EX-99.2 3 d645625dex992.htm EX-99.2 EX-99.2

Exhibit 99.2

Royal Dutch Shell plc

Three and nine month periods ended September 30, 2018

Unaudited Condensed Interim Financial Report

 

Royal Dutch Shell plc    Unaudited Condensed Interim Financial Report        5


 

ROYAL DUTCH SHELL PLC

3RD QUARTER 2018 AND NINE MONTHS UNAUDITED RESULTS

 

                        

   LOGO

SUMMARY OF UNAUDITED RESULTS

 

Quarters     

$ million

        Nine months  

Q3 2018

    Q2 2018     Q3 2017     %1           Definition    2018     2017     %  
  5,839       6,024       4,087       +43      Income/(loss) attributable to shareholders         17,762       9,170       +94  
  5,570       5,226       3,698       +51      CCS earnings attributable to shareholders    Note 2      16,499       8,999       +83  
  (54     535       (405      Of which: Identified items    A      783       (2,462  

 

 

   

 

 

   

 

 

            

 

 

   

 

 

   
  5,624       4,691       4,103       +37     

CCS earnings attributable to shareholders excluding identified items

        15,716       11,461       +37  
  169       121       105       

Add: CCS earnings attributable to non-controlling interest

        411       324    

 

 

   

 

 

   

 

 

            

 

 

   

 

 

   
  5,793       4,812       4,208       +38      CCS earnings excluding identified items         16,127       11,785       +37  
             Of which:          
  2,292       2,305       1,282                Integrated Gas         7,036       3,632    
  1,886       1,457       562                Upstream         4,894       1,441    
  2,010       1,660       2,668                Downstream         5,436       7,686    
  (395     (610     (304              Corporate         (1,239     (974  

 

 

   

 

 

   

 

 

            

 

 

   

 

 

   
  12,092       9,500       7,582       +59      Cash flow from operating activities         31,064       28,375       +9  
  (4,082     29       (3,912      Cash flow from investing activities         (8,347     (7,364  
  8,010       9,529       3,670        Free cash flow    H      22,717       21,011    

 

 

   

 

 

   

 

 

            

 

 

   

 

 

   
  0.70       0.72       0.50       +40      Basic earnings per share ($)         2.14       1.12       +91  
  0.67       0.63       0.45       +49      Basic CCS earnings per share ($)    B      1.99       1.10       +81  
  0.68       0.56       0.50       +36     

Basic CCS earnings per share excl. identified items ($)

        1.89       1.40       +35  

 

 

   

 

 

   

 

 

            

 

 

   

 

 

   
  0.47       0.47       0.47       —        Dividend per share ($)         1.41       1.41       —    

 

 

   

 

 

   

 

 

            

 

 

   

 

 

   

 

1. 

Q3 on Q3 change.

CCS earnings attributable to shareholders excluding identified items were $5.6 billion, compared with $4.1 billion in the third quarter 2017. Earnings primarily benefited from increased realised oil, gas and LNG prices as well as higher contributions from trading in Integrated Gas, partly offset by lower margins in Downstream, higher deferred tax charges in Upstream and adverse currency exchange effects.

Cash flow from operating activities for the third quarter 2018 was $12.1 billion, which included negative working capital movements of $2.6 billion, compared with $7.6 billion in the third quarter 2017, which included negative working capital movements of $1.3 billion1. Excluding working capital movements, cash flow from operations of $14.7 billion mainly reflected increased earnings and higher dividends received.

Total dividends distributed to shareholders in the quarter were $3.9 billion. In October, the first tranche of the share buyback programme was completed, with almost 61 million A ordinary shares bought back for cancellation for an aggregate consideration of $2.0 billion. Today, Shell launches the second tranche of the share buyback programme, with a maximum aggregate consideration of $2.5 billion in the period up to and including January 28, 2019.

Royal Dutch Shell Chief Executive Officer Ben van Beurden commented:

“Good operational delivery across all Shell businesses produced one of our strongest-ever quarters, with cash flow from operations of $14.7 billion, excluding working capital movements. Our strong financial performance allowed us to cover the cash dividend, interest payments, share buybacks and to further pay down debt.

Our strategy remains on track. We have completed the first tranche of share buybacks, in line with our intention to purchase $25 billion of our shares by the end of 2020, and today I’m pleased to announce the second tranche. Meanwhile, the transformation of our portfolio continued, with further divestments of non-strategic assets and the final investment decision on LNG Canada.”

 

1 

Revised from negative working capital movements of $2.5 billion. See Note 7 and Definition I.

 

Royal Dutch Shell plc    Unaudited Condensed Interim Financial Report        6


ADDITIONAL PERFORMANCE MEASURES

 

Quarters   

$ million

     Nine months  

Q3 2018

    Q2 2018     Q3 2017     %1         Definition      2018     2017     %  
  5,830       5,771       5,742        Capital investment      C        16,784       17,228    
  613       2,502       1,365        Divestments      D        4,403       10,866    

 

 

   

 

 

   

 

 

            

 

 

   

 

 

   
  3,596       3,442       3,657     -2    Total production available for sale (thousand boe/d)         3,625       3,634       —    

 

 

   

 

 

   

 

 

            

 

 

   

 

 

   
  68.38       66.24       47.06     +45    Global liquids realised price ($/b) 2         65.19       47.03       +39  
  4.92       4.86       4.25     +16    Global natural gas realised price ($/thousand scf) 2         4.91       4.30       +14  

 

 

   

 

 

   

 

 

            

 

 

   

 

 

   
  9,312       10,006       9,477     -2    Operating expenses      G        29,037       28,307       +3  
  9,248       9,844       9,197     +1    Underlying operating expenses      G        28,878       27,717       +4  

 

 

   

 

 

   

 

 

            

 

 

   

 

 

   
  8.7     8.1     5.0      ROACE      E        8.7     5.0  
  7.1     6.5     4.6      ROACE (CCS basis excluding identified items)      E        7.1     4.6  

 

 

   

 

 

   

 

 

            

 

 

   

 

 

   
  23.1     23.6     25.7      Gearing3      F        23.1     25.7  

 

 

   

 

 

   

 

 

            

 

 

   

 

 

   

 

1. 

Q3 on Q3 change.

2. 

Following a reassessment, second and first quarter 2018 (liquids realised price) and the four quarters 2017 (natural gas realised price) have been revised.

3. 

With effect from 2018, the net debt calculation has been amended (see Definition F). Gearing as previously published at September 30, 2017 was 25.4%.

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

THIRD QUARTER 2018 PORTFOLIO DEVELOPMENTS

Integrated Gas

In October, Shell and its partners announced a final investment decision on LNG Canada (Shell interest 40%). Construction has started, and first LNG is expected before the middle of the next decade.

Upstream

During the quarter, Shell and its partner Chevron won a 35-year production-sharing contract for the Saturno pre-salt block located off the coast of Brazil in the Santos Basin (Shell interest 50%).

In October, Shell announced the sale of its 36.8% non-operating interest in the Danish Underground Consortium to Norwegian Energy Company ASA, for a consideration of $1.9 billion, with an effective date of January 1, 2017.

In October, Shell and its partners announced first production at the Lula Extreme South deep-water development in the Brazilian pre-salt Santos Basin (Shell pre-unitisation interest 25%).

Downstream

In October, Shell completed the sale of its Downstream business in Argentina to Raízen. The business acquired by Raízen will continue the relationship with Shell through various commercial agreements, including long-term brand licence agreements as well as products supply and offtake contracts.

 

Royal Dutch Shell plc    Unaudited Condensed Interim Financial Report        7


PERFORMANCE BY SEGMENT

INTEGRATED GAS

 

Quarters     

$ million

   Nine months  

Q3 2018

    Q2 2018      Q3 2017     %1           2018      2017      %  
  2,116       3,358        1,217       +74      Segment earnings      7,865        4,230        +86  
  (176     1,053        (65     

Of which: Identified items (Definition A)

     829        598     
  2,292       2,305        1,282       +79      Earnings excluding identified items      7,036        3,632        +94  

 

 

   

 

 

    

 

 

         

 

 

    

 

 

    
  3,320       2,950        1,742       +91      Cash flow from operating activities      8,831        5,644        +56  

 

 

   

 

 

    

 

 

         

 

 

    

 

 

    
  862       804        1,148       -25      Capital investment (Definition C)      2,977        2,784        +7  

 

 

   

 

 

    

 

 

         

 

 

    

 

 

    
  208       223        226       -8      Liquids production available for sale (thousand b/d)      214        194        +10  
  4,156       4,243        4,496       -8      Natural gas production available for sale (million scf/d)      4,267        3,836        +11  

 

 

   

 

 

    

 

 

         

 

 

    

 

 

    
  924       954        1,001       -8      Total production available for sale (thousand boe/d)      950        856        +11  
  8.18       8.46        8.45       -3      LNG liquefaction volumes (million tonnes)      25.54        24.72        +3  

 

 

   

 

 

    

 

 

         

 

 

    

 

 

    
  17.27       17.97        16.97       +2      LNG sales volumes (million tonnes)      53.82        48.89        +10  

 

 

   

 

 

    

 

 

         

 

 

    

 

 

    

 

1. 

