THE HAGUE, The Netherlands, August 1, 2023 /PRNewswire/ -
Royal Dutch Shell’s (NYSE: RDS.A) (NYSE: RDS.B) second quarter 2013 earnings, on a current cost of supplies (CCS) basis (see Note 1), were $2.4 billion compared with $6.0 billion in the same quarter a year ago. Second quarter 2013 earnings included an identified net charge of $2.2 billion after tax, mainly reflecting impairments (see page 6).
Second quarter 2013 CCS earnings excluding identified items (see page 6), were $4.6 billion and included a combined negative impact of $0.7 billion after tax related to the impact of the weakening Australian dollar on a deferred tax liability and the impact of the deteriorating operating environment in Nigeria. Compared to the second quarter 2012, CCS earnings excluding identified items were also impacted by higher operating expenses and depreciation as well as increased exploration well write-offs. Second quarter 2012 CCS earnings excluding identified items were $5.7 billion.
Basic CCS earnings per share excluding identified items decreased by 21% versus the same quarter a year ago.
Cash flow from operating activities for the second quarter 2013 was $12.4 billion, compared with $13.3 billion in the same quarter last year. Excluding working capital movements, cash flow from operating activities for the second quarter 2013 was $8.4 billion, compared with $9.5 billion in the second quarter 2012.
Capital investment for the second quarter 2013 was $11.3 billion. Net capital investment (see Note 1) for the quarter was $10.9 billion.
Total dividends distributed in the quarter were $2.8 billion, of which some $0.8 billion were settled under the Scrip Dividend Programme. During the second quarter some 56.2 million shares were bought back for cancellation for a consideration of $1.9 billion.
Gearing at the end of the second quarter 2013 was 10.3% (see Note 2).
A second quarter 2013 dividend has been announced of $0.45 per ordinary share and $0.90 per American Depositary Share (“ADS”), an increase of 5% compared with the second quarter 2012.
SUMMARY OF UNAUDITED RESULTS Quarters $ million Half year Q1 Q2 Q2 2013 2013 2012[1] %[2] 2013 2012[1] % Income attributable to 1,737 8,176 4,083 -57 shareholders 9,913 12,820 -23 Current cost of supplies (CCS) adjustment for 657 (225) 1,901 Downstream 432 841 2,394 7,951 5,984 -60 CCS earnings 10,345 13,661 -24 (2,206) 431 245 Less: Identified items[3] (1,775) 625 CCS earnings excluding 4,600 7,520 5,739 -20 identified items 12,120 13,036 -7 Of which: 3,526 5,648 4,527 Upstream 9,174 10,797 1,168 1,848 1,296 Downstream 3,016 2,418 Corporate and (94) 24 (84) Non-controlling interest (70) (179) Cash flow from operating 12,444 11,559 13,305 -6 activities 24,003 26,744 -10 Basic CCS earnings per 0.38 1.26 0.96 -60 share ($) 1.64 2.19 -25 Basic CCS earnings per ADS 0.76 2.52 1.92 ($) 3.28 4.38 Basic CCS earnings per share excl. identified 0.73 1.19 0.92 -21 items ($) 1.92 2.09 -8 Basic CCS earnings per ADS 1.46 2.38 1.84 excl. identified items ($) 3.84 4.18 0.45 0.45 0.43 +5 Dividend per share ($) 0.90 0.86 +5 0.90 0.90 0.86 Dividend per ADS ($) 1.80 1.72 [1] Restated for accounting policy change (see Note 2) [2] Q2 on Q2 change [3] See page 6
Royal Dutch Shell Chief Executive Officer Peter Voser commented: “Our cash flow pays for Shell’s dividends and investment in new projects to ensure affordable and reliable energy supplies for our customers, and to add value for our shareholders.”
Shell’s underlying CCS earnings were $4.6 billion for the quarter, a 21% decrease in CCS earnings per share from the second quarter of 2012.
“Higher costs, exploration charges, adverse currency exchange rate effects and challenges in Nigeria have hit our bottom line. These results were undermined by a number of factors - but they were clearly disappointing for Shell”, continued Voser.
Oil theft and disruptions to gas supplies in Nigeria are causing widespread environmental damage, and could cost the Nigerian government $12 billion in lost revenues per year. ”We will play our part, but these are problems Shell cannot solve alone,” Voser said.
“We’ve made substantial improvements to our portfolio in the last few years. Today, Shell is rich with new investment opportunities and is capital constrained - the opposite position to where the company was in the middle of the last decade.”
“Shell is investing in new capacity worldwide, to generate profitable growth for shareholders. In the next 18 months we expect to see five major project start-ups, which should add over $4 billion to our 2015 cash flow[1].
We’ve embedded rigorous portfolio management into Shell, to improve our capital efficiency and refresh the portfolio for growth. We have completed some $21 billion of divestments in the last three years and some $4 billion in the last 12 months alone, with more to come.
Shell is entering a new phase of more substantial portfolio change, which will lead to a higher rate of divestments in the coming years.
We have recently launched strategic portfolio reviews in both Nigeria onshore and North America resources plays, which will lead to further
focus and divestments there, as we continue to shape the company for the future.
Our strategy is to deliver sustainable growth in cash generation through the business cycle, underpinning Shell’s competitive dividends and returns. We are not targeting oil and gas production volumes; rather we are focusing on financial performance.”
Voser concluded, ”Shell’s sustained investment in new growth projects will drive our financial performance. Dividends are Shell’s main route for returning cash to shareholders and we have distributed more than $11 billion of dividends in the last 12 months. So far this year, we have repurchased more than $3 billion of shares, and we are on track for $4-5 billion of share buy-backs in 2013. This underlines our commitment to shareholder returns.”
[1] Projects comprised of Mars B and Cardamom in deep-water Gulf of Mexico, Gumusut-Kakap in deep-water Malaysia, Kashagan Phase 1 in Kazakhstan and the completion of the acquisition of part of Repsol S.A.’s LNG portfolio. Cash flow from operations addition outlook assumes that the Brent oil price is $100 per barrel.
