ROYAL DUTCH SHELL PLC

4TH QUARTER AND FULL YEAR 2013 UNAUDITED RESULTS

 

/

SUMMARY OF UNAUDITED RESULTS

Quarters

$ million

Full year

Q4 2013

Q3 2013

Q4 20121

%2

 

2013

20121

%

1,781

4,677

6,728

-74

Income attributable to shareholders

16,371

26,712

-39

371

(429)

623

 

Current cost of supplies (CCS) adjustment for Downstream

374

452

 

2,152

4,248

7,351

-71

CCS earnings

16,745

27,164

-38

(763)

(209)

1,712

 

Less: Identified items3

(2,747)

1,905

 

2,915

4,457

5,639

-48

CCS earnings excluding identified items

19,492

25,259

-23

 

 

 

 

 Of which:

 

 

 

2,477

3,466

4,401

 

  Upstream

15,117

20,107

 

558

892

1,190

 

  Downstream

4,466

5,343

 

(120)

99

48

 

  Corporate and Non-controlling interest

(91)

(191)

 

6,028

10,409

9,913

-39

Cash flow from operating activities

40,440

46,140

-12

0.34

0.68

1.17

-71

Basic CCS earnings per share ($)

2.66

4.34

-39

0.68

1.36

2.34

 

Basic CCS earnings per ADS ($)

5.32

8.68

 

0.46

0.71

0.90

-49

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

3.10

4.04

-23

0.92

1.42

1.80

 

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

6.20

8.08

 

0.45

0.45

0.43

+5

Dividend per share ($)

1.80

1.72

+5

0.90

0.90

0.86

 

Dividend per ADS ($)

3.60

3.44

 

1 Restated for accounting policy change (see Note 2)

2 Q4 on Q4 change 3 See page 6

 

Royal Dutch Shell Chief Executive Officer Ben van Beurden:

“Our momentum slowed in 2013. We must improve our financial results, achieve better capital efficiency and continue to strengthen our operational performance and project delivery.”

FOURTH QUARTER 2013 PORTFOLIO DEVELOPMENTS

Upstream

In Brazil, Shell paid $1.3 billion as its share of the signature bonus for the 35-year production-sharing contract (“PSC”) to develop the Libra discovery (Shell interest 20%), a potentially multi-billion barrel oil field in pre-salt reservoirs located in the Santos Basin.

Also in Brazil, Shell completed the acquisition of an additional 23% interest in the Shell-operated deepwater project BC-10, for a consideration of some $1 billion.

During the fourth quarter 2013, Shell announced positive well test results in Block 2-3 (Shell interest 75%) onshore south-central Albania, demonstrating light oil potential in a fractured carbonate play. In addition, Shell drilled a number of successful exploration and appraisal wells during 2013 near its established production infrastructure.

As part of its global exploration programme Shell added new acreage positions during the fourth quarter 2013, including offshore positions in Australia and Greenland as well as onshore positions in Tunisia.

Upstream divestment proceeds totalled some $0.3 billion for the fourth quarter 2013 and included proceeds from the divestment of certain liquids-rich shales acreage positions in Ohio, United States.

In January 2014, Shell completed the acquisition of Repsol S.A.’s LNG portfolio outside of North America, including supply positions in Peru and Trinidad & Tobago, for a net cash purchase price of $3.8 billion, subject to post-closing adjustments. As part of the transaction, Shell also assumed $1.6 billion of balance sheet liabilities relating to existing leases for LNG ship charters. The acquisition adds 7.2 million tonnes per annum (“mtpa”) of directly managed LNG volumes through long-term offtake agreements, including 4.2 mtpa of equity LNG plant capacity. Shell’s fourth quarter 2013 capital investment includes $3.4 billion for this transaction, with the remaining $2.0 billion booked in the first quarter 2014, of which $1.6 billion is a non-cash item relating to the LNG ship charter finance leases.

Also in January 2014, Shell agreed to sell its 8% interest in the Wheatstone-Iago joint venture and its 6.4% interest in the 8.9 mtpa Wheatstone LNG project in Western Australia to the Kuwait Foreign Petroleum Exploration Company for $1.1 billion, subject to closing.

