6-K
Table of Contents

FORM 6-K
UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16 of
The Securities Exchange Act of 1934
For July 2007
Commission File Number: 1-32575
Royal Dutch Shell plc
(Exact name of registrant as specified in its charter)
England and Wales
(Jurisdiction of incorporation or organization)
30, Carel van Bylandtlaan, 2596 HR The Hague
The Netherlands
Tel No: (011 31 70) 377 9111

(Address of principal executive officers)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F þ Form 40-F o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):                     
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):                     
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes o           No þ
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):82-                    

 


TABLE OF CONTENTS

SIGNATURES


Table of Contents

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorised.
ROYAL DUTCH SHELL PLC
(Registrant)
         
By: /s/ Michiel Brandjes    
 
       
     
Name:
  Michiel Brandjes    
Title:
  Company Secretary    
Date: July 26, 2007

 


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Royal Dutch Shell
2nd Quarter 2007 results

(UNAUDITED RESULTS)
 
Royal Dutch Shell’s second quarter 2007 earnings, on a current cost of supply (CCS) basis, were $7.6 billion compared to $6.3 billion a year ago. Basic CCS earnings per share increased by 22% versus the same quarter a year ago.
 
 
From 2007 onwards the Group is declaring its dividends in US dollars rather than in euros. A second quarter 2007 dividend has been announced of $0.36 per share, an increase of 14% over the US dollar dividend for the same period in 2006.
 
 
$0.9 billion or 0.4% of Royal Dutch Shell shares were bought back for cancellation during the quarter.
 
Royal Dutch Shell Chief Executive Jeroen van der Veer commented: “We have delivered another set of competitive results, driven by operating performance. Our investment plans are on track. I am pleased with our progress in downstream and on exploration. We are rejuvenating our portfolio, with sustained investment in new legacy assets, as well as disposals, both upstream and downstream. We continue to see competitive growth opportunities based on our technological strengths, by making disciplined capital choices, in an industry landscape of both higher energy prices and higher costs”.


Summary unaudited results

 

                                                         
QUARTERS             $ million   SIX MONTHS  
Q2     Q1     Q2     %1                      
2007     2007     2006                 2007     2006     %  
 
  8,667       7,281       7,324       +18    
Income attributable to shareholders
    15,948       14,217       +12  
  (1,111)       (349)       (1,010)            
Estimated CCS adjustment for Oil Products and Chemicals (see note 2)
    (1,460)       (1,815)          
                         
 
                   
  7,556       6,932       6,314       +20    
CCS earnings
    14,488       12,402       +17  
                         
 
                   
                               
 
                       
  1.38       1.16       1.13            
Basic earnings per share ($)
    2.54       2.19          
  (0.18)       (0.06)       (0.15)            
Estimated CCS adjustment per share ($)
    (0.23)       (0.28)          
  1.20       1.10       0.98            
Basic CCS earnings per share ($)
    2.31       1.91          
                               
 
                       
  0.36       0.36       0.315            
Dividend per ordinary share ($) 2
    0.72       0.63          
 
1   Q2 on Q2 change
 
2   From 2007 onwards dividends are declared in US dollars. 2006 dividends were declared in euros and translated, for comparison purposes, to US dollars (based on the US dollar dividend of American Depositary Receipts in the applicable period converted to ordinary shares).


 

The information in these quarterly results reflects the consolidated financial position and results of Royal Dutch Shell plc (“Royal Dutch Shell”). All amounts shown throughout this report are unaudited. Registered Office: England, 4366849, Shell Centre, London, SE1 7NA, UK


 


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Key features of the second quarter 2007
 
Second quarter 2007 CCS earnings were $7,556 million or 20% higher than in the same quarter a year ago.
 
Second quarter 2007 reported income was $8,667 million or 18% higher than in the same quarter a year ago.
 
Exploration & Production segment earnings were $3,301 million compared with $3,999 million in the second quarter 2006. Earnings, when compared to the second quarter 2006, were mainly impacted by lower volumes, tax charges and higher costs, reflecting current industry conditions, partly offset by a divestment gain.
 
Gas & Power segment earnings were $779 million compared to $513 million a year ago. Earnings, when compared to the same quarter in 2006, reflected higher Liquefied Natural Gas (LNG) sales volumes, LNG dividends and divestment gains which were partly offset by lower European marketing and trading results.
 
Oil Products CCS earnings were $2,936 million compared to $2,065 million in 2006. Earnings benefited from higher refining margins, improved marketing margins and a divestment gain, which were partly offset by higher operating costs when compared to the second quarter of 2006.
 
Chemicals CCS earnings were $494 million compared to $348 million in 2006, reflecting improved margins and higher profits from equity-accounted investments, partly offset by higher operating costs.
 
Cash flow from operating activities was $8.8 billion compared to $7.8 billion in the second quarter 2006. Excluding working capital movements and taxation effects, cash flow from operating activities was $10.0 billion compared to $11.9 billion a year ago (see note 7).
 
Total cash returned to shareholders in the second quarter 2007 in the form of dividends and share repurchases was $3.2 billion.
 
Capital investment for the second quarter 2007 was $5.8 billion and approximately $6.3 billion of proceeds were realised from divestments.
 
Return on average capital employed (ROACE), on a reported income basis (see note 3), was 22.8%.
 
Gearing (see note 5) was 12% at the end of the second quarter 2007 versus 13.6 % at the end of the second quarter 2006.
 
As at March 31, 2007, Royal Dutch Shell, through its affiliates, had acquired the remaining shares of Shell Canada, not already owned by the Group, at a total price of some $7.1 billion. As from the second quarter 2007, Royal Dutch Shell’s financial statements include the fully consolidated results of Shell Canada with no minority interest impact.
 
On April 18, 2007, Royal Dutch Shell completed the divestment to OAO Gazprom of a 50% stake (plus 1 share) in the Sakhalin project in Russia. Royal Dutch Shell diluted its stake in the project from 55% to 27.5% for a total sale price of $4.1 billion. Royal Dutch Shell’s financial statements now include the balance sheet and income statement of Sakhalin Energy on an equity accounted basis (see note 6).

 


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3

Basic earnings per share (see notes 1, 2 and 8)

                                         
        QUARTERS         SIX MONTHS  
Q2     Q1     Q2                  
2007     2007     2006         2007     2006  
 
  1.38       1.16       1.13    
Earnings per share ($)
    2.54       2.19  
 
  1.20       1.10       0.98    
CCS earnings per share ($)
    2.31       1.91  
Diluted earnings per share (see notes 1, 2 and 8)

                                         
        QUARTERS           SIX MONTHS  
Q2     Q1     Q2                    
2007     2007     2006         2007       2006  
 
  1.38       1.15       1.13    
Earnings per share ($)
    2.53       2.18  
 
  1.20       1.10       0.97    
CCS earnings per share ($)
    2.30       1.91  
Summary segment earnings (see notes 2 and 4)

                                                       
        QUARTERS             $ million   SIX MONTHS  
Q2     Q1     Q2                            
2007     2007     2006     % 1         2007     2006   %  
                               
Segment earnings
                     
  3,301       3,508       3,999            
Exploration & Production
    6,809       7,742        
  779       803       513            
Gas & Power2
    1,582       1,273        
  2,936       1,488       2,065            
Oil Products (CCS basis)
    4,424       3,398        
  494       480       348            
Chemicals (CCS basis)
    974       487        
  177       801       (448)            
Corporate2
    978       (221)        
  (131)       (148)       (163)            
Minority interest
    (279)       (277)        
                         
 
                 
  7,556       6,932       6,314       +20    
CCS earnings
    14,488       12,402     +17  
                         
 
                 
 
1   Q2 on Q2 change
 
2     As from 2007, the segment Other Industry and Corporate has been renamed as Corporate. Its earnings no longer include the results generated by the Wind and Solar businesses, which were previously reported as part of Other Industry segments, but continue to include some non-material businesses. The Wind and Solar businesses earnings are, as from 2007, reported under the Gas & Power segment. For comparison purposes, the second quarter 2006 and the six months period of 2006 results were reclassified and are impacted by $(3) million and $(8) million in the Gas & Power segment and by $3 million and $8 million in the Corporate segment, respectively.