Q3 on Q3 change.

Third quarter identified items primarily reflected impairments of $131 million, mainly related to Shell’s investment in a joint venture. Other identified items mainly comprised a loss of $48 million related to the fair value accounting of commodity derivatives, as well as a gain of $26 million on sale of assets.

Compared with the third quarter 2017, Integrated Gas earnings excluding identified items benefited from higher realised oil, gas and LNG prices, as well as higher trading margins from LNG cargo diversions. This was partly offset by a decrease in production, which was 8% lower than in the third quarter 2017, mainly due to higher maintenance activity. LNG liquefaction volumes were 3% lower, largely driven by divestments.

Cash flow from operating activities included negative working capital movements of $421 million, compared with negative movements of $58 million2 in the same quarter a year ago. Cash flow from operating activities excluding working capital movements increased compared with the same quarter a year ago, mainly as a result of higher earnings.

Nine months identified items primarily reflected a net gain of $904 million on sale of assets, mainly related to divestments in Thailand and India. Identified items also included impairments of $181 million, mainly driven by Shell’s investment in a joint venture, as well as a gain on fair value accounting of commodity derivatives of $160 million.

Compared with the first nine months of 2017, Integrated Gas earnings excluding identified items benefited from increased realised oil, gas and LNG prices, as well as a stronger contribution from trading and higher volumes. This was partly offset by higher operating expenses. Total production increased by 11%, mainly due to lower maintenance activity and the ramp-up of new fields. LNG liquefaction volumes were 3% higher, compared with the first nine months of 2017, mainly as a result of increased feedgas availability, partly offset by divestments.

Cash flow from operating activities included negative working capital movements of $853 million, compared with negative movements of $297 million3 in the same period last year. Cash flow from operating activities excluding working capital movements increased compared with the same period a year ago as a result of higher earnings, partly offset by cash margining on derivatives and higher tax payments.

 

2 

Revised from negative working capital movements of $532 million. See Note 7 and Definition I.

3 

Revised from negative working capital movements of $1,255 million. See Note 7 and Definition I.

 

Royal Dutch Shell plc    Unaudited Condensed Interim Financial Report        8


UPSTREAM

 

Quarters     

$ million

   Nine months  
Q3 2018      Q2 2018     Q3 2017      %1           2018      2017     %  
  2,249        1,094       575        +291      Segment earnings      5,197        (499     +1,141  
  363        (363     13             Of which: Identified items (Definition A)      303        (1,940  
  1,886        1,457       562        +236      Earnings excluding identified items      4,894        1,441       +240  

 

 

    

 

 

   

 

 

          

 

 

    

 

 

   
  6,663        5,528       4,222        +58      Cash flow from operating activities      15,792        12,572       +26  

 

 

    

 

 

   

 

 

          

 

 

    

 

 

   
  3,037        3,021       2,805        +8      Capital investment (Definition C)      8,537        10,163       -16  

 

 

    

 

 

   

 

 

          

 

 

    

 

 

   
  1,602        1,507       1,626        -1      Liquids production available for sale (thousand b/d)      1,561        1,650       -5  
  6,206        5,687       5,974        +4      Natural gas production available for sale (million scf/d)      6,461        6,546       -1  

 

 

    

 

 

   

 

 

          

 

 

    

 

 

   
  2,672        2,488       2,656        +1      Total production available for sale (thousand boe/d)      2,675        2,778       -4  

 

 

    

 

 

   

 

 

          

 

 

    

 

 

   

 

1. 

Q3 on Q3 change.

Third quarter identified items were primarily driven by impairment movements mainly in North America, which resulted in an overall reversal of $381 million. This included an impairment reversal of $912 million for a shale asset, partly offset by an impairment charge of $515 million for an offshore asset. Identified items also comprised a net gain of $115 million on sale of assets, mainly related to divestments in the UK, as well as a charge of $108 million associated with the impact of the weakening Brazilian real on a deferred tax position.

Compared with the third quarter 2017, Upstream earnings excluding identified items reflected higher realised oil and gas prices as well as lower depreciation. These were partly offset by negative movements in deferred tax positions, which included impacts arising from changes in the upstream fiscal regime in Brazil, as well as a provision for unitisation settlements related to pre-salt assets in Brazil. Total production increased by 1% compared with the third quarter 2017, mainly driven by new field start-ups and ramp-ups, partly offset by divestments. Excluding portfolio impacts, production was 4% higher than in the same quarter a year ago.

Cash flow from operating activities included negative working capital movements of $631 million, compared with negative movements of $495 million4 in the same quarter a year ago. Cash flow from operating activities excluding working capital movements increased compared with the same quarter a year ago as a result of higher earnings, partly offset by higher tax payments.

Nine months identified items primarily reflected a net gain of $1,306 million on sale of assets, primarily related to divestments in Iraq, Malaysia and Oman. This was partly offset by a net charge of $665 million associated with the impact of the weakening Brazilian real on a deferred tax position, as well as a net impairment charge of $285 million, mainly related to assets in North America and deep-water rig joint ventures.

Compared with the first nine months of 2017, Upstream earnings excluding identified items benefited from higher realised oil and gas prices and lower depreciation, partly offset by negative movements in deferred tax positions and lower volumes. Production was 4% lower, mainly due to divestments and field decline, partly offset by new fields start-ups and ramp-ups. Excluding portfolio impacts, production increased by 3%.

Cash flow from operating activities included negative working capital movements of $976 million, compared with negative movements of $414 million5 in the same period last year. Cash flow from operating activities excluding working capital movements increased compared with the first nine months of 2017 mainly as a result of stronger earnings, partly offset by higher tax payments.

 

 

 

4 

Revised from negative working capital movements of $627 million. See Note 7 and Definition I.

5 

Revised from negative working capital movements of $757 million. See Note 7 and Definition I.

 

Royal Dutch Shell plc    Unaudited Condensed Interim Financial Report        9


DOWNSTREAM

 

Quarters     

$ million

   Nine months  
Q3 2018      Q2 2018     Q3 2017     %1           2018     2017     %  
  1,709        1,168       2,405       -29      Segment earnings2      4,683       7,142       -34  
  (301)        (492     (263          Of which: Identified items (Definition A)      (753     (544  
  2,010        1,660       2,668       -25      Earnings excluding identified items2      5,436       7,686       -29  
         

Of which:

      
  1,473        1,102       2,018       -27     

Oil Products

     3,656       5,576       -34  
  424        114       891       -52     

Refining & Trading

     679       2,366       -71  
  1,049        988       1,127       -7     

Marketing

     2,977       3,210       -7  
  537        558       650       -17     

Chemicals

     1,780       2,110       -16  

 

 

    

 

 

   

 

 

         

 

 

   

 

 

   
  1,037        990       949       +9      Cash flow from operating activities      5,134       9,780       -48  

 

 

    

 

 

   

 

 

         

 

 

   

 

 

   
  1,860        1,908       1,743       +7      Capital investment (Definition C)      5,137       4,208       +22  

 

 

    

 

 

   

 

 

         

 

 

   

 

 

   
  2,675        2,557       2,592       +3      Refinery processing intake (thousand b/d)      2,623       2,566       +2  

 

 

    

 

 

   

 

 

         

 

 

   

 

 

   
  6,697        6,745       6,557       +2      Oil products sales volumes (thousand b/d)      6,742       6,511       +4  

 

 

    

 

 

   

 

 

         

 

 

   

 

 

   
  4,145        4,875       4,540       -9      Chemicals sales volumes (thousand tonnes)      13,534       13,551       —    

 

 

    

 

 

   

 

 

         

 

 

   

 

 

   

 

1. 

Q3 on Q3 change.

2. 

Earnings are presented on a CCS basis (See Note 2).

Third quarter identified items primarily comprised impairments totalling $136 million, mainly related to assets in Singapore, and a loss of $101 million on fair value accounting of commodity derivatives.

Compared with the third quarter 2017, Downstream earnings excluding identified items were negatively impacted by lower margins, adverse currency exchange effects and higher operating expenses.

Cash flow from operating activities included negative working capital movements of $1,886 million, compared with negative movements of $1,277 million6 in the same quarter a year ago. Cash flow from operating activities excluding working capital movements benefited from reduced contributions to pension funds compared with the third quarter 2017. Excluding this impact, cash flow from operating activities excluding working capital movements remained at a similar level to that of the third quarter 2017.

Oil Products

 

   

Refining & Trading earnings excluding identified items reflected lower refining margins, lower trading results and higher tax expenses, compared with the third quarter 2017.

Refinery availability increased to 92% compared with 87% in the third quarter 2017, mainly due to the impacts of Hurricane Harvey in 2017 and improved operational performance.

 

   

Marketing earnings excluding identified items were negatively impacted by adverse currency exchange effects and lower margins, largely offset by lower tax expenses.

Compared with the third quarter 2017, Oil Products sales volumes were 2% higher, reflecting increased refining and trading volumes as well as stronger marketing volumes.

Chemicals

 

   

Chemicals earnings excluding identified items were impacted by lower cracker margins, reflecting less favourable industry conditions and higher feedstock prices, compared with the third quarter 2017. Earnings were also impacted by higher tax expenses.

