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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of July 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): ¨





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
Regulatory release.
Royal Dutch Shell plc – Three and six month periods ended June 30, 2020 Unaudited Condensed Interim Financial Report (formatted in Inline eXtensible Business Language).
This Unaudited Condensed Interim Financial Report contains the Unaudited Condensed Consolidated Interim Financial Statements of the Registrant and its subsidiaries for the three and six month periods ended June 30, 2020, and Business Review in respect of such periods. This Report on Form 6-K contains the Unaudited Condensed Interim Financial Report required to keep current the Registrant's 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 333-222005 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: July 30, 2020



Exhibit


Exhibit 99.1
Regulatory release
Three and six month periods ended June 30, 2020
Unaudited Condensed Interim Financial Report
On July 30, 2020, Royal Dutch Shell plc released the Unaudited Condensed Interim Financial Report for the three and six month periods ended June 30, 2020, of Royal Dutch Shell plc and its subsidiaries (collectively, “Shell”).
Contact – Investor Relations
 
International:
 +31 (0)70 377 4540
North America:
 +1 832 337 2034
 
 
Contact – Media
 
International:
 +44 (0) 207 934 5550
USA:
 +1 832 337 4355



Exhibit


Exhibit 99.2
Royal Dutch Shell plc
Three and six month periods ended June 30, 2020
Unaudited Condensed Interim Financial Report


Royal Dutch Shell plc            Unaudited Condensed Interim Financial Report            1



ROYAL DUTCH SHELL PLC
2ND QUARTER 2020 AND HALF YEAR UNAUDITED RESULTS
https://cdn.kscope.io/a8e5edfcc2ae4702d3eac2d3eba1728e-shell1a07.jpg
 

SUMMARY OF UNAUDITED RESULTS
Quarters
$ million

Half year
Q2 2020
 
Q1 2020
 
Q2 2019
 
 
Reference
2020
2019
%
(18,131)

 
(24)

 
2,998

 
-705
Income/(loss) attributable to shareholders

(18,155)

8,999

-302
(18,377)

 
2,756

 
3,025

 
-707
CCS earnings attributable to shareholders
Note 2
(15,620)

8,318

-288
638

 
2,860

 
3,462

 
-82
Adjusted Earnings²
A
3,498

8,763

-60
2,563

 
14,851

 
11,031

 
-77
Cash flow from operating activities

17,415

19,661

-11
(2,320)

 
(2,718)

 
(4,166)

 
 
Cash flow from investing activities
 
(5,039)

(8,788)

 
243

 
12,133

 
6,865

 

Free cash flow
G
12,376

10,873


3,617

 
4,970

 
5,337

 

Cash capital expenditure
C
8,587

10,938


7,504

 
8,600

 
9,477

 
-21
Underlying operating expenses
F
16,105

18,343

-12
(2.9)%

 
4.6%

 
8.4%

 

ROACE (Net income basis)
D
(2.9)%

8.4%


5.3%

 
6.1%

 
8.2%

 
 
ROACE (CCS basis excluding identified items)
D
5.3%

8.2%

 
32.7%

 
28.9%

 
27.6%

 

Gearing
E
32.7%

27.6%


3,379

 
3,719

 
3,583

 
-6
Total production available for sale (thousand boe/d)

3,549

3,667

-3
(2.33
)
 
0.00

 
0.37

 
-730
Basic earnings per share ($)

(2.33
)
1.11

-310
0.16

 
0.16

 
0.47

 
-66
Dividend per share ($)

0.32

0.94

-66
1.     Q2 on Q2 change.
2.     Adjusted Earnings is defined as income/(loss) attributable to shareholders plus cost of supplies adjustment (see Note 2) and excluding identified items (see Reference A).
Income attributable to Royal Dutch Shell plc shareholders was a loss of $18.1 billion for the second quarter 2020, which included an impairment charge of $16.8 billion post-tax ($22.3 billion pre-tax), as a result of revised medium- and long-term price and refining margin outlook assumptions in response to the COVID-19 pandemic and macroeconomic conditions as well as energy market demand and supply fundamentals. Second quarter 2020 results reflected lower realised prices for oil, LNG and gas, lower realised refining margins, Oil Products sales volumes and higher well write-offs, compared with the second quarter 2019. This was partly offset by very strong crude and oil products trading and optimisation results as well as lower operating expenses.

Adjusted Earnings were $0.6 billion for the second quarter 2020, reflecting lower realised prices for oil, LNG and gas, lower realised refining margins, Oil Products sales volumes and higher well write-offs, compared with the second quarter 2019. This was partly offset by very strong crude and oil products trading and optimisation results as well as lower operating expenses.

Cash flow from operating activities for the second quarter 2020 was $2.6 billion, which included negative working capital movements of $4 billion. Cash flow from investing activities for the quarter was an outflow of $2.3 billion, driven mainly by capital expenditure, partly offset by proceeds from divestments.

Gearing was 32.7% at the end of the second quarter 2020, compared with 28.9% at the end of the first quarter 2020, mainly driven by the impact of impairments and pension remeasurement, due to actuarial assumption changes mainly caused by falling credit spreads and increasing market estimates of future inflation, as well as a net debt increase in the quarter.

Total dividends distributed to Royal Dutch Shell plc shareholders in the quarter were $1.2 billion.


Royal Dutch Shell plc            Unaudited Condensed Interim Financial Report            2



Supplementary financial and operational disclosure and a separate press release for this quarter are available at www.shell.com/investor1.
1. 
Not incorporated by reference.  
SECOND QUARTER 2020 PORTFOLIO DEVELOPMENTS
Integrated Gas
During the quarter, all conditions were met for the Final Investment Decision (FID) and contracts were awarded on a new LNG processing unit, known as Train 7, at Nigeria LNG (Shell interest 25.6%), which will add 8 million tonnes per annum (mtpa) of capacity to the Bonny Island facility.
Upstream
During the quarter, Shell reached an agreement to sell its Appalachia shale gas position for $541 million, subject to closing adjustments, with an effective date of January 1, 2020, and expected to close in the third quarter 2020.
PERFORMANCE BY SEGMENT
INTEGRATED GAS
Quarters
 
$ million
Half year
Q2 2020
 
Q1 2020
 
Q2 2019
 
 
 
2020
2019
%
(7,959)

 
1,812

 
1,340

 
-694
 
Segment earnings
(6,147)

4,134

-249
(8,321)

 
(331)

 
(386)

 
 
 
Of which: Identified items (Reference A)
(8,652)

(160)


362

 
2,143

 
1,726

 
-79
 
Adjusted Earnings
2,506

4,294

-42
2,663

 
3,986

 
3,403

 
-22
 
Cash flow from operating activities
6,649

7,630

-13
2,871

 
3,352

 
2,824

 
+2
 
Cash flow from operating activities excluding working capital movements (Reference H)
6,224

6,540

-5
736

 
882

 
738

 
 
 
Cash capital expenditure (Reference C)
1,618

2,081

 
151

 
162

 
159

 
-5
 
Liquids production available for sale (thousand b/d)
157

148

+6
4,369

 
4,596

 
4,456

 
-2
 
Natural gas production available for sale (million scf/d)
4,482

4,300

+4
904

 
955

 
927

 
-2
 
Total production available for sale (thousand boe/d)
930

889

+5
8.36

 
8.88

 
8.66

 
-3
 
LNG liquefaction volumes (million tonnes)
17.23

17.39

-1
16.65

 
19.00

 
17.95

 
-7
 
LNG sales volumes (million tonnes)
35.65

35.46

+1
1.     Q2 on Q2 change.

Second quarter segment earnings were a loss of $7,959 million. This included a post-tax impairment charge of $8,151 million mainly related to the Queensland Curtis LNG and Prelude floating LNG operations in Australia. Also included was a net charge of $265 million due to the fair value accounting of commodity derivatives. These net charges are part of identified items (see Reference A).

Compared with the second quarter 2019, Integrated Gas Adjusted Earnings of $362 million primarily reflected lower realised prices for oil, LNG and gas, unfavourable movements in deferred tax positions and a charge of $403 million reflecting well write-offs for the second quarter, partly offset by lower operating expenses and higher contributions from trading and optimisation.

Cash flow from operating activities for the quarter was $2,663 million, primarily driven by Adjusted Earnings before non-cash expenses including depreciation, well write-offs and deferred tax charges.

Compared with the second quarter 2019, total production decreased by 2% mainly due to more maintenance activities in Australia and lower demand, partly offset by the transfer of the Rashpetco operations in Egypt from the Upstream segment. LNG liquefaction volumes decreased mainly as a result of cargo timing.

Half year segment earnings were a loss of $6,147 million. This included a post-tax impairment charge of $8,210 million mainly related to the Queensland Curtis LNG and Prelude floating LNG operations in Australia. Also included was a net charge of $419 million due to the fair value accounting of commodity derivatives. These net charges are part of identified items (see Reference A).


Royal Dutch Shell plc            Unaudited Condensed Interim Financial Report            3



Compared with the first half 2019, Integrated Gas Adjusted Earnings of $2,506 million primarily reflected lower realised prices for oil, LNG and gas, higher well write-offs and higher depreciation, partly offset by higher volumes and lower operating expenses.

