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1 Copyright of Royal Dutch Shell plc 5 September, 2014
BALANCING GROWTH & RETURNS NEW YORK INVESTOR DAY
5 SEPTEMBER 2014 ROYAL DUTCH SHELL PLC
2 Copyright of Royal Dutch Shell plc 5 September, 2014
DEFINITIONS & CAUTIONARY NOTE
Reserves: Our use of the term “reserves” in this presentation means SEC proved oil and gas reserves.
Resources: Our use of the term “resources” in this presentation includes quantities of oil and gas not yet classified as SEC proved oil and gas reserves. Resources are consistent with the Society of Petroleum Engineers 2P and 2C definitions.
Organic: Our use of the term Organic includes SEC proved oil and gas reserves excluding changes resulting from acquisitions, divestments and year-average pricing impact.
Resources plays: our use of the term ‘resources plays’ refers to tight, shale and coal bed methane oil and gas acreage.
The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate entities. In this presentation “Shell”, “Shell group” and “Royal Dutch Shell” are sometimes used for convenience where references are made to Royal Dutch Shell plc and its subsidiaries in general. Likewise, the words “we”, “us” and “our” are also used to refer to subsidiaries in general or to those who work for them. These expressions are also used where no useful purpose is served by identifying the particular company or companies. ‘‘Subsidiaries’’, “Shell subsidiaries” and “Shell companies” as used in this presentation refer to companies in which Royal Dutch Shell either directly or indirectly has control, by having either a majority of the voting rights or the right to exercise a controlling influence. The companies in which Shell has significant influence but not control are referred to as “associated companies” or “associates” and companies in which Shell has joint control are referred to as “jointly controlled entities”. In this presentation, associates and jointly controlled entities are also referred to as “equity-accounted investments”. The term “Shell interest” is used for convenience to indicate the direct and/or indirect ownership interest held by Shell in a venture, partnership or company, after exclusion of all third-party interest.
This presentation 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 presentation, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for Shell’s products; (c) currency fluctuations; (d) drilling and production results; (e) reserves estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and regulatory developments including potential litigation and regulatory measures as a result of climate changes; (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 presentation 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 20-F for the year ended 31 December, 2013 (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 presentation, 5 September, 2014. 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 presentation. There can be no assurance that dividend payments will match or exceed those set out in this presentation in the future, or that they will be made at all.
We use certain terms in this presentation, such as discovery potential, that the United States Securities and Exchange Commission (SEC) guidelines strictly prohibit us from including in filings with the SEC. U.S. Investors are urged to consider closely the disclosure in our Form 20-F, File No 1-32575, available on the SEC website www.sec.gov. You can also obtain this form from the SEC by calling 1-800-SEC-0330.
3 Copyright of Royal Dutch Shell plc 5 September, 2014
BEN VAN BEURDEN CHIEF EXECUTIVE OFFICER
ROYAL DUTCH SHELL PLC
4 Copyright of Royal Dutch Shell plc 5 September, 2014
AGENDA
Ben van Beurden Chief Executive Officer
Marvin Odum Upstream Americas Director
John Abbott Downstream Director
Simon Henry Chief Financial Officer
Question & answer session
Panel break-outs
Downstream
Upstream Americas: deep-water
Upstream Americas: resources plays
5 Copyright of Royal Dutch Shell plc 5 September, 2014
EXECUTING A CONSISTENT, LONG-TERM STRATEGY
source: Shell estimates
Unrelenting focus on HSSE
Technology, integration and scale
Disciplined capital investment by strategic theme
Growth in cash flow through-cycle
Competitive shareholder returns
Energy demand outlook million boe per day
Oil Gas Biomass Wind
