ROYAL DUTCH SHELL PLC

3RD QUARTER 2014 UNAUDITED RESULTS

 

SUMMARY OF UNAUDITED RESULTS

Quarters

$ million

Nine months

Q3 2014

Q2 2014

Q3 2013

%1

 

2014

2013

%

4,463

5,307

4,677

-5

Income attributable to Royal Dutch Shell plc shareholders

14,279

14,590

-2

803

(160)

(429)

 

Current cost of supplies (CCS) adjustment for Downstream

599

3

 

5,266

5,147

4,248

+24

CCS earnings

14,878

14,593

+2

(581)

(979)

(209)

 

Identified items2

(4,422)

(1,984)

 

5,847

6,126

4,457

+31

CCS earnings excluding identified items

19,300

16,577

+16

 

 

 

 

 Of which:

 

 

 

4,343

4,722

3,466

 

  Upstream

14,775

12,640

 

1,793

1,347

892

 

  Downstream

4,715

3,908

 

(289)

57

99

 

  Corporate and Non-controlling interest

(190)

29

 

12,811

8,641

10,409

+23

Cash flow from operating activities

35,436

34,412

+3

0.83

0.81

0.68

+22

Basic CCS earnings per share ($)

2.36

2.32

+2

1.66

1.62

1.36

 

Basic CCS earnings per ADS ($)

4.72

4.64

 

0.92

0.97

0.71

+30

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

3.06

2.63

+16

1.84

1.94

1.42

 

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

6.12

5.26

 

0.47

0.47

0.45

+4

Dividend per share ($)

1.41

1.35

+4

0.94

0.94

0.90

 

Dividend per ADS ($)

2.82

2.70

 

1 Q3 on Q3 change

2 See page 5

Royal Dutch Shell Chief Executive Officer Ben van Beurden commented:

“Shell is proud to deliver high-quality fuels, lubricants and petrochemicals, for transportation, power generation and manufacturing industries. With over 90,000 employees in more than 70 countries around the world, Shell is dedicated to delivering low-cost, safe and reliable energy for our customers.

The recent decline in oil prices is part of the volatility in our industry. It underlines the importance of our drive to get a tighter grip on performance management, keep a tight hold on costs and spending, and improve the balance between growth and returns.

Our results today show that we are delivering on the three priorities I set out at the start of 2014 – better financial performance, enhanced capital efficiency and continued strong project delivery.

We have moderated our spending on growth and accelerated disposals of our non-strategic portfolio as part of a drive to improve capital efficiency. Proceeds from asset sales so far this year total $11.6 billion, with further disposals ongoing.

Our plans to exit from Pinedale and Haynesville mark the completion of the major sales programme in our North America resources plays portfolio. We are now focusing on creating value from this slimmed-down position. Restructuring in Oil Products continues, with the completion of the divestment of Shell’s Australia positions in the quarter.

Our new investments are delivering benefits to the bottom line. We have brought four new deep-water fields on-stream this year. We are also adding new potential to the portfolio through exploration and appraisal successes.

Shell’s strategy is founded on creating value for the long term.

Our dividend per share for the third quarter of 2014 is up 4% from year-ago levels. With $8.9 billion of dividends declared and $2.4 billion of shares repurchased in the first three quarters of this year, we are on track for a programme of over $30 billion of dividend distributions and buybacks for 2014 and 2015 combined. All of this underlines the company’s recent improved performance and potential for the future.”

 

THIRD QUARTER 2014 PORTFOLIO DEVELOPMENTS

Upstream

In Nigeria, Shell announced first production from the Shell-operated Bonga North West deep-water development (Shell interest 55%). Oil from the Bonga North West subsea facilities is transported by a new undersea pipeline to the existing Bonga floating production, storage and offloading (“FPSO”) export facility. The Bonga FPSO has been upgraded to handle the additional oil flow from Bonga North West which, at peak production, is expected to contribute 40 thousand barrels of oil equivalent per day (“boe/d”).

In the United States, Shell announced the second major 2014 start-up in the deep-water Gulf of Mexico with the Cardamom development first oil (Shell interest 100%). Oil from the Cardamom subsea development is piped through Shell’s Auger platform and is planned to ramp up to 50 thousand boe/d at peak production.