Cash flow from operating activities for the first half 2020 was $6,649 million, primarily driven by Adjusted Earnings before non-cash expenses including depreciation and well write-offs.

Compared with the first half 2019, total production increased by 5% mainly due to less maintenance activities, new fields and field ramp-ups, as well as the transfer of the Rashpetco operations in Egypt from the Upstream segment. LNG liquefaction volumes decreased mainly as a result of cargo timing and lower feedgas availability, partly offset by less maintenance activities and new capacity.
UPSTREAM
Quarters
$ million
Half year
Q2 2020
 
Q1 2020
 
Q2 2019
 
 
2020
2019
%
(6,721
)
 
(863)

 
1,435

 
-568
Segment earnings
(7,584
)
3,059

-348
(5,209
)
 
(1,154
)
 
172

 
 
Of which: Identified items (Reference A)
(6,364
)
149


(1,512
)
 
291

 
1,263

 
-220
Adjusted Earnings
(1,220
)
2,910

-142
319

 
5,607

 
5,478

 
-94
Cash flow from operating activities
5,926

10,756

-45
548

 
3,718

 
5,251

 
-90
Cash flow from operating activities excluding working capital movements (Reference H)
4,265

10,515

-59
1,876

 
2,521

 
2,321

 
 
Cash capital expenditure (Reference C)
4,397

4,812


1,609

 
1,730

 
1,636

 
-2
Liquids production available for sale (thousand b/d)
1,670

1,651

+1
4,673

 
5,680

 
5,640

 
-17
Natural gas production available for sale (million scf/d)
5,176

6,249

-17
2,415

 
2,710

 
2,609

 
-7
Total production available for sale (thousand boe/d)
2,562

2,729

-6
1.    Q2 on Q2 change.

Second quarter segment earnings were a loss of $6,721 million. This included a post-tax impairment charge of $4,658 million mainly related to unconventional assets in North America, assets offshore in Brazil and Europe, a project in Nigeria (OPL245), and an asset in the US Gulf of Mexico. Also included were a net charge of $187 million mainly related to a reduction in discount rate used for provisions, as well as redundancy and restructuring costs of $183 million. These net charges are part of identified items (see Reference A).

Compared with the second quarter 2019, Upstream Adjusted Earnings were a loss of $1,512 million primarily reflecting lower realised oil and gas prices.

Cash flow from operating activities for the second quarter 2020 was $319 million, primarily driven by Adjusted Earnings before non-cash expenses including depreciation, as well as the cash impact of the settlement for the Lula unitisation in Brazil and cash effect of tax.

Compared with the second quarter 2019, total production decreased by 7%, mainly due to the challenging macroeconomic environment (which included OPEC+ restrictions and COVID-19-related restrictions), the impact of divestments and lower production in the NAM joint venture. Field ramp-ups in the Santos Basin, Brazil, the US Gulf of Mexico and Permian, USA more than offset field decline. Lower production volumes were offset by favourable timing of entitlement liftings.

Half year segment earnings were a loss of $7,584 million. This included a post-tax impairment charge of $5,074 million mainly related to unconventional assets in North America, assets offshore in Brazil and Europe, a project in Nigeria (OPL245), and an asset in the US Gulf of Mexico. Also included were a net charge of $916 million related to the impact of the weakening Brazilian real on a deferred tax position, and redundancy and restructuring costs of $191 million. These net charges are part of identified items (see Reference A).

Compared with the first half 2019, Upstream Adjusted Earnings were a loss of $1,220 million primarily reflecting lower realised oil and gas prices and lower gas volumes.


Royal Dutch Shell plc            Unaudited Condensed Interim Financial Report            4



Cash flow from operating activities for the first half 2020 was $5,926 million, primarily driven by Adjusted Earnings before non-cash expenses including depreciation, as well as positive working capital movements, cash effect of tax and the settlement for the Lula unitisation in Brazil.

Compared with the first half 2019, total production decreased by 6%, mainly due to the impact of divestments, lower production in the NAM joint venture and the challenging macroeconomic environment (which included OPEC+ restrictions and COVID-19-related restrictions). Field ramp-ups in the Santos Basin, Brazil, the US Gulf of Mexico and Permian, USA, more than offset field decline.

Royal Dutch Shell plc            Unaudited Condensed Interim Financial Report            5



OIL PRODUCTS
Quarters
$ million
Half year
Q2 2020
 
Q1 2020
 
Q2 2019
 
%¹
 
2020
2019
%
(3,023
)
 
2,211

 
1,299

 
-333
Segment earnings²
(811
)
2,523

-132
(5,433
)
 
849

 
20

 
 
Of which: Identified items (Reference A)
(4,585
)
(205
)
 
2,411

 
1,363

 
1,278

 
+89
Adjusted Earnings²
3,774

2,727

+38
 
 
 
 
 
 
 
Of which:
 
 
 
1,500

 
158

 
52

 
+2,763
Refining & Trading
1,658

473

+251
911

 
1,205

 
1,225

 
-26
Marketing
2,116

2,254

-6
(362
)
 
4,878

 
1,268

 
-129
Cash flow from operating activities
4,516

670

+574
2,430

 
353

 
2,081

 
+17
Cash flow from operating activities excluding working capital movements (Reference H)
2,783

4,670

-40
606

 
580

 
1,118

 

Cash capital expenditure (Reference C)
1,186

1,971


1,944

 
2,397

 
2,632

 
-26
Refinery processing intake (thousand b/d)
2,170

2,649

-18
4,041
³
 
5,278
³
 
6,608

 
-39
Oil Products sales volumes (thousand b/d)
4,659
³
6,538

-29
1.    Q2 on Q2 change.
2.    Earnings are presented on a CCS basis (See Note 2).
3.    With effect from the first quarter 2020, the reporting of Oil Products sales volumes has changed (See Note 2). Sales volumes would be 4,742 thousand b/d in the second quarter 2020 on a comparable basis with 2019.

Second quarter segment earnings were a loss of $3,023 million. This included a post-tax impairment charge of $4,027 million, as a result of revised medium- and long-term price outlook assumptions in response to the energy market demand and supply fundamentals as well as the COVID-19 pandemic and macroeconomic conditions. Also included were a net charge of $1,257 million due to the fair value accounting of commodity derivatives, and redundancy and restructuring costs of $118 million. These net charges are part of identified items (see Reference A).

Compared with the second quarter 2019, Oil Products Adjusted Earnings of $2,411 million for the quarter reflected very strong contributions from crude and oil products trading and optimisation as well as lower operating expenses. This was partly offset by lower realised refining margins and lower marketing sales volumes due to the weak macroeconomic environment and COVID-19 pandemic.

Cash flow from operating activities for the second quarter 2020 was an outflow of $362 million, primarily driven by Adjusted Earnings before depreciation, as well as negative working capital movements and cash outflows from commodity derivatives.

With effect from the first quarter 2020, certain Oil Products contracts are no longer included in sales volumes (see Note 2). Excluding this impact, Oil Products sales volumes decreased due to lower refining & trading and marketing sales volumes, compared with the second quarter 2019.

Refining & Trading Adjusted Earnings reflected very strong contributions from crude and oil products trading and optimisation as well as lower operating expenses. This was partly offset by lower realised refining margins, compared with the second quarter 2019.

With effect from the first quarter 2020, Shell discloses utilisation instead of availability to improve transparency on refinery production volumes. Utilisation is defined as the actual usage of the plants as a percentage of the rated capacity. Refinery utilisation was 70% compared with 76% in the second quarter 2019, mainly due to lower demand and economic optimisation.

Marketing Adjusted Earnings reflected lower sales volumes, partly offset by lower operating expenses, compared with the second quarter 2019.

Half year segment earnings were a loss of $811 million. This included a post-tax impairment charge of $4,088 million, as a result of revised medium- and long-term price outlook assumptions in response to the energy market demand and supply fundamentals as well as the COVID-19 pandemic and macroeconomic conditions. Also included were a net charge of $291 million due to the fair value accounting of commodity derivatives, and redundancy and restructuring costs of $117 million. These net charges are part of identified items (see Reference A).


Royal Dutch Shell plc            Unaudited Condensed Interim Financial Report            6



Compared with the first half 2019, Oil Products Adjusted Earnings of $3,774 million reflected very strong contributions from crude and oil products trading and optimisation as well as lower operating expenses. This was partly offset by lower realised refining margins and lower marketing sales volumes due to the weak macroeconomic environment and COVID-19 pandemic.

Cash flow from operating activities for the first half 2020 was $4,516 million, primarily driven by Adjusted Earnings before depreciation, and positive working capital movements. This was partly offset by cost-of-sales adjustments for the first half 2020.

With effect from the first quarter 2020, certain Oil Products contracts are no longer included in sales volumes (see Note 2). Excluding this impact, Oil Products sales volumes decreased due to lower refining & trading and marketing sales volumes, compared with the first half 2019.

Refining & Trading Adjusted Earnings reflected very strong contributions from crude and oil products trading and optimisation as well as lower operating expenses. This was partly offset by lower realised refining margins, compared with the first half 2019.