 


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Summary segment earnings - continued
Earnings in the second quarter 2007 reflected the following items, which in aggregate were a net income of $660 million (compared to a net charge of $232 million in the second quarter 2006) as summarised in the table below:
 
Exploration & Production earnings included a net income of $153 million, reflecting a divestment gain of $226 million and a gain of $19 million related to the mark-to-market valuation of certain UK gas contracts, which were partly offset by tax charges of $92 million. Earnings for the second quarter 2006 included a combined net income of $304 million including the impacts of a Canadian tax rate change and income of $147 million related to the mark-to-market valuation of certain UK gas contracts.
 
Gas & Power earnings included a gain from divestments of $247 million.
 
Oil Products earnings included a divestment gain of $205 million. Earnings for the second quarter 2006 included net charges of $65 million related to employee retirement plans expenses in France partly offset by the impact of a Canadian tax rate change.
 
Chemicals earnings did not include any identified items for the second quarter 2007. Earnings for the second quarter 2006 included net charges of $30 million related to employee retirement plans expenses in France partly offset by the impact of a Canadian tax rate change.
 
Corporate earnings included a net income of $55 million related to the sale of property in the United Kingdom. Earnings for the second quarter 2006 included a $500 million provision in respect of the putative shareholder class actions filed in the United States District Court for the District of New Jersey relating to the 2004 recategorisation of certain hydrocarbon reserves.
 
Minority interest did not include any identified items for the second quarter 2007. In the second quarter of 2006 a Canadian tax rate change occurred resulting in an additional income of $41 million attributable to Minority interest.
Summary table:
                                         
QUARTERS     $ million   SIX MONTHS  
Q2     Q1     Q2                  
2007     2007     2006         2007     2006  
                       
Segment earnings impact of identified items:
               
  153       104       304    
Exploration & Production
    257       417  
  247       39       -    
Gas & Power
    286       -  
  205       (176 )     (65 )  
Oil Products (CCS basis)
    29       (65 )
  -       -       (30 )  
Chemicals (CCS basis)
    -       (30 )
  55       404       (400 )  
Corporate
    459       (400 )
  -       -       (41)    
Minority interest
    -       (41)  
                 
 
           
  660       371       (232)    
CCS earnings impact
    1,031       (119)  
                 
 
           
These items generally relate to events with an impact of greater than $50 million on earnings and are shown to provide additional insight in the segment earnings, CCS earnings and income attributable to shareholders. Further additional comments are provided in the section ‘Earnings per industry segment’ on page 5 and onwards.

 


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5
Earnings per industry segment
Upstream

                                     
QUARTERS              SIX MONTHS  
Q2   Q1     Q2                  
2007   2007     2006         2007     2006  
                                     
$/bbl     Realised oil prices (period average)       $/bbl  
64.41
    54.88       63.99     WOUSA     59.52       60.75  
61.06
    51.91       63.63     USA     56.34       59.56  
63.92
    54.45       63.95     Global     59.06       60.61  
                                     
$/thousand scf     Realised gas prices (period average)       $/thousand scf
5.95
    7.84       6.54     Europe     6.93       6.83  
4.01
    4.71       4.18     WOUSA (including Europe)     4.36       4.48  
7.78
    7.20       7.36     USA     7.48       8.43  
4.74
    5.21       4.82     Global     4.98       5.24  
                                     
 
                  Oil and gas marker industry prices (period average)                
68.86
    57.76       69.51     Brent ($/bbl)     63.31       65.65  
64.89
    58.05       70.45     WTI ($/bbl)     61.47       66.88  
7.56
    7.15       6.59     Henry Hub ($/MMBtu)     7.36       7.17  
20.20
    22.31       34.60     UK National Balancing Point (pence/therm)     21.25       52.42  
Exploration & Production

                                                     
QUARTERS             $ million   SIX MONTHS  
Q2   Q1     Q2                              
2007   2007     2006     %1         2007     2006     %  
 
3,301
    3,508       3,999       -17     Segment earnings     6,809       7,742       -12  
                                                     
1,908
    1,961       1,897       +1     Crude oil production (thousand b/d)     1,934       1,931          
7,367
    8,981       7,865       -6     Natural gas production available for sale (million scf/d)     8,170       9,088       -10  
3,178
    3,509       3,253       -2     Barrels of oil equivalent (thousand boe/d)     3,343       3,498       -4  
 
1Q2 on Q2 change
Second quarter Exploration & Production segment earnings were $3,301 million compared to $3,999 million a year ago.
Second quarter earnings included a net income of $153 million, reflecting a gain from a divestment of $226 million and a gain of $19 million related to the mark-to-market valuation of certain UK gas contracts, which were partly offset by tax charges of $92 million. Exploration & Production earnings for the second quarter 2006 included a combined net income of $304 million including the impacts of a Canadian tax rate change and income of $147 million related to the mark-to-market valuation of certain UK gas contracts.
Earnings, when compared to the second quarter 2006, were mainly impacted by lower volumes, tax impacts and higher costs, reflecting current industry conditions, partly offset by a divestment gain. In addition, higher depreciation charges and exploration expenses impacted earnings when compared to the second quarter 2006.

 


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6
Liquids realisations were relatively flat when compared to a year ago, while marker crudes Brent and WTI were down 1% and 8%, respectively. Gas realisations were 2% lower than a year ago. Outside the USA gas realisations decreased by 4% whereas in the USA gas realisations increased by 6%.
Second quarter 2007 production was 3,178 thousand boe per day compared to 3,253 thousand boe per day a year ago. Total crude oil production (including oil sands) was up 1% and total natural gas production was down 6% when compared to the second quarter 2006. Second quarter 2007 production was impacted by lower demand in North West Europe as a consequence of the continued warm weather and lower production in Nigeria due to the security situation. In Nigeria, at the end of the quarter, 195 thousand boe per day (Shell share) of production remained shut-in due to the security situation mainly in the Western Delta. No firm date can be given for a return to full production, nor the rate of ramp-up to full production.
Production compared to the second quarter 2006 included volumes from new fields including Erha (Shell share 44%) in Nigeria, E8 and B12 (Shell share 50%) in Malaysia, Pohokura (Shell share 48%) in New Zealand, Enfield in Australia (Shell share 21%, indirect) and Changbei (Shell share 50%) in China.
Second quarter portfolio developments:
In the United Kingdom, the Group announced its intention to sell its equity interests in a number of northern North Sea assets.
The Group completed the disposal to OAO Gazprom of a 50% stake (plus 1 share) in the Sakhalin project in Russia (see note 6).
During the first half of 2007, the Group made four material exploration discoveries, with two in Australia and further discoveries in Nigeria and Malaysia. The Group also significantly increased its overall acreage position with new exploration licences in Australia and the USA.
Gas & Power

                                                     
QUARTERS             $ million   SIX MONTHS  
Q2   Q1     Q2                              
2007   2007     2006     %1         2007     2006     %  
 
