e6vk
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 October 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-                    

 


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Royal Dutch Shell plc (the “Registrant”) is filing the following exhibits on this Report on Form 6-K, each of which is hereby incorporated by reference:
     
Exhibit No.   Description
99.1
  Regulatory release.
99.2
  Royal Dutch Shell plc – Three and nine month period ended September 30, 2007 Unaudited Condensed Interim Financial Report.
This Unaudited Condensed Interim Financial Report contains the Unaudited Condensed Consolidated Interim Financial Statements of the Registrant and its consolidated subsidiaries for the three and nine month period ended September 30, 2007 and Operational and Financial Review and Results of Operations in respect of such period. The Unaudited Condensed Consolidated Interim Financial Statements, including condensed notes, are presented on the same basis that such was announced by press release on October 25, 2007, that was furnished to the Commission by the Registrant on Form 6-K. This Report on Form 6-K contains the Unaudited Condensed Interim Financial Report with additional information required to keep current our registration statement on Form F-3, including a condensed reconciliation to U.S. GAAP, not included in the October 25, 2007 press release.
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 333-126726 and 333-126726-01); and
 
  b)   the Registration Statements on Forms S-8 of Royal Dutch Shell plc (Registration Numbers 333-126715 and 333-141397).

 


TABLE OF CONTENTS

SIGNATURES
Exhibit 99.1
Exhibit 99.2


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 authorized.
Royal Dutch Shell plc
(Registrant)
         
By:
  Michiel Brandjes /s/    
 
       
 
  Name: Michiel Brandjes    
 
  Title: Company Secretary    
Date: November 1, 2007

 

exv99w1
 

Exhibit 99.1
Regulatory release
Three and nine month periods ended September 30, 2007
Unaudited Condensed Interim Financial Report
On October 25, 2007, Royal Dutch Shell plc (“Royal Dutch Shell”) released the Unaudited Condensed Interim Financial Report for the three and nine month period ended September 30, 2007 of Royal Dutch Shell and its consolidated subsidiaries (collectively, the “Shell Group”). This report includes the Unaudited Condensed Consolidated Interim Financial Statements, including condensed notes, for the Shell Group on the same basis that such information was announced by press release on October 25, 2007.
             
Contact – Investor Relations
           
Europe:
  Tjerk Huysinga   +31 70 377 3996    
USA:
  Harold Hatchett   +1 212 218 3112    
 
           
Contact – Media
           
UK, International:
  Shell Media Contact   +44 20 7934 3505    
The Netherlands:
  Shell Media Contact   +31 70 377 8750    

 

exv99w2
 

Exhibit 99.2
Royal Dutch Shell plc
Three and nine month periods ended September 30, 2007
Unaudited Condensed Interim Financial Report

 


 

Contents
         
    Page  
UNAUDITED CONDENSED INTERIM FINANCIAL REPORT
    1  
OPERATIONAL AND FINANCIAL REVIEW FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2007
    2  
CONDENSED CONSOLIDATED STATEMENT OF INCOME
    8  
CONDENSED CONSOLIDATED BALANCE SHEET
    9  
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
    10  
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
    11  
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
    12  
APPENDIX
    22  

 


 

Unaudited Condensed Interim Financial Report
This report contains:
(1)   An Operational and Financial Review and Results of Operations with respect to Royal Dutch Shell plc, a publicly-listed company incorporated in England and Wales and headquartered and tax resident in The Netherlands (“Royal Dutch Shell”) and its consolidated subsidiaries (collectively, with Royal Dutch Shell, the “Shell Group”) for the three and nine month periods ended September 30, 2007; and
 
(2)   Unaudited Condensed Consolidated Interim Financial Statements for the three and nine month periods ended September 30, 2007 and 2006.
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 report contains forward-looking statements concerning the financial condition, results of operations and businesses of Royal Dutch Shell. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of Royal Dutch Shell to market risks and statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of terms and phrases such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “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, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; and (m) changes in trading conditions. All forward-looking statements contained in this report are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Additional factors that may affect future results are contained in Royal Dutch Shell’s 2006 20-F (available at www.shell.com/investor and www.sec.gov ). These factors also should be considered by the reader. Each forward-looking statement speaks only as of the date of this report, November 1, 2007. 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 on Form 20-F for the year ended December 31, 2006 for a description of certain important factors, risks and uncertainties that may affect the businesses of the Shell Group.
             
 
  Royal Dutch Shell plc        
 
  Unaudited Condensed Interim Financial Report     1  

 


 

Operational and Financial Review for the three and nine month periods ended September 30, 2007
Presented under IFRS (unaudited)
                                 
                       $ million  
    Three months     Nine months  
    ended September 30,     ended September 30,  
    2007     2006     2007     2006  
 
Income for the period
    7,041       6,255       23,293       20,798  
 
Attributable to minority interest
    125       313       429       639  
 
Income attributable to shareholders of Royal Dutch Shell plc
    6,916       5,942       22,864       20,159  
 
THREE MONTHS ENDED SEPTEMBER 30, 2007
The Group’s income for the three months ended September 30, 2007 was $7,041 million, an increase of 13% compared to 2006 mainly caused by increased earnings in the Oil Products segment. Earnings included a charge of $110 million related to a one-time impact on past-service pension liabilities due to implementation of a revised structure for certain employees’ remuneration, of which the major elements arose in the Exploration & Production and Oil Products segment earnings.
Exploration & Production
Segment earnings were $3,510 million compared to $3,743 million for the same period last year. Earnings included a net gain of $130 million, comprising a gain of $143 million related to an impairment reversal and a combined gain of $228 million related to tax impacts and the benefit of a tax rate change in Germany. These gains were partly offset by charges of $93 million related to the mark-to-market valuation impact of certain UK gas contracts, exploration write-offs in Alaska of $77 million and a $71 million charge related to a one-time pension liability impact. Earnings for the third quarter 2006 included a net charge of $163 million reflecting a gain of $147 million related to the mark-to-market valuation of certain UK gas contracts, more than offset by charges of $310 million related to a UK tax increase effective as from January 1, 2006.
Earnings, when compared to the third quarter 2006, were mainly impacted by lower volumes, higher tax charges and higher costs, reflecting current industry conditions, partly offset by the impact of higher oil prices on revenues. In addition, higher exploration expenses, and lower profits from the Sakhalin project, as a consequence of the partial divestment in the second quarter 2007, impacted earnings when compared to the third quarter 2006.
Liquids realisations were 9% higher than in the third quarter 2006, following marker crudes Brent and WTI which were both up 7%. Gas realisations were 4% lower than a year ago. Outside the USA gas realisations were relatively unchanged whereas in the USA gas realisations decreased by 11%.
Third quarter 2007 production was 3,137 thousand barrels of oil equivalent (boe) per day compared to 3,251 thousand barrels of oil equivalent per day a year ago. Total crude oil production (including oil sands) was down 9% and total natural gas production was up 6% when compared to the third quarter 2006. Third quarter 2007 production was mainly impacted by field decline rates and divested volumes, which were partly offset by new fields production and ramp-up volumes when compared to the same quarter last year.
Production compared to the third quarter 2006 included increased volumes from E8 and B12 (Shell share 50%) in Malaysia, Pohokura (Shell share 48%) in New Zealand, West Salym (Shell share 50%) in Russia, Changbei (Shell share 50%) in China, Erha (Shell share 44%) in Nigeria, Merganser (Shell share 44%) in the UK, Enfield in Australia (Shell share 21%, indirect) and Deimos (Shell share 71.5%) in the USA.
Gas & Power
Segment earnings were $568 million compared to $781 million for the same period last year. Earnings included a net charge of $4 million, reflecting a gain of $11 million related to a tax rate change in Germany, which was more than offset by charges of $10 million related to a one-time pension liability impact and $5 million related to the mark-to-market valuation impact of certain gas contracts.
Earnings, when compared to the third quarter 2006, reflected lower marketing and trading results and reduced gas-to-liquids (GTL) sales volumes due to a planned shutdown of the Bintulu GTL plant, which were partly offset by higher earnings from increased equity liquefied natural gas (LNG) sales volumes.
LNG equity sales volumes of 3.29 million tonnes were 12% higher than in the same quarter a year ago, driven by additional sales mainly at Nigeria LNG (Shell interest 26%) due to increased feedgas supply.
Marketing and trading earnings benefited from storage optimisation in the third quarter 2007. Earnings, when compared to the same period last year, were lower due to less favourable overall trading conditions in both Europe and North America.
             