With effect from the first quarter 2020, Shell discloses utilisation instead of availability to improve transparency on refinery production volumes. Utilisation is defined as the actual usage of the plants as a percentage of the rated capacity. Refinery utilisation was 75% compared with 78% in the first half 2019, mainly due to lower demand and economic optimisation.

Marketing Adjusted Earnings reflected lower sales volumes, partly offset by lower operating expenses and higher realised global commercial and retail margins, compared with the first half 2019.



Royal Dutch Shell plc            Unaudited Condensed Interim Financial Report            7



CHEMICALS
Quarters
$ million
Half year
Q2 2020
 
Q1 2020
 
Q2 2019
 
 
2020
2019
%
164

 
146
 
(107)
 
+253
Segment earnings²
311
345
-10
(41)
 
(2)
 
(239)
 
 
Of which: Identified items (Reference A)
(43)
(237)
 
206
 
148
 
132
 
+56
Adjusted Earnings²
354
582
-39
734
 
(178)
 
1,268
 
-42
Cash flow from operating activities
556
1,257
-56
304
 
189
 
508
 
-40
Cash flow from operating activities excluding working capital movements (Reference H)
492
1,037
-52
369
 
846
 
1,079
 
 
Cash capital expenditure (Reference C)
1,215
1,907
 
3,623
 
3,871
 
3,787
 
-4
Chemicals sales volumes (thousand tonnes)
7,494
7,924
-5
1.     Q2 on Q2 change.
2.    Earnings are presented on a CCS basis (See Note 2).
 
Second quarter segment earnings were $164 million. This included redundancy and restructuring costs of $30 million, which are part of identified items (see Reference A).

Compared with the second quarter 2019, Chemicals Adjusted Earnings of $206 million reflected lower operating expenses, partly offset by lower realised margins due to chemicals downcycle conditions compounded by COVID-19 pandemic.

Cash flow from operating activities for the quarter was $734 million, primarily driven by Adjusted Earnings before depreciation, as well as positive working capital movements due to positive movements in receivables and payables. This was partly offset by higher cost-of-sales adjustments for the quarter.

With effect from the first quarter 2020, Shell discloses utilisation instead of availability to improve transparency on chemicals production volumes. Utilisation is defined as the actual usage of the plants as a percentage of the rated capacity. Chemicals manufacturing plant utilisation was 78% compared with 73% in the second quarter 2019, mainly due to higher maintenance activities in Asia and Europe in 2019, as well as the impact of strike actions in the Netherlands last year.

Half year segment earnings were $311 million. This included redundancy and restructuring costs of $31 million, which are part of identified items (see Reference A).

Compared with the first half 2019, Chemicals Adjusted Earnings of $354 million reflected lower realised margins due to chemicals downcycle conditions compounded by COVID-19.

Cash flow from operating activities was an inflow of $556 million, primarily driven by Adjusted Earnings before depreciation. This is partly offset by cost-of-sales adjustments for the first half 2020.

With effect from the first quarter 2020, Shell discloses utilisation instead of availability to improve transparency on chemicals production volumes. Utilisation is defined as the actual usage of the plants as a percentage of the rated capacity. Chemicals manufacturing plant utilisation was 81% compared with 78% in the first half 2019, mainly due to higher maintenance activities in Asia and Europe in 2019, including the impact of strike actions in the Netherlands last year.


CORPORATE
Quarters
 
$ million
Half year
Q2 2020
 
Q1 2020
 
Q2 2019
 
 
2020
2019
(805
)
 
(453
)
 
(789
)
 
Segment earnings
(1,258
)
(1,460
)
(9
)
 
535

 
18

 
Of which: Identified items (Reference A)
526

31

(796
)
 
(989
)
 
(806
)
 
Adjusted Earnings
(1,784
)
(1,490
)
(791
)
 
559

 
(385
)
 
Cash flow from operating activities
(232
)
(651
)
390

 
(239
)
 
(202
)
 
Cash flow from operating activities excluding working capital movements (Reference H)
151

(185
)


Royal Dutch Shell plc            Unaudited Condensed Interim Financial Report            8



Second quarter segment earnings were an expense of $805 million. This included a post-tax impairment charge of $5 million, as a result of macroeconomic conditions. This net charge is part of identified items (see Reference A).

Adjusted Earnings were an expense of $796 million, reflecting lower net interest expense, largely offset by adverse currency exchange rate effects and reduced tax credits, compared with the second quarter 2019.

Half year segment earnings were an expense of $1,258 million. This included a gain of $530 million from the impact of the weakening Brazilian real on financing positions, which is part of identified items (see Reference A).

Adjusted Earnings were an expense of $1,784 million, reflecting adverse currency exchange rate effects, compared with the first half 2019.


Royal Dutch Shell plc            Unaudited Condensed Interim Financial Report            9



OUTLOOK FOR THE THIRD QUARTER 2020
As a result of COVID-19, there continues to be significant uncertainty in the macroeconomic conditions with an expected negative impact on demand for oil, gas and related products. Furthermore, recent global developments and uncertainty in oil supply have caused further volatility in commodity markets. The third quarter 2020 outlook provides ranges for operational and financial metrics based on current expectations, but these are subject to change in the light of current evolving market conditions. Due to demand or regulatory requirements and/or constraints in infrastructure, Shell may need to take measures to curtail or reduce oil and/or gas production, LNG liquefaction as well as utilisation of refining and chemicals plants and similarly sales volumes could be impacted. Such measures will likely have a variety of impacts on our operational and financial metrics.

Integrated Gas production is expected to be approximately 820 - 880 thousand boe/d. LNG liquefaction volumes are expected to be approximately 7.6 - 8.2 million tonnes. Due to price-lag in oil-linked LNG term contracts, the impact of low oil prices is expected to become more significant in the third quarter.
Upstream production is expected to be approximately 2,100 - 2,400 thousand boe/d.
Refinery utilisation is expected to be approximately 68% - 76%.
Oil Products sales volumes are expected to be approximately 4,000 - 5,000 thousand b/d.
Chemicals manufacturing plant utilisation is expected to be approximately 78% - 88%.
Chemicals sales volumes are expected to be approximately 3,600 - 3,900 thousand tonnes.
Corporate Adjusted Earnings are expected to be a net expense of approximately $800 - 875 million in the third quarter 2020 and a net expense of approximately $3,200 - 3,500 million for the full year 2020. This excludes the impact of currency exchange rate effects.

Royal Dutch Shell plc            Unaudited Condensed Interim Financial Report            10



UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME
Quarters
 
$ million
Half year
Q2 2020
 
Q1 2020
 
Q2 2019
 
 
2020
2019
32,504

 
60,029

 
90,544

 
Revenue¹
92,533

174,278

(161
)
 
854

 
632

 
Share of profit of joint ventures and associates
693

2,116

148

 
76

 
662

 
Interest and other income
224

1,105

32,491

 
60,959

 
91,838

 
Total revenue and other income
93,450

177,499

18,093

 
43,213

 
68,590

 
Purchases
61,306

128,513

5,822

 
5,982

 
6,835

 
Production and manufacturing expenses
11,803

13,189

2,370

 
2,393

 
2,881

 
Selling, distribution and administrative expenses
4,763

5,233

232

 
243

 
225

 
Research and development
475

437

723

 
294

 
439

 
Exploration
1,018

745

28,089

 
7,093

 
6,699

 
Depreciation, depletion and amortisation²
35,182

12,649

1,070

 
1,118

 
1,252

 
Interest expense
2,188

2,411

56,398

 
60,336

 
86,920

 
Total expenditure
116,735

163,176

(23,907
)
 
623

 
4,917

 
Income/(loss) before taxation
(23,284
)
14,323

(5,806
)
 
646

 
1,755

 
Taxation charge/(credit)
(5,160
)
5,003

(18,101
)
 
(23
)
 
3,162

 
Income/(loss) for the period¹
(18,124
)
9,319

30

 
1

 
164

 
Income/(loss) attributable to non-controlling interest
31

320

(18,131
)
 
(24)

 
2,998

 
Income/(loss) attributable to Royal Dutch Shell plc shareholders
(18,155
)
8,999

(2.33)

 
0.00

 
0.37

 
Basic earnings per share ($)³
(2.33)

1.11

(2.33)

 
0.00

 
0.37

 
Diluted earnings per share ($)³
(2.33)

1.10

1. 
See Note 2 “Segment information”.
2. 
Includes impairment charges of $21,780 million (Q1 2020: $749 million; half year 2020: $22,529 million) mainly triggered by revision of Shell's mid- and long-term commodity price and refining margin outlook. See Notes 1 and 7.
3. 
See Note 3 “Earnings per share”.