In Upstream Americas resources plays, insights from ongoing exploration and appraisal drilling results and production information, and Shell’s ongoing restructuring of this portfolio, could potentially lead to future asset sales and/or impairments.

Downstream

Shell is restructuring its Oil Products business to improve profitability.

In the Czech Republic, Shell agreed to sell its 16.3% interest in Ceska Rafinerska, which includes the Kralupy and Litvinov refineries with a combined capacity of 160 thousand barrels per day (“b/d”) (100%). The transaction is expected to complete during the first half of 2014.

Shell sold its 21% interest in the Mongstad refinery (capacity 205 thousand b/d) in Norway and, under the transaction, acquired an additional 10% interest in the Pernis refinery (capacity 404 thousand b/d) in the Netherlands. Following this transaction, Shell’s interest in the Pernis refinery increased to 100%.

Downstream divestment proceeds totalled some $0.2 billion for the fourth quarter 2013 and included proceeds from the divestment of certain downstream marketing businesses in Egypt, the first phase of the sale of the Harburg refinery (capacity 108 thousand b/d) in Germany and the divestment of the LPG business in the Philippines.

Shell commenced a review of its global refining portfolio, in the context of the growth of light crude supply in North America, and excess industry refining capacity world-wide. These factors are affecting the dynamics of the global refining industry environment. The portfolio review could potentially lead to further asset sales, closures and/or impairments.

Shell is also considering the sale of certain of its marketing assets in Norway and Italy. In Australia, Shell has received indications of interest to acquire its refining and parts of its marketing portfolio. The company is considering its options for divestment, subject to achieving satisfactory commercial terms for these positions.

KEY FEATURES OF THE FOURTH QUARTER AND FULL YEAR 2013

Full year 2013 CCS earnings excluding identified items were $19,492 million compared with $25,259 million in the fourth quarter 2012, a decrease of 23%.

Full year 2013 cash flow from operating activities was $40.4 billion, compared with $46.1 billion in 2012. Excluding working capital movements, cash flow from operating activities for the full year 2013 was $37.5 billion, compared with $42.7 billion in 2012.

Full year 2013 net capital investment was $44.3 billion. Capital investment for the full year 2013 was $46.0 billion and divestment proceeds were $1.7 billion.

Full year 2013 oil and gas production was 3,199 thousand boe/d, a decrease of 2% compared with 2012. Excluding the impact of the deteriorated operating environment in Nigeria, divestments and PSC price effects, 2013 production volumes were in line with 2012. Production volumes were impacted by higher maintenance and asset replacement activities during 2013.

Full year 2013 equity LNG sales volumes of 19.64 million tonnes were 3% lower than in 2012.

Full year 2013 oil products sales volumes were 1% lower than in 2012. Full year 2013 chemicals sales volumes decreased by 7% compared with 2012.

With 2013 production of some 1.2 billion boe, our headline proved Reserves Replacement Ratio for the year on an SEC basis is expected to be around 131%. Our Organic Reserves Replacement Ratio, which excludes the impact of oil and gas price movements in the year, acquisitions and divestments, is expected to be around 123%.

At the end of 2013, total proved reserves on an SEC basis are expected to be around 13.9 billion boe, after taking into account 2013 production.

The 3-year average headline proved Reserves Replacement Ratio on an SEC basis is expected to be around 91%. Our 3-year average Organic Reserves Replacement Ratio, which excludes the impact of oil and gas price movements in the year, acquisitions and divestments, is expected to be around 112%.

Further information will be provided in our Annual Report and Form 20-F, which is expected to be filed in March 2014.

SUMMARY OF IDENTIFIED ITEMS

Earnings for the fourth quarter 2013 reflected the following items, which in aggregate amounted to a net charge of $763 million (compared with a net gain of $1,712 million in the fourth quarter 2012), as summarised in the table below:

SUMMARY OF IDENTIFIED ITEMS

Quarters

$ million

Full year

Q4 2013

Q3 2013

Q4 2012

 

2013

2012

 

 

 

Segment earnings impact of identified items:

 

 

(631)

(176)

1,801

 Upstream

(2,479)

2,137

(86)

14

(89)

 Downstream

(597)

39

(46)

(47)

-

 Corporate and Non-controlling interest

329

(271)

(763)

(209)

1,712

Earnings impact

(2,747)

1,905

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:

Further items may be identified in addition to the above. Prior period comparatives have not been restated.