779
    803       513       +52     Segment earnings2     1,582       1,273       +24  
                                                     
3.25
    3.30       2.84       +14     Equity LNG sales volume (million tonnes)     6.55       5.84       +12  
     
1 Q2 on Q2 change
 
2 As from 2007, the Gas & Power earnings include earnings generated by the Wind and Solar businesses, which were previously reported as part of Other Industry segments. For comparison purposes, the second quarter 2006 and six months period of 2006 results were reclassified and were impacted by $(3) million and $(8) million respectively.
Second quarter Gas & Power segment earnings were $779 million compared to $513 million a year ago. Second quarter 2007 earnings included a gain from divestments of $247 million. Excluding this item and compared to the same quarter in 2006, earnings were up 4%, reflecting higher LNG sales volumes and LNG dividends, which were partly offset by lower European marketing and trading results.
LNG equity sales volumes of 3.25 million tonnes were 14% higher than in the same quarter a year ago. The increase was mainly related to the Nigeria LNG venture (Shell interest 26%), as a result of increased feedgas supply.
Second quarter portfolio developments:
In South America, the Group signed an agreement for the sale of certain gas transportation and power generation assets in Bolivia and Brazil. The transaction is expected to close before year-end, pending regulatory approvals.
In the United States, the sale of the Group’s participation in Enterprise Product Partners L.P., a natural gas processing company, was concluded mainly through private placement sales.

 


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7
Downstream

                                         
QUARTERS       SIX MONTHS
Q2   Q1   Q2            
2007   2007   2006       2007   2006
        $/bbl          
Refining marker industry gross margins
(period average)
  $/bbl  
  23.10       22.15       22.20    
ANS US West Coast coking margin
    22.65       17.60  
  27.05       12.85       20.85    
WTS US Gulf Coast coking margin
    19.95       16.65  
  6.30       3.70       4.75    
Rotterdam Brent complex
    5.00       3.55  
  3.60       3.05       4.05    
Singapore 80/20 Arab light/Tapis complex
    3.35       2.60  
Oil Products

                                                       
QUARTERS           $ million      SIX MONTHS  
Q2   Q1   Q2                  
2007   2007   2006   %1       2007   2006 %
  3,928       1,802       3,017            
Segment earnings
    5,730       5,120        
  (992 )     (314 )     (952 )          
CCS adjustment — see note 2
    (1,306 )     (1,722 )      
                               
 
                     
  2,936       1,488       2,065       +42    
Segment CCS earnings
    4,424       3,398     +30  
                               
 
                     
                               
 
                     
  3,806       3,608       3,789            
Refinery intake (thousand b/d)
    3,707       3,825     -3  
  6,490       6,406       6,426       +1    
Total Oil products sales (thousand b/d)
    6,449       6,475        
1 Q2 on Q2 change
Second quarter segment earnings were $3,928 million compared to $3,017 million for the same period last year.
Second quarter CCS segment earnings were $2,936 million compared to $2,065 million in the second quarter of 2006. Earnings for the second quarter 2007 included a gain from divestments of $205 million. Second quarter 2006 earnings included net charges of $65 million related to restructuring of employee retirement plans in France partially offset by the impact of a reduction in deferred taxes in Canada arising from reduced tax rates.
Improved CCS earnings reflected higher refining margins, improved marketing margins, a higher trading contribution and divestment gains which were partly offset by higher operating and legal costs when compared to the second quarter 2006.
In Manufacturing, Supply and Distribution, industry refining margins in the United States and Europe remained strong and were higher than in the same period a year ago. Refining margins in the East declined from levels in the second quarter of 2006. Refinery availability improved to 92.4% from 90.7% in the second quarter of 2006.
In Marketing, earnings increased compared to the same period a year ago mainly due to higher retail marketing margins and continued strong lubricants margins.
Marketing sales volumes declined 1.9% compared to volumes in the second quarter of 2006. Excluding the impact of divested volumes (1.9%) and rationalised B2B volumes (0.7%), volumes were some 0.7% higher.


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8

Second quarter portfolio developments:
In the United States, the Group completed the transaction to sell the Los Angeles Refinery, Wilmington Products Terminal and approximately 250 retail sites and supply agreements in and around Los Angeles and San Diego to Tesoro Corporation.
In Malaysia, the Group signed an agreement for the acquisition of 100 % of the shares in the wholly owned subsidiary of ConocoPhillips, Conoco Jet, comprising 44 ProJet branded retail service stations and 14 vacant land sites in the key growth markets of Malaysia.
Chemicals

                                                         
QUARTERS           $ million   SIX MONTHS  
Q2   Q1   Q2                    
2007   2007   2006   %1       2007   2006   %
 
  626       527       446            
Segment earnings
    1,153       629          
  (132 )     (47 )     (98 )          
CCS adjustment — see note 2
    (179 )     (142 )        
                               
 
                       
  494       480       348       +42    
Segment CCS earnings
    974       487       +100  
                               
 
                       
                               
 
                       
  5,653       5,567       5,870       -4    
Sales volumes (thousand tonnes)
    11,220       11,811       -5  
1 Q2 on Q2 change
Second quarter segment earnings were $626 million compared to $446 million for the same period last year.
Second quarter CCS segment earnings were $494 million compared to $348 million in the same quarter last year. Second quarter 2006 earnings included net charges of $30 million related to restructuring of employee retirement plans in France partially offset by the impact of a reduction in deferred taxes in Canada arising from reduced tax rates.
Earnings reflected improved margins and higher profits from equity-accounted investments, which were partly offset by higher operating costs when compared to the same quarter in 2006. Sales volumes declined mainly as a consequence of a reduction in sales of lower margin products, including aromatics trading. Chemicals manufacturing plant availability remained strong at 92.6%, some 2% points lower than in the second quarter 2006.
Corporate

                                         
QUARTERS   $ million   SIX MONTHS
Q2   Q1   Q2                
2007   2007   2006           2007 2006  
 
  177       801       (448 )   Segment earnings1  
978
(221)      
1 As from 2007, the segment Other Industry and Corporate has been renamed as Corporate. Its earnings no longer include the results generated by the Wind and Solar businesses, which were previously reported as part of Other Industry segments, but continue to include some non-material businesses. For comparison purposes, the second quarter 2006 and the six months period of 2006 results were reclassified and are impacted by $3 million and $8 million respectively.
Second quarter segment results were $177 million, included a net income of $55 million on the sale of properties in the United Kingdom, compared to a loss of $448 million for the same period last year. Second quarter 2006 earnings included a $500 million provision in respect of the putative shareholder class actions filed in the United States District Court for the District of New Jersey relating to the 2004 recategorisation of certain hydrocarbon reserves.
Earnings reflected higher insurance underwriting income and improved net interest income, partly offset by higher corporate costs when compared to the second quarter 2006.


