UNITED STATES SECURITIES AND EXCHANGE COMMISSION

 

Washington D.C. 20549

 

Form 6-K/A

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of January 2020

 

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)

 

Carel van Bylandtlaan 30, 2596 HR, The Hague

The Netherlands

Tel No: 011 31 70 377 9111

(Address of principal executive office)

 

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 þ 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): ¨

 

 

 

The Registrant filed to the SEC a report on Form 6-K on January 30, 2020. The Registrant is filing this Form 6-K/A in order to amend to correct typographical errors in the Consolidated Statement of Cash Flows. The labels for four line items in Cash flow from operating activities have been corrected in this revised version.

 

Royal Dutch Shell plc (the “Registrant”) is filing the following exhibits on this Report on Form 6-K/A, each of which is hereby incorporated by reference:

 

Exhibit

No.Description
  
99.2Royal Dutch Shell plc –Three and twelve month periods ended December 31, 2019 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 twelve month periods ended December 31, 2019, and Business Review in respect of such periods. This Report on Form 6-K/A contains the Unaudited Condensed Interim Financial Report with additional information required to keep current the Registrant's registration statement on Form F-3.

 

This Report on Form 6-K/A 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 333-222005 and 333-222005-01); and

 

b)the Registration Statements on Form S-8 of Royal Dutch Shell plc (Registration Numbers 333-126715, 333-141397, 333-171206, 333-192821, 333-200953, 333-215273, 333-222813 and 333-228137).

 

 

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 authorized.

 

Royal Dutch Shell plc

 

(Registrant)

 

By: /s/ Linda M. Coulter  
     
  Name: Linda M. Coulter  
  Title: Company Secretary  

Date: January 31, 2020

 

 

 

 

 

 

 

 

 

 

Exhibit 99.2

 

Royal Dutch Shell plc

 

Three and twelve month periods ended December 31, 2019
Unaudited Condensed Interim Financial Report

 

ROYAL DUTCH SHELL PLC

4TH QUARTER 2019 AND FULL YEAR UNAUDITED RESULTS

 

 

 

SUMMARY OF UNAUDITED RESULTS

 

Quarters     $ million   Full year
Q4 2019¹ Q3 2019¹ Q4 2018         Reference 2019¹ 2018   %
965     5,879     5,590     -83       Income/(loss) attributable to shareholders   15,843     23,352     -32  
871     6,081     7,334     -88       CCS earnings attributable to shareholders Note 2 15,270     23,833     -36  
(2,060 )   1,313     1,646           Of which: Identified items A (1,192 )   2,429      
2,931     4,767     5,688     -48       CCS earnings attributable to shareholders excluding identified items   16,462     21,404     -23  
125     149     120           Add: CCS earnings attributable to non-controlling interest   535     531      
3,056     4,917     5,808     -47       CCS earnings excluding identified items   16,997     21,935     -23  
                  Of which:            
1,986     2,674     2,363           Integrated Gas   8,955     9,399      
778     907     1,881           Upstream   4,744     6,775      
1,368     2,153     2,131           Downstream   6,680     7,567      
(1,075 )   (817 )   (567 )         Corporate   (3,383 )   (1,806 )    
10,267     12,252     22,021     -53       Cash flow from operating activities   42,179     53,085     -21  
(4,862 )   (2,130 )   (5,312 )         Cash flow from investing activities   (15,779 )   (13,659 )    
5,405     10,122     16,709           Free cash flow H 26,400     39,426      
0.12     0.73     0.68     -82       Basic earnings per share ($)   1.97     2.82     -30  
0.11     0.76     0.89     -88       Basic CCS earnings per share ($) B 1.89     2.88     -34  
0.37     0.59     0.69     -46       Basic CCS earnings per share excl. identified items ($)   2.04     2.58     -21  
0.47     0.47     0.47           Dividend per share ($)   1.88     1.88      
1.IFRS 16 Leases (IFRS 16) was adopted with effect from January 1, 2019. See Note 8 “Adoption of IFRS 16 Leases”.
2.Q4 on Q4 change.

 

CCS earnings attributable to shareholders excluding identified items at $2.9 billion reflected lower realised oil, gas and LNG prices, weaker realised refining and chemicals margins as well as negative movements in deferred tax positions, compared with the fourth quarter 2018. This was partly offset by stronger contributions from LNG trading and optimisation.

 

Cash flow from operating activities excluding working capital movements at $12.3 billion reflected lower inflows related to commodity derivatives and lower cash earnings, partly offset by lower tax payments, compared with the fourth quarter 2018.

 

Total dividends distributed to shareholders in the quarter were $3.7 billion. Today, Shell launches the next tranche of the share buyback programme, with a maximum aggregate consideration of $1 billion in the period up to and including April 27, 2020. Since the launch of the programme, Shell has bought back almost $15 billion in shares for cancellation.

 

Royal Dutch Shell plcUnaudited Condensed Interim Financial Report4

Royal Dutch Shell Chief Executive Officer Ben van Beurden commented: "The strength of Shell’s strategy and portfolio has enabled delivery of competitive cash flow performance in 2019 despite challenging macroeconomic conditions in refining and chemicals, as well as lower oil and gas prices. We generated $47 billion in cash flow from operating activities excluding working capital movements and distributed over $25 billion in dividends and share buybacks to our shareholders.

 

We remain committed to prudent capital discipline supported by world-class project delivery and are looking to further strengthen our balance sheet while we continue with share buybacks. Our intention to complete the $25 billion share buyback programme is unchanged, but the pace remains subject to macro conditions and further debt reduction."

 

ADDITIONAL PERFORMANCE MEASURES

 

Quarters   $ million       Full year
Q4 2019   Q3 2019   Q4 2018         Reference   2019   2018   %
6,883     6,098     7,430         Cash capital expenditure²   C   23,919     24,078      
8,003     7,759     7,879         Capital investment³   C   28,788     24,878      
3,763     3,563     3,788     -1     Total production available for sale (thousand boe/d)       3,665     3,666      
56.60     55.99     59.89     -5     Global liquids realised price ($/b)       57.76     63.85     -10  
4.42     4.19     5.75     -23     Global natural gas realised price ($/thousand scf)       4.57     5.13     -11  
10,384     8,650     10,279     +1     Operating expenses   G   37,893     39,316     -4  
9,993     8,657     10,147     -2     Underlying operating expenses   G   36,993     39,025     -5  
6.7 %   8.6 %   9.4 %       ROACE (Net income basis)   E   6.7 %   9.4 %    
6.9 %   8.1 %   8.7 %       ROACE (CCS basis excluding identified items)   E   6.9 %   8.7 %    
29.3 %   27.9 %   20.3 %       Gearing   F   29.3 %   20.3 %    
1.Q4 on Q4 change.
2.With effect from 2019, Cash capital expenditure has been introduced as a capital spent performance measure (see Reference C).
3.With effect from 2019, the definition has been amended (see Reference C). Comparative information has been revised.
4.With effect from 2019, the definition has been amended (see Reference E). Comparative information has been revised.

 

Supplementary financial and operational disclosure for this quarter is available at www.shell.com/investor.

 

The IFRS 16 impact on net debt in 2019 was an increase of $15,657 million. Fourth quarter 2019 reported Gearing was 29.3% on an IFRS 16 basis, comparable with 25.0% on an IAS 17 basis.

 

The impact of IFRS 16 is presented in Note 8 “Adoption of IFRS 16 Leases” and is not addressed in the performance analysis sections of this results announcement.

Royal Dutch Shell plcUnaudited Condensed Interim Financial Report5

 

FOURTH QUARTER 2019 PORTFOLIO DEVELOPMENTS

 

Upstream

 

During the quarter, Shell and its Consortium partners announced the start of oil and gas production at P-68 FPSO, located at BM-S-11-A concession (Shell pre-unitisation interest 25%) in Berbigão, Sururu, and West Atapu, which can process up to 150 thousand barrels of oil and 6 million cubic metres of natural gas daily.

 

PERFORMANCE BY SEGMENT

 

INTEGRATED GAS

 

Quarters   $ million   Full year
Q4 2019¹   Q3 2019¹   Q4 2018         2019¹   2018   %
1,897     2,597     3,579     -47     Segment earnings   8,628     11,444     -25  
(89 )   (77 )   1,216         Of which: Identified items (Reference A)   (326 )   2,045      
1,986     2,674     2,363     -16     Earnings excluding identified items   8,955     9,399     -5  
3,457     4,224     5,786     -40     Cash flow from operating activities   15,311     14,617     +5  
4,017     4,271     6,597     -39     Cash flow from operating activities excluding working capital movements (Reference I)   14,828     16,281     -9  
1,323     894     1,262         Cash capital expenditure (Reference C)³   4,299     3,819      
1,602     2,303     1,350         Capital investment (Reference C)   6,706     4,259      
161     166     213     -25     Liquids production available for sale (thousand b/d)   156     214     -27  
4,578     4,586     4,442     +3     Natural gas production available for sale (million scf/d)   4,442     4,311     +3  
950     957     979     -3     Total production available for sale (thousand boe/d)   922     957     -4  
9.21     8.95     8.78     +5     LNG liquefaction volumes (million tonnes)   35.55     34.32     +4  
20.09     18.90     17.39     +16     LNG sales volumes (million tonnes)   74.45     71.21     +5  
1.IFRS 16 was adopted with effect from January 1, 2019. See Note 8 “Adoption of IFRS 16 Leases”.
2.Q4 on Q4 change.
3.With effect from 2019, Cash capital expenditure has been introduced as a capital spent performance measure (see Reference C).
4.With effect from 2019, the definition has been amended (see Reference C). Comparative information has been revised.

 

Fourth quarter identified items primarily reflected a charge of $508 million related to impairments and negative movements in deferred tax positions of $292 million, both mainly in Australia, partly offset by gains of $718 million related to the fair value accounting of commodity derivatives.