Coal Nuclear Other renewables Solar
Shell activities
6 Copyright of Royal Dutch Shell plc 5 September, 2014
FOCUS ON SAFETY UPDATE
Injuries – TRCF/million working hours
Goal Zero on safety Volume in thousand tonnes
Spills - operational Number of incidents
Energy intensity – refineries Energy Intensity Index (EEITM)
Process safety trend
million working hours
Working hours (RHS) TRCF
HSSE priority
Performance + transparency Tier 1 incidents Tier 2 incidents
4Q rolling 4Q rolling
7 Copyright of Royal Dutch Shell plc 5 September, 2014
2014 PRIORITIES
Returns and cash flow
Competitive returns for shareholders
Take hard choices on new options
Increase asset sales
Reduce pace of growth investment
Major deep-water start-ups in 2014
Integrate 2013 acquisitions
Deliver new projects
Enhance our capital efficiency
Improve our financial performance
8 Copyright of Royal Dutch Shell plc 5 September, 2014
IMPROVE FINANCIAL PERFORMANCE H1 2014 OUTCOME
CCS earnings + ROACE excluding identified items
Earnings + ROACE $ billion
Cash flow $ billion
Dividend + buy-back $ billion
Upstream
Downstream
Corporate/Other
Dividend declared Buy-back
CFFO CFFI
Balancing returns + growth
Competitive shareholder returns Expecting > $30 billion distributions to shareholders
2014-15
ROACE (RHS) Free cash flow (RHS)
$ billion
9 Copyright of Royal Dutch Shell plc 5 September, 2014
DRIVING PERFORMANCE IN SHELL
Policy from 1.1.2015
New shareholding requirements Performance units
Drive bottom line focus
Credible, competitive and affordable plans
Drives decisions on spending + divestment
Individual performance management
Stronger accountability for outcomes
New shareholding requirements for senior executives
7 x base pay CEO
4 x base pay CFO
Top 200 executives below Executive Committee: 1.5 x base pay
Senior Executives
10 Copyright of Royal Dutch Shell plc 5 September, 2014
FUTURE OPPORTUNITIES
RESOURCES PLAYS
DEEP-WATER INTEGRATED GAS
UPSTREAM DOWNSTREAM
INVESTMENT PRIORITIES + STRATEGIC INTENT
1 Iraq, Nigeria onshore (SPDC), Kazakhstan, heavy oil, Arctic
Engines
Free cash flow businesses
Maintain competitiveness
Asset integrity + selective growth
Growth Priority
Global leadership established
High-grading our rich opportunity set
Longer Term
Major potential; managing non-technical risks
Slower pace + capital allocation
Credible, competitive, affordable Investment choices driven on a global thematic basis
1
11 Copyright of Royal Dutch Shell plc 5 September, 2014
IMPROVE FINANCIAL PERFORMANCE PORTFOLIO RESTRUCTURING
Gas supply for LNG Canada
LRS exploration: Permian + W.Canada
Appalachia Utica gas exploration
Asset sales + cost focus
Downstream 10-12% ROACE + $10 billion p.a. CFFO potential
MLP proposal
Asset sales + cost focus
North America resources plays Oil Products
12 Copyright of Royal Dutch Shell plc 5 September, 2014
ENHANCE CAPITAL EFFICIENCY
Take hard choices on new options
More selectivity: FIDs >$500 million require CEO approval at FEED
Maturing new projects: LNG, deep-water
Increase asset sales
~$10 billion completed year-to-date
US midstream MLP proposal
Reduce pace of growth investment
2014 organic spending ~$35 billion
Scrip cancellation reflects improving FCF
completed
2014+ Asset sales / license expiry
Wheatstone LNG
BC-10 dilution
North America non-core LRS
Italy Downstream
ADCO license expiry
Woodside market sell down
Australia / Denmark / Norway Downstream
Nigeria onshore
Mature UKCS + GOM assets
Pinedale + Haynesville dry gas
others
340,000 boed upstream
180,000 b/d refining
300,000 b/d marketing
13 Copyright of Royal Dutch Shell plc 5 September, 2014
Gumusut-Kakap
Perdido North America: tight gas Gbaran-Ubie Gjoa AOSP-1
West Qurna Schoonebeek North America: tight gas Qatargas 4 LNG Pearl GTL Qarn Alam
Harweel Caesar Tonga ph1 Gumusut-Kakap (early
production) Pluto LNG North America: tight gas Eagle Ford
Majnoon FCP BC-10 ph2 Basrah gas company North Rankin Amal steam AOSP debottlenecking others
Repsol LNG acquisition Mars B Petai Bonga North West Cardamom Gumusut-Kakap others
DELIVER NEW PROJECTS UPSTREAM TRACK RECORD 2010-14
Mars-B
Repsol LNG
2010 2011 2012 2013 2014
Key project start-ups:
Consistent delivery of new projects
Last 12 months CFFO from 2010+ start-ups $11 billion
Growth from key start-ups
kboe per day $ billion
Production Cash flow from operations (RHS)