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9

Note
All amounts shown throughout this report are unaudited.
Third quarter results are expected to be announced on October 25, 2007.
In this Report “Group” is defined as Royal Dutch Shell together with all of its consolidated subsidiaries. The expressions “Shell”, “Group”, “Shell Group” and “Royal Dutch Shell” are sometimes used for convenience where references are made to the Group or Group companies in general. Likewise, the words “we”, “us” and “our” are also used to refer to Group companies in general or to those who work for them. These expressions are also used where no useful purpose is served by identifying the particular company or companies. The expression “Group companies” as used in this Report refers to companies in which Royal Dutch Shell either directly or indirectly has control, by having either a majority of the voting rights or the right to exercise a controlling influence. The companies in which the Group has significant influence but not control are referred to as “associated companies” or “associates” and companies in which the Group has joint control are referred to as “jointly controlled entities”. In this Report, associates and jointly controlled entities are also referred to as “equity accounted investments”.
This document contains forward-looking statements concerning the financial condition, results of operations and businesses of Royal Dutch Shell. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of Royal Dutch Shell to market risks and statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of terms and phrases such as ''anticipate’’, ''believe’’, ''could’’, ’’estimate’’, ''expect’’, ''intend’’, ''may’’, ''plan’’, ''objectives’’, ''outlook’’, ’’probably’’, ''project’’, ''will’’, ''seek’’, ''target’’, ''risks’’, ''goals’’, ''should’’ and similar terms and phrases. There are a number of factors that could affect the future operations of Royal Dutch Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this Report, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for the Group’s products; (c) currency fluctuations; (d) drilling and production results; (e) reserve estimates; (f) loss of market and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and regulatory developments including potential litigation and regulatory effects arising from recategorisation of reserves; (k) economic and financial market conditions in various countries and regions; (l) political risks, project delay or advancement, approvals and cost estimates; and (m) changes in trading conditions. All forward-looking statements contained in this Report are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of this Report. Neither Royal Dutch Shell nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this Report.
Please refer to the Annual Report and Form 20-F for the year ended December 31, 2006 for a description of certain important factors, risks and uncertainties that may affect Shell’s businesses.
Cautionary Note to US Investors:
The United States Securities and Exchange Commission (SEC) permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We may use certain terms in this announcement that the SEC’s guidelines strictly prohibit us from including in filings with the SEC. US Investors are urged to consider closely the disclosure in our Form 20-F, File No 1-32575 and disclosure in our Forms 6-K, File No 1-32575, available on the SEC’s website www.sec.gov. You can also obtain these forms from the SEC by calling 1-800-SEC-0330.
July 26, 2007


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-10-

Appendix 1: Royal Dutch Shell financial report and tables
Statement of income (see note 1)

                                                 
QUARTERS       $ million   SIX MONTHS    
Q2   Q1   Q2                    
2007   2007   2006   %1       2007   2006   %
                           
 
                   
  84,896       73,480       83,127        
Revenue2
    158,376       159,091      
  68,715       60,666       67,838        
Cost of sales
    129,381       129,760      
                           
 
                   
  16,181       12,814       15,289     +6  
Gross profit
    28,995       29,331     -1
                           
 
                   
  4,120       3,778       4,429        
Selling, distribution and administrative expenses
    7,898       7,842      
  450       272       250        
Exploration
    722       531      
  2,138       1,808       1,829        
Share of profit of equity accounted investments
    3,946       3,652      
  (477 )     (901 )     47        
Net finance costs and other (income)/expense
    (1,378 )     (108 )    
                           
 
                   
  14,226       11,473       12,392     +15  
Income before taxation
    25,699       24,718     +4
                           
 
                   
  5,415       4,032       4,865        
Taxation
    9,447       10,175      
                           
 
                   
  8,811       7,441       7,527     +17  
Income for the period
    16,252       14,543     +12
                           
 
                   
  144       160       203        
Income attributable to minority interest
    304       326      
                           
 
                   
                           
 
                   
  8,667       7,281       7,324     +18  
Income attributable to shareholders
    15,948       14,217     +12
                           
 
                   
 
1   Q2 on Q2 change
 
2   Revenue is stated after deducting sales taxes, excise duties and similar levies of $18,993 million in Q2 2007, $17,305 million in Q1 2007, $17,984 million in Q2 2006 and $16,709 million in Q1 2006.


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Earnings by industry segment (see notes 2 and 4)

                                                         
QUARTERS           $ million   SIX MONTHS    
Q2   Q1   Q2                    
2007   2007   2006   %1       2007   2006   %
                               
Exploration & Production:
                       
  2,385       2,656       3,014       -21    
World outside USA
    5,041       5,809       -13  
  916       852       985       -7    
USA
    1,768       1,933       -9  
                               
 
                       
  3,301       3,508       3,999       -17    
 
    6,809       7,742       -12  
                               
 
                       
                               
 
                       
                               
Gas & Power2:
                       
  494       682       461       +7    
World outside USA
    1,176       1,175          
  285       121       52            
USA
    406       98          
                               
 
                       
  779       803       513       +52    
 
    1,582       1,273       +24  
                               
 
                       
                               
 
                       
                               
Oil Products (CCS basis):
                       
  1,827       1,158       1,332       +37    
World outside USA
    2,985       2,403       +24  
  1,109       330       733       +51    
USA
    1,439       995       +45  
                               
 
                       
  2,936       1,488       2,065       +42    
 
    4,424       3,398       +30  
                               
 
                       
                               
 
                       
                               
Chemicals (CCS basis):
                       
  454       469       309       +47    
World outside USA
    923       482       +91  
  40       11       39       +3    
USA
    51       5          
                               
 
                       
  494       480       348       +42    
 
    974       487       +100  
                               
 
                       
  7,510       6,279       6,925       +8    
TOTAL OPERATING SEGMENTS
    13,789       12,900       +7  
                               
 
                       
                               
 
                       
                               
Corporate2:
                       
  158       583       38            
Interest and investment income/(expense)
    741       38          
  20       46       (73 )          
Currency exchange gains/(losses)
    66       39          
  (1 )     172       (413 )          
Other - including taxation
    171       (298 )        
                               
 
                       
  177       801       (448 )          
 
    978       (221 )        
                               
 
                       
                               
 
                       
  (131 )     (148 )     (163 )          
Minority interest
    (279 )     (277 )        
                               
 
                       
  7,556       6,932       6,314       +20    
CCS EARNINGS
    14,488       12,402       +17  
                               
 
                       
                               
 
                       
  1,111       349       1,010            
CCS adjustment for Oil Products and Chemicals
    1,460       1,815          
                               
 
                       
                               
 
                       
  8,667       7,281       7,324       +18    
Income attributable to shareholders of Royal Dutch Shell plc
    15,948       14,217       +12  
                               
 
                       
 
1 Q2 on Q2 change
2 As from 2007, the segment Other Industry and Corporate has been renamed as Corporate. Its earnings no longer include the results generated by the Wind and Solar businesses, which were previously reported as part of Other Industry segments, but continue to include some non-material businesses. The Wind and Solar businesses earnings are, as from 2007, reported under the Gas & Power segment. For comparison purposes, the second quarter 2006 and the six months period of 2006 results were reclassified and are impacted by $(3) million and $(8) million in the Gas & Power segment and by $3 million and $8 million in the Corporate segment, respectively.