Royal Dutch Shell plc            Unaudited Condensed Interim Financial Report            11



CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Quarters
 
$ million
Half year
Q2 2020
 
Q1 2020
 
Q2 2019
 
 
2020
2019
(18,101
)
 
(23
)
 
3,162

 
Income/(loss) for the period
(18,124
)
9,319

 
 
 
 
 
 
Other comprehensive income/(loss) net of tax:




 
 
 
 
 
 
Items that may be reclassified to income in later periods:




1,588

 
(3,935
)
 
215

 
– Currency translation differences
(2,347
)
391

43

 
(28
)
 
18

 
– Debt instruments remeasurements
15

29

(137
)
 
(152
)
 
109

 
– Cash flow hedging gains/(losses)
(289
)
(348
)
(99
)
 

 
(8
)
 
– Net investment hedging gains/(losses)
(99
)
2

55

 
101

 
79

 
– Deferred cost of hedging
156

105

30

 
(60
)
 
(1
)
 
– Share of other comprehensive income/(loss) of joint ventures and associates
(30
)
(56
)
1,481

 
(4,074
)
 
413

 
Total
(2,593
)
125

 
 
 
 
 
 
Items that are not reclassified to income in later periods:




(4,924
)
 
1,756

 
(1,172
)
 
– Retirement benefits remeasurements
(3,167
)
(2,646
)
77

 
(137
)
 
(73
)
 
– Equity instruments remeasurements
(60
)
30

19

 
48

 
(6
)
 
– Share of other comprehensive income/(loss) of joint ventures and associates
67

(5
)
(4,828
)
 
1,667

 
(1,251
)
 
Total
(3,160
)
(2,621
)
(3,347
)
 
(2,407
)
 
(839
)
 
Other comprehensive income/(loss) for the period
(5,753
)
(2,496
)
(21,448
)
 
(2,430
)
 
2,323

 
Comprehensive income/(loss) for the period
(23,877
)
6,823

43

 
(123
)
 
180

 
Comprehensive income/(loss) attributable to non-controlling interest
(80
)
358

(21,490
)
 
(2,307
)
 
2,143

 
Comprehensive income/(loss) attributable to Royal Dutch Shell plc shareholders
(23,797
)
6,465



Royal Dutch Shell plc            Unaudited Condensed Interim Financial Report            12



CONDENSED CONSOLIDATED BALANCE SHEET
$ million
 
 
 
 
 
 
June 30, 2020
 
December 31, 2019
Assets
 
 
 
 
Non-current assets
 
 
 
 
Intangible assets
 
23,163

 
23,486

Property, plant and equipment
 
213,100

 
238,349

Joint ventures and associates
 
21,771

 
22,808

Investments in securities
 
3,144

 
2,989

Deferred tax
 
15,573

 
10,524

Retirement benefits¹
 
3,135

 
4,717

Trade and other receivables
 
7,681

 
8,085

Derivative financial instruments²
 
1,331

 
689

 
 
288,898

 
311,647

Current assets
 
 
 
 
Inventories
 
17,726

 
24,071

Trade and other receivables
 
32,375

 
43,414

Derivative financial instruments²
 
8,161

 
7,149

Cash and cash equivalents
 
27,939

 
18,055

 
 
86,201

 
92,689

Total assets
 
375,098

 
404,336

Liabilities
 
 
 
 
Non-current liabilities
 
 
 
 
Debt
 
87,460

 
81,360

Trade and other payables
 
2,731

 
2,342

Derivative financial instruments²
 
1,452

 
1,209

Deferred tax
 
11,743

 
14,522

Retirement benefits¹
 
15,881

 
13,017

Decommissioning and other provisions³
 
25,993

 
21,799

 
 
145,260

 
134,249

Current liabilities
 
 
 
 
Debt
 
17,530

 
15,064

Trade and other payables
 
34,615

 
49,208

Derivative financial instruments²
 
7,217

 
5,429

Taxes payable
 
6,479

 
6,693

Retirement benefits
 
391

 
419

Decommissioning and other provisions
 
3,160

 
2,811

 
 
69,393

 
79,624

Total liabilities
 
214,653

 
213,873

Equity attributable to Royal Dutch Shell plc shareholders
 
157,156

 
186,476

Non-controlling interest⁴
 
3,289

 
3,987

Total equity
 
160,445

 
190,463

Total liabilities and equity
 
375,098

 
404,336


1. 
The change is mainly driven by a decrease in the weighted average discount rate applied caused by falling credit spreads and increasing market estimates of future inflation. See Note 1.
2. 
See Note 6 “Derivative financial instruments and debt excluding lease liabilities”.
3. 
The discount rate applied at June 30, 2020 was 1.75% (December 31, 2019: 3.0%). Compared with December 31, 2019, non-current decommissioning and restoration provisions increased by $3,999 million as a result of the change in the discount rate, to $25,993 million at June 30, 2020.

Royal Dutch Shell plc            Unaudited Condensed Interim Financial Report            13



4. 
The change is mainly related to the non-controlling interest in Shell Midstream Partners, L.P. (“SHLX”) following the completion of the sale of Shell's 79% interest in the Mattox Pipeline Company LLC and certain logistics assets at the Shell Norco Manufacturing Complex to SHLX.

Royal Dutch Shell plc            Unaudited Condensed Interim Financial Report            14



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, 2020
657

 
 
(1,063
)
 
14,451

 
 
172,431

 
186,476

 
3,987

 
190,463

Comprehensive income/(loss) for the period

 
 

 
(5,642
)
 
 
(18,155
)
 
(23,797
)
 
(80
)
 
(23,877
)
Transfer from other comprehensive income

 
 

 
17

 
 
(17
)
 

 

 

Dividends³

 
 

 

 
 
(4,718
)
 
(4,718
)
 
(178
)
 
(4,896
)
Repurchases of shares
(6
)
 
 

 
6

 
 
(1,214
)
 
(1,214
)
 

 
(1,214
)
Share-based compensation

 
 
539

 
(324
)
 
 
(231
)
 
(16
)
 

 
(16
)
Other changes in non-controlling interest

 
 

 

 
 
426

 
426

 
(440
)
 
(14
)
At June 30, 2020
651

 
 
(524
)
 
8,508

 
 
148,521

 
157,156

 
3,289

 
160,445

At January 1, 2019
685

 
 
(1,260
)
 
16,615

 
 
182,610

 
198,650

 
3,888

 
202,538

Comprehensive income/(loss) for the period

 
 

 
(2,534
)
 
 
8,999

 
6,465

 
358

 
6,823

Transfer from other comprehensive income

 
 

 
(102
)
 
 
102

 

 

 

Dividends

 
 

 

 
 
(7,699
)
 
(7,699
)
 
(270
)
 
(7,969
)
Repurchases of shares
(12
)
 
 

 
12

 
 
(5,021
)
 
(5,021
)
 

 
(5,021
)
Share-based compensation

 
 
842

 
(276
)
 
 
(683
)
 
(118
)
 

 
(118
)
Other changes in non-controlling interest

 
 

 

 
 
1

 
1

 
1

 
2

At June 30, 2019
674

 
 
(419
)
 
13,715

 
 
178,308

 
192,278

 
3,977

 
196,254

1. 
See Note 4 “Share capital”.
2. 
See Note 5 “Other reserves”.
3. 
The amount charged to retained earnings is based on prevailing exchange rates on payment date.


Royal Dutch Shell plc            Unaudited Condensed Interim Financial Report            15



CONSOLIDATED STATEMENT OF CASH FLOWS
Quarters
 
$ million
Half year
Q2 2020
 
Q1 2020
 
Q2 2019
 
 
2020
2019
(23,907
)
 
623

 
4,917

 
Income before taxation for the period
(23,284
)
14,323

 
 
 
 
 
 
Adjustment for:




889

 
897

 
1,030

 
- Interest expense (net)
1,786

1,926

28,089

 
7,093

 
6,699

 
- Depreciation, depletion and amortisation
35,182

12,649

518

 
83

 
202

 
- Exploration well write-offs
601

321

(128
)
 
106

 
(379
)
 
- Net (gains)/losses on sale and revaluation of non-current assets and businesses
(21
)
(444
)
161

 
(854
)
 
(632
)
 
- Share of (profit)/loss of joint ventures and associates
(693
)
(2,116
)
610

 
531

 
1,217

 
- Dividends received from joint ventures and associates
1,141

1,961

(3,713
)
 
9,594

 
(61
)
 
- (Increase)/decrease in inventories
5,881

(2,902
)
3,959

 
6,314

 
308

 
- (Increase)/decrease in current receivables
10,273

(1,117
)
(4,226
)
 
(8,430
)
 
321

 
- Increase/(decrease) in current payables
(12,655
)
1,104

837

 
(171
)
 
(480
)
 
- Derivative financial instruments
665

(1,589
)
293

 
(91
)
 
30

 
- Retirement benefits
203

52

392

 
(102
)
 
8

 
- Decommissioning and other provisions
290

(294
)
(480
)
 
579

 
(39
)
 
- Other
98

(13
)
(730
)
 
(1,321
)
 
(2,110
)
 
Tax paid
(2,051
)
(4,199
)
2,563

 
14,851

 
11,031

 
Cash flow from operating activities
17,415

19,661

(3,436
)
 
(4,263
)
 
(5,150
)
 
Capital expenditure
(7,699
)
(10,272
)
(161
)
 
(559
)
 
(160
)
 
Investments in joint ventures and associates
(720
)
(601
)
(20
)
 
(147
)
 
(26
)
 
Investments in equity securities
(167
)
(65
)
211

 
1,613

 
644

 
Proceeds from sale of property, plant and equipment and businesses
1,824

822

423

 
547

 
102

 
Proceeds from sale of joint ventures and associates
970

646

62

 
73

 
17

 
Proceeds from sale of equity securities
135

288

118

 
192

 
220

 
Interest received
310

457

1,174

 
855

 
592

 
Other investing cash inflows
2,029

1,272

(691
)
 