SECOND QUARTER 2013 portfolio developments[1]
Upstream
In Abu Dhabi, Shell was selected by the Abu Dhabi National Oil Company to participate in a 30-year joint venture (Shell interest 40%) to develop the Bab sour gas reservoirs in the Emirate of Abu Dhabi. The two companies will now enter a period of commercial and technical work leading to the development of the Bab sour gas reservoir, potentially for 0.5 billion standard cubic feet per day (“scf/d”) of sales gas.
In Indonesia, Shell acquired an additional 5% interest in the Masela block in the Arafura Sea, increasing its interest to 35%. The Masela production-sharing contract (“PSC”) contains the Abadi gas discovery, for which a 2.5 million tonnes per annum (“mtpa”) floating LNG facility is in the front-end engineering and design (“FEED”) phase.
In Iraq, the Basrah Gas Company (“BGC”), a 25-year incorporated joint venture (Shell interest 44%), officially commenced operations. BGC captures associated gas that is currently being flared from three oil fields in southern Iraq. BGC will be dedicated to the rehabilitation and upgrade of current facilities as well as building new assets, which is expected to increase the production capacity from currently 0.4 billion scf/d to potentially 2 billion scf/d.
In Nigeria, Shell announced the final investment decisions for the Trans Niger Pipeline loop-line (“TNPL”) and the Gbaran-Ubie Phase Two projects (Shell interest 30%), both in the eastern Niger Delta. The TNPL project includes improvements as a result of which the pipeline will be better protected against crude oil theft and sabotage, and additional wells which are expected to add peak production of some 45 thousand barrels of oil per day (“b/d”). The Gbaran-Ubie Phase Two project consists of five gas supply and infrastructure projects, with an expected peak production of 215 thousand barrels of oil equivalent per day (“boe/d”), for continued gas supply to Nigeria LNG and the Gbaran-Ubie domestic power plant.
Shell also announced the intention of a strategic review, consultation with partners and the potential exit from interests it holds in some further onshore leases in the eastern part of the Niger Delta, subject to partner and regulatory approvals. The review could lead to divestment of some 80 to 100 thousand boe/d of Shell share production.
In the Philippines, Shell announced commencement of FEED for an LNG import facility in Batangas. The floating storage and regasification unit is expected to have an annual capacity of approximately 4 mtpa.
In the United States, Shell announced the final investment decision for the Stones deep-water project (Shell interest 100%) in the Gulf of Mexico. The first phase of development has an expected peak production of 50 thousand boe/d. The Stones field was discovered in 2005 in the Gulf of Mexico’s Lower Tertiary geologic trend.
In North American resources plays, a strategic review of Shell’s portfolio is underway, following recent acreage build and well results. This strategic review will lead to divestments and a refocusing of investment into fewer plays, with growth potential.
During the second quarter 2013, Shell announced the Vicksburg oil discovery (Shell interest 75%) in the deep-water Gulf of Mexico. This discovery adds to the nearby Appomattox discovery (Shell interest 80%). Shell also participated in the successful appraisal Zabazaba-4 (Shell interest 50%) offshore Nigeria.
As part of its global exploration programme Shell added new acreage positions during the second quarter 2013, including offshore positions in the Gulf of Mexico, the Norwegian Barents Sea, the Turkish Black Sea, and in the Australian Exmouth basin. Shell also expanded certain positions in the United Kingdom North Sea, and onshore Albania.
In July, Shell announced the final investment decision for the offshore BC-10 Phase 3 project (Shell interest 50%) in Brazil. The project will include the installation of subsea infrastructure at the Massa and Argonauta O-South fields. The project is expected to reach a peak production of 28 thousand boe/d. Shell also announced the final investment decision for a redevelopment at the offshore Bijupirá/Salema fields (Shell interest 80%), which is expected to boost production to a peak of 35 thousand boe/d.
[1] See page 22 for first quarter 2013 portfolio developments.
Downstream
In Poland, Shell completed the acquisition of Neste Oil Corporation’s network of 105 retail sites.
In July, Shell announced it will build a lubricant plant, a grease plant and other related facilities in Tuas, Singapore. When completed, the new plants will replace Shell’s Woodlands plants in Singapore.
Key features of the SECOND quarter 2013
Second quarter 2013 CCS earnings (see Note 1) were $2,394 million, 60% lower than for the same quarter a year ago. Second quarter 2013 earnings included an identified net charge of $2.2 billion after tax, mainly reflecting impairments (see page 6).
Second quarter 2013 CCS earnings excluding identified items (see page 6) were $4,600 million compared with $5,739 million in the second quarter 2012, a decrease of 20%. Second quarter 2013 CCS earnings excluding identified items were reduced by some $450 million due to the impact of the weakening Australian dollar on a deferred tax liability and by at least $250 million impact from the deteriorating operating environment in Nigeria. The combined impact of these items on earnings excluding identified items was $0.7 billion after tax for the second quarter 2013, compared to a $0.1 billion after tax impact in the second quarter 2012. Compared with the second quarter 2012, CCS earnings excluding identified items were also impacted by higher operating expenses and depreciation as well as increased exploration well write-offs.
Basic CCS earnings per share decreased by 60% versus the same quarter a year ago.
Basic CCS earnings per share excluding identified items decreased by 21% versus the same quarter a year ago.
Cash flow from operating activities for the second quarter 2013 was $12.4 billion, compared with $13.3 billion in the same quarter last year. Excluding working capital movements, cash flow from operating activities for the second quarter 2013 was $8.4 billion, compared with $9.5 billion in the same quarter last year.
Net capital investment (see Note 1) for the second quarter 2013 was $10.9 billion. Capital investment for the second quarter 2013 was $11.3 billion and divestment proceeds were $0.4 billion. Net capital investment for the full year 2013 is expected to be around $40 billion, including some $3 billion of non-cash items. These estimates also include the impact of the agreement to acquire part of Repsol’s LNG portfolio, as announced in February 2013.
Total dividends distributed in the second quarter 2013 were $2.8 billion of which $0.8 billion were settled by issuing some 23.6 million A shares under the Scrip Dividend Programme for the first quarter 2013.