completed
14 Copyright of Royal Dutch Shell plc 5 September, 2014
CONVENTIONAL EXPLORATION PORTFOLIO + THEMES
Prospect size: potential
Conventional exploration spend 2014 ~ $ 4 billion
Heartland
Near field exploration Arctic/Frontier
Balancing exploration risk
Prospect size
(million boe)
Time to development
(years)
15+
10+
3+
<3 5-50
50-250
>250
>500 Arctic
Frontier Under explored basins
Heartlands New plays in Shell producing basins
Near field High value
15 Copyright of Royal Dutch Shell plc 5 September, 2014
EXPLORATION SUCCESS ADDING RESOURCES IN HEARTLANDS
Gulf of Mexico Malaysia cumulative resources added in million boe cumulative resources added in million boe
Tukau Timur West
NFE Success Limbayong-2
Tukau Timur Deep
NFE success Rosmari
Marjoram Pegaga Appraisal
Appomattox Vito
Cardamom South Deimos
Vicksburg Vito Appraisal
Appomattox appraisal
Rydberg
20 km
Shell leasehold discovery drilling
Appomattox Vicksburg
Gettysburg
Rydberg
Planned Appomattox
host
Shell licence 2011 Shell licence 2014 discovery
Limbayong-2
Rosmari
Gorek Teja
Pegaga Sintok Sirih
50 km
Stones West Boreas
Appomattox area Deep-water Malaysia
Marjoram
Kaikias
Bakong Larak
Legundi
16 Copyright of Royal Dutch Shell plc 5 September, 2014
SHELL IN NORTH AMERICA
Production and refining capacity as at end 2013
Refinery/ chemical plant
Upstream positions
Midstream positions/capacity
Refinery with LTO capability
Gas monetization options
LNG Canada Carmon Creek
LRS
AOSP
Scotford
Western Canada gas
Proposed Energy East Pipeline
Sarnia Appalachia
Gas to chemicals
Elba LNG
Ho-Ho
Motiva refineries Deer Park
Permian
Permian Express
Martinez
Puget Sound
Proposed midstream positions/capacity
Mobile
Leading industry positions
Growth potential Upstream + Downstream
Integration + opportunities
Production Refining capacity
Rest of the world
North America
Gulf of Mexico
AERA heavy oil
17 Copyright of Royal Dutch Shell plc 5 September, 2014
MARVIN ODUM UPSTREAM AMERICAS DIRECTOR
ROYAL DUTCH SHELL PLC
18 Copyright of Royal Dutch Shell plc 5 September, 2014
UPSTREAM AMERICAS
Deep-water Industry leadership
Heavy oil Mining and in-situ
Resources plays Portfolio repositioning
Integrated Gas Monetizing gas
Arctic Long-term potential
Profitable + competitive today Potential
Deliver our deep-water and heavy oil growth projects
Establish resources plays and integrated gas profitability
Drive sharper cost focus and capital efficiency across our operations
Mars B start-up Appomattox FEED Cardamom commissioning
Carmon Creek under construction
On-going restructuring LNG Canada FEED Evaluating options
19 Copyright of Royal Dutch Shell plc 5 September, 2014
UPSTREAM AMERICAS PORTFOLIO
Production million boe per day
Deep-water Resources plays Heavy oil
Capital investment $ billion
Deep-water Resources plays Heavy oil Pre-FID/other
+5%
-20%
Resources plays Deep-water
Gas monetization options Heavy oil
Western Canada dry gas + LRS
Appalachia dry gas
AOSP + in-situ
Gulf of Mexico
Brazil
LNG Canada
Gas-to-chemicals
Elba LNG
Integration potential
Completed divestments
AERA heavy oil
Permian LRS Argentina
Eastern Canada
Colombia
Resources
Deep-water Resources plays
Heavy oil
10.9 billion boe
Resources 1/1/2014 updated for 2014 announced divestments and acquisitions
Major undeveloped resources
Completed divestments
20 Copyright of Royal Dutch Shell plc 5 September, 2014
IMPROVE FINANCIAL PERFORMANCE: UPSTREAM AMERICAS - FINANCIAL DRIVERS
Earnings and CFFO excluding identified items
Balance sheet Q214 $ billion
Earnings 2013 H1 – 2014 H1
$ billion
On stream Under construction
Resources plays Deep-water
Non productive leases Heavy oil/Arctic
LRS
$3.2 billion clean DD+A 2014 H1 4Q rolling
GAS
Strong recovery in results 2014 H1
~$6 billion CFFO 12 months rolling
Continued drive to improve profitability
2014 H1 2013 H1
- 0.3 0.1
0.5
0.1
0.2
0.5
- 0.1
0.1
1.3
Long term growth
0.2
21 Copyright of Royal Dutch Shell plc 5 September, 2014
NORTH AMERICA RESOURCES PLAYS RESTRUCTURING SHELL PORTFOLIO
Portfolio
North Americas capital investment
$ billion
Resilience
Attr
activ
enes
s
Exit: Eagle Ford Mississippi Lime Rockies LRS Deep Basin (North) Foothills (Burnt Timber) Appalachia (Slippery Rock) Pinedale Haynesville
Hold or Divest
Maintain/Grow: Western Canada gas + integration plays Appalachia Western Canada LRS Permian LRS
completed