 

Compared with the fourth quarter 2018, Integrated Gas earnings excluding identified items primarily reflected lower realised LNG, oil and gas prices as well as higher operating expenses and depreciation, partly offset by stronger contributions from LNG, gas and power trading and optimisation.

 

Compared with the fourth quarter 2018, total production decreased mainly due to the transfer of the Salym asset into the Upstream segment and divestments, largely offset by field ramp-ups in Australia and Trinidad and Tobago. LNG liquefaction volumes increased mainly as a result of additional capacity from the Prelude floating LNG facility and the Elba LNG facility compared with the fourth quarter 2018.

 

Royal Dutch Shell plcUnaudited Condensed Interim Financial Report6

Compared with the fourth quarter 2018, cash flow from operating activities excluding working capital movements mainly reflected lower cash inflows related to commodity derivatives as well as lower cash earnings.

 

Full year identified items included impairments and write-offs of $1,021 million, mainly in Australia and Trinidad and Tobago, as well as negative movements in deferred tax positions of $282 million in Australia. These were partly offset by gains of $787 million related to the fair value accounting of commodity derivatives and a gain of $203 million on a sale of assets in Australia.

 

Compared with the full year 2018, Integrated Gas earnings excluding identified items were impacted by lower realised oil, LNG and gas prices, higher operating expenses, and lower liquids production volumes, partly offset by significantly stronger contributions from LNG trading and optimisation.

 

Compared with the full year 2018, total production was impacted by divestments and the transfer of the Salym asset into the Upstream segment, partly offset by production from field ramp-ups in Australia and Trinidad and Tobago. LNG liquefaction volumes were higher in comparison with the full year 2018 because of the additional volumes due to increased feedgas availability and new LNG capacity from the Prelude floating LNG facility and Elba LNG, partly offset by divestments.

 

Compared with the full year 2018, cash flow from operating activities excluding working capital movements decreased mainly due to lower cash inflows related to commodity derivatives as well as lower cash earnings.

 

 

 

 

Royal Dutch Shell plcUnaudited Condensed Interim Financial Report7

 

UPSTREAM

 

Quarters     $ million   Full year
Q4 2019¹   Q3 2019¹   Q4 2018           2019¹   2018   %
(787 )   1,722     1,601     -149       Segment earnings   4,195     6,798     -38  
(1,564 )   815     (280 )         Of which: Identified items (Reference A)   (549 )   23      
778     907     1,881     -59       Earnings excluding identified items   4,744     6,775     -30  
4,185     4,448     6,869     -39       Cash flow from operating activities   19,528     22,661     -14  
4,998     4,722     5,149     -3       Cash flow from operating activities excluding working capital movements (Reference I)   20,488     21,917     -7  
2,795     2,639     3,636           Cash capital expenditure (Reference C)³   10,277     12,582      
3,186     2,452     3,986           Capital investment (Reference C)   11,075     12,785      
1,773     1,705     1,672     +6       Liquids production available for sale (thousand b/d)   1,720     1,589     +8  
6,027     5,224     6,593     -9       Natural gas production available for sale (million scf/d)   5,935     6,494     -9  
2,813     2,606     2,809           Total production available for sale (thousand boe/d)   2,743     2,709     +1  
1.IFRS 16 was adopted with effect from January 1, 2019. See Note 8 “Adoption of IFRS 16 Leases”.
2.Q4 on Q4 change.
3.With effect from 2019, Cash capital expenditure has been introduced as a capital spent performance measure (see Reference C).
4.With effect from 2019, the definition has been amended (see Reference C). Comparative information has been revised.

 

Fourth quarter identified items primarily reflected a charge of $1,647 million related to impairments, mainly in unconventional gas assets in the US.

 

Compared with the fourth quarter 2018, Upstream earnings excluding identified items included negative movements in deferred tax positions, higher provisions related to restoration and decommissioning obligations, lower realised oil and gas prices, as well as higher well write-offs, mainly in Albania. These were partly offset by higher sales volumes associated with the timing of liftings.

 

Compared with the fourth quarter 2018, total production remained largely unchanged, mainly as field ramp-ups in the Permian, Gulf of Mexico and Santos basin were offset by the impact of divestments and field decline. Excluding portfolio impacts, production was 3% higher than in the same quarter a year ago.

 

Compared with the fourth quarter 2018, cash flow from operating activities excluding working capital movements mainly reflected lower cash earnings, largely offset by lower tax payments.

 

Full year identified items reflected a charge of $1,930 million related to impairments, primarily in unconventional gas assets in the US and a drilling rig joint venture, partly offset by a gain of $1,609 million on sale of assets, mainly in Denmark and the US Gulf of Mexico.

 

Compared with the full year 2018, Upstream earnings excluding identified items reflected lower realised oil and gas prices, higher depreciation as well as higher well write-offs, partly offset by higher sales volumes associated with the timing of liftings.

 

Compared with the full year 2018, total production increased by 1%, mainly due to field ramp-ups in North America and Brazil as well as the transfer of the Salym asset from the Integrated Gas segment, partly offset by field decline and divestments.

 

Compared with the full year 2018, cash flow from operating activities excluding working capital movements reflected mainly lower cash earnings, partly offset by lower tax payments.

Royal Dutch Shell plcUnaudited Condensed Interim Financial Report8

 

DOWNSTREAM

 

Quarters   $ million   Full year
Q4 2019¹   Q3 2019¹   Q4 2018           2019¹   2018   %
1,037     2,574     2,918     -64     Segment earnings³   6,277     7,601     -17  
(331 )   421     787         Of which: Identified items (Reference A)   (404 )   34      
1,368     2,153     2,131     -36     Earnings excluding identified items³   6,680     7,567     -12  
                Of which:            
1,433     1,929     1,835     -22     Oil Products   5,939     5,491     +8  
462     448     834     -45     Refining & Trading   1,234     1,513     -18  
971     1,481     1,001     -3     Marketing   4,705     3,978     +18  
(65 )   224     296     -122     Chemicals   741     2,076     -64  
2,304     3,205     8,794     -74     Cash flow from operating activities   7,296     13,928     -48  
3,294     3,169     1,224     +169     Cash flow from operating activities excluding working capital movements (Reference I)   11,916     10,764     +11  
2,624     2,454     2,418         Cash capital expenditure (Reference C)   8,926     7,408        
3,071     2,870     2,429         Capital investment (Reference C)   10,542     7,565        
2,438     2,522     2,723     -10     Refinery processing intake (thousand b/d)   2,564     2,648     -3  
6,435     6,731     6,906     -7     Oil Products sales volumes (thousand b/d)   6,561     6,783     -3  
3,454     3,845     4,110     -16     Chemicals sales volumes (thousand tonnes)   15,223     17,644     -14  
                                             
1.IFRS 16 was adopted with effect from January 1, 2019. See Note 8 “Adoption of IFRS 16 Leases”.
2.Q4 on Q4 change.
3.Earnings are presented on a CCS basis (See Note 2).
4.With effect from 2019, Cash capital expenditure has been introduced as a capital spent performance measure (see Reference C).
5.With effect from 2019, the definition has been amended (see Reference C). Comparative information has been revised.

 

Fourth quarter identified items primarily reflected a loss of $217 million related to the fair value accounting of commodity derivatives as well as a charge of $85 million related mainly to impairments in Singapore and the US.

 

Compared with the fourth quarter 2018, Downstream earnings excluding identified items reflected weaker realised refining, chemicals and marketing margins, partly offset by lower operating expenses and tax charges.

 

Compared with the fourth quarter 2018, cash flow from operating activities excluding working capital movements benefited mainly from higher cash earnings and lower tax payments.

 

Oil Products

 

Refining & Trading earnings excluding identified items reflected lower realised refining margins and lower contributions from crude trading and optimisation. This is partly offset by stronger contribution from oil products trading and optimisation, mainly fuel oil, as well as lower operating expenses and depreciation, compared with the fourth quarter 2018.

 

Refinery availability was 93% compared with 94% in the fourth quarter 2018, mainly due to higher planned downtime.

 

Marketing earnings excluding identified items reflected lower realised retail margins, partly offset by lower operating expenses, compared with the fourth quarter 2018.

 

Compared with the fourth quarter 2018, Oil Products sales volumes were 7% lower, mainly due to lower refining and trading volumes.

 

Chemicals

 

Chemicals earnings excluding identified items reflected lower realised chemicals margins as well as lower volumes.

 

Royal Dutch Shell plcUnaudited Condensed Interim Financial Report9

Chemicals manufacturing plant availability decreased to 85% from 93% in the fourth quarter 2018, mainly reflecting higher maintenance activities.

 

Full year identified items primarily reflected a charge of $341 million related to impairments as well as a charge of $237 million related to legal provisions in Chemicals, partly offset by a gain of $319 million on the sale of assets.

 

Compared with the full year 2018, Downstream earnings excluding identified items reflected lower realised base chemicals, intermediates and refining margins, partly offset by stronger contributions from oil products trading and optimisation, mainly fuel oil, as well as lower operating expenses.

 

Compared with the full year 2018, cash flow from operating activities excluding working capital movements mainly reflected lower cash earnings, partly offset by lower tax charges.

 

Oil Products

 

Refining & Trading earnings excluding identified items reflected lower realised refining margins, partly offset by stronger contributions from oil products trading and optimisation, mainly fuel oil, as well as lower operating expenses, compared with the full year 2018.

 

Refinery availability was 91%, at a similar level as in the full year 2018.

 

Marketing earnings excluding identified items reflected lower operating expenses as well as higher realised retail and lubricants margins, compared with the full year 2018.

 

Compared with the full year 2018, Oil Products sales volumes decreased by 3%, mainly reflecting lower refining and trading volumes.