Under our share buyback programme some 56.2 million B shares were bought back for cancellation during the second quarter 2013 for a consideration of $1.9 billion.
Return on average capital employed (see Note 9) on a reported income basis was 12.1% at the end of the second quarter 2013.
Gearing was 10.3% at the end of the second quarter 2013 versus 8.6% at the end of the second quarter 2012 (see Note 2).
Oil and gas production for the second quarter 2013 was 3,062 thousand boe/d, a decrease of 1% compared with the second quarter 2012. The deteriorating operating environment in Nigeria impacted production volumes by some 100 thousand boe/d in the second quarter 2013, and by 65 thousand boe/d compared to the second quarter 2012. Excluding the impact of the deteriorating operating environment in Nigeria, divestments and PSC price effects, second quarter 2013 production volumes were 2% higher than in the same period last year.
Equity LNG sales volumes of 4.68 million tonnes for the second quarter 2013 were 2% higher than in the same quarter a year ago.
Oil products sales volumes for the second quarter 2013 were 2% lower than in the second quarter 2012. Chemicals sales volumes in the second quarter 2013 decreased by 10% compared with the same quarter a year ago.
Comparative information in this Report has been restated following the adoption of revised IAS 19 Employee Benefits on January 1, 2023, with retrospective effect (see Note 2). Comparative information was not restated for other accounting policy changes (see Note 1) for which the impacts are not significant, including the adoption of IFRS 11 Joint Arrangements on January 1, 2023, which results in certain previously equity-accounted entities now in effect being proportionately consolidated.
Supplementary financial and operational disclosure for the second quarter 2013 is available at http://www.shell.com/investor.
Summary of identified items
Earnings in the second quarter 2013 reflected the following items, which in aggregate amounted to a net charge of $2,206 million (compared with a net gain of $245 million in the second quarter 2012), as summarised in the table below:
Upstream earnings included a net charge of $1,845 million, including impairments of $2,071 million, predominantly related to liquids-rich shales properties in North America, reflecting the latest insights from exploration and appraisal drilling results and production information. This was partly offset by the net impact of fair value accounting of commodity derivatives and certain gas contracts of $69 million, divestment gains of $41 million and other items of $116 million, mainly comprised of the release of a tax provision related to prior years. Upstream earnings for the second quarter 2012 included a net gain of $181 million.
Downstream earnings included a net charge of $365 million, reflecting impairments of $331 million, predominantly related to businesses in Italy, redundancy and restructuring charges of $22 million and other items of $12 million. Downstream earnings for the second quarter 2012 included a net gain of $64 million.
Corporate results and Non-controlling interest included a net gain of $4 million. Earnings for the second quarter 2012 did not include any identified items.
SUMMARY OF IDENTIFIED ITEMS Quarters $ million Half year Q1 Q2 2013 2013[1] Q2 2012 2013 2012 Segment earnings impact of identified items: (1,845) 173 181 Upstream (1,672) 634 (365) (160) 64 Downstream (525) 262 Corporate and Non-controlling 4 418 - interest 422 (271) (2,206) 431 245 Earnings impact (1,775) 625 [1] See page 23
These identified items are shown to provide additional insight into segment earnings and income attributable to shareholders. From the first quarter 2013 onwards, identified items include the full impact on Shell’s CCS earnings of the following items:
Divestment gains and losses
Impairments
Fair value accounting of commodity derivatives and certain gas contracts (see Note 8)
Redundancy and restructuring
Further items may be identified in addition to the above. Prior period comparatives have not been restated.
Earnings BY BUSINESS segment
UPSTREAM Quarters $ million Half year Q2 2013 Q1 2013 Q2 2012 %[2] 2013 2012 % Upstream earnings excluding 3,526 5,648 4,527 -22 identified items[1] 9,174 10,797 -15 1,681 5,821 4,708 -64 Upstream earnings[1] 7,502 11,431 -34 Upstream cash flow from 8,143 9,705 9,830 -17 operating activities 17,848 18,618 -4 Upstream net capital 9,549 7,370 5,293 +80 investment 16,919 9,065 +87 Liquids production available for sale 1,502 1,640 1,612 -7 (thousand b/d) 1,570 1,647 -5 Natural gas production available for sale (million 9,050 11,132 8,647 +5 scf/d) 10,085 9,745 +3 Total production available 3,062 3,559 3,103 -1 for sale (thousand boe/d) 3,309 3,327 -1 Equity LNG sales volumes 4.68 5.15 4.57 +2 (million tonnes) 9.83 9.74 +1 [1] Second quarter 2012 and half year 2012 comparatives restated for accounting policy change (see Note 2) [2] Q2 on Q2 change
Second quarter Upstream earnings excluding identified items were $3,526 million compared with $4,527 million a year ago. Identified items were a net charge of $1,845 million, compared with a net gain of $181 million in the second quarter 2012 (see page 6).
Second quarter 2013 Upstream earnings excluding identified items were reduced by some $450 million due to the impact of the weakening Australian dollar on a deferred tax liability and by at least $250 million impact from the deteriorating security situation onshore Nigeria and blockade of Nigeria LNG. The combined impact of these items on the second quarter 2013 earnings was $0.7 billion after tax, compared to a $0.1 billion after tax impact in the second quarter 2012.
Compared with the second quarter 2012, earnings were also impacted by higher operating expenses, higher exploration expenses, increased depreciation and lower liquids realisations. Second quarter 2013 operating expenses included some $400 million of feasibility expenses for projects in the pre-final investment decision stage. Exploration expenses increased to $1,228 million due to exploration well write-offs of some $600 million in the second quarter 2013. Compared with the second quarter 2012, earnings benefitted from the ramp-up of Pearl GTL, a dividend from an LNG venture and higher gas realisations.
Upstream Americas excluding identified items incurred a loss, mainly as a result of higher exploration expenses and well write-offs, and increased operating expenses. Under current oil and gas price conditions, Upstream Americas is expected to remain in a loss position during at least the second half year 2013.
Global liquids realisations were 9% lower than for the second quarter 2012. In Canada, synthetic crude oil realisations were 10% higher than for the same period last year. Global natural gas realisations were 17% higher than for the same quarter a year ago, with a 90% increase in the Americas and a 12% increase outside the Americas.