 
  Royal Dutch Shell plc        
 
  Unaudited Condensed Interim Financial Report     2  

 


 

Oil Products
Segment earnings were $2,153 million compared to $1,214 million for the same period last year. The impact of price volatility on inventory had a positive impact on third quarter earnings of $502 million compared with a negative impact of $946 million in the third quarter of 2006.
Earnings for the third quarter 2007 included a net gain of $121 million, reflecting a gain of $149 million related to a tax rate change in Germany, which was partly offset by a charge of $28 million related to a one-time pension liability impact.
When compared to the third quarter of 2006, earnings were mainly impacted by lower realised refining margins, lower contribution from trading and higher operating costs, which were partly offset by a gain related to a tax rate change in Germany.
In Manufacturing, Supply and Distribution industry refining margins, when compared to the same period a year ago, were higher in the eastern hemisphere and in US Gulf Coast, whilst US West Coast margins declined. Refining margins in Europe were essentially unchanged when compared to the levels of the third quarter of 2006. Despite the hurricane impact in the US Gulf Coast, refinery availability remained relatively stable at 93% when compared to 94% in the third quarter of 2006.
In marketing, when compared to the same period a year ago, earnings were relatively stable due continued strong retail, lubricants and B2B earnings.
Marketing sales volumes were in line with volumes in the third quarter 2006. The negative impact of divestments was offset mainly because of higher retail sales.
Chemicals
Segment earnings were $397 million compared to $251 million for the same period last year. Earnings included a net gain of $18 million, reflecting a gain of $19 million related to a tax rate change in Germany, which was partly offset by a charge of $1 million related to a one-time pension liability impact.
Earnings reflected improved margins, which were mostly offset by a reduced trading contribution.
Chemicals manufacturing plant availability increased to 94%, some 6% points higher than in the third quarter 2006, which was impacted by a heavy planned maintenance programme in the USA and Europe.
Corporate
Segment earnings were $413 million compared to $266 million for the same period last year. Earnigns for the third quarter 2006 included $86 million related to tax credits.
When compared to the third quarter 2006, earnings reflected higher insurance underwriting income, improved net interest income and positive results from exchange rate movements which were partly offset by lower tax credits.
NINE MONTHS ENDED SEPTEMBER 30, 2007
The Group’s income for the nine months ended September 30, 2007 was $23,293 million, an increase of 12% compared to 2006.
Exploration & Production
Segment earnings were $10,319 million compared to $11,485 million for the same period last year, mainly reflecting lower volumes, higher exploration expenses, higher costs, reflecting current industry conditions and tax impacts. Earnings included a net gain of $387 million mainly from gains from divestments of $352 million, a combined gain of $136 million related to tax impacts including the benefit of a tax rate change in Germany and a gain of $143 million related to an impairment reversal, partially offset charges of $96 million related to the mark-to-market valuation impact of certain UK gas contracts, the write-off of exploration costs in Alaska of $77 million and a $71 million charge related to a one-time pension liability impact. Earnings in the comparative period of 2006 included a net gain of $254 million mainly from a net gain in respect of the mark-to-market valuation impact of certain UK gas contracts, the impact of Canadian tax revisions and the resolution of certain contractual issues, partially offset by charges related to a UK tax increase effective as from January 1, 2006.
Liquids realisations were 1% higher than a year ago, compared to a Brent price that remained flat and a decrease in WTI of 3%. Outside the USA gas realisations decreased by 2%. In the USA, gas realisations decreased by 11%.
Hydrocarbon production was 3,273 thousand boe per day, 4% lower than a year ago (3,415 thousand boe per day).
Gas & Power
Segment earnings were $2,150 million compared to $2,054 million for the same period last year. Earnings included net gains of $282 million related to divestments, a charge related to gas contracts mark-to-market valuation, a gain related to a tax rate change in Germany and a charge related to a one-time pension liability. Earnings reflected lower marketing and trading results, which were partly offset by higher Liquefied Natural Gas (LNG) sales volumes and LNG dividends.
LNG equity sales volumes of 9.84 million tonnes were 12% higher than a year ago. The increase was mainly related to the Nigeria LNG venture (Shell interest 26%), as a result of increased feedgas supply.
             
 
  Royal Dutch Shell plc        
 
  Unaudited Condensed Interim Financial Report     3  

 


 

Oil Products
Segment earnings were $7,883 million compared to $6,334 million for the same period last year. The impact of price volatility on inventory had a positive impact on earnings of $1,808 million compared with $776 million for the same period last year.
Earnings included a net gain of $150 million resulting from gains related to a tax rate change in Germany and divestments, partially offset by a charge related to a one-time pension liability impact and impairment of certain assets. Earnings in the first nine months of 2006 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 earnings reflected strong refining margins, particularly in the second quarter, and marketing margins, partially offset by lower trading results and higher operating and legal costs when compared to the first nine months of 2006.
In Manufacturing, Supply and Distribution, industry refining margins were higher. Refinery availability declined to 90.8% from 91.6% compared to the first nine months of 2006.
In Marketing, earnings increased compared to the first nine months of 2006 mainly due to higher retail marketing margins and strong finished lubricants margins.
Marketing sales volumes declined compared to the volumes in the first nine months of 2006 due to the impact of divestments.
Chemicals
Segment earnings were $1,550 million compared to $880 million for the same period last year mainly due to improved margins and higher earnings from equity accounted investments. Earnings from equity accounted investments were impacted last year by the fact that the Nanhai petrochemicals complex in China (Shell share 50%) started-up during the first quarter and attained full operational status during the second quarter.
Sales volumes were 5% lower than last year and reflected mainly a reduction in sales of lower margin products, including aromatics trading.
Chemicals manufacturing plant availability was 92.3%, in line with last year.
Corporate
Segment earnings were $1,391 million compared to $45 million a year ago. Corporate segment earnings in this period included a gain on the sale of the equity portfolio held by the Group insurance companies of $404 million while in 2006 earnings included the recognition of a $500 million provision in respect of litigation. Earnings reflected higher insurance underwriting income and improved net interest income, partly offset by higher corporate costs when compared to a year ago.
PORTFOLIO DEVELOPMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007
Exploration & Production
In China, Shell and PetroChina started commercial production and gas delivery from the Changbei gas field.
In New Zealand, Shell delivered first offshore gas from the Pohokura field in the first quarter of 2007. This follows the delivery of onshore gas achieved in September 2006.
Shell sold 45% of the newly created Shell Technology Ventures Fund 1 BV (STV), an energy technology fund, to Coller Capital. Shell remains the majority shareholder in the fund, which will focus on investing in non-exclusive Shell and third party exploration and production technologies.
In the United Kingdom, the Group announced its intention to sell its equity interests in a number of northern North Sea assets.
In April the Group completed the disposal to OAO Gazprom of a 50% stake (plus 1 share) in the Sakhalin project in Russia. In addition, the Ministry of Natural Resources of the Russian Federation announced its approval of the revised Environmental Action Plan.
In Austria, Shell announced that it has signed a Sale and Purchase Agreement for the sale of its 25% equity holding in Austrian oil and gas producer, Rohol-Aufsuchungs AG (RAG) with completion expected late 2007 or early 2008.
             