LRS plays
Dry gas Acquisitions LRS Divestments
-20%
Resources + potential = discovered + prospective resources as at 1/1/2014 updated for 2014 announced divestments and acquisitions
~10 billion boe resources + potential
Dry gas:
Canada LNG supply
Appalachia appraisal
Liquids rich: Permian + W. Canada appraisal
Profitability focus
-50%
22 Copyright of Royal Dutch Shell plc 5 September, 2014
NORTH AMERICA RESOURCES PLAYS PROGRESS ON COSTS
Portfolio: learning curve
Top quartile in 60% of wells
~$155 million year over year reduction
Right-sizing the organization
~$130 million in savings from overhead reductions
~$40 million year over year reduction in direct lease and field costs
Drilling time reduction
-40%
program years
% improvement Pinedale
Groundbirch
Appalachia
Eagle Ford
Permian
Kaybob
Haynesville
Staff reduction Unit operating expense $/mcfe
-10%
2014 >$500 million in capital and operating cost reductions
23 Copyright of Royal Dutch Shell plc 5 September, 2014
NORTH AMERICA RESOURCES PLAYS APPRAISING NEW POTENTIAL
New Utica sweetspot in Tioga County
11-26 mmscf/day IP rates
~275k net acres + ~1500 well locations
Additional ~155k net acres once Pinedale swap complete
Multiple stacked pays
~70% liquids
Wolfcamp exploration potential
~300k net acres + ~5700 well locations
50/50 JV with Anadarko
Premier position in Duvernay play
Oil + gas condensate window
~365k net acres + ~2400 well locations
Integration potential with heavy oil
Appalachia Utica Permian Western Canada
18km
0 25km
54km
Pembina area
Fox Creek
Rocky Mountain House
Pecos
Tioga
Tioga County
18km
Loving Co
Winkler Co
Ward Co
Kaybob area
24 Copyright of Royal Dutch Shell plc 5 September, 2014
NORTH AMERICA LNG PROGRESSING TO FID
2 x ~6 mtpa first phase
25-year export license for 24 mtpa in place
Joint venture agreement signed
FEED contract awarded
Joint venture: Shell (50%), Kogas, Mitsubishi, PetroChina
Two phased liquefaction project with up to 2.5 mtpa capacity
Joint venture 49% Shell + 51% Kinder Morgan
Shell will be single LNG off-taker (100%)
FERC application filed in March 2014
FEED nearing completion
LNG Canada Elba LNG
25 Copyright of Royal Dutch Shell plc 5 September, 2014
DEEP-WATER GULF OF MEXICO PROJECT FLOW
Execute (under construction) On stream
Select/Define
Auger
Mars
Ursa
Nakika
Brutus
Vito ~100 kboe/d potential >300 million boe resources Shell 51.33% (operator)
Appomattox >150 kboe/d potential >600 million boe resources Shell ~80% (operator)
Caesar Tonga
Cardamom Deep
Mars B
100 km
Cardamom Deep ~50 kboe/d Shell 100% (operator) Tie back to Auger 2014 start-up
Growth outlook1:
~230 kboe/d on stream in Q2 2014 + Mars B continued ramp-up 2014
50 kboe/d to start-up in 2H 2014 and 50 kboe/d under construction
>170 kboe/d new options
FID Discovery
Cardamom
Stones
Appomattox/Vicksburg
Vito
Rydberg
Start-up
1 Shell share
Rydberg ~100mmboe discovery Shell ~57% (operator)
2014 exploration success
Ram Powell
Stones FPSO
Kaikias Oil discovery; further
appraisal required Shell 100% (operator)
Perdido Stones ~50 kboe/d FPSO >250 million boe resources Shell 100% (operator) FPSO under construction 2016 start-up
26 Copyright of Royal Dutch Shell plc 5 September, 2014
DEEP-WATER GULF OF MEXICO DRIVING PROFITABLE GROWTH
Unit cost range source: Rystad
Unit operating cost
$/bbl
Unit cost range Shell unit cost
Drilling moratorium
Mars B start-up
Sustained exploration delivery
Emerging from decline post-Macondo
2014 project start-ups drive new growth
Mars B, Cardamom, Nakika Phase 3
Maintaining cost leadership
Production
thousand boe/d
Cumulative resources added
million boe
Appomattox Vito
Cardamom South Deimos
Vicksburg Vito Appraisal
Appomattox appraisal
Rydberg Stones
West Boreas
Cardamom start-up
Perdido start-up
Kaikias
27 Copyright of Royal Dutch Shell plc 5 September, 2014
DEEP-WATER GULF OF MEXICO MARS B DEVELOPMENT
Mars B production ramp-up progress ‘000 boe/d
First oil February 2014
6 months ahead of schedule
Averaged ~38 kboe/d Q2 14
Capacity > 100 kboe/d
Shell 72% (operator)
Olympus on-site – February 2014
Olympus platform FID September 2010 First Oil February 2014
competitors FID 2010
Olympus in Kiewit shipyard Ingleside, Texas – Summer 2013
3rd well to start in Q4
28 Copyright of Royal Dutch Shell plc 5 September, 2014
DEEP-WATER BRAZIL PROJECT DELIVERY AND NEW POTENTIAL