(1,028
)
 
(404
)
 
Other investing cash outflows
(1,719
)
(1,335
)
(2,320
)
 
(2,718
)
 
(4,166
)
 
Cash flow from investing activities
(5,039
)
(8,788
)
90

 
321

 
145

 
Net increase/(decrease) in debt with maturity period within three months
412

55

 
 
 
 
 
 
Other debt:




15,238

 
1,003

 
180

 
- New borrowings
16,241

320

(7,113
)
 
(2,723
)
 
(2,848
)
 
- Repayments
(9,836
)
(4,381
)
(1,088
)
 
(1,033
)
 
(1,214
)
 
Interest paid
(2,121
)
(2,329
)
324

 
(81
)
 
45

 
Derivative financial instruments
243


(32
)
 
(8
)
 

 
Change in non-controlling interest
(40
)
(2
)
 
 
 
 
 
 
Cash dividends paid to:




(1,397
)
 
(3,483
)
 
(3,825
)
 
– Royal Dutch Shell plc shareholders¹
(4,880
)
(7,700
)
(68
)
 
(110
)
 
(203
)
 
– Non-controlling interest
(178
)
(271
)
(216
)
 
(1,486
)
 
(2,142
)
 
Repurchases of shares
(1,702
)
(4,396
)
(18
)
 
(182
)
 
(7
)
 
Shares held in trust: net sales/(purchases) and dividends received
(199
)
(463
)
5,721

 
(7,781
)
 
(9,868
)
 
Cash flow from financing activities
(2,060
)
(19,168
)
164

 
(595
)
 
4

 
Currency translation differences relating to cash and cash equivalents
(431
)
24

6,128

 
3,756

 
(3,000
)
 
Increase/(decrease) in cash and cash equivalents
9,884

(8,271
)
21,811

 
18,055

 
21,470

 
Cash and cash equivalents at beginning of period
18,055

26,741

27,939

 
21,811

 
18,470

 
Cash and cash equivalents at end of period
27,939

18,470

1. Cash dividends paid represents the payment of net dividends (after deduction of withholding taxes where applicable) and payment of withholding taxes on dividends paid in the previous quarter. Cash dividends paid during the second quarter 2020

Royal Dutch Shell plc            Unaudited Condensed Interim Financial Report            16



is the total of the net dividend paid relating to the first quarter 2020 gross dividend and withholding taxes paid in relation to the fourth quarter 2019 gross dividend.

Royal Dutch Shell plc            Unaudited Condensed Interim Financial Report            17



NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1.    Basis of preparation
These unaudited Condensed Consolidated Interim Financial Statements ("Interim Statements") of Royal Dutch Shell plc (“the Company”) and its subsidiaries (collectively referred to as “Shell”) have been prepared in accordance with IAS 34 Interim Financial Reporting as issued by the International Accounting Standards Board (IASB) and as adopted by the European Union, and on the basis of the same accounting principles as those used in the Annual Report and Accounts (pages 190 to 238) and Form 20-F (pages 142 to 189) for the year ended December 31, 2019 as filed with the Registrar for Companies for England and Wales and the US Securities and Exchange Commission, respectively, and should be read in conjunction with these filings.
Going concern
These unaudited Interim Statements have been prepared on the going concern basis of accounting. In assessing the appropriateness of the going concern assumption, management have stressed Shell’s most recent financial projections to incorporate a range of potential future outcomes by considering Shell’s principal risks, further potential downside pressures on commodity prices and cash preservation measures, including reduced future operating costs, capital expenditure and dividend distributions. This assessment confirmed that Shell has adequate resources to continue its operations for at least 12 months from the approval of the unaudited Condensed Consolidated Interim Financial Statements. Therefore, the Directors consider it appropriate to continue to adopt the going concern basis of accounting in preparing these unaudited Condensed Consolidated Interim Financial Statements.
The financial information presented in the unaudited Interim 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, 2019 were published in Shell’s Annual Report and Accounts, a copy of which was delivered to the Registrar of Companies for England and Wales, and in Shell's Form 20-F. 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.
Key accounting considerations related to COVID-19 and the macroeconomic environment.
Significant estimates
Future commodity price assumptions and management's view on the future development of refining margins represent a significant estimate and both were subject to change in the second quarter 2020, resulting in the recognition of impairments. The tax impact of impairments in the second quarter 2020 has been fully recognised in deferred tax positions as of June 30, 2020. See Note 7.

After finalisation of the operating plan later in 2020 the overall deferred tax position will be reviewed.

The retirement benefits remeasurements, recognised in the Consolidated Statement of Comprehensive Income, reflect the decrease in the weighted average discount rate applied caused by falling credit spreads and increasing market estimates of future inflation.

The discount rate applied to provisions is reviewed on a regular basis. Following the significant decrease in capital markets rates in 2020 the discount rate was reviewed and adjusted in the second quarter 2020. See footnote 3 to the Condensed Consolidated Balance Sheet.

2.    Segment information
With effect from 2020, Shell's reporting segments consist of Integrated Gas, Upstream, Oil Products, Chemicals and Corporate, reflecting the way Shell reviews and assesses its performance. Oil Products and Chemicals businesses were previously reported under the Downstream segment. Oil sands mining activities, previously included in the Upstream segment, are reported under Oil Products. Comparative information has been reclassified.
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 effect from January 1, 2020, additional contracts are classified as held for trading purposes and consequently revenue is reported on a net rather than gross basis. The effect on revenue for the second quarter 2020 is a reduction of $8,028 million (Q1 2020: $16,313 million).

Royal Dutch Shell plc            Unaudited Condensed Interim Financial Report            18




INFORMATION BY SEGMENT
Quarters
 
$ million
Half year
Q2 2020
 
Q1 2020
 
Q2 2019
 
 
2020
2019
 
 
 
 
 
 
Third-party revenue




7,436

 
10,157

 
8,942

 
Integrated Gas
17,593

20,582

1,177

 
2,344

 
2,346

 
Upstream
3,521

4,647

21,596

 
44,297

 
75,837

 
Oil Products
65,893

141,888

2,283

 
3,221

 
3,406

 
Chemicals
5,504

7,138

12

 
11

 
13

 
Corporate
22

24

32,504

 
60,029

 
90,544

 
Total third-party revenue¹
92,533

174,278

 
 
 
 
 
 
Inter-segment revenue²




558

 
891

 
1,045

 
Integrated Gas
1,449

2,137

4,117

 
6,476

 
8,827

 
Upstream
10,592

18,359

1,082

 
1,851

 
1,950

 
Oil Products
2,933

4,130

475

 
875

 
1,088

 
Chemicals
1,350

2,054


 

 

 
Corporate


 
 
 
 
 
 
CCS earnings




(7,959
)
 
1,812

 
1,340

 
Integrated Gas
(6,147
)
4,134

(6,721
)
 
(863
)
 
1,435

 
Upstream
(7,584
)
3,059

(3,023
)
 
2,211

 
1,299

 
Oil Products
(811
)
2,523

164
 
146
 
(107)
 
Chemicals
311
345
(805
)
 
(453
)
 
(789
)
 
Corporate
(1,258
)
(1,460
)
(18,343
)
 
2,854

 
3,177

 
Total
(15,490
)
8,601

1. 
Includes revenue from sources other than from contracts with customers, which mainly comprises the impact of fair value accounting of commodity derivatives. Second quarter 2020 included income of $1,405 million (Q1 2020: $6,686 million income; half year 2020: $8,091 million income). This amount includes both the reversal of prior gains of $686 million (Q1 2020: $317 million) related to sales contracts and prior losses of $507 million (Q1 2020: $76 million) related to purchase contracts that were previously recognised and where physical settlement has taken place in the second quarter 2020.
2. 
Comparative information for inter-segment revenue for Upstream, Oil Products and Chemicals has been revised to conform with reporting segment changes applicable from 2020. Inter-segment revenue for Integrated Gas for the half year 2019 has been revised from $1,989 million to amend for certain intra-segment transactions previously reported as inter-segment revenue.