 
  Royal Dutch Shell plc        
 
  Unaudited Condensed Interim Financial Report     4  

 


 

In Norway, Shell announced that it has entered into an agreement with E.ON Ruhrgas Norge AS to sell its 28% equity interests in the undeveloped Skarv and Idun fields for $893 million. The sale is subject to the relevant regulatory approval and is expected to be completed by end 2007.
In Russia, Shell and Rosneft Open Joint Stock Company have concluded an agreement on Strategic Cooperation, which provides for a joint implementation of upstream and downstream oil and gas projects both in Russia and elsewhere.
Also in Russia, Shell and JSC Tatneft concluded an agreement for a Strategic Partnership to devise a programme for heavy oil development in Tatarstan as well as other potential joint activities, including the acquisition of new licences for hydrocarbon exploration in Tatarstan and elsewhere in Russia.
In the USA, Shell announced first production from the Deimos (Shell share 71.5%) discovery in the Gulf of Mexico Mars Basin with a peak production capacity for Phase I of 30 thousand barrels of oil equivalent per day.
In Norway, first gas was produced from the Ormen Lange field (Shell share 17%) with a peak production capacity of some 420 thousand barrels of oil equivalent per day.
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
In Australia, the North West Shelf venture (Shell direct and indirect interest, 22%) completed the renewal of long-term LNG purchase commitments with eight Japanese customers, totaling 4.3 million tonnes per annum over 6 to 8 years as from 2009.
Also in Australia, the final investment decision was taken by Woodside Petroleum Ltd. (Shell interest 34.27%) for the development of the Pluto LNG project in North-West Australia. The Australian Federal Ministry for the Environment issued government approval for the Pluto project in October.
Shell and Petrochina concluded a binding Heads of Agreement for the supply of 1 million tonnes per annum of LNG, for 20 years, from the Gorgon project in North-West Australia, conditional on a final investment decision being taken by the Gorgon Joint Venture partners. Gorgon received State and Federal environmental approval during the third quarter.
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 USA, the sale of the Group’s participation in the common units of Enterprise Product Partners L.P., a natural gas processing company, was concluded mainly through private placement sales.
In Qatar, Shell and Qatar Petroleum announced the formation of Qatar Liquefied Gas Company Limited (4), a joint venture of Qatar Petroleum (70%) and Shell (30%), which signed a Sale and Purchase Agreement with Shell as the buyer of all the LNG volumes produced by the joint venture. An agreement was also signed with Qatargas Transport Company Limited (Nakilat), in which Shell was appointed as the shipping and maritime services provider for Nakilat’s fleet of at least 25 newly built liquefied natural gas carriers.
Oil Products
In the USA, Shell 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.
Also in the USA, Shell announced, through Motiva Enterprises (Shell share 50%) the final investment decision to proceed with a 325,000 barrels per day capacity expansion at the Port Arthur Refinery, making it the largest refinery in the USA with a total crude oil throughput capacity of 600,000 barrels per day.
Shell completed the sale of its LPG businesses in Bulgaria, the Czech Republic, Germany, Spain and Switzerland. The sale of the LPG business in Romania, which is subject to regulatory approval, is expected to close later this year.
In France, Shell has signed a Letter of Intent for the possible sale of its Petit Couronne and Reichstett Vendenheim refineries. The sale, amounting to some $875 million, with completion expected during 2008, is subject to staff consultation and regulatory approval.
Also in France, Shell has received an offer for the sale of its Berre-l’Etang refinery site complex and associated infrastructure and businesses. A purchase price of $700 million has been agreed with completion to be expected in early 2008. The sale is subject to staff consultation and regulatory approval.
Shell announced a strategic review of the Yabucoa petrochemical feedstock refinery in Puerto Rico, which has a capacity of 79 thousand barrels per day (Shell share 100%).
In Ukraine, Shell and OJSC Alliance Group announced a commitment to establish a joint venture to operate 150 Shell branded retail sites. Shell has a 51% share of the joint venture. Start-up of operations commenced in the third quarter.
             
 
  Royal Dutch Shell plc        
 
  Unaudited Condensed Interim Financial Report     5  

 


 

In third quarter, the Group acquired 100% of shares in the wholly-owned subsidiary of ConocoPhillips, Conoco Jet in Malaysia, comprising 44 ProJet branded retail service stations and 14 vacant land sites in the key growth markets of Malaysia.
In Scandinavia, Shell has signed an agreement which will result in the rebranding of a planned 269 service stations across Norway, Sweden and Denmark.
LIQUIDITY AND CAPITAL RESOURCES
Three months ended September 30, 2007
Cash flow provided by operating activities in the three month period to September 30, 2007 was $9.1 billion compared to $10.1 billion a year ago.
Capital investment[A] for the three months ended September 30, 2007 was $6.8 billion of which $5.3 billion was invested in the Exploration & Production and Gas & Power segments. Capital investment in the same period of 2006 was $6.1 billion (including the minority share of Sakhalin) of which $4.9 billion was invested in the Exploration & Production and Gas & Power segments.
Gross proceeds from divestments in the three month period to September 30, 2007 were $0.2 billion compared to $0.3 billion a year ago.
Dividends of $0.36 per share were declared on October 25, 2007 in respect of the third quarter. These dividends are payable on December 12, 2007. In the case of the Class B shares, the dividends will be payable through the dividend access mechanism and are expected to be treated as UK-source rather than Dutch-source. See the Annual Report on Form 20-F for additional information on the dividend access mechanism.
During the third quarter 2007 $1.5 billion or 0.6% of Royal Dutch Shell shares were bought back for cancellation.
Nine months ended September 30, 2007
Cash flow provided by operating activities in the nine month period to September 30, 2007 was $29.2 billion compared to $25.7 billion a year ago.
Cash and cash equivalents amounted to $14.1 billion at the end of the period (2006: $11.2 billion). Total short and long-term debt amounted to $17.3 billion (2006: $14.1 billion).
Capital investment[A] for the nine months ended September 30, 2007 was $18.5 billion (including the minority share of Sakhalin) of which $15.0 billion was invested in the Exploration & Production and Gas & Power segments. Capital investment in the same period of 2006 (including the minority share of Sakhalin) was $17.4 billion of which $14.6 billion was invested in the Exploration & Production and Gas & Power segments.
In the nine months ended September 30, 2007 the Group has paid cash of $7.1 billion for the acquisition of the 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 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. Partially offsetting the cash flow impact of the Shell Canada acquisition were increases in other minority interests.
Gross proceeds from divestments in the nine month period to September 30, 2007 were $7.7 billion compared to $1.1 billion a year ago. Dividends of $0.36 per share were declared on May 3, 2007, July 26, 2007 and October 25, 2007 totaling $1.08 per share in respect of the first, second and third quarters.
During the first nine months of 2007 $2.8 billion or 1.2% of Royal Dutch Shell shares were bought back for cancellation.
 
 
[A]   Capital investment includes capital expenditure (adjusted for non-cash items and the pre-funding of working capital within jointly controlled assets), investments in equity accounted investments and exploration expense (excluding depreciation and release of currency translation differences).
             