Chemicals manufacturing plant availability increased to 93% from 88% in the third quarter 2017, mainly due to the impacts of Hurricane Harvey in 2017.

 

 

6 

Revised from negative working capital movements of $1,446 million. See Note 7 and Definition I.

 

Royal Dutch Shell plc    Unaudited Condensed Interim Financial Report        10


Nine months identified items primarily reflected a loss on fair value accounting of commodity derivatives of $437 million and impairments totalling $226 million, mainly related to assets in Singapore.

Compared with the first nine months of 2017, Downstream earnings excluding identified items were negatively impacted by lower margins, adverse currency exchange effects and higher operating expenses.

Cash flow from operating activities included negative working capital movements of $4,406 million, compared with positive movements of $186 million7 in the first nine months 2017. Excluding working capital movements, cash flow from operations remained at a similar level to that of the same period a year ago.

Oil Products

 

   

Refining & Trading earnings excluding identified items reflected lower refining margins, lower trading results, adverse currency exchange effects and higher operating expenses, compared with the first nine months of 2017.

Refinery availability was 90%, compared with 91% in the first nine months of 2017.

 

   

Marketing earnings excluding identified items were impacted by adverse currency exchange effects and higher operating expenses, compared with the first nine months of 2017.

Compared with the first nine months of 2017, Oil Products sales volumes were 4% higher, mainly due to increased refining and trading volumes.

Chemicals

 

   

Chemicals earnings excluding identified items were impacted by lower cracker margins and higher operating expenses compared with the same period a year ago.

Chemicals manufacturing plant availability increased to 93% from 91% in the first nine months of 2017, mainly as a result of lower maintenance activity.

 

 

7 

Revised from positive working capital movements of $77 million. See Note 7 and Definition I.

 

Royal Dutch Shell plc    Unaudited Condensed Interim Financial Report        11


CORPORATE

 

Quarters    

$ million

   Nine months  
Q3 2018     Q2 2018     Q3 2017          2018     2017  
  (335     (273     (394   Segment earnings      (835     (1,578
  60       337       (90  

Of which: Identified items (Definition A)

     404       (604
  (395     (610     (304   Earnings excluding identified items      (1,239     (974
        

 

 

   

 

 

 
  1,072       32       669     Cash flow from operating activities      1,307       379  
        

 

 

   

 

 

 

Third quarter identified items mainly reflected a tax credit of $68 million related to the impact of the weakening Brazilian real on financing positions.

Compared with the third quarter 2017, Corporate earnings excluding identified items reflected adverse currency exchange effects, partly offset by higher tax credits.

Nine months identified items mainly reflected a tax credit of $399 million related to the impact of the weakening Brazilian real on financing positions.

Compared with the first nine months of 2017, Corporate earnings excluding identified items reflected adverse currency exchange effects as well as lower tax credits, partly offset by lower interest expense.

OUTLOOK FOR THE FOURTH QUARTER 2018

Compared with the fourth quarter 2017, Integrated Gas production is expected to be 0 – 40 thousand boe/d lower, mainly due to divestments. LNG liquefaction volumes are expected to be up to 0.3 million tonnes higher, mainly driven by increased feed gas availability and lower maintenance activity.

Compared with the fourth quarter 2017, Upstream production is expected to be 80 – 120 thousand boe/d higher, mainly due to lower maintenance activity and growth from new fields more than offsetting the impacts of field decline and divestments.

Refinery availability is expected to increase in the fourth quarter 2018 compared with the same period in 2017, as a result of lower maintenance activity.

Oil Products sales volumes are expected to be 40 – 70 thousand boe/d lower, compared with the same period a year ago, mainly as a result of the divestment of the Downstream business in Argentina.

Chemicals availability is expected to increase in the fourth quarter 2018 as a result of lower maintenance activity compared with the fourth quarter 2017.

Corporate earnings excluding identified items are expected to be a net charge of $350 – 400 million in the fourth quarter 2018. This excludes the impact of currency exchange rate effects.

FORTHCOMING EVENTS

Shell will host Management Day events on June 4, 2019 in London, and on June 5, 2019 in New York.

Fourth quarter 2018 results and dividends are scheduled to be announced on January 31, 2019. First quarter 2019 results and dividends are scheduled to be announced on May 2, 2019. Second quarter 2019 results and dividends are scheduled to be announced on August 1, 2019. Third quarter 2019 results and dividends are scheduled to be announced on October 31, 2019.

 

Royal Dutch Shell plc    Unaudited Condensed Interim Financial Report        12


UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF INCOME

 

Quarters     

$ million

   Nine months  

Q3 2018

     Q2 2018      Q3 2017           2018      2017  
  100,151        96,765        75,830      Revenue1      286,151        219,757  
  1,000        716        1,062      Share of profit of joint ventures and associates      2,755        3,191  
  397        1,787        841      Interest and other income      3,024        798  

 

 

    

 

 

    

 

 

       

 

 

    

 

 

 
  101,548        99,268        77,733      Total revenue and other income      291,930        223,746  

 

 

    

 

 

    

 

 

       

 

 

    

 

 

 
  76,070        73,121        54,849      Purchases      215,719        159,352  
  6,256        6,988        6,497      Production and manufacturing expenses      20,167        20,089  
  2,829        2,781        2,750      Selling, distribution and administrative expenses      8,198        7,556  
  227        237        230      Research and development      672        662  
  322        243        326      Exploration      795        1,024  
  5,198        5,359        6,408      Depreciation, depletion and amortisation2      15,891        20,427  
  909        929        1,011      Interest expense      2,774        3,058  

 

 

    

 

 

    

 

 

       

 

 

    

 

 

 
  91,811        89,658        72,071      Total expenditure      264,216        212,168  

 

 

    

 

 

    

 

 

       

 

 

    

 

 

 
  9,737        9,610        5,662      Income/(loss) before taxation      27,714        11,578  
  3,696        3,422        1,450      Taxation charge/(credit)      9,454        2,080  

 

 

    

 

 

    

 

 

       

 

 

    

 

 

 
  6,041        6,188        4,212      Income/(loss) for the period1      18,260        9,498  
  202        164        125      Income/(loss) attributable to non-controlling interest      498        328  

 

 

    

 

 

    

 

 

       

 

 

    

 

 

 
  5,839        6,024        4,087      Income/(loss) attributable to Royal Dutch Shell plc shareholders      17,762        9,170  

 

 

    

 

 

    

 

 

       

 

 

    

 

 

 
  0.70        0.72        0.50      Basic earnings per share ($)3      2.14        1.12  
  0.70        0.72        0.49      Diluted earnings per share ($)3      2.12        1.11  

 

 

    

 

 

    

 

 

       

 

 

    

 

 

 

 

1. 

See Note 2 “Segment information”.

2. 

Third quarter 2018 includes an overall impairment reversal of $253 million, mainly related to Upstream assets in North America, where an impairment reversal for a shale asset was partly offset by an impairment loss for an offshore asset. 

3. 

See Note 3 “Earnings per share”.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

Quarters     

$ million

   Nine months  

Q3 2018

    Q2 2018      Q3 2017           2018      2017  
  6,041       6,188        4,212      Income/(loss) for the period      18,260        9,498  
        Other comprehensive income/(loss) net of tax:      
       

Items that may be reclassified to income in later periods:

     
  (500     (2,782      1,552     

- Currency translation differences

     (2,818      4,801  
  —         —          328     

- Unrealised gains/(losses) on securities1

     —          335  
  (1     (2      —       

- Debt instruments remeasurements1

     (15      —    
  (69     (632      (327   

- Cash flow hedging gains/(losses)

     (769      (68
  43       (98      —       

- Deferred cost of hedging1

     (148      —    
  8       (57      (8   

- Share of other comprehensive income/(loss) of joint ventures and associates

     (27      124  

 

 

   

 

 

    

 

 

       

 

 

    

 

 

 
  (519     (3,571      1,545      Total      (3,777      5,192  
       

Items that are not reclassified to income in later periods:

     
  615       1,265        (512   

- Retirement benefits remeasurements

     3,162        2,660  
  84       131        —       

- Equity instruments remeasurements1

     (203      —    
  (2     —          —       

- Share of other comprehensive income/(loss) of joint ventures and associates

     (1      —    

 

 

   

 

 

    

 

 

       

 

 

    

 

 

 
  697       1,396        (512   

Total

     2,958        2,660  

 

 

   

 

 

    

 

 

       

 

 

    

 

 

 
  178       (2,175      1,033      Other comprehensive income/(loss) for the period      (819      7,852  

 

 

   

 

 

    

 

 

       

 

 

    

 

 

 
  6,219       4,013        5,245      Comprehensive income/(loss) for the period      17,441        17,350  
  173       83        177      Comprehensive income/(loss) attributable to non-controlling interest      349        445  

 

 

   

 

 

    

 

 

       

 

 

    

 

 

 
  6,046       3,930        5,068      Comprehensive income/(loss) attributable to Royal Dutch Shell plc shareholders      17,092        16,905  

 

 

   

 

 

    

 

 

       

 

 

    

 

 

 

 

1. 

See Note 1 “Basis of preparation” regarding IFRS 9 Financial Instruments.