In October, Shell announced first production from the Shell-operated Gumusut-Kakap deep-water development (Shell interest 33%) in Malaysia. The production system is expected to reach a peak oil production of around 135 thousand boe/d. With oil production now underway, work on the gas injection facilities is continuing with an expected start-up during 2015.

In October, Shell announced the final investment decision (“FID”) on the Bonga Main phase 3 project (Shell interest 55%) offshore Nigeria. The development is expected to contribute some 40 thousand boe/d at peak production through the existing Bonga FPSO export facility.

In October, Shell commenced front end engineering and design (“FEED”) on the Vito deep-water development project (Shell interest 51%) in the Gulf of Mexico, United States. The development, which is expected to deliver peak production of 100 thousand boe/d after coming on-stream, will be a 120 thousand boe/d capacity floating production system (“FPS”) with flexibility for up to four subsea tiebacks.

In October, Shell announced a frontier exploration discovery offshore Gabon, West Africa (Shell interest 75%). The Leopard-1 well encountered a substantial gas column with around 200 metres net gas pay in a pre-salt reservoir. Shell and its partners are planning to undertake an appraisal programme to further determine the resource volumes.

During the quarter, in Shell’s heartlands exploration programme Shell made a gas discovery at the Shell-operated deep-water Marjoram-1 well (Shell interest 85%) in Malaysia. Shell also announced two oil discoveries in the Gulf of Mexico with the successful Rydberg exploration well (Shell interest 57%) in the Norphlet play, and with the Kaikias well (Shell interest 100%) in the Mars basin.

Shell had continued success with near-field exploration discoveries in a number of countries, including the successful Dhulaima drilling campaign in North Oman.

As part of its global exploration programme, Shell added new acreage positions following successful bidding results in the United States and Colombia.

In resources plays in the United States, Shell announced two gas discoveries in the Utica formation in Tioga County, Pennsylvania with the Neal and Gee exploration wells.

Shell continued to divest non-strategic Upstream positions during the third quarter 2014, with divestment proceeds totalling some $1.6 billion.

In Canada, Shell completed the divestment of its 100% interest in the Orion Steam Assisted Gravity Drainage (“SAGD”) project to Osum Oil Sands Corp. for a consideration of $0.3 billion.

Shell also completed the sale of its interest in a portion of its dry gas Deep Basin assets in Canada to Mapan Energy Ltd. for a consideration of some $0.1 billion.

In the United States, Shell completed the divestment of its entire interest in the Pinedale dry gas asset in Wyoming to Ultra Petroleum Corp. As part of the transaction, Shell received cash consideration of $0.8 billion including closing adjustments and gained an additional 155 thousand net acres in the Marcellus and Utica Shale areas in Pennsylvania. Shell now holds a 100% interest in the Tioga Area of Mutual Interest where two new gas discoveries were announced during the quarter.

Also in the United States, Shell completed the sale of its interest in 207 thousand net acres in the Slippery Rock acreage in western Pennsylvania to Rex Energy for a consideration of $0.1 billion.

Shell also agreed to sell its entire interest in the Haynesville dry gas asset in Louisiana, United States to Vine Oil & Gas LP and its partner Blackstone Group L.P. for a consideration of $1.2 billion, subject to closing. The transaction is effective from July 2014.

Shell agreed to sell its non-operated 20% interest in the BM-ES-23 concession in the Espirito Santos basin offshore Brazil to PTT Exploration and Production Public Company Ltd. The transaction, which is effective from January 2014, is expected to close later in the year.

Downstream

Shell (40%), together with Hyundai Oilbank (60%), announced through its joint venture, Hyundai and Shell Base Oil Company Ltd, first production from the venture’s Base Oil Manufacturing Plant (“BOMP”) in South Korea. The plant has the capacity to produce some 13 thousand barrels per day of API Group II base oils.

On October 28, 2014 Shell Midstream Partners, L.P., a limited partnership formed by Shell in the United States earlier this year, announced the pricing of its initial public offering of 40,000,000 common units representing limited partner interests at $23.00 per common unit. The common units began trading on the New York Stock Exchange on October 29, 2014 under the ticker symbol “SHLX”. The underwriters of the offering have a 30-day option to purchase up to an additional 6,000,000 common units from Shell Midstream Partners. The offering is expected to close on or around November 3, 2014, subject to customary closing conditions.