 
  Royal Dutch Shell plc        
 
  Unaudited Condensed Interim Financial Report     6  

 


 

Royal Dutch Shell plc
Three and nine month periods ended September 30, 2007
Unaudited Condensed Consolidated Interim Financial Statements
             
 
  Royal Dutch Shell plc        
 
  Unaudited Condensed Interim Financial Report     7  

 


 

Condensed Consolidated Statement of Income
                                 
                      $ million  
    Three months ended September 30,     Nine months ended September 30,  
    2007     2006     2007     2006  
 
Revenue[A]
    90,703       84,254       249,079       243,345  
Cost of sales
    76,713       70,383       206,094       200,143  
 
Gross profit
    13,990       13,871       42,985       43,202  
Selling, distribution and administrative expenses
    3,843       4,126       11,741       11,968  
Exploration
    608       401       1,330       932  
Share of profit of equity accounted investments
    1,912       1,358       5,858       5,010  
Net finance costs and other (income)/expense
    (38 )     (60 )     (1,416 )     (168 )
 
Income before taxation
    11,489       10,762       37,188       35,480  
Taxation
    4,448       4,507       13,895       14,682  
 
Income for the period
    7,041       6,255       23,293       20,798  
 
 
 
Income attributable to minority interest
    125       313       429       639  
 
Income attributable to shareholders of Royal Dutch Shell plc
    6,916       5,942       22,864       20,159  
 
 
                               
 
                            $  
 
Basic earnings per share (see Note 4)
    1.10       0.93       3.64       3.13  
Continuing operations
    1.10       0.93       3.64       3.13  
 
Diluted earnings per share (see Note 4)
    1.10       0.93       3.63       3.12  
Continuing operations
    1.10       0.93       3.63       3.12  
 
 
[A]   Revenue is stated after deducting sales taxes, excise duties and similar levies of $20,830 million in the third quarter 2007 ($57,128 million cumulatively) and $18,472 million in the third quarter 2006 ($53,165 million cumulatively).
The Notes on pages 12 to 21 are an integral part of these Condensed Consolidated Interim Financial Statements.
             
 
  Royal Dutch Shell plc        
 
  Unaudited Condensed Interim Financial Report     8  

 


 

Condensed Consolidated Balance Sheet
                 
      $ million  
    Sept 30, 2007     Dec 31, 2006  
 
ASSETS
               
Non-current assets
               
Intangible assets
    5,307       4,808  
Property, plant and equipment
    96,611       100,988  
Investments:
               
equity accounted investments
    28,717       20,740  
financial assets
    2,987       4,493  
Deferred tax
    3,375       2,968  
Pre-paid pension costs
    5,045       3,926  
Other
    5,903       5,468  
 
 
    147,945       143,391  
 
Current assets
               
Inventories
    27,906       23,215  
Accounts receivable
    61,636       59,668  
Cash and cash equivalents
    14,092       9,002  
 
 
    103,634       91,885  
 
Total assets
    251,579       235,276  
 
 
               
LIABILITIES
               
Non-current liabilities
               
Debt
    12,660       9,713  
Deferred tax
    13,665       13,094  
Retirement benefit obligations
    6,449       6,096  
Other provisions
    12,467       10,355  
Other
    3,797       4,325  
 
 
    49,038       43,583  
 
Current liabilities
               
Debt
    4,683       6,060  
Accounts payable and accrued liabilities
    63,224       62,556  
Taxes payable
    12,144       6,021  
Retirement benefit obligations
    338       319  
Other provisions
    2,126       1,792  
 
 
    82,515       76,748  
 
Total liabilities
    131,553       120,331  
 
 
               
EQUITY
               
Equity attributable to shareholders of Royal Dutch Shell plc
    118,194       105,726  
Minority interest
    1,832       9,219  
 
Total equity
    120,026       114,945  
 
Total liabilities and equity
    251,579       235,276  
 
The Notes on pages 12 to 21 are an integral part of these Condensed Consolidated Interim Financial Statements.
             
 
  Royal Dutch Shell plc        
 
  Unaudited Condensed Interim Financial Report     9  

 


 

Condensed Consolidated Statement of Changes in Equity
                                                         
$ million  
    Equity attributable to shareholders of Royal Dutch Shell plc                
    Ordinary     Treasury     Other     Retained           Minority        
    share capital     shares     reserves[A]     earnings     Total     interest     Total equity  
 
At January 1, 2007
    545       (3,316 )     8,820       99,677       105,726       9,219       114,945  
 
                                                       
Income/(expense) recognised directly in equity
                3,513             3,513       (33 )     3,480  
Income for the period
                      22,864       22,864       429       23,293  
 
Total recognised income/(expense) for the period
                3,513       22,864       26,377       396       26,773  
 
                                                       
Capital contributions from minority shareholders
                                  802       802  
Acquisition of Shell Canada[B]
                      (5,445 )     (5,445 )     (1,639 )     (7,084 )
Partial divestment of Sakhalin[B]
                                  (6,711 )     (6,711 )
Other changes in minority interest
                      6       6       (49 )     (43 )
Dividends paid
                      (6,683 )     (6,683 )     (186 )     (6,869 )
Treasury shares: net sales/(purchases) and dividends received
          752                   752             752  
Shares repurchased for cancellation
    (6 )           6       (2,849 )     (2,849 )           (2,849 )
Share-based compensation
                310             310             310  
 
At September 30, 2007
    539       (2,564 )     12,649       107,570       118,194       1,832       120,026  
 
 
                                                       
At January 1, 2006
    571       (3,809 )     3,584       90,578       90,924       7,000       97,924  
 
                                                       
Income/(expense) recognised directly in equity
                2,528             2,528       73       2,601  
Income for the period
                      20,159       20,159       639       20,798  
 
Total recognised income/(expense) for the period
                2,528       20,159       22,687       712       23,399  
 
                                                       
Capital contributions from minority shareholders
                                  1,233       1,233  
Effect of Unification
                154             154             154  
Dividends paid
                      (6,012 )     (6,012 )     (258 )     (6,270 )
Treasury shares: net sales/(purchases) and dividends received
          375                   375             375  
Shares repurchased for cancellation
    (22 )           22       (6,811 )     (6,811 )           (6,811 )
Share-based compensation
                287             287             287  
 
At September 30, 2006
    549       (3,434 )     6,575       97,914       101,604       8,687       110,291  
 
[A]   See Note 2.
 
[B]   See Note 3.
The Notes on pages 12 to 21 are an integral part of these Consolidated Financial Statements.
             