Royal Dutch Shell plc            Unaudited Condensed Interim Financial Report            19



RECONCILIATION OF INCOME FOR THE PERIOD TO CCS EARNINGS
Quarters
 
$ million
Half year
Q2 2020
 
Q1 2020
 
Q2 2019
 
 
2020
2019
(18,131
)
 
(24
)
 
2,998

 
Income/(loss) attributable to Royal Dutch Shell plc shareholders
(18,155
)
8,999

30

 
1

 
164

 
Income/(loss) attributable to non-controlling interest
31

320

(18,101
)
 
(23
)
 
3,162

 
Income/(loss) for the period
(18,124
)
9,319

 
 
 
 
 
 
Current cost of supplies adjustment:


(432
)
 
3,774

 
30

 
Purchases
3,342

(955
)
98

 
(916
)
 
1

 
Taxation
(819
)
237

92

 
19

 
(16
)
 
Share of profit/(loss) of joint ventures and associates
111


(242
)
 
2,876

 
15

 
Current cost of supplies adjustment
2,634

(719
)
 
 
 
 
 
 
of which:
 
 
(246
)
 
2,780

 
27

 
Attributable to Royal Dutch Shell plc shareholders
2,535

(681
)
4

 
96

 
(12
)
 
Attributable to non-controlling interest
100

(38
)
(18,343
)
 
2,854

 
3,177

 
CCS earnings
(15,490
)
8,601

 
 
 
 
 
 
of which:


(18,377
)
 
2,756

 
3,025

 
CCS earnings attributable to Royal Dutch Shell plc shareholders
(15,620
)
8,318

34

 
97

 
152

 
CCS earnings attributable to non-controlling interest
131

282



3.    Earnings per share
EARNINGS PER SHARE
Quarters
 
 
Half year
Q2 2020
 
Q1 2020
 
Q2 2019
 
 
2020
2019
(18,131
)
 
(24
)
 
2,998

 
Income/(loss) attributable to Royal Dutch Shell plc shareholders ($ million)
(18,155
)
8,999

 
 
 
 
 
 
Weighted average number of shares used as the basis for determining:




7,789.8

 
7,819.8

 
8,100.8

 
Basic earnings per share (million)
7,804.8

8,126.3

7,789.8

 
7,819.8

 
8,153.7

 
Diluted earnings per share (million)
7,804.8

8,182.1


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, 2020
 
4,151,787,517

 
3,729,407,107

 
349

 
308

 
657

Repurchases of shares
 
(50,548,018
)
 
(23,223,271
)
 
(4
)
 
(2
)
 
(6
)
At June 30, 2020
 
4,101,239,499

 
3,706,183,836

 
345

 
306

 
651

At January 1, 2019
 
4,471,889,296

 
3,745,486,731

 
376

 
309

 
685

Repurchases of shares
 
(139,414,447
)
 

 
(12
)
 

 
(12
)
At June 30, 2019
 
4,332,474,849

 
3,745,486,731

 
365

 
309

 
674

1.    Share capital at June 30, 2020 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 19, 2020 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 182.7 million (representing 2,611 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 19, 2021, and the end of the Annual General Meeting to be held in 2021, unless previously renewed, revoked or varied by Royal Dutch Shell plc in a general meeting.

Royal Dutch Shell plc            Unaudited Condensed Interim Financial Report            20



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, 2020
37,298

 
154

 
123

 
1,049

 
(24,173
)
 
14,451

Other comprehensive income/(loss) attributable to Royal Dutch Shell plc shareholders

 

 

 

 
(5,642
)
 
(5,642
)
Transfer from other comprehensive income

 

 

 

 
17

 
17

Repurchases of shares

 

 
6

 

 

 
6

Share-based compensation

 

 

 
(324
)
 

 
(324
)
At June 30, 2020
37,298

 
154

 
129

 
725

 
(29,798
)
 
8,508

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

 

 

 

 
(2,534
)
 
(2,534
)
Transfer from other comprehensive income

 

 

 

 
(102
)
 
(102
)
Repurchases of shares

 

 
12

 

 

 
12

Share-based compensation

 

 

 
(276
)
 

 
(276
)
At June 30, 2019
37,298

 
154

 
107

 
821

 
(24,664
)
 
13,715


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, 2019, presented in the Annual Report and Accounts 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 June 30, 2020, are consistent with those used in the year ended December 31, 2019, though the carrying amounts of derivative financial instruments measured using predominantly unobservable inputs have changed since that date.
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
June 30, 2020
 
December 31, 2019
Carrying amount
75,918
 
65,887
Fair value¹
82,369
 
71,163
1.    Mainly determined from the prices quoted for these securities.
7.    Impairments

The impairment loss in the second quarter 2020 was mainly triggered by revision of Shell's mid- and long-term commodity price and refining margin outlook reflecting the expected effects of the COVID-19 pandemic and related macroeconomic as well as energy market demand and supply fundamentals.

Impairments losses of $16,842 million post-tax ($22,332 million pre-tax, of which $21,780 million recognised in depreciation, depletion and amortisation and $552 million recognised in share of profit of joint ventures and associates)

Royal Dutch Shell plc            Unaudited Condensed Interim Financial Report            21



mainly related to Integrated Gas for $8,151 million post-tax ($11,191 million pre-tax), mainly relating to the QGC Integrated Gas asset and Prelude floating LNG both in Australia, to Upstream for $4,658 million post-tax ($6,281 million pre-tax) mainly related to two unconventional assets in North America, a project in Nigeria (OPL245), two offshore projects in Brazil, four offshore projects in Europe and an asset in the US Gulf of Mexico, to Oil Products for $4,027 million post-tax ($4,851 million pre-tax) mainly relating to three refineries in Europe and North America, and to Corporate for $5 million post-tax ($9 million pre-tax).

For impairment testing purposes, the respective carrying amounts of property, plant and equipment and intangible assets were compared with their value in use. Cash flow projections used in the determination of value in use were made using management’s forecasts of commodity prices, market supply and demand, potential costs associated with operational GHG emissions, product margins including forecast refining margins and expected production volumes. These cash flows were adjusted for the risks specific to the assets, and therefore these risks were not included in the determination of the discount rate applied. The nominal pre-tax rate applied in the second quarter 2020 was 6% (2019: 6%).

Oil and gas price assumptions applied for impairment testing in Integrated Gas and Upstream are reviewed and, where necessary, adjusted on a periodic basis. Reviews include comparison with available market data and forecasts that reflect developments in demand such as global economic growth, technology efficiency, policy measures. Factors impacting supply include consideration of investment and resource potential, cost of development of new supply, and behaviour of major resource holders. The near-term commodity price assumptions applied in impairment testing in the second quarter 2020 were as follows:

Commodity price assumptions [A]
2020
2021
2022
2023
Brent crude oil ($/b)
35
40
50
60
Henry Hub natural gas ($/MMBtu)
1.75
2.50
2.50
2.75
[A] Money of the day.

The long-term price assumptions applied were $60 per barrel (/b) for Brent crude oil and $3.00 per million British thermal units (/MMBtu) for Henry Hub natural gas, both at real term 2020.

Until 2019 management’s estimate of longer-term refining margins in Oil Products was based on the reversion to mean methodology, unless a fundamental shift in markets had been identified, over the life of the refineries. Under this approach, it is assumed that refining margins would revert to historical averages over time. As from second quarter 2020, a different price methodology has been applied, based on Shell management's understanding and interpretation of demand and supply fundamentals in the near term and taking into account various other factors such as industry rationalisation and energy transition in the long term. This resulted in a downward revision of average long-term refining margins by around 30% from previous assumptions applied.
 
Approximately 50% of the combined “Property, Plant and Equipment, Joint Ventures and Associates as well as Intangible Assets” carrying amount was tested for impairment in the second quarter 2020. The main sensitivity in the impairment test is the long term Brent price assumption. For sensitivity purposes, a decrease from 2024 of the long-term Brent price assumption to $55/b (real term 2020), would ceteris paribus result in some additional $6 - $7 billion pre-tax impairment at June 30, 2020.

Royal Dutch Shell plc            Unaudited Condensed Interim Financial Report            22



ALTERNATIVE PERFORMANCE (NON-GAAP) MEASURES
A.
Adjusted Earnings
The “Adjusted Earnings” measure aims to facilitate a comparative understanding of Shell’s financial performance from period to period by removing the effects of oil price changes on inventory carrying amounts and removing the effects of identified items. These items are in some cases driven by external factors and may, either individually or collectively, hinder the comparative understanding of Shell’s financial results from period to period. This measure excludes earnings attributable to non-controlling interest. This measure was previously referred to as “CCS earnings attributable to shareholders excluding identified items” and was renamed for simplicity with effect from the second quarter 2020.
Quarters
$ million
Half year
Q2 2020
Q1 2020
Q2 2019
 
2020
2019
(18,131
)
(24
)
2,998

Income/(loss) attributable to Royal Dutch Shell plc shareholders
(18,155
)
8,999

(246
)
2,780

27

Add: Current cost of supplies adjustment attributable to Royal Dutch Shell plc shareholders (Note 2)
2,535

(681
)
(19,015
)
(104
)
(437
)
Less: Identified items attributable to Royal Dutch Shell plc shareholders
(19,118
)
(445
)
638

2,860

3,462

Adjusted Earnings
3,498

8,763

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.