 

Royal Dutch Shell plc    Unaudited Condensed Interim Financial Report        13


CONDENSED CONSOLIDATED BALANCE SHEET

 

$ million

             
     September 30,
2018
     December 31,
2017
 

Assets

     

Non-current assets

     

Intangible assets

     23,684        24,180  

Property, plant and equipment

     224,172        226,380  

Joint ventures and associates

     25,619        27,927  

Investments in securities

     3,057        7,222  

Deferred tax

     11,565        13,791  

Retirement benefits

     4,121        2,799  

Trade and other receivables

     7,902        8,475  

Derivative financial instruments1

     623        919  
  

 

 

    

 

 

 
     300,743        311,693  
  

 

 

    

 

 

 

Current assets

     

Inventories

     29,313        25,223  

Trade and other receivables

     51,097        44,565  

Derivative financial instruments1

     7,724        5,304  

Cash and cash equivalents

     19,112        20,312  
  

 

 

    

 

 

 
     107,246        95,404  
  

 

 

    

 

 

 

Total assets

     407,989        407,097  
  

 

 

    

 

 

 

Liabilities

     

Non-current liabilities

     

Debt

     64,455        73,870  

Trade and other payables

     3,133        3,447  

Derivative financial instruments1

     1,359        981  

Deferred tax

     14,083        13,007  

Retirement benefits

     10,521        13,247  

Decommissioning and other provisions

     23,206        24,966  
  

 

 

    

 

 

 
     116,757        129,518  
  

 

 

    

 

 

 

Current liabilities

     

Debt

     13,923        11,795  

Trade and other payables

     54,713        51,410  

Derivative financial instruments1

     7,389        5,253  

Taxes payable

     9,496        7,250  

Retirement benefits

     411        594  

Decommissioning and other provisions

     3,814        3,465  
  

 

 

    

 

 

 
     89,746        79,767  
  

 

 

    

 

 

 

Total liabilities

     206,503        209,285  
  

 

 

    

 

 

 

Equity attributable to Royal Dutch Shell plc shareholders

     197,533        194,356  

Non-controlling interest

     3,953        3,456  
  

 

 

    

 

 

 

Total equity

     201,486        197,812  
  

 

 

    

 

 

 

Total liabilities and equity

     407,989        407,097  
  

 

 

    

 

 

 

 

1. 

See Note 6 “Derivative financial instruments and debt excluding finance lease liabilities”.

 

Royal Dutch Shell plc    Unaudited Condensed Interim Financial Report        14


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

     Equity attributable to Royal Dutch Shell plc
shareholders
   

 

 

$ million

   Share
capital1
    Shares
held in
trust
    Other
reserves2
    Retained
earnings
    Total     Non-
controlling
interest
    Total
equity
 

At January 1, 2018 (as previously published)

     696       (917     16,932       177,645       194,356       3,456       197,812  

Impact of IFRS 93

     —         —         (138     88       (50     —         (50

At January 1, 2018 (as revised)

     696       (917     16,794       177,733       194,306       3,456       197,762  

Comprehensive income/(loss) for the period

     —         —         (670     17,762       17,092       349       17,441  

Transfer from other comprehensive income4

     —         —         (1,108     1,108       —         —         —    

Dividends

     —         —         —         (11,806     (11,806     (489     (12,295

Repurchases of shares5

     (4     —         4       (2,007     (2,007     —         (2,007

Share-based compensation6

     —         (301     25       177       (99     —         (99

Other changes in non-controlling interest

     —         —         —         47       47       637       684  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At September 30, 2018

     692       (1,218     15,045       183,014       197,533       3,953       201,486  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At January 1, 2017

     683       (901     11,298       175,566       186,646       1,865       188,511  

Comprehensive income/(loss) for the period

     —         —         7,735       9,170       16,905       445       17,350  

Dividends

     —         —         —         (11,731     (11,731     (309     (12,040

Scrip dividends

     9       —         (9     3,120       3,120       —         3,120  

Share-based compensation

     —         350       (309     (9     32       —         32  

Other changes in non-controlling interest

     —         —         —         54       54       1,506       1,560  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At September 30, 2017

     692       (551     18,715       176,170       195,026       3,507       198,533  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

1. 

See Note 4 “Share capital”.

2. 

See Note 5 “Other reserves”.

3. 

See Note 1 “Basis of preparation”.

4. 

In accordance with IFRS 9 Financial Instruments, the transfer mainly relates to the sale of Shell’s shareholding in Malaysia LNG Tiga Sdn Bhd ($617 million) and the sale of shares in Canadian Natural Resources Limited ($481 million).

5. 

On July 26, 2018 Shell entered into an irrevocable, non-discretionary arrangement to enable the repurchase of A ordinary and/or B ordinary shares for cancellation, covering the period up to and including October 25, 2018. The repurchase of shares recognised through retained earnings in the quarter represents the aggregate maximum consideration Shell is contractually bound to under this first tranche of the buyback programme, plus associated stamp duty.

6. 

The amendments to IFRS 2 Share-based Payment became effective January 1, 2018. Following adoption of the amendments, components of share-based payments that were previously classified as cash-settled are now classified as equity-settled. This resulted in an increase of $172 million in the share plan reserve within other reserves and a net increase of $125 million in retained earnings.

 

Royal Dutch Shell plc    Unaudited Condensed Interim Financial Report        15


CONSOLIDATED STATEMENT OF CASH FLOWS

 

Quarters    

$ million

   Nine months  

Q3 2018

    Q2 2018     Q3 2017          2018     2017  
  6,041       6,188       4,212     Income/(loss) for the period      18,260       9,498  
      Adjustment for:     
  2,694       2,808       1,734     - Current tax      7,671       5,124  
  690       734       839     - Interest expense (net)      2,161       2,548  
  5,198       5,359       6,408     - Depreciation, depletion and amortisation      15,891       20,427  
  149       46       47     - Exploration well write-offs1      304       356  
  (163     (1,568     (459   - Net (gains)/losses on sale and revaluation of non-current assets and businesses      (2,338     (321
  (1,000     (716     (1,062   - Share of (profit)/loss of joint ventures and associates      (2,755     (3,191
  1,374       1,244       1,082     - Dividends received from joint ventures and associates      3,368       3,351  
  (1,693     (3,459     (1,237   - (Increase)/decrease in inventories      (4,871     (711
  (2,722     (3,061     (3,816   - (Increase)/decrease in current receivables1      (6,466     (33
  1,788       4,374       3,776     - Increase/(decrease) in current payables1      5,678       366  
  560       (624     (1,076   - Derivative financial instruments1      (827     (899
  711       634       (1,319   - Deferred tax, retirement benefits, decommissioning and other provisions1      1,294       (4,467
  299       156       (31   - Other1      467       269  
  (1,834     (2,615     (1,516   Tax paid2      (6,773     (3,942

 

 

   

 

 

   

 

 

      

 

 

   

 

 

 
  12,092       9,500       7,582     Cash flow from operating activities      31,064       28,375  

 

 

   

 

 

   

 

 

      

 

 

   

 

 

 
  (5,800     (5,275     (5,018   Capital expenditure      (15,864     (14,984
  (78     (179     (42   Investments in joint ventures and associates      (672     (393
  231       1,422       236     Proceeds from sale of property, plant and equipment and businesses      2,400       5,942  
  935       163       874     Proceeds from sale of joint ventures and associates      1,119       1,956  
  236       210       237     Interest received      602       567  
  394       3,688       (199   Other2,3      4,068       (452

 

 

   

 

 

   

 

 

      

 

 

   

 

 

 
  (4,082     29       (3,912   Cash flow from investing activities      (8,347     (7,364

 

 

   

 

 

   

 

 

      

 

 

   

 

 

 
  (155     (2,968     (544   Net increase/(decrease) in debt with maturity period within three months      (416     (1,412
      Other debt:     
  424       123       29     - New borrowings      788       640  
  (2,260     (3,582     (2,702   - Repayments      (7,232     (7,617
  (864     (895     (858   Interest paid      (2,648     (2,710
  (1     —         279     Change in non-controlling interest      673       287  
      Cash dividends paid to:     
  (3,949     (3,886     (3,016   - Royal Dutch Shell plc shareholders      (11,806     (8,611
  (134     (228     (113   - Non-controlling interest      (486     (309
  (1,414     —         —       Repurchases of shares      (1,414     —    
  (2     (192     (221   Shares held in trust: net sales/(purchases) and dividends received      (1,088     (274

 

 

   

 

 

   

 

 

      

 

 

   

 

 

 
  (8,355     (11,628     (7,146   Cash flow from financing activities      (23,629     (20,006

 

 

   

 

 

   

 

 

      

 

 

   

 

 

 
  (11     (360     183     Currency translation differences relating to cash and cash equivalents      (288     564  

 

 

   

 

 

   

 

 

      

 

 

   

 

 

 
  (356     (2,459     (3,293   Increase/(decrease) in cash and cash equivalents      (1,200     1,569  

 

 

   

 

 

   

 

 

      

 

 

   

 

 

 
  19,468       21,927       23,992     Cash and cash equivalents at beginning of period      20,312       19,130  

 

 

   

 

 

   

 

 

      

 

 

   

 

 

 
  19,112       19,468       20,699     Cash and cash equivalents at end of period      19,112       20,699  

 

 

   

 

 

   

 

 

      

 

 

   

 

 

 

 

1.