 
  Royal Dutch Shell plc        
 
  Unaudited Condensed Interim Financial Report     10  

 


 

Condensed Consolidated Statement of Cash Flows
                 
$ million  
    Nine months ended September 30,  
    2007     2006  
 
Cash flow from operating activities:
               
Income for the period
    23,293       20,798  
Adjustment for:
               
Current taxation
    14,525       14,181  
Interest (income)/expense
    454       498  
Depreciation, depletion and amortisation
    9,340       9,309  
(Profit)/loss on sale of assets
    (1,550 )     (279 )
Decrease/(increase) in net working capital
    (2,831 )     (4,695 )
Share of profit of equity accounted investments
    (5,858 )     (5,010 )
Dividends received from equity accounted investments
    4,673       4,066  
Deferred taxation and other provisions
    (47 )     1,614  
Other
    (777 )     (317 )
 
Cash flow from operating activities (pre-tax)
    41,222       40,165  
Taxation paid
    (12,054 )     (14,428 )
 
Cash flow from operating activities
    29,168       25,737  
 
Cash flow from investing activities:
               
Capital expenditure
    (16,563 )     (15,857 )
Investments in equity accounted investments
    (1,333 )     (534 )
Proceeds from sale of assets
    6,824       1,006  
Proceeds from sale of equity accounted investments
    451       81  
Proceeds from sale of/(additions to) financial assets
    1,175       (33 )
Interest received
    872       759  
 
Cash flow from investing activities
    (8,574 )     (14,578 )
 
Cash flow from financing activities:
               
Net increase/(decrease) in debt with maturity period within three months
    (290 )     (49 )
Other debt:
               
New borrowings
    4,396       2,073  
Repayments
    (3,122 )     (1,360 )
Interest paid
    (923 )     (952 )
Change in minority interest
    (6,705 )     1,070  
Net issue/(repurchase) of shares
    (2,849 )     (6,657 )
Dividends paid to:
               
Shareholders of Royal Dutch Shell plc
    (6,683 )     (6,012 )
Minority interest
    (186 )     (258 )
Treasury shares: net sales/(purchases) and dividends received
    752       375  
 
Cash flow from financing activities
    (15,610 )     (11,770 )
 
Currency translation differences relating to cash and cash equivalents
    106       121  
 
Increase/(decrease) in cash and cash equivalents
    5,090       (490 )
Cash and cash equivalents at January 1
    9,002       11,730  
 
Cash and cash equivalents at September 30
    14,092       11,240  
 
The Notes on pages 12 to 21 are an integral part of these Condensed Consolidated Interim Financial Statements.
             
 
  Royal Dutch Shell plc        
 
  Unaudited Condensed Interim Financial Report     11  

 


 

Notes to the Condensed Consolidated Interim Financial Statements
1. Basis of preparation
These Condensed Consolidated Interim Financial Statements of Royal Dutch Shell and its subsidiaries (collectively known as the “Shell Group”, “Group” or “Group Companies”) are prepared on the same basis as, and should be read in conjunction with, the Annual Report on Form 20-F for the year ended December 31, 2006 (pages 108 to 112) as filed with the Securities and Exchange Commission.
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 interest 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 three and nine month periods ended September 30, 2007 Condensed Consolidated Interim Financial Statements of Royal Dutch Shell and its consolidated subsidiaries have been prepared in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting.
2. Other reserves
                                                 
$ million
            Capital                          
    Merger     redemption     Share premium     Share plan              
    reserve[A]     reserve     reserve     reserve     Other     Total  
 
At January 1, 2007
    3,444       39       154       736       4,447       8,820  
 
                                               
Cumulative currency translation differences
                            4,326       4,326  
Unrealised gains/(losses) on securities
                            (734 )     (734 )
Unrealised gains/(losses) on cash flow hedges
                            (79 )     (79 )
 
Income/(expense) recognised directly in equity
                            3,513       3,513  
 
                                               
Shares repurchased for cancellation
          6                         6  
Share-based compensation
                      310             310  
 
At September 30, 2007
    3,444       45       154       1,046       7,960       12,649  
 
 
                                               
At January 1, 2006
    3,444       13             351       (224 )     3,584  
 
                                               
Cumulative currency translation differences
                            2,161       2,161  
Unrealised gains/(losses) on securities
                            255       255  
Unrealised gains/(losses) on cash flow hedges
                            112       112  
 
Income/(expense) recognised directly in equity
                            2,528       2,528  
 
                                               
Effect of Unification
                154                   154  
Shares repurchased for cancellation
          22                         22  
Share-based compensation
                      287             287  
 
At September 30, 2006
    3,444       35       154       638       2,304       6,575  
 
[A]   The merger reserve was established as, in 2005, Royal Dutch Shell plc (“Royal Dutch Shell”) became the single parent company of Royal Dutch Petroleum Company (“Royal Dutch”) and of Shell Transport and Trading Company Limited (previously known as The “Shell” Transport and Trading Company, p.l.c.) (“Shell Transport”) the two former public parent companies of the Group. It relates primarily to the difference between the nominal value of Royal Dutch Shell plc shares issued and the nominal value of Royal Dutch Petroleum Company and Shell Transport and Trading Company Limited shares received.
3. Equity
Consistent with the accounting policies disclosed in Note 1, the acquisition of the minority interest in Shell Canada in 2007 was accounted for as a transaction between shareholders with the impact reflected in the equity section of the balance sheet. The Group 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, with effect of the second quarter 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 Royal Dutch Shell plc share options.
             
 
  Royal Dutch Shell plc        
 
  Unaudited Condensed Interim Financial Report     12  

 


 

On April 18, 2007, Royal Dutch Shell 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. As of the end of the first quarter 2007, 100% of the Sakhalin project net assets of approximately $15 billion (property, plant and equipment $15.7 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. As a result of this transaction, the consolidated financial statements of Royal Dutch Shell plc no longer include the separate assets, liabilities and associated minority interest of the Sakhalin project and resulted 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.
4. Earnings per share
Basic earnings per share amounts are calculated by dividing the income attributable to the shareholders of Royal Dutch Shell plc for the period by the weighted average number of Class A and B shares outstanding during the period.
The diluted earnings per share is based on the same income figures. The weighted average number of shares outstanding during the period is adjusted for the number of shares related to share option schemes.
                                 
Earnings per share are identical for Class A and Class B shares.  
   
    Three months ended September 30,     Nine months ended September 30,  
    2007     2006     2007     2006  
Income attributable to shareholders of Royal Dutch Shell plc ($ million)
                               
Total
    6,916       5,942       22,864       20,159  
Continuing operations
    6,916       5,942       22,864       20,159  
 
Basic weighted average number of ordinary shares
    6,261,705,157       6,373,944,405       6,276,730,073       6,446,602,707  
Diluted weighted average number of ordinary shares
    6,285,823,218       6,399,752,630       6,296,501,450       6,470,891,921  
 
5. Information by business segment
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.
Three months ended September 30, 2007
                                                         
$ million  
    Exploration &                                      
    Production     Gas & Power     Oil Products     Chemicals     Corporate     Eliminations     Total  
 
Revenue
                                                       
third party
    7,192       3,816       69,220       10,465       10             90,703  
inter-segment
    10,214       222       924       1,285             (12,645 )      
 
Total
    17,406       4,038       70,144       11,750       10       (12,645 )     90,703  
 
Segment result
    6,866       116       2,197       328       32               9,539  
Share of profit of equity accounted investments
    733       471       515       174       19               1,912  
Net finance costs and other (income)/expense
                                                    (38 )
Taxation
                                                    4,448  
 
Income for the period
                                                    7,041  
 
             
 
  Royal Dutch Shell plc        
 
  Unaudited Condensed Interim Financial Report     13  

 


 

Three months ended September 30, 2006
                                                         
$ million  
    Exploration &                                      
    Production     Gas & Power     Oil Products     Chemicals     Corporate     Eliminations     Total  
 
Revenue
                                                       
third party
    4,864       3,519       66,679       9,313       (121 )             84,254  
inter-segment
    8,243       260       751       1,145             (10,399 )      
 
Total
    13,107       3,779       67,430       10,458       (121 )     (10,399 )     84,254  
 
Segment result
    7,655       452       1,200       113       (76 )             9,344  
Share of profit of equity accounted investments
    574       375       291       155       (37 )             1,358  
Net finance costs and other (income)/expense
                                                    (60 )
Taxation
                                                    4,507  
 
Income for the period
                                                    6,255  
 
Nine months ended September 30, 2007
                                                         
$ million  
    Exploration &                                      
    Production     Gas & Power     Oil Products     Chemicals     Corporate     Eliminations     Total  
 