Phase 2 water injection complete
Injection above target plan
Phase 3 wells completed
Q2/14 ~60 kboe/d
Shell 50% (operator)
Redevelopment complete
First oil February 2014
Production up 20% from Q1 due to well management efforts
Q2/14 ~26 kboe/d
Shell 80% (operator)
First well spudded in August 2014
Joint project team established
Extended well test planned to begin December 2016
Shell 20%
BC-10
Bijupira Salema
Libra
Update picture
29 Copyright of Royal Dutch Shell plc 5 September, 2014
UPSTREAM AMERICAS
Deep-water Industry leadership
Heavy oil Mining and in-situ
Resources plays Portfolio repositioning
Integrated Gas Monetizing gas
Arctic Long-term potential
Profitable + competitive today Potential
Deliver our deep-water and heavy oil growth projects
Establish resources plays and integrated gas profitability
Drive sharper cost focus and capital efficiency across our operations
Mars B start-up Appomattox FEED Cardamom commissioning
Carmon Creek under construction
On-going restructuring LNG Canada FEED Evaluating options
30 Copyright of Royal Dutch Shell plc 5 September, 2014
JOHN ABBOTT DOWNSTREAM DIRECTOR
ROYAL DUTCH SHELL PLC
31 Copyright of Royal Dutch Shell plc 5 September, 2014
DOWNSTREAM STRATEGY
Developing and sustaining competitive advantage through…
Advantaged feedstock +
supply
Improving our footprint
Differentiated Products +
Customer Offer
Leveraging the Brand
Priority to improve our financial performance
Renewed focus on upgrading our portfolio
Returns + free cash flow improvement
32 Copyright of Royal Dutch Shell plc 5 September, 2014
DOWNSTREAM OPERATIONAL EXCELLENCE CONTINUOUS IMPROVEMENT
Port Arthur expansion included from 2013
Focus on HSSE continues
Injuries – TRCF/million working hours
Operating performance % unplanned downtime
million working hours
Refining
Working hours TRCF
Chemicals
Positive overall safety trends
Controlling unplanned downtime
Pernis refinery, The Netherlands
4Q rolling
33 Copyright of Royal Dutch Shell plc 5 September, 2014
DOWNSTREAM COMPETITIVE LANDSCAPE
Earnings excluding identified items; peer group: XOM, LBI, DOW, BP, RDS
Cash flow performance Downstream ROACE $ billion
Chemicals ROACE %
2010 2011 2012 2013 2014
Q2 rolling Shell Chemicals Peer group range
Earnings on local GAAP basis adjusted for inventory valuation differences and excluding identified items; Peer group: Chevron, Total, BP, XOM, RDS
Peer group range Shell Downstream
CFFO excl. WC movements Working capital movements
Cash flow from investments
Free cash flow (RHS)
Priority to improve financial performance
Targeting:
10 - 12% ROACE
>$10 billion p.a. CFFO
$ billion
2013 14Q2 4Q rolling
2012 2011 2010
$ billion
34 Copyright of Royal Dutch Shell plc 5 September, 2014
UPGRADING OUR PORTFOLIO
Downstream asset sales $ billion
Portfolio change
2014 YTD is end August 2014
Announced divestments 2014 ytd: 180,000 b/d refining 300,000 b/d marketing
Asset sales proceeds
Resilience
Attr
activ
enes
s
Selective Growth: Chemicals China LNG for transport Premium fuels + lubes Refinery crude flexibility others
Fix: Motiva Singapore fuels Pernis + Rheinland others
Exit: Italy Norway Australia Denmark others
Optimise footprint
Integrated value capture
Selective investment in growth markets
Capital discipline and project delivery completed
35 Copyright of Royal Dutch Shell plc 5 September, 2014
IMPROVE FINANCIAL PERFORMANCE: NORTH AMERICA DOWNSTREAM
1 Shell share crude distillation capacity
Share of Shell portfolio
~35% of Shell worldwide refining capacity
No. 1 North America fuels retail + lubes market share
Drive to improve financial performance Shell Chemical facility
Scotford
Sarnia
Martinez
Puget Sound
1.2 million b/d refinery capacity
15,400 retail stations
6,000 kilometers pipelines
Refinery 50,000 boed capacity1
Global refining capacity 3.2 million boed total
Global branded retail stations 43,000 stations total
Motiva
North America
Rest of world
Rest of world
North America
Motiva refineries1
Deer Park
Mobile
Geismar
Norco
Rest of North America
36 Copyright of Royal Dutch Shell plc 5 September, 2014
MLP PROPOSAL – SHELL MIDSTREAM ASSETS
SEC S-1 filing 18th June, 2014
Targeting $750 million initial fund raising
Drop-down potential
Colonial system
Initial MLP drop-down %: Zydeco (Ho-Ho) 43% Mars 28.6% Bengal 49% Colonial 1.612%
37 Copyright of Royal Dutch Shell plc 5 September, 2014