 

Chemicals

 

Chemicals earnings excluding identified items reflected lower realised base chemicals and intermediate margins, partly offset by lower operating expenses, compared with the full year 2018.

 

Chemicals manufacturing plant availability decreased to 89% from 93% in the full year 2018, mainly reflecting higher maintenance activities.

 

 

 

 

 

Royal Dutch Shell plcUnaudited Condensed Interim Financial Report10

 

CORPORATE

 

Quarters   $ million   Full year
Q4 2019¹   Q3 2019¹   Q4 2018       2019¹   2018
(1,151 )   (663 )   (644 )   Segment earnings   (3,273 )   (1,479 )
(76 )   154     (77 )   Of which: Identified items (Reference A)   109     327  
(1,075 )   (817 )   (567 )   Earnings excluding identified items   (3,383 )   (1,806 )
321     375     572     Cash flow from operating activities   44     1,879  
(9 )   (80 )   (50 )   Cash flow from operating activities excluding working capital movements (Reference I)   (274 )   681  
1.IFRS 16 was adopted with effect from January 1, 2019. See Note 2 “Segment information”.

 

Fourth quarter identified items primarily reflected a tax charge of $74 million related to the impact of the strengthening Brazilian real on financing positions.

 

Compared with the fourth quarter 2018, Corporate earnings excluding identified items reflected lower tax credits as well as adverse currency exchange rate effects. Earnings also included a negative impact of $161 million related to the implementation of IFRS 16.

 

Full year identified items mainly reflected a gain of $55 million related to the impact of the weakening Brazilian real on financing positions and a gain of $51 million on the sale of assets.

 

Compared with the full year 2018, Corporate earnings excluding identified items reflected lower tax credits and higher net interest expense. Earnings also included a negative impact of $707 million related to the implementation of IFRS 16.

 

 

 

 

Royal Dutch Shell plcUnaudited Condensed Interim Financial Report11

 

PRELIMINARY RESERVES UPDATE

 

When final volumes are reported in the 2019 Annual Report and Form 20-F, Shell expects that SEC proved oil and gas reserves additions before taking into account production will be approximately 0.9 billion boe, and that 2019 production will be approximately 1.4 billion boe. As a result, total proved reserves on an SEC basis are expected to be approximately 11.1 billion boe. Acquisitions and divestments of 2019 reserves are expected to account for a net reduction of approximately 0.2 billion boe.

 

The proved Reserves Replacement Ratio on an SEC basis is expected to be 65% for the year and 48% for the 3-year average. Excluding the impact of acquisitions and divestments, the proved Reserves Replacement Ratio is expected to be 76% for the year and 90% for the 3-year average.

 

Further information will be provided in the 2019 Annual Report and 2019 Form 20-F, which are expected to be filed in March 2020.

 

OUTLOOK FOR THE FIRST QUARTER 2020

 

Integrated Gas production is expected to be 950 - 980 thousand boe/d. LNG liquefaction volumes are expected to be 9.0 - 9.5 million tonnes.

 

Upstream production is expected to be 2,625 - 2,775 thousand boe/d.

 

Refinery availability is expected to be 90% - 94%.

 

Oil Products sales volumes are expected to be 6,400 - 7,000 thousand b/d.

 

Chemicals manufacturing plant availability is expected to be 91% - 95%.

 

Corporate segment earnings excluding identified items are expected to be a net charge of $800 - 875 million in the first quarter 2020 and a net charge of $3,200 – 3,500 million for the full year 2020. This excludes the impact of currency exchange rate effects.

 

As of the first quarter 2020, the Egypt offshore assets will be transferred from the Upstream segment to the Integrated Gas segment, and Oil Sands will be transferred from the Upstream segment to the Refining and Trading sub-segment. The outlook numbers incorporate these changes.

 

Cash capital expenditure for 2020 is expected to be at the lower end of the $24 - 29 billion range.

 

Divestments are expected to amount to more than $10 billion over the 2019 - 2020 period.

 

 

Royal Dutch Shell plcUnaudited Condensed Interim Financial Report12

 

FORTHCOMING EVENTS

 

The LNG Outlook will be held on February 20, 2020 in London.

 

The Annual General Meeting is scheduled to be held on May 19, 2020.

 

First quarter 2020 results and dividends are scheduled to be announced on April 30, 2020. Second quarter 2020 results and dividends are scheduled to be announced on July 30, 2020. Third quarter 2020 results and dividends are scheduled to be announced on October 29, 2020.

 

 

 

 

 

 

 

Royal Dutch Shell plcUnaudited Condensed Interim Financial Report13

 

UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

 

CONSOLIDATED STATEMENT OF INCOME

 

Quarters   $ million   Full year
Q4 20191   Q3 2019¹   Q4 2018       2019   2018
84,006     86,592     102,228     Revenue²   344,877     388,379  
719     769     1,351     Share of profit of joint ventures and associates   3,604     4,106  
340     2,180     1,047     Interest and other income   3,625     4,071  
85,066     89,541     104,626     Total revenue and other income   352,107     396,556  
60,570     63,900     78,680     Purchases   252,983     294,399  
7,247     6,002     6,803     Production and manufacturing expenses   26,438     26,970  
2,831     2,429     3,162     Selling, distribution and administrative expenses   10,493     11,360  
306     219     314     Research and development   962     986  
965     644     545     Exploration   2,354     1,340  
9,238     6,815     6,244     Depreciation, depletion and amortisation   28,701     22,135  
1,118     1,161     971     Interest expense   4,690     3,745  
82,275     81,169     96,719     Total expenditure   326,621     360,935  
2,791     8,372     7,907     Income/(loss) before taxation   25,486     35,621  
1,702     2,348     2,261     Taxation charge/(credit)   9,053     11,715  
1,089     6,024     5,646     Income/(loss) for the period²   16,433     23,906  
124     145     56     Income/(loss) attributable to non-controlling interest   590     554  
965     5,879     5,590     Income/(loss) attributable to Royal Dutch Shell plc shareholders   15,843     23,352  
0.12     0.73     0.68     Basic earnings per share ($)³   1.97     2.82  
0.12     0.73     0.67     Diluted earnings per share ($)³   1.95     2.80  
1.See Note 8 “Adoption of IFRS 16 Leases”.
2.See Note 2 “Segment information”.
3.See Note 3 “Earnings per share”.

 

 

 

 

 

Royal Dutch Shell plcUnaudited Condensed Interim Financial Report14

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

Quarters   $ million   Full year
Q4 2019   Q3 2019   Q4 2018       2019   2018
1,089     6,024     5,646     Income/(loss) for the period   16,433     23,906  
            Other comprehensive income/(loss) net of tax:        
            Items that may be reclassified to income in later periods:        
1,467     (1,514 )   (354 )   - Currency translation differences   344     (3,172 )
(2 )   2         - Debt instruments remeasurements   29     (15 )
(135 )   213     1,499     - Cash flow and net investment hedging gains / (losses)   (267 )   730  
(45 )   5     (61 )   - Deferred cost of hedging   66     (209 )
24     (45 )   17     - Share of other comprehensive income/(loss) of joint ventures and associates   (76 )   (10 )
1,310     (1,339 )   1,101     Total   95     (2,676 )
            Items that are not reclassified to income in later periods:        
2,553     (2,010 )   426     - Retirement benefits remeasurements   (2,102 )   3,588  
(5 )   (53 )   50     - Equity instruments remeasurements   (28 )   (153 )
6     1     194     - Share of other comprehensive income/(loss) of joint ventures and associates   1     193  
2,554     (2,062 )   670     Total   (2,129 )   3,628  
3,863     (3,401 )   1,771     Other comprehensive income/(loss) for the period   (2,033 )   952  
4,952     2,624     7,417     Comprehensive income/(loss) for the period   14,399     24,858  
143     124     34     Comprehensive income/(loss) attributable to non-controlling interest   625     383  
4,809     2,499     7,383     Comprehensive income/(loss) attributable to Royal Dutch Shell plc shareholders   13,774     24,475  

 

 

 

 

 

 

 

 

Royal Dutch Shell plcUnaudited Condensed Interim Financial Report15

CONDENSED CONSOLIDATED BALANCE SHEET

 

$ million        
    December 31, 2019¹   December 31, 2018
Assets        
Non-current assets        
Intangible assets   23,486     23,586  
Property, plant and equipment   238,349     223,175  
Joint ventures and associates   22,808     25,329  
Investments in securities   2,989     3,074  
Deferred tax   10,524     12,097  
Retirement benefits   4,717     6,051  
Trade and other receivables   8,085     7,826  
Derivative financial instruments²   689     574  
    311,648     301,712  
Current assets        
Inventories   24,071     21,117  
Trade and other receivables   43,414     42,431  
Derivative financial instruments²   7,149     7,193  
Cash and cash equivalents   18,054     26,741  
    92,689     97,482  
Total assets   404,336     399,194  
Liabilities        
Non-current liabilities        
Debt   81,360     66,690  
Trade and other payables   2,342     2,735  
Derivative financial instruments²   1,209     1,399  
Deferred tax   14,522     14,837  
Retirement benefits   13,017     11,653  
Decommissioning and other provisions   21,799     21,533  
    134,249     118,847  
Current liabilities        
Debt   15,064     10,134  
Trade and other payables   49,208     48,888  
Derivative financial instruments²   5,429     7,184  
Taxes payable   6,693     7,497  
Retirement benefits   419     451  
Decommissioning and other provisions   2,811     3,659  
    79,625     77,813  
Total liabilities   213,873     196,660  
Equity attributable to Royal Dutch Shell plc shareholders   186,476     198,646  
Non-controlling interest   3,987     3,888  
Total equity   190,463     202,534  
Total liabilities and equity   404,336     399,194  
1.See Note 8 “Adoption of IFRS Leases”.
2.See Note 6 “Derivative financial instruments and debt excluding lease liabilities”.