Second quarter 2013 production was 3,062 thousand boe/d compared with 3,103 thousand boe/d a year ago. Liquids production decreased by 7% and natural gas production increased by 5% compared with the second quarter 2012. The deteriorating operating environment in Nigeria impacted production volumes by some 100 thousand boe/d in the second quarter 2013, and by 65 thousand boe/d compared to the second quarter 2012. Excluding the impact of the deteriorating operating environment in Nigeria, divestments and PSC price effects, second quarter 2013 production was 2% higher than for the same period last year.
New field start-ups and the continuing ramp-up of fields, in particular Pearl GTL in Qatar and Pluto LNG in Australia, contributed some 190 thousand boe/d to production for the second quarter 2013, which more than offset the impact of field declines.
Equity LNG sales volumes of 4.68 million tonnes increased by 2% compared to the same quarter a year ago, reflecting the contribution from Pluto LNG, which was partly offset by lower volumes from Nigeria LNG. Shell share Nigeria LNG volumes were some 0.15 million tonnes lower due to reduced feedgas supply, as a result of the deteriorating security situation onshore, and due to a blockade of Nigeria LNG operations by the Nigerian Maritime Administration and Safety Agency.
Half year Upstream earnings excluding identified items were $9,174 million compared with $10,797 million in the first half year 2012. Identified items were a net charge of $1,672 million, compared with a net gain of $634 million in the first half year 2012 (see page 6).
Compared with the first half year 2012, Upstream earnings excluding identified items reflected higher operating expenses, lower liquids realisations, higher exploration expenses and well write-offs as well as increased depreciation. Earnings were also reduced by the impact of the weakening Australian dollar on a deferred tax liability and by the deteriorating operating environment in Nigeria. This was partly offset by the contribution of Pearl GTL, higher gas realisations and increased LNG trading contributions.
Global liquids realisations were 8% lower than for the first half year 2012. In Canada, synthetic crude oil realisations were in line with the same period last year. Global natural gas realisations were 11% higher than for the first half year 2012, with a 46% increase in the Americas and a 8% increase outside the Americas.
Half year 2013 production was 3,309 thousand boe/d compared with 3,327 thousand boe/d for the same period a year ago. Liquids production was down 5% and natural gas production increased by 3% compared with the first half year 2012. Production volumes were significantly impacted by the deteriorating operating environment in Nigeria. Excluding the impact of divestments, PSC price effects and the deteriorating operating environment in Nigeria, production volumes in the first half year of 2013 were 2% higher than in the same period last year.
Equity LNG sales volumes of 9.83 million tonnes were 1% higher than in the first half year 2012, reflecting the contribution from Pluto LNG, which was partly offset by lower volumes from Nigeria LNG due to reduced feedgas supply as a result of the deteriorating operating environment in Nigeria.
DOWNSTREAM Quarters $ million Half year Q2 2013 Q1 2013 Q2 2012 %[2] 2013 2012 % Downstream CCS earnings 1,168 1,848 1,296 -10 excluding identified items[1] 3,016 2,418 +25 803 1,688 1,360 -41 Downstream CCS earnings[1] 2,491 2,680 -7 Downstream cash flow from 3,761 365 3,265 +15 operating activities 4,126 6,473 -36 Downstream net capital 1,328 820 967 +37 investment 2,148 1,753 +23 Refinery processing intake 2,914 2,890 2,810 +4 (thousand b/d) 2,902 2,796 +4 Oil products sales volumes 6,212 6,004 6,321 -2 (thousand b/d) 6,109 6,140 -1 Chemicals sales volumes 4,211 4,143 4,671 -10 (thousand tonnes) 8,354 9,350 -11 [1] Second quarter 2012 and half year 2012 comparatives restated for accounting policy change (see Note 2) [2] Q2 on Q2 change
Second quarter Downstream earnings excluding identified items were $1,168 million compared with $1,296 million for the second quarter 2012. Identified items were a net charge of $365 million, compared with a net gain of $64 million for the second quarter 2012 (see page 6).
Compared with the second quarter 2012, Downstream earnings excluding identified items benefited from increased contributions from marketing and trading, reflecting strong performance from these businesses, which was more than offset by lower realised refining margins. Realised refining margins reflected weak demand in Europe and the impact of the narrowing price differential between North American crude oil markers and the Brent crude oil marker on contributions from refineries in North America, partly offset by better refining margins in Asia. Contributions from Chemicals were lower as a result of the industry environment in Europe, as well as higher maintenance activity in North America and Europe, partly offset by Shell’s improved operating performance in Asia.
Oil products sales volumes decreased by 2% compared with the same period a year ago, mainly as a result of lower trading volumes, partly offset by the effect of an accounting policy change (see Note 1b).
Chemicals sales volumes decreased by 10% compared with the same quarter last year, mainly as a result of an accounting policy change (see Note 1b), as well as higher maintenance activity and contract expirations. Chemicals manufacturing plant availability decreased to 88% from 89% for the second quarter 2012, as a result of higher planned maintenance, partly offset by improved operating performance.
Refinery intake volumes were 4% higher compared with the same quarter last year, mainly as a result of an accounting policy change (see Note 1b). Refinery availability was 92%, in line with the second quarter 2012.
Half year Downstream earnings excluding identified items were $3,016 million compared with $2,418 million in the first half year 2012. Identified items were a net charge of $525 million, compared with a net gain of $262 million in the first half year 2012 (see page 6).
Compared with the first half year 2012, Downstream earnings excluding identified items reflected higher contributions from marketing and trading, and improved realised refining margins during the first quarter of 2013. This was partly offset by higher depreciation. Chemicals contributions were broadly similar to the first half year 2012.
Oil products sales volumes were broadly similar to the same period a year ago, reflecting lower marketing volumes, offset by higher trading volumes and the effect of an accounting policy change (see Note 1b).
Chemicals sales volumes decreased by 11% compared with the first half year 2012, mainly as a result of an accounting policy change (see Note 1b), as well as higher maintenance activity and contract expirations. Chemicals manufacturing plant availability decreased to 90% from 92% for the first half year 2012, as a result of higher planned maintenance, partly offset by improved operating performance.