Mobile refinery, Alabama
ACCESSING ADVANTAGED FEEDSTOCK NORTH AMERICA LIGHT TIGHT OIL + CANADIAN HEAVY
North America - Advantaged crude processing Crude runs kbbl/day
Moved from 50% advantaged crude processing in 2011 to ~90% 2014 ytd
Achieved with minor capex and logistics changes
Scotford, Edmonton Canada
High margin refinery
Processes 100% advantaged feedstock
Integrated upstream + downstream
Integration value: $4/bbl upstream + $3/bbl chemicals
New debottlenecking potential
Incremental additional capex
Logistics and blending improvements
Pipeline reversal (Ho-Ho) completed
Further options continuing to develop
% of equity capacity
% of equity capacity (RHS) Advantaged N.A. crude
38 Copyright of Royal Dutch Shell plc 5 September, 2014
MOTIVA JOINT VENTURE
Supply and distribution
50-50 JV Shell-Saudi Aramco
Manufacturing: ~1.1 million b/d refining + lubes
Fuels marketing: 35 terminals, ~8,300 retail sites
Supply, trading, logistics – recent advantaged crude logistics success
Port Arthur refinery
Largest refinery in US
Port Arthur refinery expanded to 600,000 b/d
Ramp up in 2013
EXPORTS
ADVANTAGED CRUDE LOGISTICS CANADIAN HEAVY + BAKKEN SHALE
39 Copyright of Royal Dutch Shell plc 5 September, 2014
MOTIVA JV – IMPROVEMENT PLAN
Earnings and cash flow IFRS basis
Earnings $ billion
Cash flow $ billion
Aligned with partner Saudi Aramco on improvement plan, covering:
Refocused delivery strategy
Reliability, crude advantage, unit yields, E2E optimization
Management structure + leadership team changes effective 2014
CFFO excl. working capital movements Capital expenditure
Free cash flow
H2’12 H1’13 H2’13 H1’14
$/bbl
Net income before tax USGC Coking Margin (RHS)
H2’12 H1’13 H2’13 H1’14
2012 2013 2014
40 Copyright of Royal Dutch Shell plc 5 September, 2014
NORTH AMERICA FUELS MARKETING + LUBRICANTS
Fuels volumes and penetration on 100% venture basis; 2014H1 is 12 months rolling
North American sales leader in fuels & lubricants
Strategy focused on premium brands & services, through quality and innovation
Recent launch of PurePlus Technology leveraging our upstream GTL base oils
Retail network well positioned in major demand centres and around our refinery & supply assets
Synthetic Lubricants volume growth – North America
Indexed Premium volume mix (2011 = 100)
Premium fuels penetration (V-Power) - USA
% penetration
Differentiated fuels volume USA Differentiated fuels penetration
41 Copyright of Royal Dutch Shell plc 5 September, 2014
DOWNSTREAM STRATEGY
Developing and sustaining competitive advantage through…
Advantaged feedstock +
supply
Improving our footprint
Differentiated Products +
Customer Offer
Leveraging the Brand
Priority to improve our financial performance
Renewed focus on upgrading our portfolio
Returns + free cash flow improvement
42 Copyright of Royal Dutch Shell plc 5 September, 2014
SIMON HENRY CHIEF FINANCIAL OFFICER
ROYAL DUTCH SHELL PLC
43 Copyright of Royal Dutch Shell plc 5 September, 2014
FINANCIAL FRAMEWORK AND PRIORITIES
CASH PERFORMANCE
INVESTMENT
BALANCE SHEET
CFFO
PAY OUT
Cash dividend Buy-back
Gearing
CFFI
$ billion
%
$ billion
$ billion
Priorities for cash
1. Debt service
2. Dividends: growth policy
3. Capital investment: disciplined through cycle growth
4. Return surplus cash: buy-backs
$ billion
Net debt
4Q rolling
4Q rolling
4Q rolling
44 Copyright of Royal Dutch Shell plc 5 September, 2014
Q214 4Q rolling
Cash generation
Dividend and buy back
UP STREAM
DOWN STREAM
CASH FLOW AND PAY-OUT
CFFO Downstream includes Corporate
$ billion
Dividend track record $ billion
Gearing + balance sheet $ billion
Cash flow from operations Cash flow from investments
Gearing range
Net debt
Dividends declared
Gearing (RHS)
4Q rolling
Maintaining long-term financial framework
> $30 billion distributions (dividends + buy-backs) to shareholders 2014-15
2014-15 buy-back $7-8 billion
Last 3 years
UP STREAM
DOWN STREAM
$ billion
45 Copyright of Royal Dutch Shell plc 5 September, 2014
INVESTMENT PRIORITIES
* includes Corporate
Organic capital investment 2014 $ billion
Credible, competitive, affordable
Investment choices driven on a global thematic basis
Future opportunities
Resources plays
Deep-water
Integrated gas
Upstream engine
Downstream*
Longer term
Growth priorities
Engines
25% Preparing new options
30% Driving new Upstream growth