 

 

 

 

Royal Dutch Shell plcUnaudited Condensed Interim Financial Report16

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

  Equity attributable to Royal Dutch Shell plc shareholders    
$ million Share capital¹     Shares held in trust   Other reserves²     Retained earnings   Total   Non-controlling interest   Total equity
At January 1, 2019 (as previously published) 685       (1,260 )   16,615       182,606     198,646     3,888     202,534  
Impact of IFRS 16³                 4     4         4  
At January 1, 2019 (as revised) 685       (1,260 )   16,615       182,610     198,650     3,888     202,538  
Comprehensive income/(loss) for the period           (2,069 )     15,843     13,774     625     14,399  
Transfer from other comprehensive income           (74 )     74              
Dividends                 (15,199 )   (15,199 )   (537 )   (15,735 )
Repurchases of shares (28 )         28       (10,286 )   (10,286 )       (10,286 )
Share-based compensation       197     (49 )     (613 )   (465 )       (465 )
Other changes in non-controlling interest                 2     2     11     12  
At December 31, 2019 657       (1,063 )   14,451       172,431     186,476     3,987     190,463  
At January 1, 2018 696       (917 )   16,794       177,733     194,306     3,456     197,762  
Comprehensive income/(loss) for the period           1,123       23,352     24,475     383     24,858  
Transfer from other comprehensive income           (971 )     971              
Dividends                 (15,675 )   (15,675 )   (586 )   (16,261 )
Repurchases of shares (11 )         11       (4,519 )   (4,519 )       (4,519 )
Share-based compensation       (343 )   (342 )     693     8         8  
Other changes in non-controlling interest                 51     51     635     686  
At December 31, 2018 685       (1,260 )   16,615       182,606     198,646     3,888     202,534  
1.See Note 4 “Share capital”.
2.See Note 5 “Other reserves”.
3.See Note 8 “Adoption of IFRS 16 Leases”.

 

 

 

 

 

 

Royal Dutch Shell plcUnaudited Condensed Interim Financial Report17

CONSOLIDATED STATEMENT OF CASH FLOWS

 

Quarters   $ million   Full year
Q4 2019¹   Q3 2019¹   Q4 2018       2019¹   2018
2,791     8,372     7,907     Income before taxation for the period²   25,486     35,621  
            Adjustment for:        
859     921     717     - Interest expense (net)   3,705     2,878  
9,238     6,815     6,244     - Depreciation, depletion and amortisation   28,701     22,135  
496     402     145     - Exploration well write-offs   1,218     449  
(36 )   (2,039 )   (927 )   - Net (gains)/losses on sale and revaluation of non-current assets and businesses   (2,519 )   (3,265 )
(719 )   (769 )   (1,351 )   - Share of (profit)/loss of joint ventures and associates   (3,604 )   (4,106 )
1,318     859     1,535     - Dividends received from joint ventures and associates   4,139     4,903  
(546 )   813     7,694     - (Increase)/decrease in inventories   (2,635 )   2,823  
(2,448 )   2,644     8,421     - (Increase)/decrease in current receivables   (921 )   1,955  
961     (3,289 )   (7,014 )   - Increase/(decrease) in current payables   (1,223 )   (1,336 )
254     (149 )   1,626     - Derivative financial instruments   (1,484 )   799  
217     (634 )   158     - Retirement benefits²   (365 )   390  
(141 )   (250 )   (781 )   - Decommissioning and other provisions²   (686 )   (1,754 )
(82 )   67     545     - Other²   (28 )   1,264  
(1,894 )   (1,511 )   (2,898 )   Tax paid   (7,605 )   (9,671 )
10,267     12,252     22,021     Cash flow from operating activities   42,179     53,085  
(6,707 )   (5,992 )   (7,147 )   Capital expenditure   (22,971 )   (23,011 )
(112 )   (30 )   (208 )   Investments in joint ventures and associates   (743 )   (880 )
(65 )   (76 )   (75 )   Investments in equity securities²   (205 )   (187 )
1,049     2,932     1,966     Proceeds from sale of property, plant and equipment and businesses   4,803     4,366  
1,032     922     475     Proceeds from sale of joint ventures and associates   2,599     1,594  
55     126     97     Proceeds from sale of equity securities²   469     4,505  
224     229     221     Interest received   911     823  
918     732     74     Other investing cash inflows²   2,921     1,373  
(1,255 )   (973 )   (715 )   Other investing cash outflows²   (3,563 )   (2,242 )
(4,862 )   (2,130 )   (5,312 )   Cash flow from investing activities   (15,779 )   (13,659 )
(406 )   44     20     Net increase/(decrease) in debt with maturity period within three months³   (308 )   (396 )
            Other debt:        
8,758     2,107     3,189     - New borrowings³   11,185     3,977  
(2,731 )   (7,180 )   (4,680 )   - Repayments   (14,292 )   (11,912 )
(1,232 )   (1,088 )   (926 )   Interest paid   (4,649 )   (3,574 )
(124 )   76         Derivative financial instruments²   (48 )    
2         5     Change in non-controlling interest       678  
            Cash dividends paid to:        
(3,725 )   (3,773 )   (3,869 )   - Royal Dutch Shell plc shareholders   (15,198 )   (15,675 )
(133 )   (133 )   (98 )   - Non-controlling interest   (537 )   (584 )
(2,848 )   (2,944 )   (2,533 )   Repurchases of shares   (10,188 )   (3,947 )
(618 )   (94 )   (27 )   Shares held in trust: net sales/(purchases) and dividends received   (1,174 )   (1,115 )
(3,057 )   (12,985 )   (8,919 )   Cash flow from financing activities   (35,211 )   (32,548 )
289     (190 )   (161 )   Currency translation differences relating to cash and cash equivalents   124     (449 )
2,637     (3,054 )   7,629     Increase/(decrease) in cash and cash equivalents   (8,687 )   6,429  
15,417   18,470   19,112     Cash and cash equivalents at beginning of period   26,741   20,312  
18,054   15,417   26,741     Cash and cash equivalents at end of period   18,054   26,741  
1.See Note 8 “Adoption of IFRS 16 Leases”.
2.See Note 7 “Change in presentation of Consolidated Statement of Cash Flows”.
3.Q3 2019 has been revised to amend for commercial paper with maturity dates greater than 3 months, which was previously reported in "Net (decrease)/increase in debt with maturity period within three months". The amount previously reported as “Net increase / (decrease) in debt with maturity period within three months” was $2,009 million. The amount previously reported as "New borrowings" was $142 million.

 

Royal Dutch Shell plcUnaudited Condensed Interim Financial Report18

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

 

1.       Basis of preparation

 

These unaudited Condensed Consolidated Financial Statements of Royal Dutch Shell plc (“the Company”) and its subsidiaries (collectively referred to as “Shell”) have been prepared on the basis of the same accounting principles as those used in the Annual Report and Form 20-F for the year ended December 31, 2018 (pages 167 to 214) as filed with the US Securities and Exchange Commission, except for the adoption of IFRS 16 Leases on January 1, 2019, and should be read in conjunction with that filing.

 

Under IFRS 16, all lease contracts, with limited exceptions, are recognised in financial statements by way of right-of-use assets and corresponding lease liabilities. Shell applied the modified retrospective transition method without restating comparative information. Further information in respect of the implementation of IFRS 16 is included in Note 8.

 

In March 2019, the IFRS Interpretations Committee (IFRIC) made its agenda decision regarding “Physical settlement of contracts to buy or sell a non-financial item (IFRS 9)”. The impact of this decision is under review.

 

The financial information presented in the unaudited Condensed Consolidated Financial Statements does not constitute statutory accounts within the meaning of section 434(3) of the Companies Act 2006 (“the Act”). Statutory accounts for the year ended December 31, 2018 were published in Shell’s Annual Report and Form 20-F and a copy was delivered to the Registrar of Companies for England and Wales. The auditor’s report on those accounts was unqualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report and did not contain a statement under sections 498(2) or 498(3) of the Act.

 

2.       Segment information

 

Segment earnings are presented on a current cost of supplies basis (CCS earnings), which is the earnings measure used by the Chief Executive Officer for the purposes of making decisions about allocating resources and assessing performance. On this basis, the purchase price of volumes sold during the period is based on the current cost of supplies during the same period after making allowance for the tax effect. CCS earnings therefore exclude the effect of changes in the oil price on inventory carrying amounts. Sales between segments are based on prices generally equivalent to commercially available prices.

 

With the adoption of IFRS 16, the interest expense on leases formerly classified as operating leases is reported under the Corporate segment, while depreciation related to the respective right-of-use assets is reported in the segments making use of the assets. This treatment is consistent with the existing treatment for leases formerly classified as finance leases.

 

INFORMATION BY SEGMENT

 

Quarters   $ million   Full year
Q4 2019   Q3 2019   Q4 2018       2019   2018
            Third-party revenue        
11,006     9,735     11,902     Integrated Gas   41,323     43,764  
2,728     2,347     3,205     Upstream   9,965     9,892  
70,263     74,499     87,117     Downstream   293,545     334,680  
9     12     4     Corporate   45     43  
84,006     86,592     102,228     Total third-party revenue¹   344,877     388,379  
            Inter-segment revenue²        
1,117     1,025     1,326     Integrated Gas   4,279     5,031  
9,609     8,144     8,917     Upstream   36,448     37,841  
293     267     155     Downstream   1,132     917  
            Corporate        
            CCS earnings        
1,897     2,597     3,579     Integrated Gas   8,628     11,444  
(787 )   1,722     1,601     Upstream   4,195     6,798  
1,037     2,574     2,918     Downstream   6,277     7,601  
(1,151 )   (663 )   (644 )   Corporate   (3,273 )   (1,479 )
996     6,230     7,454     Total   15,827     24,364  
1.Includes revenue from sources other than from contracts with customers, which mainly comprises the impact of fair value accounting of commodity derivatives. Fourth quarter 2019 included income of $594 million (Q3 2019: $1,460 million income; full year 2019: $3,760 million income).