Prior period comparatives within Cash flow from operating activities have been revised to conform with current year presentation. See Note 7 “Change in presentation of Consolidated Statement of Cash Flows”.

2.

With effect from the third quarter 2018, tax paid on divestments has been reclassified from Cash flow from operating activities to Cash flow from investing activities. 2018 comparatives have been revised to conform with this presentation change, with a cash outflow of $45 million reclassified from “Tax paid” to “Other” (all related to first quarter 2018). No revision was made for prior years.

3.

Second quarter 2018 includes $3,307 million from the sale of shares in Canadian Natural Resources Limited, which were received in connection with the oil sands divestment.

 

Royal Dutch Shell plc    Unaudited Condensed Interim Financial Report        16


NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

 

1.

Basis of preparation

These unaudited Condensed Consolidated Interim Financial Statements (“Interim Statements”) of Royal Dutch Shell plc (“the Company”) and its subsidiaries (collectively referred to as “Shell”) have been prepared in accordance with IAS 34 Interim Financial Reporting as issued by the International Accounting Standards Board and as adopted by the European Union, and on the basis of the same accounting principles as those used in the Annual Report and Form 20-F for the year ended December 31, 2017 (pages 142 to 148) as filed with the US Securities and Exchange Commission, except for the adoption of IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers on January 1, 2018, and should be read in conjunction with that filing.

IFRS 9 sets out the requirements for recognising and measuring financial assets, financial liabilities and certain contracts to buy or sell non-financial items. Furthermore, this standard facilitates the use of hedge accounting and results in different income recognition upon the sale of certain investments in securities. The adoption of IFRS 9 resulted in a decrease of $83 million in equity at January 1, 2018, mainly representing the recognition of additional provisions for impairment of receivables under the expected loss model. In addition, changing the measurement basis from amortised cost to fair value for certain financial assets resulted in an increase of $33 million in equity at January 1, 2018. Furthermore, a reclassification within equity between other reserves and retained earnings, primarily representing deferred cost of hedging, was recognised.

IFRS 15 provides a single model of accounting for revenue arising from contracts with customers based on the identification and satisfaction of performance obligations, and revenue from contracts with customers that is distinguished from other sources. Shell has adopted IFRS 15 with effect from January 1, 2018 and has elected to apply the modified retrospective transition approach. Although IFRS 15 does not generally represent a change from Shell’s current practice, the accounting for certain contracts, such as those with provisional pricing or take-or-pay arrangements, and underlifts and overlifts, has been identified as an area of change. However, these do not have a significant effect on Shell’s accounting or disclosures, and therefore no transition adjustment is presented.

IFRS 16 Leases will be applied by Shell with effect from January 1, 2019. Under the new standard, all lease contracts, with limited exceptions, are recognised in the financial statements by way of right-of-use assets and corresponding lease liabilities. Shell will apply the modified retrospective transition approach without restating comparative information.

Compared with the existing accounting for operating leases under IAS 17, application of the new standard will have a significant impact on the classification of expenditures and consequently the classification of cash flow from operating activities, cash flow from investing activities and cash flow from financing activities. It will also impact the timing of expenses recognised in the statement of income.

Differences between the operating lease commitments under the current standard and the additional lease liabilities recognised on balance sheet at January 1, 2019 are expected to be mainly driven by the impact of discounting lease payments, short-term leases, the use of hindsight to assess options to extend or terminate leases and commencement of lease contracts after January 1, 2019. To determine the impact upon application of the new standard, a detailed review of contracts is underway. No impact is expected in relation to lease contracts previously classified as finance leases.

The financial information presented in the Interim Statements does not constitute statutory accounts within the meaning of section 434(3) of the Companies Act 2006 (“the Act”). Statutory accounts for the year ended December 31, 2017 were published in Shell’s Annual Report and Form 20-F and a copy was delivered to the Registrar of Companies for England and Wales. The auditor’s report on those accounts was unqualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report and did not contain a statement under sections 498(2) or 498(3) of the Act.

 

Royal Dutch Shell plc    Unaudited Condensed Interim Financial Report        17


2.

Segment information

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

INFORMATION BY SEGMENT

 

Quarters    

$ million

   Nine months  

Q3 2018

    Q2 2018     Q3 2017          2018     2017  
     

Third-party revenue

    
  10,848       10,293       8,316    

Integrated Gas

     31,862       24,469  
  1,769       2,346       1,654    

Upstream

     6,687       5,079  
  87,518       84,119       65,843    

Downstream

     247,563       190,170  
  16       7       17    

Corporate

     39       39  
  100,151       96,765       75,830    

Total third-party revenue1

     286,151       219,757  

 

 

   

 

 

   

 

 

      

 

 

   

 

 

 
     

Inter-segment revenue

    
  1,242       1,271       1,101    

Integrated Gas

     3,601       2,779  
  10,526       9,494       7,991    

Upstream

     28,924       24,211  
  1,559       1,927       1,142    

Downstream

     4,280       2,967  
  —         —         —      

Corporate

     —         —    

 

 

   

 

 

   

 

 

      

 

 

   

 

 

 
     

CCS earnings

    
  2,116       3,358       1,217    

Integrated Gas

     7,865       4,230  
  2,249       1,094       575    

Upstream

     5,197       (499
  1,709       1,168       2,405    

Downstream

     4,683       7,142  
  (335     (273     (394  

Corporate

     (835     (1,578
  5,739       5,347       3,803    

Total

     16,910       9,295  

 

 

   

 

 

   

 

 

      

 

 

   

 

 

 

 

1. 

Includes revenue from sources other than from contracts with customers, which mainly comprises the impact of fair value accounting of commodity derivatives. Third quarter 2018 includes a charge of $1,078 million (Q2 2018: $1,047 million charge; nine months 2018: $1,591 million charge).

RECONCILIATION OF INCOME FOR THE PERIOD TO CCS EARNINGS

 

Quarters     

$ million

   Nine months  

Q3 2018

    Q2 2018      Q3 2017           2018      2017  
  5,839       6,024        4,087     

Income/(loss) attributable to Royal Dutch Shell plc shareholders

     17,762        9,170  
  202       164        125     

Income/(loss) attributable to non-controlling interest

     498        328  

 

 

   

 

 

    

 

 

       

 

 

    

 

 

 
  6,041       6,188        4,212     

Income/(loss) for the period

     18,260        9,498  
       

Current cost of supplies adjustment:

     
  (381     (1,105      (528   

Purchases

     (1,760      (230
  95       273        145     

Taxation

     435        62  
  (16     (9      (26   

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

     (25      (35

 

 

   

 

 

    

 

 

       

 

 

    

 

 

 
  (302     (841      (409   

Current cost of supplies adjustment1

     (1,350      (203

 

 

   

 

 

    

 

 

       

 

 

    

 

 

 
  5,739       5,347        3,803     

CCS earnings

     16,910        9,295  
       

of which:

     
  5,570       5,226        3,698     

CCS earnings attributable to Royal Dutch Shell plc shareholders

     16,499        8,999  
  169       121        105     

CCS earnings attributable to non-controlling interest

     411        296  

 

 

   

 

 

    

 

 

       

 

 

    

 

 

 

 

1. 

The adjustment attributable to Royal Dutch Shell plc shareholders is a negative $269 million in the third quarter 2018 (Q2 2018: negative $798 million; Q3 2017: negative $389 million; nine months 2018: negative $1,263 million; nine months 2017: negative $171 million).

 

Royal Dutch Shell plc    Unaudited Condensed Interim Financial Report        18


3.

Earnings per share

EARNINGS PER SHARE

 

Quarters

          Nine months  

Q3 2018

   Q2 2018      Q3 2017           2018      2017  

5,839

     6,024        4,087     

Income/(loss) attributable to Royal Dutch Shell plc shareholders

($ million)

     17,762        9,170  
         Weighted average number of shares used as the basis for determining:      

8,290.3

     8,309.4        8,249.6      Basic earnings per share (million)      8,301.4        8,206.1  

8,353.1

     8,376.0        8,324.9      Diluted earnings per share (million)      8,368.7        8,280.3  

 

4.

Share capital

ISSUED AND FULLY PAID ORDINARY SHARES OF €0.07 EACH1

 

     Number of shares      Nominal value ($ million)  
     A     B        A         B          Total    

At January 1, 2018

     4,597,136,050       3,745,486,731        387       309        696  

Repurchases of shares

     (43,054,969     —          (4     —          (4
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

At September 30, 2018

     4,554,081,081       3,745,486,731        383       309        692  
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

At January 1, 2017

     4,428,903,813       3,745,486,731        374       309        683  

Scrip dividends

     115,510,804       —          9       —          9  
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

At September 30, 2017

     4,544,414,617       3,745,486,731        383       309        692  
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

1. 

Share capital at September 30, 2018 also included 50,000 issued and fully paid sterling deferred shares of £1 each.