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Summarised balance sheet (see notes 1 and 6)

                         
    $ million
 
    June 30,   March 31,   June 30,
ASSETS   2007   2007   2006
 
Non-current assets:
                       
Intangible assets
    5,126       5,117       4,721  
Property, plant and equipment
    90,584       103,624       94,102  
Investments:
                       
equity accounted investments
    27,185       22,001       19,083  
financial assets
    2,954       3,538       3,912  
Deferred tax
    3,108       3,135       2,259  
Pre-paid pension costs
    4,772       4,289       3,143  
Other
    5,548       5,285       4,569  
 
                       
 
    139,277       146,989       131,789  
 
                       
Current assets:
                       
Inventories
    26,497       23,960       24,660  
Accounts receivable
    60,649       58,998       62,327  
Cash and cash equivalents
    15,117       11,184       11,774  
 
                       
 
    102,263       94,142       98,761  
 
                       
TOTAL ASSETS
    241,540       241,131       230,550  
 
                       
LIABILITIES
                       
Non-current liabilities:
                       
Debt
    12,236       11,978       8,472  
Deferred tax
    13,159       13,114       12,007  
Retirement benefit obligations
    6,282       6,219       6,271  
Other provisions
    10,877       10,514       8,682  
Other
    3,784       4,154       4,650  
 
                       
 
    46,338       45,979       40,082  
 
                       
Current liabilities:
                       
Debt
    5,266       5,393       6,112  
Accounts payable and accrued liabilities
    61,978       64,156       63,701  
Taxes payable
    11,214       9,835       10,525  
Retirement benefit obligations
    324       326       285  
Other provisions
    2,076       1,932       1,612  
 
                       
 
    80,858       81,642       82,235  
 
                       
TOTAL LIABILITIES
    127,196       127,621       122,317  
 
                       
 
Equity attributable to
    112,621       105,105       100,213  
shareholders of Royal Dutch Shell plc
                       
 
Minority interest
    1,723       8,405       8,020  
 
                       
TOTAL EQUITY
    114,344       113,510       108,233  
 
                       
TOTAL LIABILITIES AND EQUITY
    241,540       241,131       230,550  
 
                       


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-13-

Summarised statement of cash flows (see notes 1 and 7)

                                         
QUARTERS     $ million   SIX MONTHS  
Q2     Q1     Q2                  
2007     2007     2006         2007     2006  
                       
CASH FLOW FROM OPERATING ACTIVITIES:
               
  8,811       7,441       7,527    
Income for the period
    16,252       14,543  
                       
Adjustment for:
               
  5,460       4,267       4,763    
Current taxation
    9,727       9,778  
  130       198       121    
Interest (income)/expense
    328       353  
  3,238       3,260       3,132    
Depreciation, depletion and amortisation
    6,498       5,944  
  (1,133)       (362)       (8)    
(Profit)/loss on sale of assets
    (1,495 )     (193)  
  (1,704)       (399)       (3,276)    
Decrease/(increase) in net working capital
    (2,103)       (5,255)  
  (2,138)       (1,808)       (1,829)    
Share of profit of equity accounted investments
    (3,946)       (3,652)  
  1,519       1,587       1,556    
Dividends received from equity accounted investments
    3,106       2,616  
  214       (152)       903    
Deferred taxation and other provisions
    62       1,481  
  (676)       (447)       489    
Other
    (1,123)       (18)  
                 
 
           
  13,721       13,585       13,378    
Cash flow from operating activities (pre-tax)
    27,306       25,597  
                 
 
           
  (4,873)       (2,404)       (5,544)    
Taxation paid
    (7,277)       (9,939)  
                 
 
           
  8,848       11,181       7,834    
Cash flow from operating activities
    20,029       15,658  
                 
 
           
                       
CASH FLOW FROM INVESTING ACTIVITIES:
               
  (5,652)       (5,361)       (6,630)    
Capital expenditure
    (11,013)       (10,449)  
  (319)       (370)       (177)    
Investments in equity accounted investments
    (689)       (408)  
  6,270       380       211    
Proceeds from sale of assets
    6,650       717  
  279       115       36    
Proceeds from sale of equity accounted investments
    394       44  
  585       555       29    
Proceeds from sale of / (additions to) financial assets
    1,140       (11)  
  295       285       240    
Interest received
    580       474  
                 
 
           
  1,458       (4,396)       (6,291)    
Cash flow from investing activities
    (2,938)       (9,633)  
                 
 
           
                       
CASH FLOW FROM FINANCING ACTIVITIES:
               
  (1,185)       341       887    
Net increase/(decrease) in debt with maturity period within three months
    (844)       683  
  1,634       2,762       1,098    
Other debt: New borrowings
    4,396       1,882  
  (274)       (1,613)       (133)    
Repayments
    (1,887)       (1,058)  
  (290)       (351)       (261)    
Interest paid
    (641)       (622)  
  (3,585)       (3,110)       423    
Change in minority interest
    (6,695)       783  
  (900)       (486)       (2,512)    
Net issue/(repurchase) of shares
    (1,386)       (3,856)  
                       
Dividends paid to:
               
  (2,300)       (2,100)       (2,091)    
Shareholders of Royal Dutch Shell plc
    (4,400)       (3,929)  
  (77)       (42)       (161)    
Minority interest
    (119)       (205)  
                       
Treasury shares:
               
  568       (16)       135    
Net sales/(purchases) and dividends received
    552       226  
                 
 
           
  (6,409)       (4,615)       (2,615)    
Cash flow from financing activities
    (11,024)       (6,096)  
                 
 
           
  36       12       79    
Currency translation differences relating to cash and cash equivalents
    48       115  
                 
 
           
  3,933       2,182       (993)    
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
    6,115       44  
                 
 
           
                       
 
               
  11,184       9,002       12,767    
Cash and cash equivalents at beginning of period
    9,002       11,730  
                       
 
               
  15,117       11,184       11,774    
Cash and cash equivalents at end of period
    15,117       11,774  


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-14-

Operational data – Upstream

                                                         
QUARTERS         SIX MONTHS  
Q2     Q1     Q2                              
2007     2007     2006     %1         2007     2006     %  
 
thousand b/d          
CRUDE OIL PRODUCTION
  thousand b/d  
                               
 
                       
  442       447       488            
Europe
    445       509          
  305       339       321            
Africa
    322       329          
  235       231       232            
Asia Pacific
    233       232          
  428       422       439            
Middle East, Russia, CIS
    425       424          
  328       343       295            
USA
    335       293          
  79       83       76            
Other Western Hemisphere
    81       83          
                         
 
                   
  1,817       1,865       1,851            
Total crude oil production excluding oil sands
    1,841       1,870          
  91       96       46            
Production from oil sands
    93       61          
                         
 
                   
  1,908       1,961       1,897       +1    
Total crude oil production including oil sands
    1,934       1,931          
                         
 
                   
                               
 
                       
million scf/d2          
NATURAL GAS PRODUCTION AVAILABLE FOR SALE
  million scf/d2  
                               
 
                       
  2,496       4,110       3,027            
Europe
    3,299       4,230          
  601       519       481            
Africa
    560       463          
  2,414       2,455       2,381            
Asia Pacific
    2,435       2,434          
  251       260       304            
Middle East, Russia, CIS
    255       312          
  1,091       1,162       1,175            
USA
    1,126       1,146          
  514       475       497            
Other Western Hemisphere
    495       503          
                         
 
                   
  7,367       8,981       7,865       -6    
 
    8,170       9,088       -10  
                         
 
                   
                               
 
                       
thousand boe/d3          
TOTAL PRODUCTION IN BARRELS OF OIL EQUIVALENT
  thousand boe/d3  
                               
 
                       
  872       1,156       1,010            
Europe
    1,014       1,238          
  409       428       404            
Africa
    419       409          
  651       654       642            
Asia Pacific
    653       651          
  471       467       491            
Middle East, Russia, CIS
    469       478          
  516       543       498            
USA
    529       491          
  168       165       162            
Other Western Hemisphere
    166       170          
                         
 
                   
  3,087       3,413       3,207            
Total production excluding oil sands
    3,250       3,437          
  91       96       46            
Oil sands
    93       61          
                         
 
                   
  3,178       3,509       3,253       -2    
Total production including oil sands
    3,343       3,498       -4  
                         
 
                   
 
1 Q2 on Q2 change
 
2 scf/d = standard cubic feet per day; 1 standard cubic foot = 0.0283 cubic metre
 