Revenue
                                                       
third party
    14,247       11,352       194,000       29,430       50               249,079  
inter-segment
    28,506       757       2,410       3,408             (35,081 )      
 
Total
    42,753       12,109       196,410       32,838       50       (35,081 )     249,079  
 
Segment result
    19,610       280       8,778       1,343       (97 )             29,914  
Share of profit of equity accounted investments
    2,305       1,319       1,706       529       (1 )             5,858  
Net finance costs and other (income)/expense
                                                    (1,416 )
Taxation
                                                    13,895  
 
Income for the period
                                                    23,293  
 
Nine months ended September 30, 2006
                                                         
$ million  
    Exploration &                                      
    Production     Gas & Power     Oil Products     Chemicals     Corporate     Eliminations     Total  
 
Revenue
                                                       
third party
    12,837       12,026       191,072       27,234       176               243,345  
inter-segment
    25,368       1,037       2,151       3,556             (32,112 )      
 
Total
    38,205       13,063       193,223       30,790       176       (32,112 )     243,345  
 
Segment result
    22,413       1,025       6,892       794       (822 )             30,302  
Share of profit of equity accounted investments
    2,271       1,095       1,431       301       (88 )             5,010  
Net finance costs and other (income)/expense
                                                    (168 )
Taxation
                                                    14,682  
 
Income for the period
                                                    20,798  
 
The information above is provided in accordance with IAS 14 Segment Reporting. Operating segment results are appraised by management on the basis of income including equity accounted investments and certain net finance costs and other (income)/expense and after tax, and this forms the basis of the discussion of segment results in the Operational and Financial Review (OFR). The table below reconciles the foregoing segment information to the information used for management reporting and is consistent with how the information will be presented in the Shell Group’s annual Financial Statements to comply with SFAS 131.
             
 
  Royal Dutch Shell plc        
 
  Unaudited Condensed Interim Financial Report     14  

 


 

Income for the period by segment — Three months ended September 30, 2007
                                                 
$ million  
    Exploration                                
    &     Gas &     Oil                    
    Production     Power     Products     Chemicals     Corporate     Total  
 
Segment result - IAS 14
    6,866       116       2,197       328       32       9,539  
Share of profit of equity accounted investments
    733       471       515       174       19       1,912  
Net finance costs and other (income)/expense
    114       (2 )           1       (151 )     (38 )
Taxation
    3,975       21       559       104       (211 )     4,448  
 
Segment result — OFR
    3,510       568       2,153       397       413       7,041  
 
Income for the period by segment — Three months ended September 30, 2006
                                                 
$ million  
    Exploration                                
    &     Gas &     Oil                    
    Production     Power     Products     Chemicals     Corporate     Total  
 
Segment result - IAS 14
    7,655       452       1,200       113       (76 )     9,344  
Share of profit of equity accounted investments
    574       375       291       155       (37 )     1,358  
Net finance costs and other (income)/expense
    79       (59 )     (10 )     2       (72 )     (60 )
Taxation
    4,407       105       287       15       (307 )     4,507  
 
Segment result — OFR
    3,743       781       1,214       251       266       6,255  
 
Income for the period by segment — Nine months ended September 30, 2007
                                                 
$ million  
    Exploration                                
    &     Gas &     Oil                    
    Production     Power     Products     Chemicals     Corporate     Total  
 
Segment result - IAS 14
    19,610       280       8,778       1,343       (97 )     29,914  
Share of profit of equity accounted investments
    2,305       1,319       1,706       529       (1 )     5,858  
Net finance costs and other (income)/expense
    336       (740 )     (22 )     18       (1,008 )     (1,416 )
Taxation
    11,260       189       2,623       304       (481 )     13,895  
 
Segment result — OFR
    10,319       2,150       7,883       1,550       1,391       23,293  
 
Income for the period by segment — Nine months ended September 30, 2006
                                                 
$ million  
    Exploration                                
    &     Gas &     Oil                    
    Production     Power     Products     Chemicals     Corporate     Total  
 
Segment result - IAS 14
    22,413       1,025       6,892       794       (822 )     30,302  
Share of profit of equity accounted investments
    2,271       1,095       1,431       301       (88 )     5,010  
Net finance costs and other (income)/expense
    246       (209 )     8       9       (222 )     (168 )
Taxation
    12,953       275       1,981       206       (733 )     14,682  
 
Segment result — OFR
    11,485       2,054       6,334       880       45       20,798  
 
6. Ordinary share capital
                 
$ million  
    September 30, 2007     December 31, 2006  
 
Allotted, called up and fully paid
               
Class A ordinary shares
    306       312  
Class B ordinary shares
    233       233  
Sterling deferred
           
 
 
    539       545  
 
The number of shares outstanding at September 30, 2007 and December 31, 2006, were as follows:
                 
$ million  
    September 30, 2007     December 31, 2006  
 
Shares of 0.07 each
               
Class A
    3,621,935,000       3,695,780,000  
Class B
    2,759,360,000       2,759,360,000  
Shares of £1 each
               
Sterling deferred
    50,000       50,000  
 
             
 
  Royal Dutch Shell plc        
 
  Unaudited Condensed Interim Financial Report     15  

 


 

7. Reconciliation from IFRS to US GAAP
Reconciliation of statement of income from IFRS to US GAAP — Nine months ended September 30, 2007
                                                                                         
$ million  
                                            Currency                     Minority              
            Discontinued     Reclassi-     Retirement     Share based     translation             Reversals of     interest              
    IFRS     operations     fications     benefits     compensation     differences     Impairments     impairments     buy-out     Other     US GAAP  
 
Revenue
    249,079       (7,283 )                                               (14 )     241,782  
Cost of sales
    206,094       (6,293 )     (416 )     346       5       207       (64 )     143       151       38       200,211  
 
Gross profit
    42,985       (990 )     416       (346 )     (5 )     (207 )     64       (143 )     (151 )     (52 )     41,571  
Selling, distribution and adminstrative expenses
    11,741       (274 )           403             8                         (9 )     11,869  
Exploration
    1,330                                                             1,330  
Research and development
                  781                                                 781  
Share of profit of equity accounted investments
    5,858       (2 )           (21 )                       22             9       5,866  
Net finance costs and other (income)/expense
    (1,416 )     (2 )     (365 )                 6                         (80 )     (1,857 )
 
Income before taxation
    37,188       (716 )           (770 )     (5 )     (221 )     64       (121 )     (151 )     46       35,314  
Taxation
    13,895       (280 )           (365 )     3             (18 )           (43 )     138       13,330  
Income attributable to minority interest
                                                                            428       428  
 
Income from continuing operations
    23,293       (436 )           (405 )     (8 )     (221 )     82       (121 )     (108 )     (520 )     21,556  
Income/(loss) from discontinued operations
          436                                                       436  
 
Income for the period
    23,293                   (405 )     (8 )     (221 )     82       (121 )     (108 )     (520 )     21,992  
 
 
                                                                                       
 
Attributable to minority interest
    429                                                       (429 )        
 
Income attibutable to shareholders of Royal Dutch Shell plc
    22,864                   (405 )     (8 )     (221 )     82       (121 )     (108 )     (91 )     21,992  
 
Earnings per share under US GAAP
                                 
$  
    Three months ended September 30,     Nine months ended September 30,  
    2007     2006     2007     2006  
Basic earnings per share
    1.08       0.89       3.50       3.07  
Continuing operations
    1.08       0.89       3.43       3.05  
Discontinued operations
                0.07       0.02  
 
Diluted earnings per share
    1.07       0.89       3.49       3.06  
Continuing operations
    1.07       0.89       3.42       3.04  
Discontinued operations
                0.07       0.02  
 
The principles of the calculation and the number of shares used are given in Note 4.
             