 

Royal Dutch Shell plcUnaudited Condensed Interim Financial Report19

 

2.Inter-segment revenue has been revised to amend for transactions within certain segments that were previously reported as inter-segment revenue and vice versa. Comparative information has been revised. The amounts previously reported as inter-segment revenue for Integrated Gas were Q4 2018: $1,252 million and full year 2018 $4,853 million. The amounts previously reported as inter-segment revenue for Downstream were Q4 2018: $1,078 million and full year 2018: $5,358 million.

 

RECONCILIATION OF INCOME FOR THE PERIOD TO CCS EARNINGS

 

Quarters   $ million   Full year
Q4 2019   Q3 2019   Q4 2018       2019   2018
965     5,879     5,590     Income/(loss) attributable to Royal Dutch Shell plc shareholders   15,843     23,352  
124     145     56     Income/(loss) attributable to non-controlling interest   590     554  
1,089     6,024     5,646     Income/(loss) for the period   16,433     23,906  
            Current cost of supplies adjustment:        
(69 )   240     2,319     Purchases   (784 )   559  
13     (56 )   (551 )   Taxation   194     (116 )
(37 )   22     40     Share of profit/(loss) of joint ventures and associates   (16 )   15  
(93 )   206     1,808     Current cost of supplies adjustment¹   (606 )   458  
996     6,230     7,454     CCS earnings   15,827     24,364  
            of which:        
871     6,081     7,334     CCS earnings attributable to Royal Dutch Shell plc shareholders   15,270     23,833  
125     149     120     CCS earnings attributable to non-controlling interest   557     531  
1.The adjustment attributable to Royal Dutch Shell plc shareholders is a negative $94 million in the fourth quarter 2019 (Q3 2019: positive $202 million; Q4 2018: positive $1,744 million; full year 2019: negative $573 million; full year 2018: positive $481 million).

 

3.       Earnings per share

 

EARNINGS PER SHARE

 

Quarters       Full year
Q4 2019   Q3 2019   Q4 2018       2019   2018
965     5,879     5,590     Income/(loss) attributable to Royal Dutch Shell plc shareholders ($ million)   15,843     23,352  
            Weighted average number of shares used as the basis for determining:        
7,907.2     8,017.5     8,227.8     Basic earnings per share (million)   8,058.3     8,282.8  
7,962.5     8,067.6     8,289.4     Diluted earnings per share (million)   8,112.5     8,348.7  

 

Royal Dutch Shell plcUnaudited Condensed Interim Financial Report20

4.       Share capital

 

ISSUED AND FULLY PAID ORDINARY SHARES OF €0.07 EACH1

 

    Number of shares   Nominal value ($ million)
    A   B   A   B   Total
At January 1, 2019   4,471,889,296     3,745,486,731     376     309     685  
Repurchases of shares   (320,101,779 )   (16,079,624 )   (27 )   (1 )   (28 )
At December 31, 2019   4,151,787,517     3,729,407,107     350     308     658  
At January 1, 2018   4,597,136,050     3,745,486,731     387     309     696  
Repurchases of shares   (125,246,754 )       (11 )       (11 )
At December 31, 2018   4,471,889,296     3,745,486,731     376     309     685  
1.Share capital at December 31, 2019 also included 50,000 issued and fully paid sterling deferred shares of £1 each.

 

At Royal Dutch Shell plc’s Annual General Meeting on May 21, 2019, the Board was authorised to allot ordinary shares in Royal Dutch Shell plc, and to grant rights to subscribe for, or to convert, any security into ordinary shares in Royal Dutch Shell plc, up to an aggregate nominal amount of €190 million (representing 2,720 million ordinary shares of €0.07 each), and to list such shares or rights on any stock exchange. This authority expires at the earlier of the close of business on August 21, 2020, and the end of the Annual General Meeting to be held in 2020, unless previously renewed, revoked or varied by Royal Dutch Shell plc in a general meeting.

 

5.       Other reserves

 

OTHER RESERVES

 

$ million Merger reserve   Share premium reserve   Capital redemption reserve   Share plan reserve   Accumulated other comprehensive income   Total
At January 1, 2019 37,298     154     95     1,098     (22,030 )   16,615  
Other comprehensive income/(loss) attributable to Royal Dutch Shell plc shareholders                 (2,069 )   (2,069 )
Transfer from other comprehensive income                 (74 )   (74 )
Repurchases of shares         28             28  
Share-based compensation             (49 )       (49 )
At December 31, 2019 37,298     154     123     1,049     (24,173 )   14,451  
At January 1, 2018 37,298     154     84     1,440     (22,182 )   16,794  
Other comprehensive income/(loss) attributable to Royal Dutch Shell plc shareholders                 1,123     1,123  
Transfer from other comprehensive income                 (971 )   (971 )
Repurchases of shares         11             11  
Share-based compensation             (342 )       (342 )
At December 31, 2018 37,298     154     95     1,098     (22,030 )   16,615  

 

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 The “Shell” Transport and Trading Company, p.l.c., now The Shell Transport and Trading Company Limited, in 2005. The merger reserve increased in 2016 following the issuance of shares for the acquisition of BG Group plc. The capital redemption reserve was established in connection with repurchases of shares of Royal Dutch Shell plc. The share plan reserve is in respect of equity-settled share-based compensation plans.

 

6.       Derivative financial instruments and debt excluding lease liabilities

 

As disclosed in the Consolidated Financial Statements for the year ended December 31, 2018, presented in the Annual Report and Form 20-F for that year, Shell is exposed to the risks of changes in fair value of its financial assets and liabilities. The fair values of the financial assets and liabilities are defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Methods and assumptions used to estimate the fair values at December 31, 2019 are consistent with those used in the year ended December 31, 2018, though the carrying amounts of derivative financial instruments measured using predominantly unobservable inputs have changed since that date.

 

Royal Dutch Shell plcUnaudited Condensed Interim Financial Report21

The table below provides the comparison of the fair value with the carrying amount of debt excluding lease liabilities, disclosed in accordance with IFRS 7 Financial Instruments: Disclosures.

 

DEBT EXCLUDING LEASE LIABILITIES

 

$ million Dec 31, 2019   Dec 31, 2018
Carrying amount 65,887   62,798
Fair value¹ 71,163   64,708
1.Mainly determined from the prices quoted for these securities.

 

7.       Change in presentation of Consolidated Statement of Cash Flows

 

With effect from January 1, 2019, the starting point for the Consolidated Statement of Cash Flows is ‘Income before taxation’ (previously: Income). Furthermore, to improve transparency, “Retirement benefits” and “Decommissioning and other provisions” have been separately disclosed. The “Other” component of cash flow from investing activities has been expanded to distinguish between cash inflows and outflows. Prior period comparatives for these line items have been revised to conform with current year presentation. In addition, a new line item, “Derivative financial instruments”, has been introduced to cash flow from financing activities. Overall, the revisions do not have an impact on cash flow from operating activities, cash flow from investing activities or cash flow from financing activities, as previously published.

 

8.       Adoption of IFRS 16 Leases

 

IFRS 16 was adopted with effect from January 1, 2019. Under the new standard, all lease contracts, with limited exceptions, are recognised in the financial statements by way of right-of-use assets and corresponding lease liabilities. Shell applied the modified retrospective transition method, and consequently comparative information is not restated. As a practical expedient, no reassessment was performed of contracts that were previously identified as leases, and contracts that were not previously identified as containing a lease applying IAS 17 Leases and IFRIC 4 Determining whether an Arrangement contains a Lease. At January 1, 2019, additional lease liabilities were recognised for leases previously classified as operating leases applying IAS 17. These lease liabilities were measured at the present value of the remaining lease payments, discounted using entity-specific incremental borrowing rates at January 1, 2019. In general, a corresponding right-of-use asset was recognised for an amount equal to each lease liability, adjusted by the amount of any prepaid or accrued lease payment relating to the specific lease contract, as recognised on the balance sheet at December 31, 2018. Provisions for onerous lease contracts at December 31, 2018 were adjusted to the respective right-of-use assets recognised at January 1, 2019.

 

The reconciliation of differences between the operating lease commitments disclosed under the prior standard and the additional lease liabilities recognised on the balance sheet at January 1, 2019 is as follows:

 

LEASE LIABILITIES RECONCILIATION

 

$ million    
Undiscounted future minimum lease payments under operating leases at December 31, 2018   24,219  
Impact of discounting¹   (5,167 )
Leases not yet commenced at January 1, 2019   (2,586 )
Short-term leases²   (277 )
Long-term leases expiring before December 31, 2019²   (192 )
Other reconciling items (net)   40  
Additional lease liability at January 1, 2019   16,037  
Finance lease liability at December 31, 2018   14,026  
Total lease liability at January 1, 2019   30,063  
1.Under the modified retrospective transition method, lease payments were discounted at January 1, 2019 using an incremental borrowing rate representing the rate of interest that the entity within Shell that entered into the lease would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The incremental borrowing rate applied to each lease was determined taking into account the risk-free rate, adjusted for factors such as the credit rating of the contracting entity and the terms and conditions of the lease. The weighted average incremental borrowing rate applied by Shell upon transition was 7.2%.
2.Shell has applied the practical expedient to classify leases for which the lease term ends within 12 months of the date of initial application of IFRS 16 as short-term leases. Shell has also applied the recognition exemption for short-term leases.

 

Royal Dutch Shell plcUnaudited Condensed Interim Financial Report22

Compared with the previous accounting for operating leases under IAS 17, the application of the new standard has a significant impact on the classification of expenditures and cash flows. It also impacts the timing of expenses recognised in the statement of income.

