Ben van Beurden – Barclays CEO Energy-Power Conference in New York, New York. September 3, 2014
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Transcript of Ben van Beurden – Barclays CEO Energy-Power Conference in New York, New York. September 3, 2014
1 Copyright of Royal Dutch Shell plc 3 September 2014
BALANCING GROWTH & RETURNS Barclays CEO Energy-Power Conference SEPTEMBER 3, 2014 ROYAL DUTCH SHELL PLC
2 Copyright of Royal Dutch Shell plc 3 September 2014
BEN VAN BEURDEN CHIEF EXECUTIVE OFFICER
ROYAL DUTCH SHELL PLC
3 Copyright of Royal Dutch Shell plc 3 September 2014
DEFINITIONS & CAUTIONARY NOTE
Reserves: Our use of the term “reserves” in this presentation means SEC proved oil and gas reserves.
Resources: Our use of the term “resources” in this presentation includes quantities of oil and gas not yet classified as SEC proved oil and gas reserves. Resources are consistent with the Society of Petroleum Engineers 2P and 2C definitions.
Organic: Our use of the term Organic includes SEC proved oil and gas reserves excluding changes resulting from acquisitions, divestments and year-average pricing impact.
Resources plays: our use of the term ‘resources plays’ refers to tight, shale and coal bed methane oil and gas acreage.
The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate entities. In this presentation “Shell”, “Shell group” and “Royal Dutch Shell” are sometimes used for convenience where references are made to Royal Dutch Shell plc and its subsidiaries in general. Likewise, the words “we”, “us” and “our” are also used to refer to subsidiaries in general or to those who work for them. These expressions are also used where no useful purpose is served by identifying the particular company or companies. ‘‘Subsidiaries’’, “Shell subsidiaries” and “Shell companies” as used in this presentation refer to companies in which Royal Dutch Shell either directly or indirectly has control, by having either a majority of the voting rights or the right to exercise a controlling influence. The companies in which Shell has significant influence but not control are referred to as “associated companies” or “associates” and companies in which Shell has joint control are referred to as “jointly controlled entities”. In this presentation, associates and jointly controlled entities are also referred to as “equity-accounted investments”. The term “Shell interest” is used for convenience to indicate the direct and/or indirect ownership interest held by Shell in a venture, partnership or company, after exclusion of all third-party interest.
This presentation contains forward-looking statements concerning the financial condition, results of operations and businesses of Royal Dutch Shell. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of Royal Dutch Shell to market risks and statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of terms and phrases such as ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘estimate’’, ‘‘expect’’, ‘‘intend’’, ‘‘may’’, ‘‘plan’’, ‘‘objectives’’, ‘‘outlook’’, ‘‘probably’’, ‘‘project’’, ‘‘will’’, ‘‘seek’’, ‘‘target’’, ‘‘risks’’, ‘‘goals’’, ‘‘should’’ and similar terms and phrases. There are a number of factors that could affect the future operations of Royal Dutch Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this presentation, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for Shell’s products; (c) currency fluctuations; (d) drilling and production results; (e) reserves estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and regulatory developments including potential litigation and regulatory measures as a result of climate changes; (k) economic and financial market conditions in various countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; and (m) changes in trading conditions. All forward-looking statements contained in this presentation are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Additional factors that may affect future results are contained in Royal Dutch Shell’s 20-F for the year ended 31 December, 2013 (available at www.shell.com/investor and www.sec.gov ). These factors also should be considered by the reader. Each forward-looking statement speaks only as of the date of this presentation, 3 September, 2014. Neither Royal Dutch Shell nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this presentation. There can be no assurance that dividend payments will match or exceed those set out in this presentation in the future, or that they will be made at all.
We use certain terms in this presentation, such as discovery potential, that the United States Securities and Exchange Commission (SEC) guidelines strictly prohibit us from including in filings with the SEC. U.S. Investors are urged to consider closely the disclosure in our Form 20-F, File No 1-32575, available on the SEC website www.sec.gov. You can also obtain this form from the SEC by calling 1-800-SEC-0330.