Refinery intake volumes were 4% higher compared with the first half year 2012, mainly as a result of an accounting policy change (see Note 1b). Refinery availability decreased to 92% from 93% for the same period a year ago, as a result of higher planned maintenance.
CORPORATE AND NON-CONTROLLING INTEREST Quarters $ million Half year Q2 2013 Q1 2013 Q2 2012 2013 2012 Corporate and Non-controlling interest (94) 24 (84) excl. identified items[1] (70) (179) Of which: (77) 88 (36) Corporate[1] 11 (66) (17) (64) (48) Non-controlling interest (81) (113) Corporate and Non-controlling (90) 442 (84) interest[1] 352 (450) [1] Second quarter 2012 and half year 2012 comparatives restated for accounting policy change (see Note 2)
Second quarter Corporate results and Non-controlling interest excluding identified items were a loss of $94 million, compared with a loss of $84 million in the same period last year. Identified items for the second quarter 2013 were a net gain of $4 million, whereas earnings for the second quarter 2012 did not include any identified items (see page 6).
Compared with the second quarter 2012, Corporate results excluding identified items mainly reflected lower tax credits and adverse currency exchange rate effects, partly offset by lower net interest expense.
Half year Corporate results and Non-controlling interest excluding identified items were a loss of $70 million compared with a loss of $179 million in the first half year 2012. Identified items for first half year 2013 were a net gain of $422 million, compared with a net charge of $271 million in the first half year 2012 (see page 6).
Compared with the first half year 2012, Corporate results excluding identified items mainly reflected lower net interest expense and lower costs, partly offset by adverse currency exchange rate effects.
FORTHCOMING EVENTS
Third quarter 2013 results and third quarter 2013 dividend are scheduled to be announced on October 31, 2022.
Unaudited Condensed Consolidated Interim Financial Statements
CONSOLIDATED STATEMENT OF INCOME Quarters $ million Half year Q2 Q2 2013 Q1 2013 2012[1] %[2] 2013 2012[1] % 112,669 112,810 117,068 Revenue 225,479 236,988 Share of profit of equity-accounted 1,433 2,303 1,514 investments 3,736 4,454 Interest and other 246 401 1,304 income 647 2,218 Total revenue and other 114,348 115,514 119,886 income 229,862 243,660 88,901 86,603 95,041 Purchases 175,504 189,110 Production and 7,000 6,458 6,366 manufacturing expenses 13,458 12,404 Selling, distribution and administrative 3,661 3,587 3,432 expenses 7,248 7,091 Research and 305 294 287 development 599 581 1,228 648 862 Exploration 1,876 1,224 Depreciation, depletion 7,502 4,225 3,503 and amortisation 11,727 6,905 379 401 411 Interest expense 780 963 5,372 13,298 9,984 -46 Income before taxation 18,670 25,382 -26 3,631 5,072 5,896 Taxation 8,703 12,442 1,741 8,226 4,088 -57 Income for the period 9,967 12,940 -23 Income attributable to non-controlling 4 50 5 interest 54 120 Income attributable to Royal Dutch Shell plc 1,737 8,176 4,083 -57 shareholders 9,913 12,820 -23 [1] Restated for accounting policy change (see Note 2) [2] Q2 on Q2 change
EARNINGS PER SHARE Quarters $ Half year Q2 Q2 2013 Q1 2013 2012[1] 2013 2012[1] 0.28 1.30 0.66 Basic earnings per share 1.57 2.06 0.27 1.29 0.66 Diluted earnings per share 1.57 2.06 [1] Restated for accounting policy change (see Note 2)
SHARES[1] Quarters Millions Half year Q2 2013 Q1 2013 Q2 2012 2013 2012 Weighted average number of shares as the basis for: 6,313.7 6,308.9 6,265.9 Basic earnings per share 6,311.3 6,247.7 6,316.9 6,313.7 6,273.2 Diluted earnings per share 6,314.6 6,255.7 Shares outstanding at the end of 6,296.0 6,340.2 6,266.2 the period 6,296.0 6,266.2 [1] Royal Dutch Shell plc ordinary shares of EUR0.07 each
Notes 1 to 7 are an integral part of these Condensed Consolidated Interim Financial Statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Quarters $ million Half year Q2 Q2 2013 Q1 2013 2012[1] 2013 2012[1] 1,741 8,226 4,088 Income for the period 9,967 12,940 Other comprehensive income: Items that may be reclassified to income in later periods: - Currency translation (1,024) (1,652) (2,430) differences (2,676) (805) - Unrealised (losses)/gains on (71) 31 70 securities (40) (35) 142 13 567 - Cash flow hedging gains 155 117 - Share of other comprehensive (loss)/income of (29) (56) 39 equity-accounted investments (85) (70) (982) (1,664) (1,754) Total (2,646) (793) Items that are not reclassified to income in later periods: - Retirement benefits 584 1,436 (12) remeasurements 2,020 (41) 584 1,436 (12) Total 2,020 (41) Other comprehensive loss for the (398) (228) (1,766) period (626) (834) Comprehensive income for the 1,343 7,998 2,322 period 9,341 12,106 Comprehensive (loss)/income attributable to non-controlling (22) 25 (36) interest 3 122 Comprehensive income attributable to Royal Dutch 1,365 7,973 2,358 Shell plc shareholders 9,338 11,984 [1] Restated for accounting policy change (see Note 2)
Notes 1 to 7 are an integral part of these Condensed Consolidated Interim Financial Statements.