 

With effect from 2019, expenses related to leases previously classified as operating leases are presented under Depreciation, depletion and amortisation and Interest expense (in 2018 these were mainly reported in Purchases, Production and manufacturing expenses, and Selling, distribution and administrative expenses).

 

With effect from 2019, payments related to leases previously classified as operating leases are presented under Cash flow from financing activities (in 2018 these were reported in Cash flow from operating activities and Cash flow from investing activities).

 

The adoption of the new standard had an accumulated impact of $4 million in equity following the recognition of lease liabilities of $16,037 million and additional right-of-use assets of $15,558 million and reclassifications mainly related to pre-paid leases and onerous contracts previously recognised. The detailed impact on the balance sheet at January 1, 2019, is as follows:

  

CONDENSED CONSOLIDATED BALANCE SHEET

 

$ million            
    December 31, 2018   IFRS 16 impact   January 1, 2019
Assets            
Non-current assets            
Intangible assets   23,586         23,586  
Property, plant and equipment   223,175     15,558     238,733  
Joint ventures and associates   25,329         25,329  
Investments in securities   3,074         3,074  
Deferred tax   12,097         12,097  
Retirement benefits   6,051         6,051  
Trade and other receivables¹   7,826     (814 )   7,012  
Derivative financial instruments   574         574  
    301,712     14,744     316,456  
Current assets            
Inventories   21,117         21,117  
Trade and other receivables   42,431     69     42,500  
Derivative financial instruments   7,193         7,193  
Cash and cash equivalents   26,741         26,741  
    97,482     69     97,551  
Total assets   399,194     14,813     414,007  
Liabilities            
Non-current liabilities            
Debt   66,690     13,125     79,815  
Trade and other payables²   2,735     (540 )   2,195  
Derivative financial instruments   1,399         1,399  
Deferred tax   14,837         14,837  
Retirement benefits   11,653         11,653  
Decommissioning and other provisions³   21,533     (347 )   21,186  
    118,847     12,238     131,085  
Current liabilities            
Debt   10,134     2,912     13,046  
Trade and other payables   48,888     (23 )   48,865  
Derivative financial instruments   7,184         7,184  
Taxes payable   7,497         7,497  
Retirement benefits   451         451  
Decommissioning and other provisions³   3,659     (318 )   3,341  
    77,813     2,571     80,384  
Total liabilities   196,660     14,809     211,469  
Equity attributable to Royal Dutch Shell plc shareholders   198,646     4     198,650  
Non-controlling interest   3,888         3,888  
Total equity   202,534     4     202,538  
Total liabilities and equity   399,194     14,813     414,007  
1.Mainly in respect of pre-paid leases.
2.Mainly related to operating lease contracts that were measured at fair value under IFRS 3 Business Combinations following the acquisition of BG in 2016.
3.Mainly in respect of onerous contracts.
4.See Note 6 “Derivative financial instruments and debt excluding lease liabilities”.

 

Royal Dutch Shell plcUnaudited Condensed Interim Financial Report23

ALTERNATIVE PERFORMANCE (NON-GAAP) MEASURES

 

Impact of IFRS 16 Leases

 

IFRS 16 Leases primarily impacts the following key measures of Shell’s financial performance: Segment earnings; Cash flow from operating activities; Cash flow from operating activities excluding working capital movements; Free cash flow; Capital investment and Cash capital expenditure; Operating expenses; Gearing; and Return on average capital employed.

 

As explained in Note 8 “Adoption of IFRS 16 Leases”, in accordance with Shell’s use of the modified retrospective transition method, comparative information for prior years is not restated, and continues to be presented as reported under IAS 17.

 

Additional information is provided in this section of the report to provide indicative impacts of Shell’s transition from IAS 17 to IFRS 16. In addition to the IFRS 16 reported basis, impacted Alternative Performance Measures are presented on an IAS 17 basis, to enable like-for-like comparisons between 2019 and 2018. For 2019, information on an IAS17 basis represents estimates for the purpose of transition.

 

A.Identified items

 

Identified items comprise: divestment gains and losses, impairments, fair value accounting of commodity derivatives and certain gas contracts, redundancy and restructuring, the impact of exchange rate movements on certain deferred tax balances, and other items. These items, either individually or collectively, can cause volatility to net income, in some cases driven by external factors, which may hinder the comparative understanding of Shell’s financial results from period to period. The impact of identified items on Shell’s CCS earnings is shown as follows:

 

 

 

 

 

 

Royal Dutch Shell plcUnaudited Condensed Interim Financial Report24

 

IDENTIFIED ITEMS

 

Quarters   $ million   Full year
Q4 2019   Q3 2019   Q4 2018       2019   2018
            Identified items before tax        
128     2,039     927            Divestment gains/(losses)   2,611     3,283  
(2,941 )   (509 )   (438 )          Impairments   (4,155 )   (1,020 )
616     47     1,639            Fair value accounting of commodity derivatives and certain gas contracts   602     1,145  
(59 )   6     (32 )          Redundancy and restructuring   (132 )   (203 )
(333 )       (167 )          Other   (770 )   (116 )
(2,589 )   1,584     1,929     Total identified items before tax   (1,844 )   3,089  
            Tax impact        
(16 )   (283 )   (12 )          Divestment gains/(losses)   (441 )   (219 )
700     79     22            Impairments   993     (92 )
(90 )   44     (472 )          Fair value accounting of commodity derivatives and certain gas contracts   48     (282 )
13     (4 )   (4 )          Redundancy and restructuring   44     53  
29     (106 )   19            Impact of exchange rate movements on tax balances   (69 )   (338 )
(108 )       164            Other   100     218  
529     (271 )   (283 )   Total tax impact   674     (660 )
            Identified items after tax        
111     1,756     915            Divestment gains/(losses)   2,170     3,064  
(2,240 )   (430 )   (416 )          Impairments   (3,162 )   (1,112 )
526     91     1,167            Fair value accounting of commodity derivatives and certain gas contracts   650     863  
(46 )   2     (36 )          Redundancy and restructuring   (89 )   (150 )
29     (106 )   19            Impact of exchange rate movements on tax balances   (69 )   (338 )
(441 )       (3 )          Other   (670 )   102  
(2,060 )   1,313     1,646     Impact on CCS earnings   (1,170 )   2,429  
            Of which:        
(89 )   (77 )   1,216     Integrated Gas   (326 )   2,045  
(1,564 )   815     (280 )   Upstream   (549 )   23  
(331 )   421     787     Downstream   (404 )   34  
(76 )   154     (77 )   Corporate   109     327  
            Impact on CCS earnings attributable to non-controlling interest   22      
(2,060 )   1,313     1,646     Impact on CCS earnings attributable to shareholders   (1,192 )   2,429  

 

The reconciliation from income attributable to RDS plc shareholders to CCS earnings attributable to RDS plc shareholders excluding identified items is shown on page 4.

 

The categories above represent the nature of the items identified irrespective of whether the items relate to Shell subsidiaries or joint ventures and associates. The after-tax impact of identified items of joint ventures and associates is fully reported within “Share of profit of joint ventures and associates” in the Consolidated Statement of Income, and fully reported as “identified items before tax” in the table above. Identified items related to subsidiaries are consolidated and reported across appropriate lines of the Consolidated Statement of Income. Only pre-tax identified items reported by subsidiaries are taken into account in the calculation of “underlying operating expenses” (Reference G).

 

Fair value accounting of commodity derivatives and certain gas contracts: In the ordinary course of business, Shell enters into contracts to supply or purchase oil and gas products, as well as power and environmental products. Shell also enters into contracts for tolling, pipeline and storage capacity. Derivative contracts are entered into for mitigation of resulting economic exposures (generally price exposure) and these 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, as well as contracts for tolling, pipeline and storage capacity, are, by contrast, recognised when the transaction occurs; 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 contracts 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 are reported as identified items.

 

Royal Dutch Shell plcUnaudited Condensed Interim Financial Report25

Impacts of exchange rate movements on tax balances represent the impact on tax balances of exchange rate movements arising on (a) the conversion to dollars of the local currency tax base of non-monetary assets and liabilities, as well as losses and (b) the conversion of dollar-denominated inter-segment loans to local currency, leading to taxable exchange rate gains or losses (this primarily impacts the Corporate segment).

 

Other identified items represent other credits or charges Shell’s management assesses should be excluded to provide additional insight, such as the impact arising from changes in tax legislation and certain provisions for onerous contracts or litigation. Q4 2019 reflects a charge associated with an update of an Australian deferred tax asset and the impact of a reduction in the discount rate used for provisions.

 

B.Basic CCS earnings per share

 

Basic CCS earnings per share is calculated as CCS earnings attributable to Royal Dutch Shell plc shareholders (see Note 2), divided by the weighted average number of shares used as the basis for basic earnings per share (see Note 3).

 

C.Capital investment and Cash capital expenditure

 

Capital investment is a measure used to make decisions about allocating resources and assessing performance. It comprises Capital expenditure, Investments in joint ventures and associates and Investments in equity securities, exploration expense excluding well write-offs, leases recognised in the period and other adjustments.

 

The definition reflects two changes with effect from January 1, 2019, for simplicity reasons. Firstly, “Investments in equity securities” now includes investments under the Corporate segment and is aligned with the line introduced in the Consolidated Statement of Cash Flows from January 1, 2019. Secondly, the adjustments previously made to bring the Capital investment measure onto an accruals basis no longer apply. Comparative information has been revised.

 

“Cash capital expenditure” is introduced with effect from January 1, 2019, to monitor investing activities on a cash basis, excluding items such as lease additions which do not necessarily result in cash outflows in the period. The measure comprises the following lines from the Consolidated Statement of Cash flows: Capital expenditure, Investments in joint ventures and associates and Investments in equity securities.