 
  Royal Dutch Shell plc        
 
  Unaudited Condensed Interim Financial Report     16  

 


 

Reconciliation of balance sheet from IFRS to US GAAP as at September 30, 2007
                                                                 
$ million  
            Retirement             Reversals of             Minority interest              
    IFRS     benefits     Impairments     impairments     Investments     buy-out     Other     US GAAP  
 
ASSETS
                                                               
Non-current assets
                                                               
Intangible assets
    5,307                               907       2       6,216  
Property, plant and equipment
    96,611             682       (143 )           7,173       51       104,374  
Investments:
                                                               
equity accounted investments
    28,717       (105 )           (257 )     (82 )           134       28,407  
financial assets
    2,987       (9 )                 (1,153 )           32       1,857  
Deferred tax
    3,375       44                               (333 )     3,086  
Other
    10,948       6,062                               (96 )     16,914  
 
 
    147,945       5,992       682       (400 )     (1,235 )     8,080       (210 )     160,854  
 
                                                               
Current assets
                                                               
Inventories
    27,906                                           27,906  
Accounts receivable
    61,636                                     2       61,638  
Cash and cash equivalents
    14,092                                           14,092  
 
 
    103,634                                     2       103,636  
 
Total assets
    251,579       5,992       682       (400 )     (1,235 )     8,080       (208 )     264,490  
 
LIABILITIES
                                                               
Non-current liabilities
                                                               
Debt
    12,660                                     (119 )     12,541  
Deferred tax
    13,665       1,463       204       (94 )           2,051       (126 )     17,163  
Provisions
    18,916       885                               (78 )     19,723  
Other
    3,797       46                               1,776       5,619  
 
 
    49,038       2,394       204       (94 )           2,051       1,453       55,046  
 
                                                               
Current liabilities
                                                               
Debt
    4,683                                     (6 )     4,677  
Accounts payable, accrued liabilities and provisions
    65,688       (82 )                             471       66,077  
Taxes payable
    12,144                                     (1,872 )     10,272  
 
 
    82,515       (82 )                             (1,407 )     81,026  
 
Total liabilities
    131,553       2,312       204       (94 )           2,051       46       136,072  
 
Minority interest
                                                    1,837       1,837  
 
                                                               
Equity attributable to shareholders of Royal Dutch Shell plc
    118,194       3,680       478       (306 )     (1,235 )     6,029       (259 )     126,581  
Minority interest
    1,832                                     (1,832 )      
 
Total equity
    120,026       3,680       478       (306 )     (1,235 )     6,029       (2,091 )     126,581  
 
Total liabilities and equity
    251,579       5,992       682       (400 )     (1,235 )     8,080       (208 )     264,490  
 
             
 
  Royal Dutch Shell plc        
 
  Unaudited Condensed Interim Financial Report     17  

 


 

Reconciliation of statement of income from IFRS to US GAAP — Nine months ended September 30, 2006
                                                                                 
$ million  
                                            Currency                            
            Discontinued     Reclassi-     Retirement     Share based     translation             Reversals of              
    IFRS     operations     fications     benefits     compensation     differences     Impairments     Impairments     Other     US GAAP  
 
Revenue
    243,345       (7,550 )                                         16       235,811  
Cost of sales
    200,143       (7,082 )     (296 )     371       (10 )     70       30       (105 )           193,121  
 
Gross profit
    43,202       (468 )     296       (371 )     10       (70 )     (30 )     105       16       42,690  
Selling, distribution and adminstrative expenses
    11,968       (264 )           194             (39 )                 (15 )     11,844  
Exploration
    932                                                       932  
Research and development
                  557                                           557  
Share of profit of equity accounted investments
    5,010                   1                         24       10       5,045  
Net finance costs and other (income)/expense
    (168 )     (5 )     (261 )                 120                   (25 )     (339 )
 
Income before taxation
    35,480       (199 )           (564 )     10       (151 )     (30 )     129       66       34,741  
Taxation
    14,682       (44 )           (213 )     (50 )           (10 )     (1 )     116       14,480  
Income attributable to minority interest
                                                                    639       639  
 
Income from continuing operations
    20,798       (155 )           (351 )     60       (151 )     (20 )     130       (689 )     19,622  
Income/ (loss) from discontinued operations
          155                                                 155  
 
Income for the period
    20,798                   (351 )     60       (151 )     (20 )     130       (689 )     19,777  
 
 
                                                                               
 
Attributable to minority interest
    639                                                 (639 )        
 
Income attibutable to shareholders of Royal Dutch Shell plc
    20,159                   (351 )     60       (151 )     (20 )     130       (50 )     19,777  
 
             
 
  Royal Dutch Shell plc        
 
  Unaudited Condensed Interim Financial Report     18  

 


 

Reconciliation of balance sheet from IFRS to US GAAP as at December 31, 2006
                                                         
$ million
    IFRS     Retirement
benefits
    Impairments     Reversals of
impairments
    Investments     Other       US GAAP  
 
ASSETS
                                                       
Non-current assets
                                                       
Intangible assets
    4,808                               2       4,810  
Property, plant and equipment
    100,988             613                   (38 )     101,563  
Investments:
                                                     
equity accounted investments
    20,740       (80 )           (290 )     (82 )     83       20,371  
financial assets
    4,493       (8 )                 (1,232 )     37       3,290  
Deferred tax
    2,968       105                         (264 )     2,809  
Other
    9,394       6,091                         (128 )     15,357  
 
 
    143,391       6,108       613       (290 )     (1,314 )     (308 )     148,200  
 
Current assets
                                                       
Inventories
    23,215                                     23,215  
Accounts receivable
    59,668                                     59,668  
Cash and cash equivalents
    9,002                                     9,002  
 
 
    91,885                                     91,885  
 
Total assets
    235,276       6,108       613       (290 )     (1,314 )     (308 )     240,085  
 
LIABILITIES
                                                       
Non-current liabilities
                                                       
Debt
    9,713                               (125 )     9,588  
Deferred tax
    13,094       1,604       221       (105 )           35       14,849  
Provisions
    16,451       1,034                         (234 )     17,251  
Other
    4,325       46                         169       4,540  
 
 
    43,583       2,684       221       (105 )           (155 )     46,228  
 
Current liabilities
                                                       
Debt
    6,060                               (43 )     6,017  
Accounts payable, accrued liabilities and provisions
    64,667       (83 )                       19       64,603  
Taxes payable
    6,021                               1       6,022  
 
 
    76,748       (83 )                       (23 )     76,642  
 
Total liabilities
    120,331       2,601       221       (105 )           (178 )     122,870  
 
Minority interest
                                            9,197       9,197  
 
                                                       
Equity attributable to shareholders of Royal Dutch Shell plc
    105,726       3,534       392       (185 )     (1,313 )     (136 )     108,018  
Minority interest
    9,219       (27 )                 (1 )     (9,191 )      
 
Total equity
    114,945       3,507       392       (185 )     (1,314 )         (9,327 )     108,018  
 
Total liabilities and equity
    235,276       6,108       613       (290 )     (1,314 )     (308 )     240,085  
 
             
 
  Royal Dutch Shell plc        
 
  Unaudited Condensed Interim Financial Report     19  

 


 