EARNINGS BY BUSINESS SEGMENT

UPSTREAM

Quarters

$ million

Full year

Q4 2013

Q3 2013

Q4 2012

%2

 

2013

2012

%

2,477

3,466

4,401

-44

Upstream earnings excluding identified items1

15,117

20,107

-25

1,846

3,290

6,202

-70

Upstream earnings1

12,638

22,244

-43

5,557

6,709

6,165

-10

Upstream cash flow from operating activities

30,114

33,061

-9

14,150

8,148

9,323

+52

Upstream net capital investment

39,217

25,320

+55

1,539

1,485

1,640

-6

Liquids production available for sale (thousand b/d)

1,541

1,633

-6

9,925

8,383

10,288

-4

Natural gas production available for sale (million scf/d)

9,616

9,449

+2

3,251

2,931

3,414

-5

Total production available for sale (thousand boe/d)

3,199

3,262

-2

4.93

4.88

5.49

-10

Equity LNG sales volumes (million tonnes)

19.64

20.20

-3

1  Fourth quarter 2012 and full year 2012 comparatives restated for accounting policy change (see Note 2)

2  Q4 on Q4 change

Fourth quarter Upstream earnings excluding identified items were $2,477 million compared with $4,401 million a year ago. Identified items were a net charge of $631 million, compared with a net gain of $1,801 million in the fourth quarter 2012 (see page 6).

Compared with the fourth quarter 2012, earnings excluding identified items were impacted by higher exploration expenses, mainly due to well write-offs in French Guiana and in resources plays globally. Increased maintenance activities, affecting high value oil and gas volumes as well as LNG sales volumes, adversely impacted earnings by some $500 million compared with the fourth quarter 2012. Depreciation increased, and the impact of the weakening Australian dollar on a deferred tax liability reduced earnings by some $170 million compared with the fourth quarter 2012. Earnings also reflected lower liquids and gas realisations, higher operating expenses and the deteriorated security situation onshore Nigeria. Earnings benefited from the contribution of growth projects and from higher LNG realisations.

Upstream Americas excluding identified items continued to incur a loss.

Global liquids realisations were 6% lower than for the fourth quarter 2012. In Canada, synthetic crude oil realisations were 2% higher than for the same period last year. Global natural gas realisations were 1% higher than for the same quarter a year ago, with a 4% increase in the Americas and a 1% decrease outside the Americas.

Fourth quarter 2013 production was 3,251 thousand boe/d compared with 3,414 thousand boe/d a year ago. Liquids production decreased by 6% and natural gas production decreased by 4% compared with the fourth quarter 2012. The deteriorated security situation in Nigeria impacted production volumes by some 40 thousand boe/d compared with the fourth quarter 2012. Excluding the impact of the deteriorated security situation environment in Nigeria, divestments and PSC price effects, fourth quarter 2013 production was 3% lower than for the same period last year. Compared with the fourth quarter 2012, production volumes were impacted by some 95 thousand boe/d due to higher maintenance and asset replacement activities.

New field start-ups and the continuing ramp-up of existing fields contributed some 115 thousand boe/d to production for the fourth quarter 2013.

Equity LNG sales volumes of 4.93 million tonnes decreased by 10% compared with the same quarter a year ago, mainly reflecting higher planned maintenance activities at several LNG plants, partly offset by stronger operating performance.

Full year Upstream earnings excluding identified items were $15,117 million compared with $20,107 million in 2012. Identified items were a net charge of $2,479 million, compared with a net gain of $2,137 million in 2012 (see page 6).

Compared with 2012, Upstream earnings excluding identified items reflected higher exploration expenses, increased operating expenses, higher depreciation as well as lower liquids and LNG realisations. Earnings were also impacted by the deteriorated operating environment in Nigeria and the impact of the weakening Australian dollar on a deferred tax liability. This was partly offset by the contribution of Pearl GTL, and higher gas realisations in the Americas.

Global liquids realisations were 6% lower than in 2012. In Canada, synthetic crude oil realisations were 7% higher than in 2012. Global natural gas realisations were 6% higher than in 2012, with a 27% increase in the Americas and a 3% increase outside the Americas.