Royal Dutch Shell plc            Unaudited Condensed Interim Financial Report            23



IDENTIFIED ITEMS
Quarters
 
$ million
Half year
Q2 2020
 
Q1 2020
 
Q2 2019
 
 
2020
2019
 
 
 
 
 
 
Identified items before tax
 
 
128

 
(76
)
 
379

 
Divestment gains/(losses)
51

444

(22,332
)
 
(749
)
 
(672
)
 
Impairments
(23,082
)
(706
)
(1,884
)
 
968

 
12

 
Fair value accounting of commodity derivatives and certain gas contracts
(916
)
(61
)
(518
)
 
(18
)
 
(27
)
 
Redundancy and restructuring
(536
)
(80
)
(427
)
 

 
(437
)
 
Other
(427
)
(437
)
(25,033
)
 
125

 
(746
)
 
Total identified items before tax
(24,908
)
(839
)
6,018

 
(228
)
 
331

 
Total tax impact of identified items
5,790

416

 
 
 
 
 
 
Identified items after tax
 
 
10

 
(32
)
 
256

 
Divestment gains/(losses)
(22
)
302

(16,842
)
 
(536
)
 
(446
)
 
Impairments
(17,378
)
(491
)
(1,540
)
 
838

 
1

 
Fair value accounting of commodity derivatives and certain gas contracts
(702
)
33

(375
)
 
(7
)
 
(13
)
 
Redundancy and restructuring
(382
)
(46
)
(44
)
 
(366
)
 
16

 
Impact of exchange rate movements on tax balances
(410
)
8

(224
)
 

 
(229
)
 
Other
(224
)
(229
)
(19,015
)
 
(104
)
 
(415
)
 
Impact on CCS earnings
(19,118
)
(423
)
 
 
 
 
 
 
Of which:
 
 
(8,321
)
 
(331
)
 
(386
)
 
Integrated Gas
(8,652
)
(160
)
(5,209
)
 
(1,154
)
 
172

 
Upstream
(6,364
)
149

(5,433
)
 
849

 
20

 
Oil Products
(4,585
)
(205
)
(41
)
 
(2
)
 
(239
)
 
Chemicals
(43
)
(237
)
(9
)
 
535

 
18

 
Corporate
526

31

(19,015
)
 
(104
)
 
(437
)
 
Impact on CCS earnings attributable to shareholders
(19,118
)
(445
)

 

 
22

 
Impact on CCS earnings attributable to non-controlling interest

22

The identified items categories above may include after-tax impacts of identified items of joint ventures and associates which are 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 F).
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.
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 (this primarily impacts the Upstream and Integrated Gas segments) 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 that based on Shell management's assessment hinder the comparative understanding of Shell's financial results from period to period, such as the impact arising from changes in tax legislation and

Royal Dutch Shell plc            Unaudited Condensed Interim Financial Report            24



certain provisions for onerous contracts or litigation. The second quarter 2020 reflects 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.    Cash capital expenditure
Cash capital expenditure represents cash spent on maintaining and developing assets as well as on investments in the period. Management regularly monitors this measure as a key lever to delivering sustainable cash flows. Cash capital expenditure is the sum of the following lines from the Consolidated Statement of Cash flows: Capital expenditure, Investments in joint ventures and associates and Investments in equity securities.
With effect from the first quarter 2020, “Capital investment” is no longer presented in this announcement since Cash capital expenditure is considered to be more closely aligned with management’s focus on free cash flow generation.
Quarters
 
$ million
Half year
Q2 2020
 
Q1 2020
 
Q2 2019
 
 
2020
2019
3,436

 
4,263

 
5,150

 
Capital expenditure
7,699

10,272

161

 
559

 
160

 
Investments in joint ventures and associates
720

601

20

 
147

 
26

 
Investments in equity securities
167

65

3,617

 
4,970

 
5,337

 
Cash capital expenditure
8,587

10,938

 
 
 
 
 
 
Of which:
 
 
736

 
882

 
738

 
Integrated Gas
1,618

2,081

1,876

 
2,521

 
2,321

 
Upstream
4,397

4,812

606

 
580

 
1,118

 
Oil Products
1,186

1,971

369

 
846

 
1,079

 
Chemicals
1,215

1,907

30

 
141

 
81

 
Corporate
171

166

D.    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 adjusted for after-tax interest expense. With effect from the second quarter 2020, the after-tax interest expense adjustment is calculated using an applicable blended statutory tax rate. This change is implemented to eliminate the distorting volatility effects of the effective tax rate. There is no significant impact on prior periods comparatives, which therefore have not been revised.
Both measures refer to Capital employed which consists of total equity, current debt and non-current debt.

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.
$ million
 
Quarters
 
 
Q2 2020
 
Q1 2020
 
Q2 2019
Income - current and previous three quarters
 
(11,011)
 
10,252

 
21,006

Interest expense after tax - current and previous three quarters
 
3,014
 
2,854

 
2,819

Income before interest expense - current and previous three quarters
 
(7,997)
 
13,106

 
23,825

Capital employed – opening
 
288,900
 
292,797

 
281,711

Capital employed – closing
 
265,435
 
278,444

 
288,900

Capital employed – average
 
277,168
 
285,620

 
285,306

ROACE on a Net income basis
 
(2.9)%
 
4.6
%
 
8.4
%
ROACE on a CCS basis excluding identified items

Royal Dutch Shell plc            Unaudited Condensed Interim Financial Report            25



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.
$ million
 
Quarters
 
 
Q2 2020
 
Q1 2020
 
Q2 2019
CCS earnings - current and previous three quarters
 
(8,264)

 
13,256

 
21,794

Identified items - current and previous three quarters
 
(19,865)

 
(1,266)

 
1,169

Interest expense after tax – current and previous three quarters
 
3,014

 
2,854

 
2,819

CCS earnings excluding identified items before interest expense - current and previous three quarters
 
14,616

 
17,376

 
23,444

Capital employed – average
 
277,168

 
285,620

 
285,306

ROACE on a CCS basis excluding identified items
 
5.3
%
 
6.1
%
 
8.2
%
E.    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.
$ million
 
Quarters
 
 
June 30, 2020

 
March 31, 2020

 
June 30, 2019

Current debt
 
17,530

 
15,767

 
16,617

Non-current debt
 
87,460

 
79,298

 
76,029

Total debt¹
 
104,990

 
95,065

 
92,646

Add: Debt-related derivative financial instruments: net liability/(asset)
 
525

 
1,218

 
634

Add: Collateral on debt-related derivatives: net liability/(asset)
 
266

 
(58)

 
78

Less: Cash and cash equivalents
 
(27,939)

 
(21,811)

 
(18,470)

Net debt
 
77,843

 
74,413

 
74,887

Add: Total equity
 
160,445

 
183,379

 
196,254

Total capital
 
238,288

 
257,792

 
271,142

Gearing
 
32.7
%
 
28.9
%
 
27.6
%
1.    Includes lease liabilities of $29,073 million at June 30, 2020 and $29,290 million at March 31, 2020, and $30,758 million at June 30, 2019.
F.    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 is a measure aimed at facilitating a comparative understanding of performance from period to period by removing the effects of identified items, which either individually or collectively, can cause volatility, in some cases driven by external factors.

Royal Dutch Shell plc            Unaudited Condensed Interim Financial Report            26



Quarters
 
$ million
Half year
Q2 2020
 
Q1 2020
 
Q2 2019
 
 
2020
2019
5,822

 
5,982

 
6,835

 
Production and manufacturing expenses
11,803

13,189

2,370

 
2,393

 
2,881

 
Selling, distribution and administrative expenses
4,763

5,233

232

 
243

 
225

 
Research and development
475

437

8,423

 
8,618

 
9,941

 
Operating expenses
17,042

18,859

 
 
 
 
 
 
Of which identified items:
 
 
(508
)
 
(18
)
 
(27
)
 
Redundancy and restructuring (charges)/reversal
(526
)
(79
)
(411
)
 

 
(306
)
 
(Provisions)/reversal
(411
)
(306
)

 

 
(131
)
 
Other

(131
)
(919
)
 
(18
)
 
(464
)
 
 
(937
)
(516
)
7,504

 
8,600

 
9,477

 
Underlying operating expenses
16,105

18,343

G.    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.
Quarters
 
$ million
Half year
Q2 2020
 
Q1 2020
 
Q2 2019
 
 
2020
2019
2,563

 
14,851

 
11,031

 
Cash flow from operating activities
17,415

19,661

(2,320
)
 
(2,718
)
 
(4,166
)
 
Cash flow from investing activities
(5,039
)
(8,788
)
243

 
12,133

 
6,865

 
Free cash flow
12,376

10,873

696

 
2,233

 
763

 
Less: Divestment proceeds (Reference I)
2,929

1,756


 

 
77

 
Add: Tax paid on divestments (reported under "Other investing cash outflows")

77

199

 
404

 
7

 
Add: Cash outflows related to inorganic capital expenditure1
602

365

(254
)
 
10,304

 
6,186

 
Organic free cash flow2
10,050

9,559

1. 
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.  
2. 
Free cash flow less divestment proceeds, adding back outflows related to inorganic expenditure.  
H.    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 plc            Unaudited Condensed Interim Financial Report            27



Quarters
 
$ million
Half year
Q2 2020
 
Q1 2020
 
Q2 2019
 
 
2020
2019
2,563

 
14,851

 
11,031

 
Cash flow from operating activities
17,415

19,661

(3,713
)
 
9,594

 
(61
)
 
(Increase)/decrease in inventories
5,881

(2,902
)
3,959

 
6,314

 
308

 
(Increase)/decrease in current receivables
10,273

(1,117
)
(4,226
)
 
(8,430
)
 
321

 
Increase/(decrease) in current payables
(12,655
)
1,104

(3,980
)
 
7,478

 
569

 
(Increase)/decrease in working capital
3,499

(2,914
)
6,543

 
7,373

 
10,462

 
Cash flow from operating activities excluding working capital movements
13,916

22,575

 
 