CONDENSED CONSOLIDATED BALANCE SHEET $ million Dec 31, June 30, 2023 Mar 31, 2023 2012[1] Assets Non-current assets: Intangible assets 4,384 4,456 4,470 Property, plant and equipment 180,863 180,244 172,293 Equity-accounted investments 33,715 34,478 38,350 Investments in securities 4,809 4,878 4,867 Deferred tax 5,097 4,641 4,288 Retirement benefits 3,649 3,502 2,301 Trade and other receivables 9,115 9,052 8,991 241,632 241,251 235,560 Current assets: Inventories 29,024 31,531 30,781 Trade and other receivables 62,312 66,598 65,403 Cash and cash equivalents 12,540 17,614 18,550 103,876 115,743 114,734 Total assets 345,508 356,994 350,294 Liabilities Non-current liabilities: Debt 28,017 27,329 29,921 Trade and other payables 4,094 4,170 4,175 Deferred tax 11,950 11,490 10,312 Retirement benefits 14,048 15,091 15,290 Decommissioning and other provisions 17,909 18,054 17,435 76,018 76,134 77,133 Current liabilities: Debt 4,954 8,461 7,833 Trade and other payables 70,922 73,301 72,839 Taxes payable 12,031 14,386 12,684 Retirement benefits 383 376 402 Decommissioning and other provisions 2,979 3,097 3,221 91,269 99,621 96,979 Total liabilities 167,287 175,755 174,112 Equity attributable to Royal Dutch Shell plc shareholders 176,867 179,806 174,749 Non-controlling interest 1,354 1,433 1,433 Total equity 178,221 181,239 176,182 Total liabilities and equity 345,508 356,994 350,294 [1] Restated for accounting policy change (see Note 2)
Notes 1 to 7 are an integral part of these Condensed Consolidated Interim Financial Statements
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Equity attributable to Royal Dutch Shell plc shareholders Shares Share held in Other Retained Non-controlling Total $ million capital trust reserves earnings Total interest equity At January 1, 2023[1] 542 (2,287) (3,752) 180,246 174,749 1,433 176,182 Comprehensive income for the period - - (575) 9,913 9,338 3 9,341 Capital contributions from, and other changes in, non-controlling interest - - - - - (2) (2) Dividends paid - - - (5,598) (5,598) (80) (5,678) Scrip dividends[2] 4 - (4) 1,647 1,647 - 1,647 Repurchases of shares[3] (6) - 6 (3,077) (3,077) - (3,077) Shares held in trust: net sales/(purchases) and dividends received - 559 - 59 618 - 618 Share-based compensation - - (430) (380) (810) - (810) At June 30, 2023 540 (1,728) (4,755) 182,810 176,867 1,354 178,221 At January 1, 2023[1] 536 (2,990) (1,961) 162,895 158,480 1,486 159,966 Comprehensive income for the period[1] - - (836) 12,820 11,984 122 12,106 Capital contributions from, and other changes in, non-controlling interest - - - 37 37 (67) (30) Dividends paid - - - (5,430) (5,430) (102) (5,532) Scrip dividends[2] 4 - (4) 1,647 1,647 - 1,647 Repurchases of shares[3] (2) - - 2 (1,584) (1,584) - (1,584) Shares held in trust: net sales/(purchases) and dividends received - 858 - 78 936 - 936 Share-based compensation - - 43 (401) (358) - (358) At June 30, 2023[1] 538 (2,132) (2,756) 170,062 165,712 1,439 167,151 [1] Restated for accounting policy change (see Note 2) [2] Under the Scrip Dividend Programme some 49.2 million A shares, equivalent to $1.6 billion, were issued during the first half year 2013 and some 47.3 million A shares, equivalent to $1.6 billion, were issued during the first half year 2012. [3] Includes shares committed to repurchase and repurchases subject to settlement at the end of the quarter
Notes 1 to 7 are an integral part of these Condensed Consolidated Interim Financial Statements.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS Quarters $ million Half year Q2 Q2 2013 Q1 2013 2012[1] 2013 2012[1] Cash flow from operating activities 1,741 8,226 4,088 Income for the period 9,967 12,940 Adjustment for: 4,048 4,892 5,892 - Current taxation 8,940 11,371 301 357 358 - Interest expense (net) 658 857 - Depreciation, depletion and 7,502 4,225 3,503 amortisation 11,727 6,905 (44) (213) (1,193) - Net gains on sale of assets (257) (1,717) 4,085 34 3,836 - Decrease in working capital 4,119 4,606 - Share of profit of (1,433) (2,303) (1,514) equity-accounted investments (3,736) (4,454) - Dividends received from equity-accounted 2,703 1,242 2,799 investments 3,945 5,381 - Deferred taxation, retirement benefits, decommissioning (845) (11) (90) and other provisions (856) 863 784 27 261 - Other 811 (147) Net cash from operating 18,842 16,476 17,940 activities (pre-tax) 35,318 36,605 (6,398) (4,917) (4,635) Taxation paid (11,315) (9,861) Net cash from operating 12,444 11,559 13,305 activities 24,003 26,744 Cash flow from investing activities (8,987) (7,862) (7,033) Capital expenditure (16,849) (13,489) Investments in equity-accounted (291) (372) (724) investments (663) (2,022) 319 382 1,675 Proceeds from sales of assets 701 4,047 Proceeds from sales of 63 154 170 equity-accounted investments 217 227 (Purchases)/proceeds from other (347) 20 10 investments (net) (327) (30) 71 36 45 Interest received 107 93 Net cash used in investing (9,172) (7,642) (5,857) activities (16,814) (11,174) Cash flow from financing activities Net (decrease)/increase in debt with maturity period (370) 133 248 within three months (237) (205) 198 180 134 Other debt: New borrowings 378 744 (3,556) (2,185) (1,533) Repayments (5,741) (4,500) (176) (158) (339) Interest paid (334) (793) Change in non-controlling 8 (7) (2) interest 1 8 Cash dividends paid to: - Royal Dutch Shell plc (2,043) (1,908) (2,112) shareholders (3,951) (3,783) (59) (21) (78) - Non-controlling interest (80) (102) (1,934) (545) (890) Repurchases of shares (2,479) (890) Shares held in trust: net (purchases)/sales and dividends (432) (10) (103) received (442) 102 Net cash used in financing (8,364) (4,521) (4,675) activities (12,885) (9,419) Currency translation differences relating to cash and 18 (332) (515) cash equivalents (314) (161) (Decrease)/increase in cash and (5,074) (936) 2,258 cash equivalents (6,010) 5,990 Cash and cash equivalents at 17,614 18,550 15,024 beginning of period 18,550 11,292 Cash and cash equivalents at 12,540 17,614 17,282 end of period 12,540 17,282 [1] Restated for accounting policy change (see Note 2)
Notes 1 to 7 are an integral part of these Condensed Consolidated Interim Financial Statements.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. Basis of preparation
These Condensed Consolidated Interim Financial Statements (“Interim Statements”) of Royal Dutch Shell plc and its subsidiaries (collectively known as Shell) have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union and as issued by the International Accounting Standards Board and on the basis of the same accounting principles as, and should be read in conjunction with, the Annual Report and Form 20-F for the year ended December 31, 2022 (pages 103 to 108) as filed with the U.S. Securities and Exchange Commission, except as described below:
- Revised IAS 19 Employee Benefits was adopted on January 1, 2023, with retrospective effect (see Note 2).
- IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and revised standards IAS 27 Separate Financial Statements and IAS 28 Investments in Associates and Joint Ventures were adopted on January 1, 2023. The standards reinforce the principles for determining when an investor controls another entity and in certain cases amend the accounting for arrangements where an investor has joint control. The impact of the changes on the accounting for Shell’s interests is not significant, hence comparative information was not restated; the major investments affected are listed in Note 7.
- IFRS 13 Fair Value Measurement was adopted on January 1, 2023, with prospective effect. The standard affects nearly all instances where assets and liabilities are currently recognised at fair value, primarily by refining the measurement concept to represent an asset or liability’s exit value. The standard also introduces certain additional considerations to the measurement process and additional disclosures have been provided where considered material (see Note 6). The impact of the changes for Shell is not significant.
The Directors consider that, taking into account Shell’s assets and income, Shell has adequate resources to continue in operational existence for the foreseeable future. For this reason the Directors adopt the going concern basis for the financial statements contained in this Report.
The financial information presented in the Interim Statements does not constitute statutory accounts within the meanings of section 434(3) of the Companies Act 2006. Statutory accounts for the year ended December 31, 2022 were published in Shell’s Annual Report and a copy delivered to the Registrar of Companies in England and Wales. The auditors’ report on those accounts was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report and did not contain a statement under sections 498(2) or (3) of the Companies Act 2006.
The Interim Statements are unaudited.
Segment information
Segment earnings (see Note 3) are presented on a current cost of supplies basis (CCS earnings). 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.
Net capital investment (see Note 10) is defined as capital expenditure as reported in the Condensed Consolidated Statement of Cash Flows, adjusted for: proceeds from disposals (excluding those in the Corporate segment relating to other investments); exploration expense excluding exploration wells written off; investments in equity-accounted investments; and leases and other items.
CCS earnings and net capital investment information are the dominant measures used by the Chief Executive Officer for the purposes of making decisions about allocating resources and assessing performance.
2. Accounting for defined benefit plans
Revised IAS 19 Employee Benefits (IAS 19R) was adopted on January 1, 2023, with retrospective effect; comparative information is therefore restated.
The revised standard requires immediate recognition of actuarial gains and losses and return on assets arising in connection with defined benefit plans through other comprehensive income (see page 11). Previously, Shell applied the corridor method of accounting under which amounts falling inside the corridor remained unrecognised, while amounts falling outside it were recognised (amortised) in income over a number of years. For the periods presented in this Report, the elimination of this amortisation is approximately offset by lower interest income being recognised in income under the IAS 19R “net interest” approach. Under this approach, interest income from defined benefit plan assets is determined based on the same discount rate as applied to measure plan obligations, rather than on an expected rate of return reflecting the plan’s investment portfolio.
The following table sets out the impact of the change on relevant lines in the Condensed Consolidated Balance Sheet, on gearing, and on the return on capital employed (ROACE, see Note 9) for the twelve months ending at the respective balance sheet date.
$ million Dec 31, 2022 June 30, 2023 Effect of Effect of As accounting As accounting previously policy previously policy stated change Restated stated change Restated Non-current assets Deferred tax 4,045 243 4,288 4,141 183 4,324 Retirement benefits 12,575 (10,274) 2,301 11,542 (7,966) 3,576 Non-current liabilities Deferred tax 15,590 (5,278) 10,312 15,626 (4,468) 11,158 Retirement benefits 6,298 8,992 15,290 6,026 7,610 13,636 Total equity Other reserves 10,021 (13,773) (3,752) 8,115 (10,871) (2,756) Retained earnings 180,218 28 180,246 170,116 (54) 170,062 Gearing[1] 9.2% 0.6% 9.8% 8.1% 0.5% 8.6% ROACE 12.7% 0.9% 13.6% 12.9% 0.6% 13.5% [1] Net debt (total debt less cash and cash equivalents) as a percentage of total capital (net debt plus total equity)
The effect of the accounting policy change at January 1, 2023 was to reduce Accumulated other comprehensive income (within Other reserves) by $10,945 million, Retained earnings by $92 million and Total equity by $11,037 million.
Income for the second quarter 2012 increased by $20 million, solely impacting the Upstream segment. Basic and diluted earnings per share for the second quarter 2012 increased by $0.01. There was no impact on net cash from operating activities.
Income for the first half year 2012 increased by $38 million of which Upstream segment earnings increased by $37 million and Downstream segment earnings increased by $1 million. Basic and diluted earnings per share for the first half year 2012 increased by $0.01. There was no impact on net cash from operating activities.