Full year 2013 production was 3,199 thousand boe/d compared with 3,262 thousand boe/d in 2012. Liquids production was down 6% and natural gas production increased by 2% compared with 2012. The deteriorated operating environment in Nigeria impacted production volumes by some 50 thousand boe/d compared with 2012. Excluding the impact of divestments, PSC price effects and the deteriorated operating environment in Nigeria, production volumes in 2013 were in line with 2012. Production volumes were impacted by higher maintenance and asset replacement activities.

New field start-ups and the continuing ramp-up of existing fields, in particular Pearl GTL in Qatar, contributed some 170 thousand boe/d to production in 2013.

Equity LNG sales volumes of 19.64 million tonnes were 3% lower than in 2012, mainly reflecting lower volumes from Nigeria LNG due to reduced feedgas supply as a result of the deteriorated operating environment in Nigeria. Excluding the impact of the challenging operating environment in Nigeria, equity LNG sales volumes were in line with 2012.

DOWNSTREAM

Quarters

$ million

Full year

Q4 2013

Q3 2013

Q4 2012

%2

 

2013

2012

%

558

892

1,190

-53

Downstream CCS earnings excluding identified items1

4,466

5,343

-16

472

906

1,101

-57

Downstream CCS earnings1

3,869

5,382

-28

808

2,969

4,303

-81

Downstream cash flow from operating activities

7,903

11,111

-29

1,571

1,166

1,471

+7

Downstream net capital investment

4,885

4,275

+14

2,910

2,947

2,804

+4

Refinery processing intake (thousand b/d)

2,915

2,819

+3

6,038

6,398

6,367

-5

Oil products sales volumes (thousand b/d)

6,164

6,235

-1

4,412

4,620

4,620

-5

Chemicals sales volumes (thousand tonnes)

17,386

18,669

-7

1  Fourth quarter 2012 and full year 2012 comparatives restated for accounting policy change (see Note 2)

2  Q4 on Q4 change

Fourth quarter Downstream earnings excluding identified items were $558 million compared with $1,190 million for the fourth quarter 2012. Identified items were a net charge of $86 million, compared with a net charge of $89 million for the fourth quarter 2012 (see page 6).

Compared with the fourth quarter 2012, Downstream earnings excluding identified items were mainly impacted by significantly weaker refining industry conditions, in particular in Asia and Europe. Earnings also reflected lower contributions from marketing and trading. This was partly offset by positive contributions from the Motiva joint venture in the United States and by higher Chemicals earnings, as a result of improved chemicals industry conditions in Asia and the United States, as well as continued strong operating performance.

Oil products sales volumes decreased by 5% compared with the same period a year ago, as a result of lower marketing and trading volumes, partly offset by an accounting policy change (see Note 1b).

Chemicals sales volumes also decreased by 5% compared with the same quarter last year, mainly as a result of an accounting policy change (see Note 1b) and contract expirations, partly offset by higher trading volumes. Chemicals manufacturing plant availability of 91% was in line with the fourth quarter 2012 and reflected continued strong operating performance, offset by higher planned maintenance.

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) and also from higher volumes from the Motiva joint venture. Refinery availability was 93%, compared with 92% for the fourth quarter 2012.

Full year Downstream earnings excluding identified items were $4,466 million compared with $5,343 million in 2012. Identified items were a net charge of $597 million, compared with a net gain of $39 million in 2012 (see page 6).

Compared with 2012, Downstream earnings excluding identified items reflected higher contributions from Chemicals and trading, with continued strong contributions from marketing, which were broadly similar to 2012. This was more than offset by significantly lower realised refining margins, mainly as a result of a severe deterioration of industry conditions in most regions. Contributions from North American refineries were also impacted by the narrower price differential between North American crude oil markers and the Brent crude oil marker. As a result of these developments, refining incurred a loss in 2013.

Oil products sales volumes were 1% lower compared with 2012, reflecting lower marketing and trading volumes, partly offset by the effect of an accounting policy change (see Note 1b).

Chemicals sales volumes decreased by 7% compared with 2012, mainly as a result of an accounting policy change (see Note 1b) and contract expirations, partly offset by higher trading volumes. Chemicals manufacturing plant availability increased to 92% from 91% in 2012, reflecting improved operational performance.