At Royal Dutch Shell plc’s Annual General Meeting on May 22, 2018, the Board was authorised to allot ordinary shares in Royal Dutch Shell plc, and to grant rights to subscribe for, or to convert, any security into ordinary shares in Royal Dutch Shell plc, up to an aggregate nominal amount of €194 million (representing 2,771 million ordinary shares of €0.07 each), and to list such shares or rights on any stock exchange. This authority expires at the earlier of the close of business on August 22, 2019, and the end of the Annual General Meeting to be held in 2019, unless previously renewed, revoked or varied by Royal Dutch Shell plc in a general meeting.

 

Royal Dutch Shell plc    Unaudited Condensed Interim Financial Report        19


5.

Other reserves

OTHER RESERVES

 

$ million

   Merger
reserve
    Share
premium
reserve
     Capital
redemption
reserve
     Share plan
reserve
    Accumulated
other
comprehensive
income
    Total  

At January 1, 2018 (as previously published)

     37,298       154        84        1,440       (22,044     16,932  

Impact of IFRS 9

     —         —          —          —         (138     (138

At January 1, 2018 (as revised)

     37,298       154        84        1,440       (22,182     16,794  

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

     —         —          —          —         (670     (670

Transfer from other comprehensive income

     —         —          —          —         (1,108     (1,108

Repurchases of shares

     —         —          4        —         —         4  

Share-based compensation

     —         —          —          25       —         25  
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

At September 30, 2018

     37,298       154        88        1,465       (23,960     15,045  
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

At January 1, 2017

     37,311       154        84        1,644       (27,895     11,298  

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

     —         —          —          —         7,735       7,735  

Scrip dividends

     (9     —          —          —         —         (9

Share-based compensation

     —         —          —          (309     —         (309
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

At September 30, 2017

     37,302       154        84        1,335       (20,160     18,715  
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

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

 

6.

Derivative financial instruments and debt excluding finance lease liabilities

As disclosed in the Consolidated Financial Statements for the year ended December 31, 2017, presented in the Annual Report and Form 20-F for that year, Shell is exposed to the risks of changes in fair value of its financial assets and liabilities. The fair values of the financial assets and liabilities are defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Methods and assumptions used to estimate the fair values at September 30, 2018 are consistent with those used in the year ended December 31, 2017, and the carrying amounts of derivative financial instruments measured using predominantly unobservable inputs have not changed materially since that date.

With effect from 2018, current and non-current derivative assets and liabilities are no longer presented as part of “Trade and other receivables” and “Trade and other payables”, but separately disclosed on the Balance Sheet to provide more insight.

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

DEBT EXCLUDING FINANCE LEASE LIABILITIES

 

$ million

   September 30, 2018      December 31, 2017  

Carrying amount

     64,101        70,140  

Fair value1

     66,643        74,650  
  

 

 

    

 

 

 

 

1. 

Mainly determined from the prices quoted for these securities.

 

Royal Dutch Shell plc    Unaudited Condensed Interim Financial Report        20


7.

Change in presentation of Consolidated Statement of Cash Flows

With effect from 2018, the reconciliation from “Income for the period” to “Cash flow from operating activities” has been revised to provide more insight and improve correlation with the Balance Sheet and Statement of Income. “Cash flow from operating activities” itself remains unchanged.

Exploration well write-offs, previously presented under “Other”, are shown separately. Changes in current and non-current derivative financial instruments, previously presented under “Decrease/(increase) in working capital” and “Other”, are presented under a new line item “Derivative financial instruments”. Changes in current retirement benefits and decommissioning provisions, previously included in “Increase/(decrease) in payables”, are presented under “Deferred tax, retirement benefits, decommissioning and other provisions”, together with changes in non-current balances. The impact of these changes is presented below.

 

$ million

         Quarters  
     Q1 2017     Q2 2017     Q3 2017     Q4 2017     Full year 2017  

Working capital movements (as previously published)

     (1,828     2,258       (2,467     (1,121     (3,158

Impact of working capital definition changes on:

          

- (Increase)/decrease in current receivables

     (1,087     (238     1,018       (585     (892

- Increase/(decrease) in current payables

     1,350       444       172       (166     1,800  

Working capital movements (as revised) (I)

     (1,565     2,464       (1,277     (1,872     (2,250
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flow from operating activities excluding working capital movements (as previously published)

     11,336       9,027       10,049       8,396       38,808  

Impact of working capital definition changes on:

          

- Exploration well write-offs

     284       25       47       541       897  

- Derivative financial instruments

     49       128       (1,076     (140     (1,039

- Deferred tax, retirement benefits, decommissioning and other provisions

     (104     (129     (161     12       (382

- Other

     (492     (230     —         338       (384

Cash flow from operating activities excluding working capital movements (as revised) (II)

     11,073       8,821       8,859       9,147       37,900  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flow from operating activities (unchanged) (I + II)

     9,508       11,285       7,582       7,275       35,650  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Royal Dutch Shell plc    Unaudited Condensed Interim Financial Report        21


DEFINITIONS

 

A.

Identified items

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

IDENTIFIED ITEMS

 

Quarters     

$ million

   Nine months  

Q3 2018

    Q2 2018      Q3 2017           2018      2017  
       

Identified items before tax

     
  163       1,568        461     

- Divestment gains/(losses)

     2,356        322  
  253       (418      (510   

- Impairments

     (582      (3,788
  (239     (218      (452   

- Fair value accounting of commodity derivatives and certain gas contracts

     (494      236  
  (68     (166      (84   

- Redundancy and restructuring

     (171      (373
  (9     7        (195   

- Other

     51        (941

 

 

   

 

 

    

 

 

       

 

 

    

 

 

 
  100       773        (780   

Total identified items before tax

     1,160        (4,544

 

 

   

 

 

    

 

 

       

 

 

    

 

 

 
       

Tax impact

     
  (41     (156      (137   

- Divestment gains/(losses)

     (207      60  
  (143     13        105     

- Impairments

     (114      1,067  
  70       104        54     

- Fair value accounting of commodity derivatives and certain gas contracts

     190        (30
  10       63        13     

- Redundancy and restructuring

     57        101  
  (52     (260      275     

- Impact of exchange rate movements on tax balances

     (357      733  
  2       (2      65     

- Other

     54        123  

 

 

   

 

 

    

 

 

       

 

 

    

 

 

 
  (154     (238      375     

Total tax impact

     (377      2,054  

 

 

   

 

 

    

 

 

       

 

 

    

 

 

 
       

Identified items after tax

     
  122       1,412        324     

- Divestment gains/(losses)

     2,149        382  
  110       (405      (405   

- Impairments

     (696      (2,721
  (169     (114      (398   

- Fair value accounting of commodity derivatives and certain gas contracts

     (304      206  
  (58     (103      (71   

- Redundancy and restructuring

     (114      (272
  (52     (260      275     

- Impact of exchange rate movements on tax balances

     (357      733  
  (7     5        (130   

- Other

     105        (818

 

 

   

 

 

    

 

 

       

 

 

    

 

 

 
  (54     535        (405   

Impact on CCS earnings

     783        (2,490

 

 

   

 

 

    

 

 

       

 

 

    

 

 

 
       

Of which:

     
  (176     1,053        (65   

Integrated Gas

     829        598  
  363       (363      13     

Upstream

     303        (1,940
  (301     (492      (263   

Downstream

     (753      (544
  60       337        (90   

Corporate

     404        (604

 

 

   

 

 

    

 

 

       

 

 

    

 

 

 
  —         —          —       

Impact on CCS earnings attributable to non-controlling interest

     —          (28

 

 

   

 

 

    

 

 

       

 

 

    

 

 

 
  (54     535        (405   

Impact on CCS earnings attributable to shareholders

     783        (2,462

 

 

   

 

 

    

 

 

       

 

 

    

 

 

 

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

 

Royal Dutch Shell plc    Unaudited Condensed Interim Financial Report        22


Fair value accounting of commodity derivatives and certain gas contracts: In the ordinary course of business, Shell enters into contracts to supply or purchase oil and gas products, as well as power and environmental products. Shell also enters into contracts for tolling, pipeline and storage capacity. Derivative contracts are entered into for mitigation of resulting economic exposures (generally price exposure) and these derivative contracts are carried at period-end market price (fair value), with movements in fair value recognised in income for the period. Supply and purchase contracts entered into for operational purposes, as well as contracts for tolling, pipeline and storage capacity, are, by contrast, recognised when the transaction occurs; furthermore, inventory is carried at historical cost or net realisable value, whichever is lower. As a consequence, accounting mismatches occur because: (a) the supply or purchase transaction is recognised in a different period, or (b) the inventory is measured on a different basis. In addition, certain contracts are, due to pricing or delivery conditions, deemed to contain embedded derivatives or written options and are also required to be carried at fair value even though they are entered into for operational purposes. The accounting impacts are reported as identified items.

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

Other identified items represent other credits or charges Shell’s management assesses should be excluded to provide additional insight, such as the impact arising from changes in tax legislation and certain provisions for onerous contracts or litigation.

 

B.

Basic CCS earnings per share

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

 

C.

Capital investment

Capital investment is a measure used to make decisions about allocating resources and assessing performance. It comprises capital expenditure, new investments in joint ventures and associates, exploration expense excluding well write-offs, new finance leases and investments in Integrated Gas, Upstream and Downstream equity securities, all of which are recognised on an accruals basis.

