme, including to shareholders who currently hold Class B shares.
Half year Net cash from operating activities in the first half 2011 was $18.7 billion compared with $12.9 billion for the same period last year.
Total current and non-current debt decreased to $42.5 billion at June 30, 2011 from $44.3 billion at December 31, 2010 while cash and cash equivalents increased to $19.5 billion at June 30, 2011, from $13.4 billion at December 31, 2010. During the first half 2011 no new debt was issued under the US shelf registration programme.
Net capital investment in the first half 2011 was $7.7 billion of which $5.8 billion was invested in Upstream, $1.8 billion in Downstream and $0.1 billion in Corporate. Net capital investment in the same period of 2010 was $11.8 billion of which $11.1 billion was invested in Upstream and $0.7 billion in Downstream.
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties affecting Shell are described in the Risk Factors section of the Annual Report / Form 20-F for the year ended December 31, 2010 (pages 13 to 15) and are summarised below. There are no material changes in those Risk Factors.
| • | Our operating results and financial condition are exposed to fluctuating prices of crude oil, natural gas, oil products and chemicals. |
| • | Our ability to achieve strategic objectives depends on how we react to competitive forces. |
| • | The global macroeconomic environment as well as financial and commodity market conditions influence our operating results and financial condition as our business model involves trading, treasury, interest rate and foreign exchange risks. |
| • | Our future hydrocarbon production depends on the delivery of large and complex projects, as well as on our ability to replace oil and gas reserves. |
| • | An erosion of our business reputation would have a negative impact on our brand, our ability to secure new resources, our licence to operate and our financial performance. |
| • | Our future performance depends on the successful development and deployment of new technologies. |
| • | Rising climate change concerns could lead to additional regulatory measures that may result in project delays and higher costs. |
| • | The nature of our operations exposes us to a wide range of health, safety, security and environment risks. |
| • | An erosion of the business and operating environment in Nigeria could adversely impact our earnings and financial position. |
| • | We operate in more than 90 countries, with differing degrees of political, legal and fiscal stability. This exposes us to a wide range of political developments that could result in changes to laws and regulations. In addition, Shell companies face the risk of litigation and disputes worldwide. |
| Royal Dutch Shell plc Unaudited Condensed Interim Financial Report 22 |
| • | Our operations expose us to social instability, terrorism and acts of war or piracy that could have an adverse impact on our business. |
| • | We rely heavily on information technology systems for our operations. |
| • | We have substantial pension commitments, whose funding is subject to capital market risks. |
| • | The estimation of reserves involves subjective judgements based on available information and the application of complex rules, 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. |
| • | Many of our major projects and operations are conducted in joint ventures or associated companies. This may reduce our degree of control, as well as our ability to identify and manage risks. |
| • | Violations of antitrust and competition law carry fines and expose us or our employees to criminal sanctions and civil suits. |
| • | Shell is currently subject to a Deferred Prosecution Agreement with the US Department of Justice for violations of the US Foreign Corrupt Practices Act. |
| • | The Company’s Articles of Association determine the jurisdiction for shareholder disputes. This might limit shareholder remedies. |
FIRST QUARTER 2011 PORTFOLIO DEVELOPMENTS
Upstream
In Qatar, Shell and Qatargas announced delivery of the first cargo of LNG from the Qatargas 4 project (Shell share 30%). Production is expected to ramp up to 1.4 billion standard cubic feet of gas per day (scf/d), delivering 7.8 million tonnes per annum (mtpa) of LNG and 70 thousand barrels per day (b/d) of condensate and liquefied petroleum gas.
In the Netherlands, Shell produced its first oil from the Schoonebeek Enhanced Oil Recovery (EOR) project (Shell share 30%). The field is expected to ramp up to produce some 20 thousand barrels of oil equivalent per day (boe/d).
Shell sold non-core Upstream assets, with proceeds totalling $2.4 billion in the quarter. As previously announced, Shell completed the sale of a group of predominately mature tight gas fields in South Texas in the USA, producing some 200 million scf/d (Shell share), for some $1.8 billion. In addition, Shell sold various other non-core assets in Canada, Pakistan, the United Kingdom and the USA (combined Shell share of production of some 25 thousand boe/d) as well as exploration acreage in Colombia.
During the first quarter 2011, Shell confirmed a significant oil and gas discovery, Geronggong, drilled in 2010 in deep water Brunei.
Downstream
Shell sold non-core Downstream assets, mainly in the USA, with proceeds totalling $0.8 billion in the quarter.
In addition, Shell agreed to divest the majority of its shareholding in most of its downstream businesses in Africa for a total consideration of some $1 billion (including estimated working capital of $0.4 billion). The agreements are subject to regulatory approvals.