Refinery intake volumes were 3% higher than in 2012, mainly as a result of an accounting policy change (see Note 1b). Refinery availability was 92%, compared with 93% in 2012.

CORPORATE AND NON-CONTROLLING INTEREST

Quarters

$ million

Full year

Q4 2013

Q3 2013

Q4 2012

 

2013

2012

(120)

99

48

Corporate and Non-controlling interest excl. identified items1

(91)

(191)

 

 

 

Of which:

 

 

(73)

135

82

  Corporate1

73

31

(47)

(36)

(34)

  Non-controlling interest

(164)

(222)

(166)

52

48

Corporate and Non-controlling interest1

238

(462)

1 Fourth quarter 2012 and full year 2012 comparatives restated for accounting policy change (see Note 2)

Fourth quarter Corporate results and Non-controlling interest excluding identified items were a loss of $120 million, compared with a gain of $48 million in the same period last year. Identified items for the fourth quarter 2013 were a net charge of $46 million, whereas earnings for the fourth quarter 2012 did not include any identified items (see page 6).

Compared with the fourth quarter 2012, Corporate results excluding identified items mainly reflected higher net interest expense and adverse currency exchange rate effects, partly offset by lower costs.

Full year Corporate results and Non-controlling interest excluding identified items were a loss of $91 million compared with a loss of $191 million in 2012. Identified items for 2013 were a net gain of $329 million, compared with a net charge of $271 million in 2012 (see page 6).

Compared with 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

Shell’s annual Management Day is scheduled for March 13, 2014 in London, United Kingdom, and will also be webcast on www.shell.com/investor. On March 17, 2014 a Management Day will be held in New York, United States.

First quarter 2014 results and first quarter 2014 dividend are scheduled to be announced on May 1, 2014. Second quarter 2014 results and second quarter 2014 dividend are scheduled to be announced on July 31, 2014. Third quarter 2014 results and third quarter 2014 dividend are scheduled to be announced on October 30, 2014.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF INCOME

Quarters

$ million

Full year

Q4 2013

Q3 2013

Q4 20121

%2

 

2013

20121

%

109,243

116,513

118,047

 

Revenue

451,235

467,153

 

2,024

1,515

2,127

 

Share of profit of joint ventures and associates

7,275

8,948

 

212

230

2,437

 

Interest and other income

1,089

5,599

 

111,479

118,258

122,611

 

Total revenue and other income

459,599

481,700

 

85,853

91,842

93,350

 

Purchases

353,199

369,725

 

7,512

7,416

7,319

 

Production and manufacturing expenses

28,386

26,215

 

3,861

3,566

3,698

 

Selling, distribution and administrative expenses

14,675

14,465

 

428

291

416

 

Research and development

1,318

1,307

 

1,766

1,636

1,167

 

Exploration

5,278

3,104

 

5,629

4,153

3,835

 

Depreciation, depletion and amortisation

21,509

14,615

 

470

392

379

 

Interest expense

1,642

1,757

 

5,960

8,962

12,447

-52

Income before taxation

33,592

50,512

-33

4,138

4,225

5,691

 

Taxation

17,066

23,552

 

1,822

4,737

6,756

-73

Income for the period

16,526

26,960

-39

41

60

28

 

Income attributable to non-controlling interest

155

248

 

1,781

4,677

6,728

-74

Income attributable to Royal Dutch Shell plc shareholders

16,371

26,712

-39

 1 Restated for accounting policy change (see Note 2)

  2 Q4 on Q4 change

 

EARNINGS PER SHARE

Quarters

$

Full year

Q4 2013

Q3 2013

Q4 20121

 

2013

20121

0.28

0.75

1.07

Basic earnings per share

2.60

4.27

0.28

0.75

1.07

Diluted earnings per share

2.60

4.26

1 Restated for accounting policy change (see Note 2)

 

 SHARES1

Quarters

Millions

Full year

Q4 2013

Q3 2013

Q4 2012

 

2013

2012

 

 

 

Weighted average number of shares as the basis for:

 

 