 
 
 
 
Of which:
 
 
2,871

 
3,352

 
2,824

 
Integrated Gas
6,224

6,540

548

 
3,718

 
5,251

 
Upstream
4,265

10,515

2,430

 
353

 
2,081

 
Oil Products
2,783

4,670

304

 
189

 
508

 
Chemicals
492

1,037

390

 
(239
)
 
(202
)
 
Corporate
151

(185
)
I.    Divestment proceeds
Divestment proceeds represent cash received from divestment activities in the period. Management regularly monitors this measure as a key lever to deliver sustainable cash flow.
Quarters
 
$ million
Half year
Q2 2020
 
Q1 2020
 
Q2 2019
 
 
2020
2019
211
 
1,613
 
644
 
Proceeds from sale of property, plant and equipment and businesses
1,824
822
423
 
547
 
102
 
Proceeds from sale of joint ventures and associates
970
646
62
 
73
 
17
 
Proceeds from sale of equity securities
135
288
696

 
2,233

 
763

 
Divestment proceeds
2,929

1,756

PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties affecting Shell are described in the Risk Factors section of the Annual Report and Accounts (pages 27 to 36) and Form 20-F (pages 11 to 15) for the year ended December 31, 2019 and are summarised below. There are no material changes in those Risk Factors for the remaining 6 months of the financial year.
We are exposed to macroeconomic risks including fluctuating prices of crude oil, natural gas, oil products and chemicals.
Our ability to deliver competitive returns and pursue commercial opportunities depends in part on the accuracy of our price assumptions.
Our ability to achieve strategic objectives depends on how we react to competitive forces.
We seek to execute divestments in the pursuit of our strategy. We may not be able to successfully divest these assets in line with our strategy.
Our future hydrocarbon production depends on the delivery of large and integrated projects, as well as on our ability to replace proved oil and gas reserves.
The estimation of proved oil and gas reserves involves subjective judgements based on available information and the application of complex rules; therefore, subsequent downward adjustments are possible.
Rising climate change concerns have led and could lead to additional legal and/or regulatory measures which could result in project delays or cancellations, a decrease in demand for fossil fuels, potential litigation and additional compliance obligations.
Our business exposes us to risks of social instability, criminality, civil unrest, terrorism, piracy, cyber-disruption, acts of war and pandemic diseases, such as the COVID-19 (coronavirus) outbreak, that could have a material adverse effect on our operations.

Royal Dutch Shell plc            Unaudited Condensed Interim Financial Report            28



We operate in more than 70 countries that have differing degrees of political, legal and fiscal stability. This exposes us to a wide range of political developments that could result in changes to contractual terms, laws and regulations. In addition, we and our joint arrangements and associates face the risk of litigation and disputes worldwide.
The nature of our operations exposes us, and the communities in which we work, to a wide range of health, safety, security and environment risks.
A further erosion of the business and operating environment in Nigeria could have a material adverse effect on us.
Production from the Groningen field in the Netherlands causes earthquakes that affect local communities.
Our future performance depends on the successful development and deployment of new technologies and new products.
We are exposed to treasury and trading risks, including liquidity risk, interest rate risk, foreign exchange risk and credit risk. We are affected by the global macroeconomic environment as well as financial and commodity market conditions.
We are exposed to commodity trading risks, including market and operational risks.
We have substantial pension commitments, funding of which is subject to capital market risks and other factors.
We mainly self-insure our risk exposure. We could incur significant losses from different types of risks that are not covered by insurance from third-party insurers.
An erosion of our business reputation could have a material adverse effect on our brand, our ability to secure new resources or access capital markets, and on our licence to operate.
Many of our major projects and operations are conducted in joint arrangements or associates. This could reduce our degree of control, as well as our ability to identify and manage risks.
We rely heavily on information technology systems for our operations.
Violations of antitrust and competition laws carry fines and expose us and/or our employees to criminal sanctions and civil suits.
Violations of anti-bribery, tax evasion and anti-money laundering laws carry fines and expose us and/or our employees to criminal sanctions, civil suits and ancillary consequences (such as debarment and the revocation of licences).
Violations of data protection laws carry fines and expose us and/or our employees to criminal sanctions and civil suits.
Violations of trade compliance laws and regulations, including sanctions, carry fines and expose us and our employees to criminal sanctions and civil suits.
The Company’s Articles of Association determine the jurisdiction for shareholder disputes. This could limit shareholder remedies.
FIRST QUARTER 2020 PORTFOLIO DEVELOPMENTS
Integrated Gas
During the quarter, Shell announced that it will not proceed with the proposed Lake Charles LNG project due to the current market conditions. Accordingly, Energy Transfer will take over as the project developer.
In April, Shell took the Final Investment Decision to develop the first phase of Arrow Energy's (Shell interest 50%) Surat Gas Project in Queensland, Australia, which will bring up to 90 billion cubic feet per year of new gas to market at peak production.
Oil Products
During the quarter, Shell completed the sale of the Martinez refinery in the USA to PBF Energy for $1.2 billion, which includes the refinery and inventory.

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 its subsidiaries in general or to those who work for them. These terms are also used where no useful

Royal Dutch Shell plc            Unaudited Condensed Interim Financial Report            29



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; (m) risks associated with the impact of pandemics, such as the COVID-19 (coronavirus) outbreak; and (n) 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 Annual Report and Accounts and Form 20-F for the year ended December 31, 2019 (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, July 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.
This announcement 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. 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.
July 30, 2020
The information in this announcement 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
- Media: International +44 (0) 207 934 5550; USA +1 832 337 4355
LEI number of Royal Dutch Shell plc: 21380068P1DRHMJ8KU70
Classification: Inside Information


Royal Dutch Shell plc            Unaudited Condensed Interim Financial Report            30



APPENDIX
LIQUIDITY AND CAPITAL RESOURCES FOR THE THREE MONTHS ENDED JUNE 30, 2020
Cash and cash equivalents increased to $27.9 billion at June 30, 2020, from $21.8 billion at March 31, 2020.
Cash flow from operating activities was an inflow of $2.6 billion for the second quarter 2020, which included a negative working capital movement of $4.0 billion.
Cash flow from investing activities was an outflow of $2.3 billion, mainly driven by capital expenditure of $3.4 billion.
Cash flow from financing activities was an inflow of $5.7 billion, mainly driven by net new borrowings of $8.2 billion partially offset by dividend payments to Royal Dutch Shell plc shareholders of $1.4 billion.
Total current and non-current debt increased to $105.0 billion at June 30, 2020, compared with $95.1 billion at March 31, 2020. Total debt excluding leases increased by $10.0 billion and the carrying amount of leases decreased by $0.2 billion. In the second quarter 2020, Shell issued $3.8 billion of debt under the US shelf registration and €5.0 billion under the Euro medium-term note programmes.
Cash dividends paid to Royal Dutch Shell plc shareholders were $1.4 billion in the second quarter 2020 compared with $3.8 billion in the second quarter 2019.
Dividends of $0.16 per share are announced on July 30, 2020, in respect of the second quarter 2020. These dividends are payable on September 21, 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 Accounts and Form 20-F for the year ended December 31, 2019 for additional information on the dividend access mechanism.

LIQUIDITY AND CAPITAL RESOURCES FOR THE SIX MONTHS ENDED JUNE 30, 2020
Cash and cash equivalents increased to $27.9 billion at June 30, 2020, from $18.5 billion at June 30, 2019.
Cash flow from operating activities was an inflow of $17.4 billion for the first half 2020, which included a positive working capital movement of $3.5 billion.
Cash flow from investing activities was an outflow of $5.0 billion for the first half 2020, mainly driven by capital expenditure of $7.7 billion.
Cash flow from financing activities was an outflow of $2.1 billion for the first half 2020, mainly driven by dividend payments to Royal Dutch Shell plc shareholders of $4.9 billion, repurchases of shares of $1.7 billion and interest paid of $2.1 billion, partially offset by net new borrowings of $6.8 billion.
Total current and non-current debt increased to $105.0 billion at June 30, 2020, compared with $92.6 billion at June 30, 2019. Total debt excluding leases increased by $14.0 billion and the carrying amount of leases decreased by $1.7 billion. In the first half 2020 Shell issued $3.8 billion of debt under the US shelf registration and €5.0 billion under the Euro medium-term note programmes.
Cash dividends paid to Royal Dutch Shell plc shareholders were $4.9 billion in the first half 2020, compared with $7.7 billion in the first half 2019.











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CAPITALISATION AND INDEBTEDNESS
The following table sets out the unaudited consolidated combined capitalisation and indebtedness of Shell at June 30, 2020. This information is derived from the Unaudited Condensed Consolidated Interim Financial Statements.
CAPITALISATION AND INDEBTEDNESS
$ million

 
June 30, 2020

Equity attributable to Royal Dutch Shell plc shareholders
157,156

 
 
Current debt
17,530

Non-current debt
87,460

Total debt[A]
104,990

Total capitalisation
262,146

[A] Of the total carrying amount of debt at June 30, 2020, $75.4 billion was unsecured, $29.6 billion was secured and $65.8 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, 2019: $56.3 billion).

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