The reconciliation of “Capital expenditure” to “Capital investment” is as follows.

 

Quarters

    

$ million

   Nine months  

Q3 2018

    Q2 2018      Q3 2017           2018      2017  
  5,800       5,275        5,018     

Capital expenditure

     15,864        14,984  
  78       179        42     

Investments in joint ventures and associates

     672        393  
  172       195        280     

Exploration expense, excluding exploration wells written off

     489        668  
  184       37        312     

Finance leases

     403        744  
  (404     85        90     

Other1

     (644      439  

 

 

   

 

 

    

 

 

       

 

 

    

 

 

 
  5,830       5,771        5,742     

Capital investment

     16,784        17,228  
       

Of which:

     
  862       804        1,148     

Integrated Gas

     2,977        2,784  
  3,037       3,021        2,805     

Upstream

     8,537        10,163  
  1,860       1,908        1,743     

Downstream

     5,137        4,208  
  71       38        46     

Corporate

     133        73  

 

1. 

Third quarter 2018 includes an adjustment of $541 million to negate the impact of an internal restructuring related to Upstream Brazil operations.

 

Royal Dutch Shell plc    Unaudited Condensed Interim Financial Report        23


D.

Divestments

Divestments is a measure used to monitor the progress of Shell’s divestment programme. This measure comprises proceeds from sale of property, plant and equipment and businesses, joint ventures and associates, and other Integrated Gas, Upstream and Downstream investments in equity securities, reported in “Cash flow from investing activities”, adjusted onto an accruals basis and for any share consideration received or contingent consideration initially recognised upon the related divestment, as well as proceeds from the sale of interests in entities while retaining control (for example, proceeds from sale of interest in Shell Midstream Partners, L.P.), which are included in “Change in non-controlling interest” within “Cash flow from financing activities”.

In future periods, the proceeds from any disposal of shares received as divestment consideration, and proceeds from realisation of contingent consideration, will be included in “Cash flow from investing activities”.

The reconciliation of “Proceeds from sale of property, plant and equipment and businesses” to “Divestments” is as follows.

 

Quarters    

$ million

   Nine months  

Q3 2018

     Q2 2018      Q3 2017          2018      2017  
  231        1,422        236    

Proceeds from sale of property, plant and equipment and businesses

     2,400        5,942  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

 
  935        163        874    

Proceeds from sale of joint ventures and associates

     1,119        1,956  
  56        138        —      

Share and contingent consideration1

     194        2,829  
  —          —          275    

Proceeds from sale of interests in entities while retaining control

     673        278  
  (609      779        (20  

Other2

     17        (139

 

 

    

 

 

    

 

 

      

 

 

    

 

 

 
  613        2,502        1,365    

Divestments

     4,403        10,866  
       

Of which:

     
  317        1,995        22    

Integrated Gas

     2,326        56  
  222        486        187    

Upstream

     1,282        8,288  
  20        21        1,156    

Downstream

     741        2,504  
  54        —          —      

Corporate

     54        18  

 

1. 

This is valued at the date of the related divestment, instead of when these shares are disposed of or the contingent consideration is realised.

2. 

Third quarter 2018 includes an adjustment of $883 million to negate the impact of an internal restructuring related to Upstream Brazil operations. Second quarter 2018 includes $636 million from the sale of Shell’s shareholding in Malaysia LNG Tiga Sdn Bhd.

 

E.

Return on average capital employed

Return on average capital employed (ROACE) measures the efficiency of Shell’s utilisation of the capital that it employs. In this calculation, ROACE is defined as income for the current and previous three quarters, adjusted for after-tax interest expense, as a percentage of the average capital employed for the same period. Capital employed consists of total equity, current debt and non-current debt.

 

$ million

   Quarters  
     Q3 2018     Q2 2018     Q3 2017  

Income for current and previous three quarters

     22,197       20,368       11,106  

Interest expense after tax

     2,435       2,604       3,088  
  

 

 

   

 

 

   

 

 

 

Income before interest expense

     24,632       22,972       14,194  
  

 

 

   

 

 

   

 

 

 

Capital employed – opening

     286,889       286,604       286,558  

Capital employed – closing

     279,864       281,711       286,889  
  

 

 

   

 

 

   

 

 

 

Capital employed – average

     283,376       284,158       286,723  
  

 

 

   

 

 

   

 

 

 

ROACE

     8.7     8.1     5.0
  

 

 

   

 

 

   

 

 

 

Return on average capital employed on a CCS basis excluding identified items is defined as the sum of CCS earnings attributable to shareholders excluding identified items for the current and previous three quarters, as a percentage of the average capital employed for the same period.

 

Royal Dutch Shell plc    Unaudited Condensed Interim Financial Report        24


$ million

   Quarters  
     Q3 2018     Q2 2018     Q3 2017  

CCS earnings excluding identified items

     20,019       18,498       13,256  
  

 

 

   

 

 

   

 

 

 

Capital employed – average

     283,376       284,158       286,723  

ROACE on a CCS basis excluding identified items

     7.1     6.5     4.6
  

 

 

   

 

 

   

 

 

 

 

F.

Gearing

Gearing is a key measure of Shell’s capital structure and is defined as net debt as a percentage of total capital. With effect from 2018, the net debt calculation includes the fair value of derivative financial instruments used to hedge foreign exchange and interest rate risks relating to debt and associated collateral balances. Management believes this amendment is useful, because it reduces the volatility of net debt caused by fluctuations in foreign exchange and interest rates and eliminates the potential impact of related collateral payments or receipts. Debt-related derivative financial instruments are a subset of the derivative financial instrument assets and liabilities presented on the Balance Sheet. Collateral balances are reported under “Trade and other receivables” or “Trade and other payables” as appropriate. Prior period comparatives have been revised to reflect the change in net debt calculation.

 

$ million

   Quarters
     September 30, 2018   June 30, 2018   September 30, 2017

Current debt

       13,923       9,924       8,675

Non-current debt

       64,455       70,547       79,681
    

 

 

     

 

 

     

 

 

 

Total debt1

       78,378       80,471       88,356
    

 

 

     

 

 

     

 

 

 

Add: Debt-related derivative financial instruments: net liability/(asset) 2

       1,247       1,208       1,156

Less: Cash and cash equivalents

       (19,112 )       (19,468 )       (20,699 )
    

 

 

     

 

 

     

 

 

 

Net debt

       60,513       62,211       68,813
    

 

 

     

 

 

     

 

 

 

Add: Total equity

       201,486       201,240       198,533
    

 

 

     

 

 

     

 

 

 

Total capital

       261,999       263,451       267,346
    

 

 

     

 

 

     

 

 

 

Gearing3

       23.1 %       23.6 %       25.7 %
    

 

 

     

 

 

     

 

 

 

 

1. 

Includes finance lease liabilities of $14,277 million at September 30, 2018, $14,464 million at June 30, 2018, and $15,400 million at September 30, 2017.

2. 

There were no collateral balances in the quarters presented.

3. 

Gearing as previously published at December 31, 2017, and at September 30, 2017, was 24.8% and 25.4% respectively. Gearing as previously published at December 31, 2016, was 28.0% (29.1% as per revised net debt calculation).

 

G.

Operating expenses

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

 

Quarters     

$ million

   Nine months  

Q3 2018

    Q2 2018      Q3 2017           2018      2017  
  6,256       6,988        6,497      Production and manufacturing expenses      20,167        20,089  
  2,829       2,781        2,750      Selling, distribution and administrative expenses      8,198        7,556  
  227       237        230      Research and development      672        662  

 

 

   

 

 

    

 

 

       

 

 

    

 

 

 
  9,312       10,006        9,477      Operating expenses      29,037        28,307  

 

 

   

 

 

    

 

 

       

 

 

    

 

 

 
        Of which identified items:      
  (64     (162      (131   

(Redundancy and restructuring charges)/reversal

     (159      (413
  —         —          (149   

(Provisions)/reversal

     —          (177

 

 

   

 

 

    

 

 

       

 

 

    

 

 

 
  (64     (162      (280         (159      (590

 

 

   

 

 

    

 

 

       

 

 

    

 

 

 
  9,248       9,844        9,197     

Underlying operating expenses

     28,878        27,717  

 

 

   

 

 

    

 

 

       

 

 

    

 

 

 

 

Royal Dutch Shell plc    Unaudited Condensed Interim Financial Report        25


H.

Free cash flow

Free cash flow is used to evaluate cash available for financing activities, including dividend payments, after investment in maintaining and growing our business. It is defined as the sum of “Cash flow from operating activities” and “Cash flow from investing activities” as shown on page 6.

 

I.

Cash flow from operating activities excluding working capital movements

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

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

 

Quarters     

$ million

   Nine months  

Q3 2018

    Q2 2018      Q3 2017           2018      2017  
  12,092       9,500        7,582      Cash flow from operating activities      31,064        28,375  

 

 

   

 

 

    

 

 

       

 

 

    

 

 

 
  (1,693     (3,459      (1,237    - (Increase)/decrease in inventories      (4,871      (711
  (2,722     (3,061      (3,816    - (Increase)/decrease in current receivables1      (6,466      (33
  1,788       4,374        3,776      - Increase/(decrease) in current payables1      5,678        366  

 

 

   

 

 

    

 

 

       

 

 

    

 

 

 
  (2,627     (2,146      (1,277    (Increase)/decrease in working capital2      (5,659      (378

 

 

   

 

 

    

 

 

       

 

 

    

 

 

 
  14,719       11,646        8,859      Cash flow from operating activities excluding working capital movements2      36,723        28,753  

 

 

   

 

 

    

 

 

       

 

 

    

 

 

 

 

1. 