6,272.9

6,269.7

6,282.8

  Basic earnings per share

6,291.1

6,261.2

6,275.1

6,272.5

6,289.2

  Diluted earnings per share

6,293.4

6,267.8

6,295.4

6,282.2

6,305.9

Shares outstanding at the end of the period

6,295.4

6,305.9

1 Royal Dutch Shell plc ordinary shares of euro 0.07 each

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Quarters

$ million

Full year

Q4 2013

Q3 2013

Q4 20121

 

2013

20121

1,822

4,737

6,756

Income for the period

16,526

26,960

 

 

 

Other comprehensive income, net of tax:

 

 

 

 

 

Items that may be reclassified to income in later periods:

 

 

(326)

1,064

36

Currency translation differences

(1,938)

1,394

28

(154)

(683)

Unrealised gains/(losses) on securities

(166)

(815)

(2)

25

101

Cash flow hedging gains/(losses)

178

31

(43)

(39)

(179)

Share of other comprehensive loss of joint ventures and associates

(167)

(222)

(343)

896

(725)

Total

(2,093)

388

 

 

 

  Items that are not reclassified to income in later periods:

 

 

2,370

(557)

(2,500)

Retirement benefits remeasurements

3,833

(2,578)

2,370

(557)

(2,500)

Total

3,833

(2,578)

2,027

339

(3,225)

Other comprehensive income/(loss) for the period

1,740

(2,190)

3,849

5,076

3,531

Comprehensive income for the period

18,266

24,770

(14)

34

46

Comprehensive income attributable to non-controlling interest

23

300

3,863

5,042

3,485

Comprehensive income attributable to Royal Dutch Shell plc shareholders

18,243

24,470

1 Restated for accounting policy change (see Note 2)

 

CONDENSED CONSOLIDATED BALANCE SHEET

 

$ million

 

Dec 31, 2013

Sept 30, 2013

Dec 31, 20121

Assets

 

 

 

Non-current assets:

 

 

 

Intangible assets

4,394

4,348

4,470

Property, plant and equipment

191,897

186,541

172,293

Joint ventures and associates

34,613

34,010

38,350

Investments in securities

4,715

4,703

4,867

Deferred tax

5,785

5,514

4,288

Retirement benefits

3,574

3,205

2,301

Trade and other receivables

9,191

9,633

8,991

 

254,169

247,954

235,560

Current assets:

 

 

 

Inventories

30,009

29,820

30,781

Trade and other receivables

63,638

62,561

65,403

Cash and cash equivalents

9,696

14,278

18,550

 

103,343

106,659

114,734

Total assets

357,512

354,613

350,294

Liabilities

 

 

 

Non-current liabilities:

 

 

 

Debt

36,218

31,972

29,921

Trade and other payables

4,065

4,198

4,175

Deferred tax

11,943

11,678

10,312

Retirement benefits

11,182

13,738

15,290

Decommissioning and other provisions

19,698

18,839

17,435

 

83,106

80,425

77,133

Current liabilities:

 

 

 

Debt

8,344

5,106

7,833

Trade and other payables

70,112

71,988

72,839

Taxes payable

11,173

13,110

12,684

Retirement benefits

382

383

402

Decommissioning and other provisions

3,247

3,195

3,221

 

93,258

93,782

96,979

Total liabilities

176,364

174,207

174,112

Equity attributable to Royal Dutch Shell plc shareholders

180,047

179,147

174,749

Non-controlling interest

1,101

1,259

1,433

Total equity

181,148

180,406

176,182

Total liabilities and equity

357,512

354,613

350,294

1 Restated for accounting policy change (see Note 2)

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

Equity attributable to Royal Dutch Shell plc shareholders

 

$ million

Share
capital

Shares held in trust

Other reserves

Retained earnings

Total

Non-controlling interest

Total
equity

At January 1, 20131

542

(2,287)

(3,752)

180,246

174,749

1,433

176,182

Comprehensive income
for the period

-

-

1,872

16,371

18,243

23

18,266

Capital contributions
from, and other changes
in, non-controlling interest

-

-

-

18

18

(103)

(85)

Dividends paid

-

-

-

(11,338)

(11,338)

(252)

(11,590)

Scrip dividends2

12

-

(12)

4,140

4,140

-

4,140

Repurchases of shares3

(12)