45% Maintaining competitive cash generation
Exploration + pre-FID
Key growth projects
Smaller growth projects
Care + maintain
46 Copyright of Royal Dutch Shell plc 5 September, 2014
FINANCIAL FRAMEWORK – KEY DRIVERS
Organic free cash flow: cash flow from operations less cash used in investing activities adjusted for major acquisitions and divestments Dividend declared: shares outstanding at end of period x dividend/share ($)
A+D supports portfolio growth $ billion
Organic free cash flow drives dividend $ billion (cash basis)
Divestments
Acquisitions
Cumulative cash surplus (deficit) of divestments over acquisitions
Organic free cash flow
Dividend declared
Cumulative organic FCF surplus (deficit) over dividend declared
47 Copyright of Royal Dutch Shell plc 5 September, 2014
FINANCIAL FRAMEWORK – TRACK RECORD
Free cash flow: cash flow from operations less cash used in investing activities
Balancing financial framework over time $ billion
Free cash flow
Cash dividend and buybacks
Cumulative surplus (deficit) of free cash flow over dividend and buybacks
48 Copyright of Royal Dutch Shell plc 5 September, 2014
BALANCING GROWTH + RETURNS
ROACE CCS earnings excluding identified items * 2015/16 outlook as per March 2014 Management day
CFFO in billion $
Strong + diverse portfolio
Priority to restructure NA resources plays + Oil Products
ROACE (%)
Downstream engine Upstream engine
Integrated gas Deep-water
Resources plays Future opportunities
Bubble size represents Q214 capital employed
Q214 4Q rolling ROACE
2014 Q2 4Q rolling
2015/16 potential*
49 Copyright of Royal Dutch Shell plc 5 September, 2014
COMPETITIVE PERFORMANCE: BALANCING GROWTH AND RETURNS 4Q ROLLING
Free cash flow: cash flow from operations less cash used in investing activities; ROACE underlying: European companies: CCS basis excluding identified items. US companies: reported earnings excluding special non-operating items.
Cash flow from operations $ billion
Free cash flow $ billion
ROACE – underlying %
Shell Peer group
Driving competitive performance
50 Copyright of Royal Dutch Shell plc 5 September, 2014
BEN VAN BEURDEN CHIEF EXECUTIVE OFFICER
ROYAL DUTCH SHELL PLC
51 Copyright of Royal Dutch Shell plc 5 September, 2014
2014 PRIORITIES
Returns and cash flow
Competitive returns for shareholders
Take hard choices on new options
Increase asset sales
Reduce pace of growth investment
Major deep-water start-ups in 2014
Integrate 2013 acquisitions
Deliver new projects
Enhance our capital efficiency
Improve our financial performance
53 Copyright of Royal Dutch Shell plc 5 September, 2014
Frontier exploration program since 2010
Exit from non-material acreage following early well results ($1 billion 2013-14)
Positive results in Western Canada (Duvernay + Wet Montney) and Permian (Wolfcamp)
~60% of wells >1000 boe/d potential
Appraisal continues
Assessing development options
NORTH AMERICA LIQUIDS RICH SHALES EXPLORATION FOCUSSING ON WESTERN CANADA + PERMIAN BASIN
LRS production
Drilling focus in sweet spots
thousand boe/day Cumulative # of exploration wells >1000 boe/d potential
Groundbirch Kaybob
Pembina
Permian
Acreage
Groundbirch drilling
Liquids Associated gas Permian W. Canada Completed divestments Completed divestments
H1 W. Canada Permian
54 Copyright of Royal Dutch Shell plc 5 September, 2014
Addressing underperforming assets
Acquisition cost overhang
Scale & cost reduction
Exit non-material acreage ($2.5 billion ‘13-’14)
Growth opportunity
Canada LNG integration options
New exploration success in Appalachia Utica
NORTH AMERICA ONSHORE DRY GAS FOCUSSING ON WESTERN CANADA + APPALACHIA
Gas production
Rig count
Pinedale Appalachia
Gas
Haynesville
Announced divestments
Groundbirch Deep Basin
Foothills
LNG Canada
Partial divestment
thousand boe/day # of rigs
Gas Associated liquids Haynesville Appalachia Completed divestments
W. Canada
H1 H1 H1
Acreage
Completed divestments Pinedale
55 Copyright of Royal Dutch Shell plc 5 September, 2014
APPALACHIA UTICA LARGE DRY GAS OPPORTUNITY
Tioga
SHELL UTICA FOCUS AREA
Gee Neal
430 k acres (Shell Net)
Including new acreage from Ultra deal
~430,000 net acres in Tioga County – focus area 250-500’ pay thickness >1500 potential wells
Production update: Gee peak rate: ~11 mmscf/d Discovery well in the Utica
play in N.E. Pennsylvania 3,100’ lateral with 13 frac