3 Natural gas converted to oil equivalent at 5.8 million scf/d = thousand boe/d


Table of Contents

-15-

Operational data - Downstream

                                                 
QUARTERS       SIX MONTHS
Q2     Q1     Q2                      
2007     2007     2006     %1     2007   2006     %
 
thousand b/d           thousand b/d  
                           
REFINERY PROCESSING INTAKE
                   
  1,713       1,590       1,627        
Europe
    1,651       1,684      
  810       759       832        
Other Eastern Hemisphere
    785       823      
  905       893       978        
USA
    899       963      
  378       366       352        
Other Western Hemisphere
    372       355      
                           
 
                   
  3,806       3,608       3,789        
 
    3,707       3,825     -3
                           
 
                   
                           
 
                   
                           
OIL SALES
                   
  2,224       2,263       2,186        
Gasolines
    2,244       2,167      
  731       720       780        
Kerosenes
    726       756      
  2,238       2,114       2,071        
Gas/Diesel oils
    2,176       2,133      
  667       679       735        
Fuel oil
    673       771      
  630       630       654        
Other products
    630       648      
                           
 
                   
  6,490       6,406       6,426     +1  
Total oil products *
    6,449       6,475      
  2,673       2,655       2,513        
Crude oil
    2,663       2,503      
                           
 
                   
  9,163       9,061       8,939     +3  
Total oil sales
    9,112       8,978     +1
                           
 
                   
                           
 
                   
                           
*Comprising:
                   
  1,826       1,832       1,948        
Europe
    1,830       1,984      
  1,238       1,245       1,229        
Other Eastern Hemisphere
    1,241       1,222      
  1,518       1,401       1,502        
USA
    1,460       1,490      
  679       653       652        
Other Western Hemisphere
    666       659      
  1,229       1,275       1,095        
Export sales
    1,252       1,120      
                           
 
                   
thousand tonnes      
CHEMICAL SALES VOLUMES BY MAIN PRODUCT CATEGORY 2**
  thousand tonnes  
  3,222       3,280       3,504        
Base chemicals
    6,502       7,218      
  2,429       2,282       2,361        
First line derivatives
    4,711       4,576      
  2       5       5        
Other
    7       17      
                           
 
                   
  5,653       5,567       5,870     -4  
 
    11,220       11,811     -5
                           
 
                   
                           
**Comprising:
                   
  2,220       2,273       2,433        
Europe
    4,493       4,896      
  1,380       1,253       1,370        
Other Eastern Hemisphere
    2,633       2,814      
  1,873       1,871       1,908        
USA
    3,744       3,788      
  180       170       159        
Other Western Hemisphere
    350       313      
 
1   Q2 on Q2 change
 
2   Excluding volumes sold by equity accounted investments, chemical feedstock trading and by-products.


Table of Contents

-16-

Capital investment

                                         
QUARTERS     $ million   SIX MONTHS  
Q2     Q1     Q2                  
2007     2007     2006         2007     2006  
                       
Capital expenditure:
               
                       
Exploration & Production:
               
  2,702       3,240       5,095    
World outside USA
    5,942       7,595  
  774       587       481    
USA
    1,361       793  
                 
 
           
  3,476       3,827       5,576    
 
    7,303       8,388  
                 
 
           
                       
Gas & Power1:
               
  711       657       253    
World outside USA
    1,368       645  
  2       1       5    
USA
    3       9  
                 
 
           
  713       658       258    
 
    1,371       654  
                 
 
           
                       
Oil Products:
               
                       
Refining:
               
  355       260       373    
World outside USA
    615       615  
  109       181       57    
USA
    290       118  
                 
 
           
  464       441       430    
 
    905       733  
                 
 
           
                       
Marketing:
               
  285       214       314    
World outside USA
    499       503  
  23       14       26    
USA
    37       44  
                 
 
           
  308       228       340    
 
    536       547  
                 
 
           
                       
Chemicals:
               
  184       153       63    
World outside USA
    337       99  
  96       83       47    
USA
    179       97  
                 
 
           
  280       236       110    
 
    516       196  
                 
 
           
  75       45       1    
Corporate1:
    120       19  
                 
 
           
  5,316       5,435       6,715    
TOTAL CAPITAL EXPENDITURE
    10,751       10,537  
                 
 
           
                       
Exploration expense:
               
  143       127       139    
World outside USA
    270       253  
  46       42       64    
USA
    88       127  
                 
 
           
  189       169       203    
 
    358       380  
                 
 
           
                       
New equity in equity accounted investments
               
  308       247       135    
World outside USA
    555       199  
  3       17       4    
USA
    20       9  
                 
 
           
  311       264       139    
 
    575       208  
                 
 
           
  8       106       38    
New loans to equity accounted investments
    114       200  
                 
 
           
  5,824       5,974       7,095    
TOTAL CAPITAL INVESTMENT*2
    11,798       11,325  
                 
 
           
                       
*Comprising:
               
  3,884       4,260       5,823    
Exploration & Production
    8,144       8,990  
  808       732       354    
Gas & Power1
    1,540       753  
  777       699       799    
Oil Products
    1,476       1,317  
  280       238       118    
Chemicals
    518       246  
  75       45       1    
Corporate1
    120       19  
                 
 
           
  5,824       5,974       7,095    
 
    11,798       11,325  
                 
 
           
 
1 As from 2007, the segment Other Industry and Corporate has been renamed as Corporate. Its financial information no longer includes data related to the Wind and Solar businesses, which were previously reported as part of Other Industry segments, but continues to include some non-material businesses. The Wind and Solar businesses financial data are, as from 2007, reported under the Gas & Power segment. For comparison purposes, the second quarter 2006 and the six months period of 2006 capital investment data were reclassified and are impacted by $22 million and $25 million in the Gas & Power segment and by $(22) million and $(25) million in the Corporate segment, respectively.
 
2 In addition to the above amounts, see Note 6 regarding accounting impacts related to the Shell Canada minority interest acquisition.


Table of Contents

-17-

Additional segmental information1
                                             
       
  QUARTERS     $ million   SIX MONTHS    
  Q2     Q1     Q2          
  2007     2007     2006       2007     2006    
     
                         
Exploration & Production
                 
    3,301       3,508       3,999    
Segment earnings
    6,809       7,742    
                         
Including:
                 
    450       272       250    
Exploration
    722       531    
    2,353       2,328       2,253    
Depreciation, depletion & amortisation
    4,681       4,160    
    659       913       720    
Share of profit of equity accounted investments
    1,572       1,697    
     
    7,452       6,596       5,875    
Cash flow from operations
    14,048       12,637    
    1,737       947       (834)    
Less: Net working capital movements and taxation paid/accrued
    2,684       299    
                   
 
             
   
5,715
     
5,649
     
6,709
   
Cash flow from operations excluding net working capital movements and taxation paid/accrued
    11,364       12,338    
     
    45,879       55,264       47,032    
Capital Employed
    45,879       47,032    
     
                         
Gas & Power
                 
    779       803       513    
Segment earnings
    1,582       1,273    
                         
Including:
                 
    77       74       68    
Depreciation, depletion & amortisation
    151       142    
    428       420       351    
Share of profit of equity accounted investments
    848       720    
     
    210       587       236    
Cash flow from operations
    797       1,368    
    4       (92)       (248)  
Less: Net working capital movements and taxation paid/accrued
    (88)       (149)    
                   
 
             
   
206
     
679
     
484
   
Cash flow from operations excluding net working capital movements and taxation paid/accrued
    885       1,517    
     