 

Royal Dutch Shell plcUnaudited Condensed Interim Financial Report26

 

The reconciliation of “Capital expenditure” to “Cash capital expenditure” and “Capital investment” is as follows. Information for 2019 is also presented on an “IAS 17 basis” to enable like-for-like performance comparisons with 2018.

 

Quarters   $ million   Full year
Q4 2019   Q4 2019   Q3 2019   Q4 2018       2019   2019   2018
As reported   IAS 17 basis   As reported   As revised       As reported   IAS 17 basis   As revised
6,707     6,936     5,992     7,147     Capital expenditure   22,971     23,624   23,011  
112     112     30     208     Investments in joint ventures and associates   743     743     880  
65     65     76     75     Investments in equity securities   205     205     187  
6,883     7,113     6,098     7,430     Cash capital expenditure   23,919     24,572     24,078  
                Of which:            
1,323     1,331     894     1,262     Integrated Gas   4,299     4,310     3,819  
2,795     3,016     2,639     3,636     Upstream   10,277     10,916     12,582  
2,624     2,624     2,454     2,418     Downstream   8,926     8,928     7,408  
141     141     111     114     Corporate   418     418     269  
469     469     244     400     Exploration expense, excluding exploration wells written off   1,137     1,136     889  
860     83     1,902     49     Leases recognised in the period   4,494     1,594     452  
(209 )   (209 )   (484 )       Other adjustments   (762 )   (762 )   (541 )
8,003     7,456     7,759     7,879     Capital investment   28,788     26,542     24,878  
                Of which:            
1,602     1,473     2,303     1,350     Integrated Gas   6,706     6,030     4,259  
3,186     3,218     2,452     3,986     Upstream   11,075     11,138     12,785  
3,071     2,624     2,870     2,429     Downstream   10,542     8,956     7,565  
143     141     134     114     Corporate   465     418     269  

 

D.Divestments

 

Following completion of the $30 billion divestment programme for 2016-18, the Divestments measure was discontinued with effect from January 1, 2019.

 

E.Return on average capital employed

 

Return on average capital employed (ROACE) measures the efficiency of Shell’s utilisation of the capital that it employs. Shell uses two ROACE measures: ROACE on a Net income basis and ROACE on a CCS basis excluding identified items.

 

Both measures refer to Capital employed which consists of total equity, current debt and non-current debt. Information for 2019 is also presented on an “IAS 17 basis” to enable like-for-like performance comparisons with 2018.

 

ROACE on a Net income basis

 

In this calculation, the sum of income for the current and previous three quarters, adjusted for after-tax interest expense, is expressed as a percentage of the average capital employed for the same period. The after-tax interest expense is calculated using the effective tax rate for the same period.

 

 

 

Royal Dutch Shell plcUnaudited Condensed Interim Financial Report27

 

$ million   Quarters
    Q4 2019   Q4 2019   Q3 2019   Q4 2018
    As reported   IAS 17 basis   As reported   As reported
Income - current and previous three quarters   16,433   16,645   20,989   23,906
Interest expense after tax - current and previous three quarters   3,024   2,441   3,115   2,513
Income before interest expense - current and previous three quarters   19,457   19,086   24,105   26,419
Capital employed – opening   295,398   279,357   279,864   283,477
Capital employed – closing   286,887   271,226   281,505   279,358
Capital employed – average   291,142   275,292   280,684   281,417
ROACE on a Net income basis   6.7 %   6.9 %   8.6 %   9.4 %
                         

ROACE on a CCS basis excluding identified items

 

In this calculation, the sum of CCS earnings excluding identified items for the current and previous three quarters, adjusted for after-tax interest expense, is expressed as a percentage of the average capital employed for the same period. The after-tax interest expense is calculated using the effective tax rate for the same period.

 

This definition reflects two changes with effect from January 1, 2019. Firstly, the calculation considers “CCS earnings excluding identified items” instead of “CCS earnings attributable to Royal Dutch Shell plc shareholders excluding identified items” used under the previous definition. This change ensures consistency with the basis for average capital employed. Secondly, the calculation adds back the after-tax interest expense. This change is made for consistency with peers. Comparative information has been revised.

 

$ million   Quarters
    Q4 2019   Q4 2019   Q3 2019   Q4 2018
    As reported   IAS 17 basis   As reported   As   revised
CCS earnings - current and previous three quarters   15,827   16,039   22,284   24,364
Identified items - current and previous three quarters   (1,170)   (1,170)   2,536   2,429
Interest expense after tax – current and previous three quarters   3,024   2,441   3,115   2,513
CCS earnings excluding identified items before interest expense - current and previous three quarters   20,021   19,650   22,864   24,448
Capital employed – average   291,142   275,292   280,684   281,417
ROACE on a CCS basis excluding identified items   6.9 %   7.1 %   8.1 %   8.7 %
                         
F.Gearing

 

Gearing is a key measure of Shell’s capital structure and is defined as net debt as a percentage of total capital. Net debt is defined as the sum of current and non-current debt, less cash and cash equivalents, adjusted for the fair value of derivative financial instruments used to hedge foreign exchange and interest rate risks relating to debt, and associated collateral balances. Management considers this adjustment useful because it reduces the volatility of net debt caused by fluctuations in foreign exchange and interest rates, and eliminates the potential impact of related collateral payments or receipts. Debt-related derivative financial instruments are a subset of the derivative financial instrument assets and liabilities presented on the balance sheet. Collateral balances are reported under “Trade and other receivables” or “Trade and other payables” as appropriate.

 

Information for 2019 is also presented on an “IAS 17 basis” to enable like-for-like performance comparisons with 2018.

 

Royal Dutch Shell plcUnaudited Condensed Interim Financial Report28

$ million   Quarters
    Q4 2019   Q4 2019   Q3 2019   Q4 2018
    As reported   IAS 17 basis   As reported   As reported
Current debt   15,064   11,803   12,812   10,134
Non-current debt   81,360   68,964   76,112   66,690
Total debt¹   96,424   80,767   88,924   76,824
Add: Debt-related derivative financial instruments: net liability/(asset)   701   701   1,013   1,273
Add: Collateral on debt-related derivatives: net liability/(asset)   23   23   148   72
Less: Cash and cash equivalents   (18,054)   (18,054)   (15,417)   (26,741)
Net debt   79,094   63,437   74,668   51,428
Add: Total equity   190,463   190,459   192,580   202,534
Total capital   269,557   253,896   267,249   253,962
Gearing   29.3 %   25.0 %   27.9 %   20.3 %
                         
1.Includes lease liabilities of $30,537 million at December 31, 2019, $31,085 million at September 30, 2019, and finance lease liabilities of $14,026 million at December 31, 2018.

 

G.Operating expenses

 

Operating expenses is a measure of Shell’s cost management performance, comprising the following items from the Consolidated Statement of Income: production and manufacturing expenses; selling, distribution and administrative expenses; and research and development expenses. Underlying operating expenses measures Shell’s total operating expenses performance excluding identified items.

 

Information for 2019 is also presented on an “IAS 17 basis” to enable like-for-like performance comparisons with 2018.

 

Quarters   $ million   Full year
Q4 2019   Q4 2019   Q3 2019   Q4 2018       2019   2019   2018
As reported   IAS 17 basis   As reported   As reported       As reported   IAS 17 basis   As reported
7,247         6,002     6,803     Production and manufacturing expenses   26,438         26,970  
2,831         2,429     3,162     Selling, distribution and administrative expenses   10,493         11,360  
306         219     314     Research and development   962         986  
10,384     10,920     8,650     10,279     Operating expenses   37,893     39,791     39,316  
                Of which identified items:            
(58 )   (58 )   7     (28 )   (Redundancy and restructuring charges)/reversal   (130 )   (130 )   (187 )
(333 )   (333 )       (104 )   (Provisions)/reversal   (639 )   (639 )   (104 )
                Other   (131 )   (131 )    
(391 )   (391 )   7     (132 )       (900 )   (900 )   (291 )
9,993     10,529     8,657     10,147     Underlying operating expenses   36,993     38,891     39,025  

 

H.Free cash flow

 

Free cash flow is used to evaluate cash available for financing activities, including dividend payments and debt servicing, after investment in maintaining and growing the business. It is defined as the sum of “Cash flow from operating activities” and “Cash flow from investing activities”.

 

Cash flows from acquisition and divestment activities are removed from Free cash flow to arrive at the Organic free cash flow, a measure used by management to evaluate the generation of free cash flow without these activities.

 

Information for 2019 is also presented on an “IAS 17 basis” to enable like-for-like performance comparisons with 2018.

 

Royal Dutch Shell plcUnaudited Condensed Interim Financial Report29

Quarters   $ million   Full year
Q4 2019   Q4 2019   Q3 2019   Q4 2018       2019   2019   2018
As reported   IAS 17 basis   As reported   As reported       As reported   IAS 17 basis   As reported
10,267     8,720     12,252     22,021     Cash flow from operating activities   42,179     37,807     53,085  
(4,862 )   (4,718 )   (2,130 )   (5,312 )   Cash flow from investing activities   (15,779 )   (16,059 )   (13,659 )
5,405     4,002     10,122     16,709     Free cash flow   26,400     21,748     39,426  
2,135     2,135     3,979     2,538     Less: Cash inflows related to divestments1   7,871     7,871     10,465  
106     106     4     437     Add: Tax paid on divestments (reported under "Other investing cash outflows")   187     187     482  
551     551     484     71     Add: Cash outflows related to inorganic capital expenditure2   1,400     1,400     1,740  
3,928     2,525     6,630     14,679     Organic free cash flow3   20,116     15,464     31,183  
1.Cash inflows related to divestments includes Proceeds from sale of property, plant and equipment and businesses, Proceeds from sale of joint ventures and associates, and Proceeds from sale of equity securities as reported in the Consolidated Statement of Cash Flows.