-

12

(5,757)

(5,757)

-

(5,757)

Shares held in trust:
net sales/(purchases)
and dividends received

-

355

-

126

481

-

481

Share-based compensation

-

-

(157)

(332)

(489)

-

(489)

At December 31, 2013

542

(1,932)

(2,037)

183,474

180,047

1,101

181,148

At January 1, 20121

536

(2,990)

(1,961)

162,895

158,480

1,486

159,966

Comprehensive income for the period1

-

-

(2,242)

26,712

24,470

300

24,770

Capital contributions
from, and other changes
in, non-controlling interest

-

-

-

39

39

(61)

(22)

Dividends paid

-

-

-

(10,955)

(10,955)

(292)

(11,247)

Scrip dividends2

9

-

(9)

3,565

3,565

-

3,565

Repurchases of shares3

(3)

- -

3

(1,728)

(1,728)

-

(1,728)

Shares held in trust:
net sales/(purchases)
and dividends received

-

703

-

150

853

-

853

Share-based compensation

-

-

457

(432)

25

-

25

At December 31, 20121

542

(2,287)

(3,752)

180,246

174,749

1,433

176,182

1 Restated for accounting policy change (see Note 2)

2 Under the Scrip Dividend Programme some 125.6 million A shares, equivalent to $4.1 billion, were issued during 2013 and some 103.8 million A shares, equivalent to $3.6 billion, were issued during 2012.

3 Includes shares committed to repurchase and repurchases subject to settlement at the end of the period

 

 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

Quarters

$ million

Full year

Q4 2013

Q3 2013

Q4 20121

 

2013

20121

 

 

 

Cash flow from operating activities

 

 

1,822

4,737

6,756

Income for the period

16,526

26,960

 

 

 

Adjustment for:

 

 

4,677

4,965

5,966

- Current taxation

18,582

22,722

436

354

324

- Interest expense (net)

1,448

1,543

5,629

4,153

3,835

- Depreciation, depletion and amortisation

21,509

14,615

(87)

(38)

(2,083)

- Net gains on sale of assets

(382)

(4,228)

(1,682)

551

994

- Decrease/(increase) in working capital

2,988

3,391

(2,024)

(1,515)

(2,127)

- Share of profit of joint ventures and associates

(7,275)

(8,948)

1,865

1,307

2,655

- Dividends received from joint ventures and associates

7,117

10,573

(938)

(907)

(422)

- Deferred taxation, retirement benefits, decommissioning

  and other provisions

(2,701)

341

1,338

788

553

- Other

2,937

201

11,036

14,395

16,451

Net cash from operating activities (pre-tax)

60,749

67,170

(5,008)

(3,986)

(6,538)

Taxation paid

(20,309)

(21,030)

6,028

10,409

9,913

Net cash from operating activities

40,440

46,140

 

 

 

Cash flow from investing activities

 

 

(14,508)

(8,788)

(10,674)

Capital expenditure2

(40,145)

(32,576)

(523)

(352)

(217)

Investments in joint ventures and associates

(1,538)

(3,028)

432

79

1,513

Proceeds from sales of assets

1,212

6,346

109

212

415

Proceeds from sales of joint ventures and associates

538

698

2

(63)

(30)

Other investments (net)

(388)

(86)

37

31

53

Interest received

175

193

(14,451)

(8,881)

(8,940)

Net cash used in investing activities

(40,146)

(28,453)

 

 

 

Cash flow from financing activities

 

 

3,239

124

(467)

Net increase/(decrease) in debt with maturity period

within three months

3,126

(165)

4,366

4,402

1,813

Other debt: New borrowings

9,146

5,108

(464)

(672)

(278)

  Repayments

(6,877)

(4,960)

(650)

(323)

(283)

Interest paid

(1,307)

(1,428)

(60)

8

25

Change in non-controlling interest

(51)

23

 

 

 

Cash dividends paid to:

 

 

(1,610)

(1,637)

(1,634)

- Royal Dutch Shell plc shareholders

(7,198)

(7,390)

(36)

(136)

(26)

- Non-controlling interest

(252)

(292)

(996)

(1,525)

(453)

Repurchases of shares

(5,000)

(1,492)