Also, in the United Kingdom, Shell agreed the sale of its 272 thousand b/d Stanlow refinery and associated local marketing businesses for a total consideration of some $1.3 billion (including estimated working capital of $0.9 billion).
On April 1, 2011, Shell agreed to sell most of its downstream business in Chile for a total consideration of some $0.6 billion (including estimated working capital of $0.1 billion).
In addition, on April 12, 2011, Shell announced a proposal to convert its 79 thousand b/d Clyde refinery and Gore Bay terminal in Australia into a fuel import terminal.
FIRST QUARTER 2011 SUMMARY OF IDENTIFIED ITEMS
Earnings in the first quarter 2011 reflected the following items, which in aggregate amounted to a net gain of $637 million (compared with a net gain of $75 million in the first quarter 2010), as summarised in the table on page 11:
| • | Upstream earnings included a net gain of $1,120 million, reflecting mainly gains related to divestments. These were partly offset by charges related to a tax provision, the mark-to-market valuation of certain gas contracts, the estimated fair value accounting of commodity derivatives (see Note 5), an asset impairment and cost impacts related to ongoing effects from the US offshore drilling moratorium. Earnings for the first quarter 2010 included a net gain of $110 million. |
| • | Downstream earnings included a net charge of $483 million, reflecting charges related to asset impairments and the estimated fair value accounting of commodity derivatives (see Note 5). Earnings for the first quarter 2010 included a net charge of $35 million. |
| Royal Dutch Shell plc Unaudited Condensed Interim Financial Report 23 |
CAUTIONARY STATEMENT
All amounts shown throughout this report are unaudited.
The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate entities. In this report “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 report 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 report, 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 24% shareholding in Woodside Petroleum Ltd.) ownership interest held by Shell in a venture, partnership or company, after exclusion of all third-party interest.
This report 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”, “goals”, “intend”, “may”, “objectives”, “outlook”, “plan”, “probably”, “project”, “risks”, “seek”, “scheduled”, “should”, “target”, “will” and similar terms and phrases. There are a number of factors that could affect the future operations of Royal Dutch Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this report, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for Shell’s products; (c) currency fluctuations; (d) drilling and production results; (e) reserves estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and regulatory developments including regulatory measures addressing climate change; (k) economic and financial market conditions in various countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; and (m) changes in trading conditions. All forward-looking statements contained in this report are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Additional factors that may affect future results are contained in Royal Dutch Shell’s Annual Report / Form 20-F for the year ended December 31, 2010 (available at www.shell.com/investor and www.sec.gov). These factors also should be considered by the reader. Each forward-looking statement speaks only as of the date of this report, July 28, 2011. Neither Royal Dutch Shell nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this report.
July 28, 2011
Contacts:
| • | Investor Relations: Europe: + 31 (0)70 377 4540; USA: +1 713 241 1042 |
| • | Media: Europe: + 31 (0)70 377 3600 |
| Royal Dutch Shell plc Unaudited Condensed Interim Financial Report 24 |
Appendix
Net capital investment by business segment
Net capital investment is capital investment (capital expenditure, exploration expense, new equity and loans in equity-accounted investments and leases and other adjustments), less divestment proceeds.
| $ million | ||||||||
| Six months ended | ||||||||
| June 30, 2011 | June 30, 2010 | |||||||
| Net capital investment: |
||||||||
| Upstream |
5,776 | 11,146 | ||||||
| Downstream |
1,831 | 666 | ||||||
| Corporate |
118 | 13 | ||||||
| Total |
7,725 | 11,825 | ||||||
| Proceeds from divestments |
4,447 | 1,559 | ||||||
| Capital investment |
12,172 | 13,384 | ||||||
| Exploration expenses excluding exploration wells written off |
(604 | ) | (468 | ) | ||||
| Investments in equity-accounted investments |
(1,372 | ) | (761 | ) | ||||
| Leases and other adjustments |
(1,070 | ) | (395 | ) | ||||
| Capital expenditure |
9,126 | 11,760 | ||||||
Return on average capital employed (ROACE)
ROACE measures the efficiency of Shell’s utilisation of the capital that it employs. In this calculation, ROACE is defined as the sum of income for the current and previous three quarters adjusted for after-tax interest expense as a percentage of the average capital employed for the same period. Capital employed consists of total equity, current debt and non-current debt. The tax rate is derived from calculations at the published segment level.
Calculation of ROACE
| $ million | ||||||||
| Year ended | ||||||||
| June 30, 2011 | June 30, 2010 | |||||||
| Income for current and previous three quarters |
28,105 | 15,352 | ||||||
| Interest expense after tax |
761 | 352 | ||||||
| ROACE numerator |
28,866 | 15,704 | ||||||
| Capital employed – opening |
179,464 | 165,212 | ||||||
| Capital employed - closing |
209,815 | 179,464 | ||||||
| Capital employed - average |
194,640 | 172,338 | ||||||
| ROACE |
14.8% | 9.1% | ||||||
Share-based compensation
There are a number of share-based compensation plans for Shell employees.