See Note 7 “Change in presentation of Consolidated Statement of Cash Flows”.

2. 

As previously published, working capital increased by $2,467 million in the third quarter 2017, and by $2,037 million in the first nine months 2017. Cash flow from operating activities excluding working capital movements, as previously published, was $10,049 million in the third quarter 2017, and $30,412 million in the first nine months 2017.

 

Royal Dutch Shell plc    Unaudited Condensed Interim Financial Report        26


CAUTIONARY STATEMENT

All amounts shown throughout this announcement are unaudited. All peak production figures in Portfolio Developments are quoted at 100% expected production.

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

This announcement contains forward-looking statements (within the meaning of the US Private Securities Litigation Reform Act of 1995) concerning the financial condition, results of operations and businesses of Royal Dutch Shell. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of Royal Dutch Shell to market risks and statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of terms and phrases such as “aim”, “ambition”, ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘estimate’’, ‘‘expect’’, ‘‘goals’’, ‘‘intend’’, ‘‘may’’, ‘‘objectives’’, ‘‘outlook’’, ‘‘plan’’, ‘‘probably’’, ‘‘project’’, ‘‘risks’’, “schedule”, ‘‘seek’’, ‘‘should’’, ‘‘target’’, ‘‘will’’ and similar terms and phrases. There are a number of factors that could affect the future operations of Royal Dutch Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this announcement, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for Shell’s products; (c) currency fluctuations; (d) drilling and production results; (e) reserves estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and regulatory developments including regulatory measures addressing climate change; (k) economic and financial market conditions in various countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; and (m) changes in trading conditions. No assurance is provided that future dividend payments will match or exceed previous dividend payments. All forward-looking statements contained in this announcement are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Additional risk factors that may affect future results are contained in Royal Dutch Shell’s Form 20-F for the year ended December 31, 2017 (available at www.shell.com/investor and www.sec.gov). These risk factors also expressly qualify all forward-looking statements contained in this announcement and should be considered by the reader. Each forward-looking statement speaks only as of the date of this announcement, November 1, 2018. Neither Royal Dutch Shell plc nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this announcement.

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

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

This announcement contains inside information.

November 1, 2018

 

 

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

 

 

Contacts:

- Linda Szymanski, Company Secretary

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

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

LEI number of Royal Dutch Shell plc: 21380068P1DRHMJ8KU70

Classification: Inside Information

 

Royal Dutch Shell plc    Unaudited Condensed Interim Financial Report        27


APPENDIX

PORTFOLIO DEVELOPMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2018

Portfolio Developments for the six months ended June 30, 2018, can be found in the Royal Dutch Shell plc Form 6-K filed with the SEC on July 26, 2018.

LIQUIDITY AND CAPITAL RESOURCES FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2018

 

   

Cash and cash equivalents decreased to $19.1 billion at September 30, 2018, from $19.5 billion at June 30, 2018.

 

   

Cash flow from operating activities was an inflow of $12.1 billion for the third quarter 2018, mainly driven by third quarter earnings and dividends from joint ventures and associates, partly offset by a negative movement in working capital.

 

   

Cash flow from investing activities was an outflow of $4.1 billion, mainly driven by capital expenditure of $5.8 billion, partly offset by proceeds from the sale of joint ventures and associates of $0.9 billion and other items totalling $0.4 billion.

 

   

Cash flow from financing activities was an outflow of $ 8.4 billion, mainly driven by dividend payments to Royal Dutch Shell plc shareholders of $3.9 billion, net repayments of debt of $2.0 billion and repurchases of shares of $1.4 billion.

 

   

Total current and non-current debt decreased to $78.4 billion at September 30, 2018, compared with $80.5 billion at June 30, 2018. Total debt excluding finance leases decreased by $1.9 billion and the carrying amount of finance leases decreased by $0.2 billion. No debt was issued in the third quarter 2018 under the US shelf registration or Euro medium-term note (EMTN) programmes.

 

   

Cash dividends paid to Royal Dutch Shell plc shareholders were $3.9 billion in the third quarter 2018, compared with $3.0 billion in the third quarter 2017. The scrip dividend programme has been cancelled with effect from the fourth quarter 2017 interim dividend. Under this programme, an additional $0.9 billion dividends were distributed in the third quarter 2017.

 

   

Dividends of $0.47 per share are announced on November 1, 2018, in respect of the third quarter 2018. These dividends are payable on December 19, 2018. In the case of B shares, the dividends will be payable through the dividend access mechanism and are expected to be treated as UK-source rather than Dutch-source. See the Annual Report and Form 20-F for the year ended December 31, 2017 for additional information on the dividend access mechanism.

LIQUIDITY AND CAPITAL RESOURCES FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

 

   

Cash and cash equivalents decreased to $19.1 billion at September 30, 2018, from $20.7 billion at September 30, 2017.

 

   

Cash flow from operating activities was an inflow of $31.1 billion for the nine months ended September 30, 2018, mainly driven by earnings, partly offset by a negative movement in working capital.

 

   

Cash flow from investing activities was an outflow of $8.3 billion for the nine months ended September 30, 2018, mainly driven by capital expenditure of $15.9 billion, partially offset by other items of $4.1 billion (mainly related to the sale of shares in Canadian Natural Resources Limited) and by proceeds from the sale of property, plant and equipment and businesses of $2.4 billion.

 

   

Cash flow from financing activities was an outflow of $23.6 billion for the nine months ended 2018, mainly driven by dividend payments to Royal Dutch Shell plc shareholders of $11.8 billion, net repayments of debt of $6.9 billion, and interest payments of $2.6 billion.

 

   

Total current and non-current debt decreased to $78.4 billion at September 30, 2018, compared with $88.4 billion at September 30, 2017. Total debt excluding finance leases decreased by $8.9 billion and the carrying amount of finance leases decreased by $1.1 billion. No debt was issued during the nine months ended September 30, 2018 under the US shelf registration or EMTN programmes.

   

Cash dividends paid to Royal Dutch Shell plc shareholders were $11.8 billion for the nine months ended September 30, 2018, compared with $8.6 billion for the same period last year. Under the scrip dividend programme, an additional $3.1 billion dividends were distributed to Royal Dutch Shell plc shareholders in the first nine months of 2017.

 

Royal Dutch Shell plc    Unaudited Condensed Interim Financial Report        28


CAPITALISATION AND INDEBTEDNESS

The following table sets out the unaudited consolidated combined capitalisation and indebtedness of Shell at September 30, 2018. This information is derived from the Unaudited Condensed Consolidated Financial Statements.

CAPITALISATION AND INDEBTEDNESS

 

     $ million  
     September 30, 2018  

Equity attributable to Royal Dutch Shell plc shareholders

     197,533  

Current debt

     13,923  

Non-current debt

     64,455  

Total debt[A]

     78,378  

Total capitalisation

     275,911  

[A] Of the total carrying amount of debt at September 30, 2018, $64.1 billion was unsecured, $14.3 billion was secured and $53.4 billion was issued by Shell International Finance B.V., a 100%-owned subsidiary of Royal Dutch Shell plc with its debt guaranteed by Royal Dutch Shell plc (December 31, 2017: $58.5 billion).

RATIO OF EARNINGS TO FIXED CHARGES

The following table sets out the consolidated unaudited ratio of earnings to fixed charges for the years ended December 31, 2013, 2014, 2015, 2016, 2017 and the nine months ended September 30, 2018:

 

     $ million
     Nine
months
ended
September 30
  Years ended December 31
     2018   2017   2016   2015   2014   2013

Pre-tax income from continuing operations before income from joint ventures and associates

       24,959       13,905       2,061       (1,480 )       22,198       26,317

Total fixed charges

       3,281       4,270       3,508       2,495       2,113       1,710

Distributed income from joint ventures and associates

       3,368       4,998       3,820       4,627       6,902       7,117

Interest capitalised

       (653 )       (622 )       (725 )       (839 )       (757 )       (762 )

Total earnings

       30,955       22,551       8,664       4,803       30,456       34,382

Interest expensed and capitalised

       2,738       3,562       2,736       1,795       1,522       1,412

Interest within rental expense

       543       708       772       700       591       298

Total fixed charges

       3,281       4,270       3,508       2,495       2,113       1,710

Ratio of earnings to fixed charges

       9.43       5.28       2.47       1.93       14.41       20.11

For the purposes of the table above, “earnings” consists of pre-tax income from continuing operations (before adjustment for non-controlling interest) plus fixed charges (excluding capitalised interest) less undistributed income of joint ventures and associates. Fixed charges consist of expensed and capitalised interest (excluding accretion expense) plus interest within rental expenses (for operating leases).

 

Royal Dutch Shell plc    Unaudited Condensed Interim Financial Report        29