 

2.Cash outflows related to inorganic capital expenditure includes portfolio actions which expand Shell's activities through acquisitions and restructuring activities as reported in capital expenditure lines in the Consolidated Statement of Cash Flows.

 

3.Free cash flow less inflows related to divestments, adding back outflows related to inorganic expenditure.

 

I.Cash flow from operating activities excluding working capital movements

 

Working capital movements are defined as the sum of the following items in the Consolidated Statement of Cash Flows: (i) (increase)/decrease in inventories, (ii) (increase)/decrease in current receivables, and (iii) increase/(decrease) in current payables.

 

Cash flow from operating activities excluding working capital movements is a measure used by Shell to analyse its operating cash generation over time excluding the timing effects of changes in inventories and operating receivables and payables from period to period.

 

Royal Dutch Shell plcUnaudited Condensed Interim Financial Report30

Information for 2019 is also presented on an “IAS 17 basis” to enable like-for-like performance comparisons with 2018.

 

Quarters   $ million   Full year
Q4 2019   Q4 2019   Q3 2019   Q4 2018       2019   2019   2018
As reported   IAS 17 basis   As reported   As reported       As reported   IAS 17 basis   As reported
10,267     8,720     12,252     22,021     Cash flow from operating activities   42,179     37,807     53,085  
                Of which:            
3,457     3,064     4,224     5,786     Integrated Gas   15,311     14,079     14,617  
4,185     3,968     4,448     6,869     Upstream   19,528     18,715     22,661  
2,304     1,373     3,205     8,794     Downstream   7,296     4,975     13,928  
321     315     375     572     Corporate   44     38     1,879  
(546 )   (546 )   813     7,694     (Increase)/decrease in inventories   (2,635 )   (2,635 )   2,823  
(2,448 )   (2,448 )   2,644     8,421     (Increase)/decrease in current receivables   (921 )   (921 )   1,955  
961     961     (3,289 )   (7,014 )   Increase/(decrease) in current payables   (1,223 )   (1,223 )   (1,336 )
(2,033 )   (2,033 )   168     9,101     (Increase)/decrease in working capital   (4,779 )   (4,779 )   3,442  
12,300     10,753     12,083     12,920     Cash flow from operating activities excluding working capital movements   46,958     42,586     49,643  
                Of which:            
4,017     3,624     4,271     6,597     Integrated Gas   14,828     13,597     16,281  
4,998     4,781     4,722     5,149     Upstream   20,488     19,674     21,917  
3,294     2,363     3,169     1,224     Downstream   11,916     9,595     10,764  
(9 )   (15 )   (80 )   (50 )   Corporate   (274 )   (280 )   681  

 

CAUTIONARY STATEMENT

 

All amounts shown throughout this announcement are unaudited. All peak production figures in Portfolio Developments are quoted at 100% expected production. The numbers presented throughout this announcement may not sum precisely to the totals provided and percentages may not precisely reflect the absolute figures, due to rounding.

 

The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate legal entities. In this announcement “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 Royal Dutch Shell plc and subsidiaries in general or to those who work for them. These terms are also used where no useful purpose is served by identifying the particular entity or entities. ‘‘Subsidiaries’’, “Shell subsidiaries” and “Shell companies” as used in this announcement refer to entities over which Royal Dutch Shell plc either directly or indirectly has control. Entities and unincorporated arrangements over which Shell has joint control are generally referred to as “joint ventures” and “joint operations”, respectively. Entities over which Shell has significant influence but neither control nor joint control are referred to as "associates". The term “Shell interest” is used for convenience to indicate the direct and/or indirect ownership interest held by Shell in an entity or unincorporated joint arrangement, after exclusion of all third-party interest.

 

This announcement contains forward-looking statements (within the meaning of the US Private Securities Litigation Reform Act of 1995) 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 "aim", "ambition", "anticipate", "believe", "could", "estimate", "expect", "goals", "intend", "may", "objectives", "outlook", "plan", "probably", "project", "risks", "schedule", "seek", "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 announcement, 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. No assurance is provided that future dividend payments will match or exceed previous dividend payments. All forward-looking statements contained in this announcement 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 risk factors that may affect future results are contained in Royal Dutch Shell’s Form 20-F for the year ended December 31, 2018 (available at www.shell.com/investor and www.sec.gov). These risk factors also expressly qualify all forward-looking statements contained in this announcement and should be considered by the reader. Each forward-looking statement speaks only as of the date of this announcement, January 30, 2020. Neither Royal Dutch Shell plc 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 announcement.

 

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This Report contains references to Shell’s website. These references are for the readers’ convenience only. Shell is not incorporating by reference any information posted on www.shell.com.

 

We may have used certain terms, such as resources, in this announcement that the United States Securities and Exchange Commission (SEC) strictly prohibits us from including in our filings with the SEC. US investors are urged to consider closely the disclosure in our Form 20-F, File No 1-32575, available on the SEC website www.sec.gov.

 

This announcement contains inside information.

 

January 30, 2020

 

The information in this Report reflects the unaudited consolidated financial position and results of Royal Dutch Shell plc. Company No. 4366849, Registered Office: Shell Centre, London, SE1 7NA, England, UK.

 

Contacts:

 

- Linda M. Coulter, Company Secretary

 

- Investor Relations: International + 31 (0) 70 377 4540; North America +1 832 337 2034

 

- Media: International +44 (0) 207 934 5550; USA +1 832 337 4355

 

LEI number of Royal Dutch Shell plc: 21380068P1DRHMJ8KU70

 

Classification: Inside Information

 

APPENDIX

 

PORTFOLIO DEVELOPMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019

 

Portfolio Developments for the three and nine months ended September 30, 2019, can be found in Royal Dutch Shell plc Form 6-K filed with the SEC on October 31, 2019. Portfolio Developments for the six months ended June 30, 2019, can be found in Royal Dutch Shell plc Form 6-K filed with the SEC on August 2, 2019.

 

LIQUIDITY AND CAPITAL RESOURCES FOR THE THREE MONTHS ENDED DECEMBER 31, 2019

 

Cash and cash equivalents increased to $18.1 billion at December 31, 2019, from $15.4 billion at September 30, 2019.

 

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Cash flow from operating activities was an inflow of $10.3 billion for the fourth quarter 2019, mainly driven by fourth quarter 2019 earnings partially offset by a negative movement in working capital.

 

Cash flow from investing activities was an outflow of $4.9 billion, mainly driven by capital expenditure of $6.7 billion.

 

Cash flow from financing activities was an outflow of $3.1 billion, mainly driven by dividend payments to Royal Dutch Shell plc shareholders of $3.7 billion, repurchases of shares of $2.8 billion partially offset by net new borrowings of $5.6 billion.

 

Total current and non-current debt increased to $96.4 billion at December 31, 2019, compared with $88.9 billion at September 30, 2019. Total debt excluding leases increased by $8.0 billion and the carrying amount of leases decreased by $0.5 billion. In the fourth quarter 2019, Shell issued $4.0 billion of debt under the US shelf registration and €3.0 billion under the Euro medium-term note programmes.

 

Cash dividends paid to Royal Dutch Shell plc shareholders were $3.7 billion in the fourth quarter 2019 compared with $3.9 billion the fourth quarter 2018.

 

Dividends of $0.47 per share are announced on January 30, 2020, in respect of the fourth quarter 2019. These dividends are payable on March 23, 2020. In the case of 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 and Form 20-F for the year ended December 31, 2018 for additional information on the dividend access mechanism.

 

LIQUIDITY AND CAPITAL RESOURCES FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2019

 

Cash and cash equivalents decreased to $18.1 billion at December 31, 2019, from $26.7 billion billion at December 31, 2018.

 

Cash flow from operating activities was an inflow of $42.2 billion for the twelve months ended December 31, 2019, mainly driven by earnings and partially offset by a negative movement in working capital.

 

Cash flow from investing activities was an outflow of $15.8 billion for the twelve months ended December 31, 2019, mainly driven by capital expenditure of $23.0 billion.

 

Cash flow from financing activities was an outflow of $35.2 billion for the twelve months ended December 31, 2019, mainly driven by dividend payments to Royal Dutch Shell plc shareholders of $15.2 billion, repurchases of shares of $10.2 billion and net repayments of debt of $3.4 billion.

 

Total current and non-current debt increased to $96.4 billion at December 31, 2019, compared with $76.8 billion at December 31, 2018. Total debt excluding leases increased by $3.1 billion and the carrying amount of leases increased by $16.5 billion mainly due to the adoption of IFRS 16. In the twelve months ended December 31,2019, Shell issued $4.0 billion of debt under the US shelf registration and €3.0 billion under the Euro medium-term note programmes.

 

Cash dividends paid to Royal Dutch Shell plc shareholders were $15.2 billion for the twelve months ended December 31, 2019, compared with $15.7 billion for 2018.

 

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CAPITALISATION AND INDEBTEDNESS

 

The following table sets out the unaudited consolidated combined capitalisation and indebtedness of Shell at December 31, 2019. This information is derived from the Unaudited Condensed Consolidated Financial Statements.

 

CAPITALISATION AND INDEBTEDNESS $ million
  December 31, 2019
Equity attributable to Royal Dutch Shell plc shareholders 186,476  
   
Current debt 15,064  
Non-current debt 81,360  
Total debt[A] 96,424  
Total capitalisation 282,900  

 

[A] Of the total carrying amount of debt at December 31, 2019, $65.7 billion was unsecured, $30.7 billion was secured and $56.3 billion was issued by Shell International Finance B.V., a 100%-owned subsidiary of Royal Dutch Shell plc with its debt guaranteed by Royal Dutch Shell plc (December 31, 2018: $53.1 billion).

 

 

 

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