3. Information by business segment
Quarters $ million Half year Q2 2012[1] 2012[1] Q2 2013 2013 Third-party revenue 12,085 10,048 Upstream 24,461 22,038 100,534 107,007 Downstream 200,943 214,925 50 13 Corporate 75 25 112,669 117,068 Total third-party revenue 225,479 236,988 Inter-segment revenue 10,353 12,548 Upstream 22,495 25,999 158 171 Downstream 401 383 - - Corporate - - Segment earnings 1,681 4,708 Upstream[2] 7,502 11,431 803 1,360 Downstream 2,491 2,680 (73) (36) Corporate 418 (300) 2,411 6,032 Total segment earnings 10,411 13,811 [1] Restated for accounting policy change (see Note 2) [2] Second quarter 2013 Upstream earnings included an impairment charge of $2,071 million after taxation ($3,267 million before taxation)
Quarters $ million Half year Q2 2012[1] 2012[1] Q2 2013 2013 2,411 6,032 Total segment earnings 10,411 13,811 Current cost of supplies adjustment: (794) (2,165) Purchases (681) (970) 218 585 Taxation 190 243 Share of profit of equity-accounted (94) (364) investments 47 (144) 1,741 4,088 Income for the period 9,967 12,940 [1] Restated for accounting policy change (see Note 2)
4. Share capital
Issued and fully paid
Ordinary shares of EUR0.07 Sterling each deferred shares of GBP1 Number of shares A B each At January 1, 2023 3,772,388,687 2,617,715,189 50,000 Scrip dividends 49,223,025 - - Repurchases of shares - (72,247,018) - At June 30, 2023 3,821,611,712 2,545,468,171 50,000
Nominal value
Ordinary shares $ million A B Total At January 1, 2023 321 221 542 Scrip dividends 4 - 4 Repurchases of shares - (6) (6) At June 30, 2023 325 215 540 The total nominal value of sterling deferred shares is less than $1 million.
At Royal Dutch Shell plc’s Annual General Meeting on May 21, 2023, 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 €148 million (representing approximately 2,114 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 21, 2023 and the end of the Annual General Meeting to be held in 2014, unless previously renewed, revoked or varied by Royal Dutch Shell plc in a general meeting.
5. Other reserves
Accumulated Share Capital Share other Merger premium redemption plan comprehensive $ million reserve[1] reserve[1] reserve[2] reserve income Total At January 1, 2023[3] 3,423 154 63 2,028 (9,420) (3,752) Other comprehensive loss attributable to Royal Dutch Shell plc shareholders - - - - (575) (575) Scrip dividends (4) - - - - (4) Repurchases of shares - - 6 - - 6 Share-based compensation - - - (430) - (430) At June 30, 2023 3,419 154 69 1,598 (9,995) (4,755) At January 1, 2023[3] 3,432 154 60 1,571 (7,178) (1,961) Other comprehensive loss attributable to Royal Dutch Shell plc shareholders[3] - - - - (836) (836) Scrip dividends (4) - - - - (4) Repurchases of shares - - 2 - - 2 Share-based compensation - - - 43 - 43 At June 30, 2023[3] 3,428 154 62 1,614 (8,014) (2,756) [1] 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, plc, now The Shell Transport and Trading Company Limited, in 2005. [2] The capital redemption reserve was established in connection with repurchases of shares of Royal Dutch Shell plc. [3] Restated for accounting policy change (see Note 2)
6. Derivative contracts
The table below provides the carrying amounts of derivatives contracts held, disclosed in accordance with IFRS 13 Fair Value Measurement (see Note 1c).
June 30, March $ million 2013 31, 2013 Dec 31, 2022 Included within: Trade and other receivables - non-current 1,337 1,426 1,881 Trade and other receivables - current 8,174 8,443 9,192 Trade and other payables - non-current 583 609 658 Trade and other payables - current 7,834 8,530 9,145
7. Major investments in joint ventures and associates
Of the major investments in joint ventures and associates listed in the Annual Report and Form 20-F for the year ended December 31, 2022 (page 117), Aera, Deer Park and Saudi Aramco Shell Refinery have been assessed as joint operations under IFRS 11 Joint Arrangements (see Note 1b) and are no longer accounted for using the equity method as from January 1, 2023.
8. Impacts of accounting for derivatives
In the ordinary course of business Shell enters into contracts to supply or purchase oil and gas products, and also enters into derivative contracts to mitigate resulting economic exposures (generally price exposure). 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 are, by contrast, recognised when the transaction occurs (see also below); 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 UK gas contracts held by Upstream 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 of the aforementioned are reported as identified items in this Report.
9. Return on average capital employed
Return on average capital employed (ROACE) measures the efficiency of Shell’s utilisation of the capital that it employs and is a common measure of business performance. In this calculation, ROACE is defined as the sum of 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. The tax rate is derived from calculations at the published segment level.
10. Liquidity and capital resources
Second quarter net cash from operating activities was $12.4 billion compared with $13.3 billion for the same period last year.
Total current and non-current debt decreased to $33.0 billion at June 30, 2023 from $35.8 billion at March 31, 2023 while cash and cash equivalents decreased to $12.5 billion at June 30, 2023, from $17.6 billion at March 31, 2023. No new debt was issued under the US shelf registration or under the euro medium-term note programme during the second quarter 2013.
Net capital investment in the second quarter 2013 was $10.9 billion, of which $9.5 billion was in Upstream, $1.3 billion in Downstream and $0.1 billion in Corporate. Net capital investment in the same period of 2012 was $6.3 billion, of which $5.3 billion was in Upstream and $1.0 billion in Downstream.
Dividends of $0.45 per share are announced on August 1, 2023 in respect of the second quarter. These dividends are payable on September 26, 2023. In the case of the 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, 2022 for additional information on the dividend access mechanism.
Under the Scrip Dividend Programme shareholders can increase their shareholding in Shell by choosing to receive new shares instead of cash dividends. Only new A shares will be issued under the Programme, including to shareholders who currently hold B shares.
Half year net cash from operating activities was $24.0 billion compared with $26.7 billion for the same period last year.
Total current and non-current debt decreased to $33.0 billion at June 30, 2023 from $37.8 billion at December 31, 2022 while cash and cash equivalents decreased to $12.5 billion at June 30, 2023, from $18.6 billion at December 31, 2022. No new debt was issued under the US shelf registration or under the euro medium-term note programme during the first half 2013.
Net capital investment in the first half 2013 was $19.1 billion, of which $16.9 billion was in Upstream, $2.1 billion in Downstream and $0.1 billion in Corporate. Net capital investment in the same period of 2012 was $10.9 billion, of which $9.1 billion was in Upstream and $1.8 billion in Downstream.
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties affecting Shell are described in the Risk Factors section of the Annual Report and Form 20-F for the year ended December 31, 2022 (pages 13 to 15) and are summarised below. Other than the deteriorating operating environment