stages Neal peak rate: ~26 mmscf/d Follow up to Gee well 4,200’ lateral with 16 frac
stages Expect 4-8 wells flowing by year end
56 Copyright of Royal Dutch Shell plc 5 September, 2014
PERMIAN LIQUIDS GROWTH BASIN
Low cost, early Wolfcamp entry Production growth and profitability Thousand boe per day
Loving Co
Ward Co
Winkler Co
Jeff Davis Co
TEXAS
NEW MEXICO Volatile Oil Gas Condensate
Horizontal Wolfcamp play outline
Shell acreage
Avalon appraisal and development
Wolfcamp prospective throughout leasehold
~300,000 net acres – focus area >3500’ stacked pay thickness with large resource potential in Wolfcamp >5700 potential wells – mostly Wolfcamp 70% liquids
Oil/ Liquids Associated gas
57 Copyright of Royal Dutch Shell plc 5 September, 2014
WESTERN CANADA KAYBOB + PEMBINA INDUSTRY LEADING POSITION IN DUVERNAY PLAY
Duvernay play thermal maturity map
Pembina
Kaybob
~ 365,000 net acres in 2 core areas 100’ thick TOC-rich shale ~ 2400 potential wells ~ 60 wells online by year end (1/3 of all wells in play) >1000 boe/d IP for most wells on-line to date
Drilling focus in sweet spots
Cumulative # of exploration wells >1000 boe/d potential
34 wells online through Q2 2014
58 Copyright of Royal Dutch Shell plc 5 September, 2014
~155,000 net acres in 5 blocks ~300-600’ thick shale Early E&A stage 6 wells drilled
ARGENTINA VACA MUERTA LIQUIDS RICH POTENTIAL
Vaca Muerta Águila Mora
Karnes Trough Eagle Ford
Haynesville
Utica Ohio
Vaca Muerta Sierras Blancas
~200 m
Vaca Muerta thermal maturity map Comparative shale thickness section
La Escalonada
Aguila Mora
Rincon de la Ceniza
Cruz de Lorena
Sierras Blancas
Non-operated
Shell operated
59 Copyright of Royal Dutch Shell plc 5 September, 2014
DEEP-WATER GULF OF MEXICO APPOMATTOX HUB
Leadership in Norphlet play
Hub strategy delivering value
>700 million boe discovered in 3 fields
Presently drilling at Gettysburg
>150 kboe/d peak production potential
Semi-submersible development concept
Moved into FEED in February 2014
Shell 80% (operator)
Includes Vicksburg tie-back (75% Shell)
Norphlet play Development concept
Appomattox 80% Shell
20% Nexen
Vicksburg 75% Shell
25% Nexen
Planned Appomattox
Host
Rydberg 57.2% Shell
28.5% Ecopetrol 14.3% Nexen
Shell Leasehold
Discovery
Prospect/Lead
Infrastructure
3 mi
Gettysburg 80% Shell
20% Nexen
60 Copyright of Royal Dutch Shell plc 5 September, 2014
LNG PRICING CONSIDERATIONS
Regional gas prices $/mmbtu
LNG price dynamics – US exports $/mmbtu
HH outlook
Liquefaction + transport costs
Landed cost
Tokyo Bay UK
2010-14
2010-14
61 Copyright of Royal Dutch Shell plc 5 September, 2014
LNG SUPPLY AND DEMAND DYNAMICS
* Risked view of all LNG supply projects
LNG demand million tonnes per annum
LNG supply* million tonnes per annum
N.A. LNG export development
million tonnes per annum
Japan/Korea/Taiwan Europe
India
SE Asia China
Other
Asia Qatar
Australia
Africa
Middle East
S. & Latin America North America
Others
Total NA applications Sanctioned projects
million boe/d million boe/d
62 Copyright of Royal Dutch Shell plc 5 September, 2014
SHELL ARCTIC & NEAR ARCTIC
CANADA
RUSSIA
KAZAKHSTAN
NORWAY
GREENLAND
UNITED STATES
SALYM
KASHAGAN
SAKHALIN
NORTH POLE
ORMEN LANGE
BAFFIN BAY
NIGLINTGAK
CHUKCHI
BEAUFORT
KANUMAS
NORWAY BARENTS
Alaska, Chukchi
Greenland, Baffin Bay
Norway, Ormen Lange
Russia, Sakhalin
Russia, Salym
Kazakhstan, Kashagan
63 Copyright of Royal Dutch Shell plc 5 September, 2014
DOWNSTREAM PORTFOLIO SEGMENTATION + PERFORMANCE
Downstream businesses 2013 CFFO ($ billion)
2013 ROACE (%)
Segmentation into performance units
Action plans to improve returns + CFFO or exit
Focus on cost efficiency
Targeted investment
Bubble size = capital employed
-5% 10%
-20% >40% Chemicals
Merchant refining
Integrated refining
+ marketing value chain
Fuels marketing
Biofuels
Lubricants
ROACE based on CCS earnings excluding identified earnings
64 Copyright of Royal Dutch Shell plc 5 September, 2014
IMPROVING PERFORMANCE OF KEY ASSETS
Over-supplied fuels market
Improving efficiency; advantaged liquids feedstock; energy costs
Cogeneration + cracker debottlenecking projects 2015
High margin refinery
Integrated upstream + downstream
Integration value: $4/bbl upstream + $3/bbl chemicals
New debottlenecking potential
Bukom – performance turnaround Scotford – building on sustained performance Refinery unplanned downtime in %
Unplanned downtime