    16,133       18,453       15,300    
Capital Employed
    16,133       15,300    
     
                         
Oil Products
                 
    2,936       1,488       2,065    
Segment CCS earnings
    4,424       3,398    
                         
Including:
                 
    571       656       697    
Depreciation, depletion & amortisation
    1,227       1,327    
    721       280       517    
Share of profit of equity accounted investments
    1,001       845    
     
    1,464       2,123       1,657    
Cash flow from operations
    3,587       (275)    
    (1,809)       (27)       (2,320)    
Less: Net working capital movements and taxation paid/accrued
    (1,836)       (6,559)    
                   
 
             
   
3,273
     
2,150
     
3,977
   
Cash flow from operations excluding net working capital movements and taxation paid/accrued
    5,423       6,284    
     
    46,546       43,716       41,620    
Capital Employed
    46,546       41,620    
     
                         
Chemicals
                 
    494       480       348    
Segment CCS earnings
    974       487    
                         
Including:
                 
    150       155       138    
Depreciation, depletion & amortisation
    305       287    
    167       188       105    
Share of profit of equity accounted investments
    355       146    
     
    451       116       443    
Cash flow from operations
    567       472    
    (177)       (537)       (112)    
Less: Net working capital movements and taxation paid/accrued
    (714)       (432)    
                   
 
             
   
628
     
653
     
555
   
Cash flow from operations excluding net working capital movements and taxation paid/accrued
    1,281       904    
     
    9,888       9,187       8,727    
Capital Employed
    9,888       8,727    
     
  1 Corporate segment information has not been included in the above table. Please refer to the Earnings per industry segment section for additional information. The above data does not consider Minority interest impacts on the segments.  
     


Table of Contents

-18-
Notes
NOTE 1. Accounting policies and basis of presentation
The quarterly financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) and are also in accordance with IFRS as adopted by the European Union.
With effect from the first quarter 2007, Wind and Solar are reported within the Gas & Power segment and all other activities within Other Industry segments are reported within the Corporate segment. Prior period financial statements have been reclassified accordingly.
Purchases of minority interests in Group companies, and disposals of shares in Group companies whilst retaining control, are accounted for as transactions within equity. The difference between the purchase price/disposal proceeds and the relevant proportion of the minority interest is reported in retained earnings as a movement in the Group share of equity. The remaining accounting policies are set out in Note 2 to the Consolidated Financial Statements of Royal Dutch Shell plc in the Annual Report and Form 20-F for the year ended December 31, 2006 on pages 108 to 112.
NOTE 2. Earnings on an estimated current cost of supplies (CCS) basis
To facilitate a better understanding of underlying business performance, the financial results are also analysed on an estimated current cost of supplies (CCS) basis as applied for the Oil Products and Chemicals segment earnings. Earnings on an estimated current cost of supplies basis provide useful information concerning the effect of changes in the cost of supplies on Royal Dutch Shell’s results of operations and is a measure to manage the performance of the Oil Products and Chemicals segments but is not a measure of financial performance under IFRS.
On this basis, Oil Products and Chemicals segment cost of sales of the volumes sold during the period is based on the cost of supplies during the same period after making allowance for the estimated tax effect, instead of the first-in, first-out (FIFO) method of inventory accounting. Earnings calculated on this basis do not represent an application of the last-in, first-out (LIFO) inventory basis and do not reflect any inventory drawdown effects.
NOTE 3. Return on average capital employed (ROACE)
ROACE is defined as the sum of the current and previous three quarters’ income attributable to shareholders adjusted for Shell’s share of interest expenses, after tax, as a percentage of Shell’s share of average capital employed for the period.
Components of the calculation ($ million):

                 
    Q2 2007     Q2 2006  
Income attributable to shareholders (four quarters)
    27,173       27,617  
Royal Dutch Shell share of interest expense after tax
    615       581  
 
               
ROACE numerator
    27,788       28,198  
Royal Dutch Shell share of capital employed – opening
    113,717       100,326  
Royal Dutch Shell share of capital employed – closing
    129,859       113,717  
 
               
Royal Dutch Shell share of capital employed – average
    121,788       107,022  
 
               
ROACE
    22.8%     26.3%

 


Table of Contents

-19-
NOTE 4. Earnings by industry segment
Operating segment results are presented before deduction of minority interest and also exclude interest and other income of a non-operational nature, interest expense, non-trading currency exchange effects and tax on these items, which are included in the results of the Corporate segment. Operating segment results are after tax and include equity accounted investments. Segment results in accordance with International Accounting Standard 14 “Segment Reporting” are disclosed in Royal Dutch Shell’s Annual Report and Form 20-F, with a reconciliation to the basis as presented here.
NOTE 5. Gearing
The numerator and denominator in the gearing calculation used by the Group are calculated by adding to reported debt and equity certain off-balance sheet obligations as at the beginning of the year such as operating lease commitments and unfunded retirement benefits (as applicable) which the Group believes to be in the nature of incremental debt, and deducting cash and cash equivalents judged to be in excess of amounts required for operational purposes.
Components of the calculation ($ million):

                 
    June 30,     June 30,  
    2007     2006  
Non-current debt
    12,236       8,472  
Current debt
    5,266       6,112  
 
               
Total debt
    17,502       14,584  
 
               
Add: Net present value of operating lease obligations
    11,319       9,442  
Unfunded retirement benefit obligations
    -       2,919  
Less: Cash and cash equivalents in excess of operational requirements
    13,217       9,874  
 
               
Adjusted debt
    15,604       17,071  
Total equity
    114,344       108,233  
 
               
Total capital
    129,948       125,304  
Gearing ratio (adjusted debt as a percentage of total capital)
    12.0%     13.6%
NOTE 6. Equity
Total equity comprises equity attributable to shareholders of Royal Dutch Shell and to the minority interest. Other reserves comprise the capital redemption reserve, share premium reserve, merger reserve, share-based compensation reserve, cumulative currency translation differences, unrealised gains/(losses) on securities and unrealised gains/(losses) on cash flow hedges.
                                                             
     
  $ million   Ordinary     Treasury     Other     Retained     Total     Minority     Total equity    
      share     shares     reserves     earnings             interest            
      capital                                                    
     
At December 31, 2006     545       (3,316 )     8,820       99,677       105,726       9,219       114,945    
Income for the period     -       -       -       15,948       15,948       304       16,252    
Income/(expense) recognised directly in equity     -       -       1,397       -       1,397       (101)       1,296    
Capital contributions from minority shareholders     -       -       -       -       -       819       819    
Acquisition of Shell Canada     -       -       -       (5,445)       (5,445)       (1,639)       (7,084)    
Sakhalin partial divestment     -       -       -       -       -       (6,711)       (6,711)    
Other changes in minority interest     -       -       -       7       7       (49)       (42)    
Dividends paid     -       -       -       (4,400)       (4,400)       (119)       (4,519)    
Treasury shares: net sales/(purchases) and dividends received     -       552       -       -       552       -       552    
Shares repurchased for cancellation     (3)       -       3       (1,386)       (1,386)       -       (1,386)    
Share-based compensation     -       -       222       -       222       -       222    
     
At June 30, 2007     542       (2,764)       10,442       104,401       112,621       1,723       114,344    
     

 


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  $ million   Ordinary     Treasury     Other     Retained     Total     Minority     Total equity    
      share     shares     reserves     earnings             interest            
      capital                                                    
     
 
At December 31, 2005
    571       (3,809)       3,584       90,578       90,924       7,000       97,924    
 
Income for the period
    -       -       -       14,217       14,217       326       14,543    
 