4 Copyright of Royal Dutch Shell plc 3 September 2014
2014 PRIORITIES
Returns and cash flow
Competitive returns for shareholders
Take hard choices on new options
Increase asset sales
Reduce pace of growth investment
Major deep-water start-ups in 2014
Integrate 2013 acquisitions
Deliver new projects
Enhance our capital efficiency
Improve our financial performance
5 Copyright of Royal Dutch Shell plc 3 September 2014
Balancing risk and reward
Strict investment hurdles and price screens drive returns
ASPIRED PORTFOLIO
ATTRACTIVENESS
Growth & returns
Opportunity scale
RESILIENCE
Risk, performance &
uncertainty
PORTFOLIO MANAGEMENT
STRATEGIC INTENT
RESULTS & PAY-OUT
6 Copyright of Royal Dutch Shell plc 3 September 2014
FUTURE OPPORTUNITIES
RESOURCES PLAYS
DEEP-WATER INTEGRATED GAS
UPSTREAM DOWNSTREAM
INVESTMENT PRIORITIES + STRATEGIC INTENT
1 Iraq, Nigeria onshore (SPDC), Kazakhstan, heavy oil, Arctic
Engines
Free cash flow businesses
Maintain competitiveness
Asset integrity + selective growth
Growth Priority
Global leadership established
High-grading our rich opportunity set
Longer Term
Major potential; managing non-technical risks
Slower pace + capital allocation
Credible, competitive, affordable Investment choices driven on a global thematic basis
1
7 Copyright of Royal Dutch Shell plc 3 September 2014
DRIVING PERFORMANCE IN SHELL
Policy from 1.1.2015
New shareholding requirements Performance units
Drive bottom line focus
Credible, competitive and affordable plans
Drives decisions on spending + divestment
Individual performance management
Stronger accountability for outcomes
New shareholding requirements for senior executives
7 x base pay CEO
4 x base pay CFO
Top 200 executives below Executive Committee: 1.5 x base pay
Senior Executives
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0
5
10
15
20
25
0
10
20
30
40
50
2010 2011 2012 2013 Q2144Q rolling-5
0
5
10
15
-10
0
10
20
30
2010 2011 2012 2013 Q2144Q rolling
0
10
20
2010 2011 2012 2013 Q2144Q rolling
IMPROVE FINANCIAL PERFORMANCE H1 2014 OUTCOME
CCS earnings + ROACE excluding identified items
Earnings + ROACE $ billion
Cash flow $ billion
Dividend + buy-back $ billion
Upstream
Downstream
Corporate/Other
Dividend declared Buy-back
CFFO CFFI
Balancing returns + growth
Competitive shareholder returns Expecting > $30 billion distributions to shareholders
2014-15
ROACE (RHS) Free cash flow (RHS)
$ billion
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IMPROVE FINANCIAL PERFORMANCE OIL PRODUCTS
ROACE: CCS earnings excluding identified items
Resilience
Attr
activ
enes
s
Addressing underperforming portfolio
024681012
02468
1012
2010 2011 2012 2013 Q214rolling
Downstream CFFO + ROACE $ billion %
Exit: Italy Norway Australia Denmark others
Fix: Motiva Singapore fuels Pernis + Rheinland others
Selective Growth: Chemicals China LNG for transport Premium fuels + lubes Refinery crude flexibility others
completed
Announced divestments 2014 year to date: 180,000 b/d refinery capacity
300,000 b/d marketing
US mid-stream MLP proposal
CFFO ROACE (RHS)
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-202468
10
2010 2011 2012 2013 2014 H1* 2014E
NORTH AMERICA RESOURCES PLAYS RESTRUCTURING SHELL PORTFOLIO
* 2014 H1: 12 month rolling
Elba LNG
LNG Canada
Groundbirch Deep Basin/Kaybob
Foothills/Pembina
Gas-to-chemicals
Appalachia
Liquids rich shales (LRS)
Gas monetization options
Permian
Dry gas Gas/LRS
Resilience
Attr
activ
enes
s
$ billion
Dry gas Acquisitions LRS Divestments
-50%
-20%
North Americas capital investment Dry gas: Canada LNG supply