66

(189)

(43)

Shares held in trust: net (purchases)/sales and dividends received

(565)

(34)

3,855

52

(1,346)

Net cash used in financing activities

(8,978)

(10,630)

(14)

158

84

Currency translation differences relating to cash and

cash equivalents

(170)

201

(4,582)

1,738

(289)

(Decrease)/increase in cash and cash equivalents

(8,854)

7,258

14,278

12,540

18,839

Cash and cash equivalents at beginning of period

18,550

11,292

9,696

14,278

18,550

Cash and cash equivalents at end of period

9,696

18,550

1 Restated for accounting policy change (see Note 2)

2 See Note 6

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of preparation

The unaudited quarterly and full year Condensed Consolidated Financial Statements of Royal Dutch Shell plc and its subsidiaries (collectively known as Shell) have been prepared 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, 2012 (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, 2013, 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, 2013. 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 3.

IFRS 13 Fair Value Measurement was adopted on January 1, 2013, 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. The impact of the changes for Shell is not significant.

The financial information presented in these Condensed Consolidated Financial Statements does not constitute statutory accounts within the meaning of section 434(3) of the Companies Act 2006. Statutory accounts for the year ended December 31, 2012 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.

Segment information

Segment earnings 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 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 joint ventures and associates; 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, 2013, 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 12). 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 average capital employed (ROACE, see Note 5) for the twelve months ending December 31, 2012.

$ million

Dec 31, 2012

 

As previously stated

Effect of accounting policy change

Restated

Non-current assets

 

 

 

 Deferred tax

4,045

243

4,288

 Retirement benefits

12,575

(10,274)

2,301

Non-current liabilities

 

 

 

 Deferred tax

15,590

(5,278)

10,312

 Retirement benefits

6,298

8,992

15,290

Total equity

 

 

 

Other reserves

10,021

(13,773)

(3,752)

Retained earnings

180,218

28

180,246

Gearing1

9.2%

0.6%

9.8%

ROACE

12.7%

0.9%

13.6%

1 Net debt (total debt less cash and cash equivalents) as percentage of total capital (net debt plus equity)

The effect of the accounting policy change at January 1, 2012 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 fourth quarter 2012 increased by $57 million, of which Upstream segment earnings increased by $24 million, Downstream segment earnings increased by $27 million and Corporate segment earnings increased by $6 million. Basic and diluted earnings per share for the fourth quarter 2012 increased by $0.01. There was no impact on net cash from operating activities.

Income for the full year 2012 increased by $120 million, of which Upstream segment earnings increased by $82 million, Downstream segment earnings increased by $32 million and Corporate segment earnings increased by $6 million. Basic and diluted earnings per share for the full year 2012 increased by $0.02. There was no impact on net cash from operating activities.

3. 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, 2012 (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, 2013.

4. 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.

5. 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.

6. Acquisition of Repsol LNG businesses

On January 1, 2014, Shell completed the acquisition of part of Repsol S.A.'s LNG portfolio for a net cash purchase price of $3.8 billion, subject to post-closing adjustments. Of this amount, $3.4 billion was paid on December 31, 2013 (reflected within Trade and other receivables in the Condensed Consolidated Balance Sheet and within Capital expenditure in the Condensed Consolidated Statement of Cash Flows), with the balance settled on completion.

CAUTIONARY STATEMENT

All amounts shown throughout this Report are unaudited.

The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate entities. In this document “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 document refer to companies over which Royal Dutch Shell plc either directly or indirectly has control. Companies over which Shell has joint control are generally referred to as “joint ventures” and companies 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 (for example, through our 23% shareholding in Woodside Petroleum Ltd.) ownership interest held by Shell in a venture, partnership or company, after exclusion of all third-party interest.

This document 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’’, ‘‘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 document, 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. All forward-looking statements contained in this document 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, 2012 (available at www.shell.com/investor and www.sec.gov). These risk factors also expressly qualify all forward-looking statements contained in this document and should be considered by the reader. Each forward-looking statement speaks only as of the date of this document, January 30, 2014. 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 document.

We may have used certain terms, such as resources, in this document that the United States Securities and Exchange Commission (SEC) strictly prohibits us from including in our 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.

January 30, 2014

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.

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