Income/(expense) recognised directly in equity
    -       -       2,438       -       2,438       76       2,514    
 
Capital contributions from minority shareholders
    -       -       -       -       -       823       823    
 
Effect of Unification
    -       -       154       -       154       -       154    
 
Dividends paid
    -       -       -       (3,929)       (3,929)       (205)       (4,134)    
 
Treasury shares: net sales/(purchases) and dividends received
    -       226       -       -       226       -       226    
 
Shares repurchased for cancellation
    (15)       -       15       (4,010)       (4,010)       -       (4,010)    
 
Share-based compensation
    -       -       193       -       193       -       193    
     
 
At June 30, 2006
    556       (3,583)       6,384       96,856       100,213       8,020       108,233    
     
Consistent with the accounting policies disclosed in Note 1, the acquisition of the minority interest in Shell Canada in the first quarter 2007 was accounted for as a transaction between shareholders with the impact reflected in the equity section of the balance sheet. In the first half of 2007, the Group has paid cash of $7.1 billion for shares in Shell Canada that it did not already own. As a result of this transaction, the consolidated financial statements of Royal Dutch Shell plc as at June 30, 2007 reflect some $7.1 billion decrease in shareholders equity, causing a $1,639 million decrease in minority interest, being the book value of the item acquired, with the excess of the purchase price over the book value of $5,445 million being taken to retained earnings. In addition to the share purchase price, $0.4 billion of Shell Canada share options were exchanged for a corresponding amount of RDS share options.
On April 18, 2007, Royal Dutch Shell signed and completed the Sale and Purchase agreement with OAO Gazprom for the transfer of 50% of its shares in Sakhalin Energy Investment Company Ltd, representing 27.5% of the total outstanding shares, for a sales price of $4.1 billion. In addition, the Ministry of Natural Resources of the Russian Federation announced its approval of the revised Environmental Action Plan. As of the end of the first quarter 2007, 100% of the Sakhalin project net assets of approximately $15 billion were presented in the Group balance sheet, offset by a minority interest of $6.7 billion representing the partners’ 45% interest in the project. Upon completion of this transaction, the consolidated financial statements of Royal Dutch Shell plc as at June 30, 2007 no longer include the separate assets, liabilities and associated minority interest of the Sakhalin project, resulting in a net gain of $0.2 billion which is included in the income statement. The Group’s net asset position in the project is now accounted for as a single line item equity accounted investment.
NOTE 7. Statement of cash flows
This statement reflects cash flows of Royal Dutch Shell and its subsidiaries as measured in their own currencies, which are translated into US dollars at average rates of exchange for the periods and therefore exclude currency translation differences except for those arising on cash and cash equivalents.
Cash from operating activities excluding net working capital movements, current taxation and taxation paid is calculated using the following line items from the cash flow statement:

                                         
QUARTERS     $ million   SIX MONTHS  
Q2     Q1     Q2                  
2007     2007     2006         2007     2006  
  8,848       11,181       7,834    
Cash flow from operating activities
    20,029       15,658  
  5,460       4,267       4,763    
Current taxation
    9,727       9,778  
  (1,704 )     (399 )     (3,276 )  
Decrease/(increase) in net working capital
    (2,103)       (5,255)  
  (4,873 )     (2,404 )     (5,544 )  
Taxation paid
    (7,277)       (9,939)  
                       
 
               
  9,965       9,717       11,891    
 
    19,682       21,074  
                       
 
               

 


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NOTE 8. Earnings per Royal Dutch Shell share
The total number of Royal Dutch Shell shares in issue at the end of the period was 6,418.9 million. Royal Dutch Shell reports earnings per share on a basic and on a diluted basis, based on the weighted average number of Royal Dutch Shell (combined A and B) shares outstanding. Shares held in respect of share options and other incentive compensation plans are excluded in determining basic earnings per share.
Basic earnings per share calculations are based on the following weighted average number of shares:

                                         
millions                           Six     Six  
    Q2     Q1     Q2     months     months  
    2007     2007     2006     2007     2006  
Royal Dutch Shell shares of 0.07
    6,281.7       6,287.0       6,457.6       6,284.4       6,483.5  
Diluted earnings per share calculations are based on the following weighted average number of shares. This adjusts the basic number of shares for all share options currently in-the-money.
                                               
  millions                             Six     Six    
      Q2     Q1     Q2       months     months    
      2007     2007     2006       2007     2006    
 
Royal Dutch Shell shares of 0.07
    6,303.1       6,306.5       6,483.1         6,303.2       6,508.6    
           
 
 
                                           
  Basic shares outstanding at the end of the following periods are:  
 
 
                                           
                       
 
millions
    Q2       Q1       Q2                      
 
 
    2007       2007       2006                      
 
Royal Dutch Shell shares of 0.07
    6,276.8       6,282.9       6,414.0                      
                       
One American Depository Receipt (ADR) is equal to two Royal Dutch Shell shares.

 


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Royal Dutch Shell plc
Second Quarter 2007 - Key Financial Data in dollars, euros and pounds sterling
Royal Dutch Shell plc publishes its financial statements in US dollars. Given below are some of the key items for the quarter translated into euros and pounds sterling.
                                                                         
$ million                 euro million                  £ million        
2007     2006     %         2007     2006     %     2007     2006     %  
                       
Revenue
                                               
  84,896       83,127       +2    
Second quarter
    62,984       66,069       -5       42,745       45,454       -6  
  158,376       159,091            
Six months
    117,499       126,446               79,742       86,991          
                       
 
                                               
                       
Income attributable to shareholders
                                               
  8,667       7,324       +18    
Second quarter
    6,430       5,821       +10       4,364       4,005       +9  
  15,948       14,217            
Six months
    11,832       11,300               8,030       7,774          
                       
 
                                               
                       
CCS Earnings
                                               
  7,556       6,314       +20    
Second quarter
    5,606       5,018       +12       3,804       3,452       +10  
  14,488       12,402            
Six months
    10,749       9,857               7,295       6,781          
                       
Total Equity
                                               
  114,344       108,233       +6    
Second quarter
    85,038       85,125       +0       57,126       59,128       -3  
                       
 
                                               
                       
Capital Investment
                                               
  5,824       7,095       -18    
Second quarter
    4,321       5,639       -23       2,932       3,880       -24  
  11,978       11,325            
Six months
    8,886       9,001               6,031       6,193          
                       
 
                                               
Income attributable to Shareholders                                                
                                                                         
                       
 
    Q2       Q1       Q2                          
                       
Per Ordinary Share
    2007       2007       2006                          
                       
 
                                               
                       
ROYAL DUTCH SHELL PLC
  $ 1.38       1.16       1.13                          
                       
 
  euro 1.02       0.88       0.90                          
                       
 
  pence 69.47       59.26       62.02                          
Notes:
1.   The exchange rates used in the quarterly translation are the average rates, except in the case of total equity where the end rate is used:
                                         
    euro/$     £/$  
    2007     2006    
2007
    2006          
Second quarter average rate
    0.7419       0.7948       0.5035       0.5468          
Second quarter end rate
    0.7437       0.7865       0.4996       0.5463          
2. CCS earnings is earnings on an estimated current cost of supplies basis.
3. Capital investment is capital expenditure, exploration expenses excluding the cost of carrying and retaining unproven properties and the costs of unsuccessful exploratory drilling, new investments in equity accounted investments and certain other investments.
4. Earnings per share calculations are explained in the notes to the Quarterly Results Announcement.
5. Previous periods are adjusted for discontinued operations.
Quarterly Financial Digest