Appalachia appraisal
Liquid rich shales: Appraisal in Western Canada + Permian
Profitability focus
Portfolio
Exit: Eagle Ford Mississippi Lime Rockies LRS Deep Basin (North) Foothills (Burnt Timber) Appalachia (Slippery
Rock) Pinedale Haynesville
Maintain / Grow: W. Canada gas +
integration plays Appalachia W. Canada LRS Permian LRS
LRS Plays
completed
Hold or Divest
11 Copyright of Royal Dutch Shell plc 3 September 2014
ENHANCE CAPITAL EFFICIENCY
Take hard choices on new options
More selectivity: FIDs >$500 million require CEO approval at FEED
Maturing new projects: LNG, deep-water
Increase asset sales
~$10 billion completed year-to-date
US midstream MLP proposal
Reduce pace of growth investment
2014 organic spending ~$35 billion
Scrip cancellation reflects improving FCF
completed
2014+ Asset sales / license expiry
Wheatstone LNG
BC-10 dilution
North America non-core LRS
Italy Downstream
ADCO license expiry
Woodside market sell down
Australia / Denmark / Norway Downstream
Nigeria onshore
Mature UKCS + GOM assets
Pinedale + Haynesville dry gas
Others
340,000 boed upstream
180,000 b/d refining
300,000 b/d marketing
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0
20
40
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
DELIVER NEW PROJECTS 2014 START-UPS
Mars B – February 2014 start-up
Mars B production ramp-up progress
Cardamom: H2 2014 start-up
Gumusut-Kakap: H2 2014 start-up
Shell 72%, 100 kboe/d
Shell 33%, 135 kboe/d Shell 100%, 50 kboe/d
kboed
13 Copyright of Royal Dutch Shell plc 3 September 2014
CONVENTIONAL EXPLORATION PROGRESS DELIVERY 2014
Rosmari & Marjoram gas discoveries in Block SK318
New Deep-water gas potential
Shell 85%
4 near field gas discoveries in 2014 (100% success rate)
Adding gas to Malaysia heartland
Shell 30%
Deep-water oil discovery 16 km south of Appomattox
~100 million boe
Shell 57.2%
3rd Norphlet discovery
Malaysia Deep-water Gas Malaysia, Block SK408 GOM, Rydberg Deep
Doo Sung rig Noble Globetrotter 1 Gorek-1 3D
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25
50
UP STREAM
DOWN STREAM
CASH FLOW AND PAY-OUT
Cash generation $ billion, Q214 4Q rolling
Gearing + balance sheet $ billion
Cash flow from operations Net cash used in investing activities
Dividend and buy back
0%
10%
20%
30%
0
10
20
30
2010 2011 2012 2013 14Q2
Gearing range
Net debt Gearing (RHS) 12 months
rolling
0
6
12
2006 2007 2008 2009 2010 2011 2012 2013 14Q2
Dividends declared 12 months rolling
Dividend track record $ billion
Scrip dividend cancelled from Q2 2014
Buy back $7-8 billion 2014-15 combined
~$1.6 billion H1 2014
15 Copyright of Royal Dutch Shell plc 3 September 2014
COMPETITIVE PERFORMANCE: BALANCING GROWTH AND RETURNS 4Q ROLLING
Free cash flow: cash flow from operations less cash used in investing activities; ROACE underlying: European companies: CCS basis excluding identified items. US companies: reported earnings excluding special non-operating items.
Cash flow from operations $ billion
Free cash flow $ billion
ROACE – underlying %
0
10
20
2010 2011 2012 2013 2014
Shell Peer group
Driving competitive performance
0
20
40
60
2010 2011 2012 2013 2014-10
0
10
20
30
40
2010 2011 2012 2013 2014
16 Copyright of Royal Dutch Shell plc 3 September 2014
2014 PRIORITIES
Returns and cash flow
Competitive returns for shareholders
Take hard choices on new options
Increase asset sales
Reduce pace of growth investment
Major deep-water start-ups in 2014
Integrate 2013 acquisitions
Deliver new projects
Enhance our capital efficiency
Improve our financial performance