The principal share-based employee compensation plan is the Performance Share Plan (PSP). For the details of the PSP reference is made to the Annual Report and Form 20-F for the year ended December 31, 2010. The following table presents the number of shares and American Depositary Shares (“ADSs”) in the Company conditionally awarded under the PSP outstanding as at June 30, 2011. The measurement period for the shares granted is three years.
| PSPs |
Class A shares | Class B shares | Class A ADSs | |||||||||
| Outstanding at June 30, 2011 (thousands) |
25,895 | 10,340 | 8,275 | |||||||||
Prior to the introduction in 2005 of the PSP, Shell’s plans offered options over shares and ADSs of the Company which were awarded to eligible employees, at a price not less than the fair market value of the shares and ADSs at the date the options were granted.
| Royal Dutch Shell plc Unaudited Condensed Interim Financial Report 25 |
The following table presents the number of shares and ADSs in the Company under option as at June 30, 2011, and the range of expiration dates.
| Share option plans |
A shares | B shares | A ADSs | |||||||||
| Under option at June 30, 2011 (thousands) |
34,142 | 9,103 | 6,966 | |||||||||
| Range of expiration dates |
Aug 2011 – Nov 2014 | Mar 2012 – Nov 2014 | Oct 2011 - May 2014 | |||||||||
Ratio of earnings to fixed charges
The following table sets out for the years ended December 31, 2006, 2007, 2008, 2009 and 2010 and the six months ended June 30, 2011, the consolidated unaudited ratio of earnings to fixed charges of Shell. With effect from this period, accretion expense is excluded from interest expensed and fixed charges. The comparative annual information is consistently presented.
| $ million | ||||||||||||||||||||||||
| Six months ended June 30, |
Years ending December 31, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||
| Pre-tax income from continuing operations before income from equity investees |
26,854 | 29,391 | 16,044 | 43,374 | 42,342 | 37,957 | ||||||||||||||||||
| Total fixed charges1 |
986 | 1,684 | 1,669 | 2,009 | 1,840 | 1,841 | ||||||||||||||||||
| Distributed income from equity investees |
4,083 | 6,519 | 4,903 | 9,325 | 6,955 | 5,488 | ||||||||||||||||||
| Less: interest capitalised |
422 | 969 | 1,088 | 870 | 667 | 564 | ||||||||||||||||||
| Total earnings |
31,501 | 36,625 | 21,528 | 53,838 | 50,470 | 44,722 | ||||||||||||||||||
| Interest expensed and capitalised1 |
787 | 1,218 | 902 | 1,371 | 1,235 | 1,296 | ||||||||||||||||||
| Interest within rental expense |
199 | 466 | 767 | 638 | 605 | 545 | ||||||||||||||||||
| Total fixed charges |
986 | 1,684 | 1,669 | 2,009 | 1,840 | 1,841 | ||||||||||||||||||
| Ratio earnings/fixed charges |
31.95 | 21.75 | 12.90 | 26.80 | 27.43 | 24.29 | ||||||||||||||||||
| 1 Excluding accretion expense. |
| |||||||||||||||||||||||
For the purposes of the table above, “earnings” consists of pre-tax income from continuing operations before adjustment for non-controlling interest plus fixed charges (excluding capitalised interest) less undistributed earnings of equity-accounted investments. Fixed charges consist of expensed and capitalised interest (excluding accretion expense) plus interest within rental expenses (for operating leases).
Capitalisation and indebtedness
The following table sets out the unaudited consolidated combined capitalisation and indebtedness of Shell as of June 30, 2011. This information is derived from the Condensed Consolidated Interim Financial Statements.
| $ million | ||||
| June 30, 2011 | ||||
| Equity attributable to Royal Dutch Shell plc shareholders |
165,487 | |||
| Current debt[A] |
10,892 | |||
| Non-current debt[A] |
29,268 | |||
| Total debt[B] [C] |
40,160 | |||
| Total capitalisation |
205,647 | |||
| [A] | Excludes a combined total of $2.3billion of certain tolling commitments. |
| [B] | Of total debt together with $2.3 billion of certain tolling agreements, $37.3 billion was unsecured and $5.2 billion was secured. |
| [C] | At June 30, 2011 Shell had outstanding guarantees of $3.5 billion, of which $2.1 billion related to debt of equity-accounted investments. |
| Royal Dutch Shell plc Unaudited Condensed Interim Financial Report 26 |