The Condensed Consolidated Interim Financial Statements of the Shell Group are prepared in accordance with IFRS, which differs in certain respects from US Generally Accepted Accounting Principles (US GAAP).
Discontinued operations
The definition of activities classified as discontinued operations differs from that under IFRS. Under IFRS the activity must be a separate major line of business or geographical area of operations and equity accounted or other investments are included in this classification. Under US GAAP this definition is broadened to include a component of an entity (rather than a separate major line of business or geographical area of operations) but equity accounted or other investments are excluded. As a result, all of the items presented as discontinued operations in 2007 and 2006 under US GAAP are included within continuing operations under IFRS. In 2007 and 2006 in Oil Products certain refineries have been classified as held for sale and are reported under US GAAP as discontinued operations.
Reclassifications
Reclassifications are differences in line item allocation under IFRS, which do not affect equity or income compared with that shown under US GAAP. They comprise research and development costs that are included in cost of sales under IFRS while these items are separately disclosed under US GAAP, and accretion expense for asset retirement obligations that is reported as interest expense under IFRS and as cost of sales under US GAAP.
Retirement benefits
The Group adopted FASB Statement No. 158 Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106, and 132R (“FAS 158”) as of December 31, 2006. FAS 158 requires that on a prospective basis all gains and losses related to defined benefit pension arrangements and other post retirement benefits are recognised on the balance sheet. The gains or losses and prior service costs or credits that arise during the period are recognised as a component of accumulated other comprehensive income/(loss), net of tax, but are not recognised as components of net periodic benefit cost. Under IFRS, all gains and losses related to defined benefit pension arrangements and other post retirement benefits at the date of transition to IFRS were recognised in the 2004 opening balance sheet, with a corresponding reduction in equity. The difference between IFRS and US GAAP therefore mainly relates to the unrecognised gains and losses under IFRS since January 1, 2004.
Share-based compensation
Under IFRS, share-based compensation awarded after November 7, 2002 and not vested at January 1, 2005 is recognised as an expense based on its fair value. For US GAAP the Group has adopted SFAS 123R as of January 1, 2005 using the modified prospective approach and this will minimise the difference between US GAAP and IFRS reporting. The remaining difference relates to share-based compensation not yet vested and granted before November 7, 2002, which under US GAAP is also recognised as an expense, and the treatment of deferred tax on share-based compensation. Under IFRS deferred tax is remeasured every reporting period and under US GAAP deferred tax is estimated at grant date and not subsequently revised.
Cumulative currency translation differences
Under IFRS at January 1, 2004, the balance of cumulative currency translation differences of $1,208 million was eliminated by increasing retained earnings. For US GAAP there is no change in the accounting for cumulative currency translation differences and the amount is included in accumulated other comprehensive income. Equity in total under both IFRS and US GAAP was not impacted.
Upon divestment or liquidation of an entity, cumulative currency translation differences related to that entity are taken to income under both IFRS and US GAAP. Due to the elimination of the opening balance as at January 1, 2004, the amounts of cumulative currency translation differences that are taken to income may differ between IFRS and US GAAP.
Impairments
Impairments under IFRS are based on discounted cash flows. Under US GAAP only if an asset’s estimated undiscounted future cash flows are below its carrying amount is a determination required of the amount of any impairment based on discounted cash flows. There is no undiscounted test under IFRS.
Reversal of impairments
Under IFRS, a favourable change in the circumstance, which resulted in an impairment of an asset other than goodwill, would trigger the requirement for a redetermination of the amount of the impairment and any reversal is recognised in income. Under US GAAP, impairments are not reversed.
Financial instruments
Under IFRS certain unquoted equity securities are recognised at fair value. Under US GAAP these are recognised at cost. This difference has no impact on the timing of recognition of income arising from these investments. Also, certain commodity contracts and embedded derivatives that are not recognised under US GAAP are recognised under IFRS mainly because of pricing or delivery conditions.
             
 
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Minority interest buy-out
Under IFRS, acquisitions of minority interest 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. Under US GAAP an acquisition of minority interest in a Group company is accounted for using the purchase method and a disposal of shares in a Group company whilst retaining control is accounted for as a disposal.
Other
Other reconciling items include differences between IFRS and US GAAP relating to income taxes and leases. With effect from January 1, 2007, the main reconciling item relates to the reclassification within the balance sheet of unrecognised tax benefits as a result of the adoption of FASB Interpretation No. 48 Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement 109 (“FIN 48”), all of which would affect the Group’s effective tax rate if recognised; the amount reclassified at January 1, 2007 was $1,460 million.
Cash flow statement
The Group compiles the cash flow statement in accordance with International Accounting Standards (IAS 7). The SEC’s rules applicable to Annual Reports on Form 20-F permit the compilation of the cash flow statement under IAS 7.
Recent US GAAP accounting pronouncements
FASB Statement No. 157 Fair Value Measurement (“FAS 157”) becomes effective for the Group and will be adopted from January 1, 2008. FAS 157 aims to achieve consistency of approach whenever assets and liabilities are required to be measured at fair value and introduces certain disclosure requirements. The Group does not expect any significant impact on the Group’s Consolidated Financial Statements.
             
 
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Appendix
Ratio of earnings to fixed charges
The following table sets forth, on a US GAAP basis for the years ended December 31, 2002, 2003, 2004, 2005 and 2006 and the nine months ended September 30, 2007 and on an IFRS basis for the years ended December 31, 2004, 2005 and 2006 and the nine months ended September 30, 2007, the consolidated unaudited ratio of earnings to fixed charges of Royal Dutch Shell. The comparative annual information is derived from the consolidated financial statements of Royal Dutch Shell contained in the Annual Report on Form 20-F for the year ended December 31, 2006 as filed with the Securities and Exchange Commission and these Condensed Consolidated Interim Financial Statements.
                                                 
    Nine months ended September 30,                     Years ending December 31,  
 
    2007     2006     2005     2004     2003     2002  
     
Ratio of Earnings to Fixed Charges (IFRS basis)
    21.43       19.99       23.33       19.17                  
Ratio of Earnings to Fixed Charges (US GAAP basis)
    25.69       23.31       26.84       17.13       15.67       11.69  
For the purposes of this table, “earnings” consists of pre-tax income from continuing operations before adjustment for minority interest and income from equity investees plus fixed charges (excluding capitalised interest) less undistributed earnings of equity investees, plus distributed income from equity interests. “Fixed charges” consists of expensed and capitalised interest plus interest within rental expenses plus preference security dividend requirements of consolidated subsidiaries.
Capitalisation and indebtedness
The following tables set forth, on a US GAAP and IFRS basis, the unaudited consolidated combined capitalisation and indebtedness of Royal Dutch Shell as of September 30, 2007. This information is derived from these Condensed Consolidated Interim Financial Statements.
US GAAP basis
         
    $ million  
    September 30, 2007  
Total equity
    126,581  
Total finance debt
       
Short-term finance debt
    4,677  
Long-term finance debt[A]
    9,825  
Total finance debt[B]
    14,502  
 
     
Total capitalisation
    141,083  
 
     
IFRS basis
         
    $ million  
    September 30, 2007  
Equity
       
 
       
Total equity attributable to shareholders of Royal Dutch Shell plc
    118,194  
Total finance debt
       
Short-term finance debt
    4,683  
Long-term finance debt[A]
    9,944  
Total finance debt[B]
    14,627  
 
     
Total capitalisation
    132,821  
 
     
 
[A]   Long-term finance debt excludes $2.7 billion of certain long-term commitments included in amounts due to banks and other credit institutions.
 
[B]   As of September 30, 2007, the Shell Group had outstanding guarantees related to Shell Group associates of $1.3 billion, of which $0.6 billion related to guarantees in respect of financial indebtedness. $12.9 billion of the finance debt of the Shell Group was unsecured.
             
 
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