Downstream divestment proceeds totalled some $2 billion for the third quarter 2014 and included proceeds from the sale of Shell’s Downstream businesses (excluding Aviation) in Australia to Vitol.

KEY FEATURES OF THE THIRD QUARTER 2014

SUMMARY OF IDENTIFIED ITEMS

Earnings for the third quarter 2014 reflected the following items, which in aggregate amounted to a net charge of $581 million (compared with a net charge of $209 million for the third quarter 2013), as summarised in the table below:

SUMMARY OF IDENTIFIED ITEMS

Quarters

$ million

Nine months

Q3 2014

Q2 2014

Q3 2013

 

2014

2013

 

 

 

Segment earnings impact of identified items:

 

 

(394)

(902)

(176)

 Upstream

(1,579)

(1,848)

(192)

(76)

14

 Downstream

(2,848)

(511)

5

(1)

(47)

 Corporate and Non-controlling interest

5

375

(581)

(979)

(209)

Earnings impact

(4,422)

(1,984)

These identified items are shown to provide additional insight into segment earnings and income attributable to shareholders. They include the full impact on Shell’s CCS earnings of the following items:

Further items may be identified in addition to the above.

EARNINGS BY BUSINESS SEGMENT

UPSTREAM

Quarters

$ million

Nine months

Q3 2014

Q2 2014

Q3 2013

%1

 

2014

2013

%

4,343

4,722

3,466

+25

Upstream earnings excluding identified items

14,775

12,640

+17

3,949

3,820

3,290

+20

Upstream earnings

13,196

10,792

+22

8,854

8,919

6,709

+32

Upstream cash flow from operating activities

26,848

24,557

+9

5,447

562

8,148

-33

Upstream net capital investment

15,349

25,067

-39

1,429

1,499

1,485

-4

Liquids production available for sale (thousand b/d)

1,469

1,541

-5

7,892

9,153

8,383

-6

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

9,082

9,511

-5

2,790

3,077

2,931

-5

Total production available for sale (thousand boe/d)

3,035

3,181

-5

5.68

6.00

4.88

+16

Equity sales of LNG (million tonnes)

17.77

14.71

+21

1  Q3 on Q3 change

Third quarter Upstream earnings excluding identified items were $4,343 million compared with $3,466 million a year ago. Identified items were a net charge of $394 million, compared with a net charge of $176 million for the third quarter 2013 (see page 5).

Compared with the third quarter 2013, earnings excluding identified items benefited from new, high-margin production despite the effect of lower oil prices and volumes overall. Earnings also reflected lower exploration expenses, primarily driven by fewer well write-offs and increased dividends from an LNG venture including the phasing of a dividend from the second quarter 2014. These items were partly offset by higher depreciation. The increase of a deferred tax liability as a result of the weakening Australian dollar reduced earnings by some $400 million.

Global liquids realisations were 8% lower than for the third quarter 2013. Global natural gas realisations were 7% lower than for the same quarter a year ago, with a 17% increase in the Americas and an 11% decrease outside the Americas.

Third quarter 2014 production was 2,790 thousand boe/d compared with 2,931 thousand boe/d a year ago. Liquids production decreased by 4% and natural gas production decreased by 6% compared with the third quarter 2013. Excluding the impact of divestments, Abu Dhabi license expiry, PSC price effects, and security impacts in Nigeria, third quarter 2014 production was 2% higher than for the same period last year. Underlying production was driven by increased high-margin liquids production in the Americas, including the impact of substantially lower downtime, partly offset by higher downtime elsewhere.

New field start-ups and the continuing ramp-up of existing fields, in particular Majnoon in Iraq, Mars B and BC-10 in the Americas, contributed some 139 thousand boe/d to production for the third quarter 2014, which more than offset the impact of field declines.

Equity LNG sales volumes of 5.68 million tonnes increased by 16% compared with the same quarter a year ago, mainly reflecting the contribution from the acquisition of Repsol’s LNG business.

DOWNSTREAM

Quarters

$ million

Nine months

Q3 2014

Q2 2014

Q3 2013

%1

 

2014

2013

%

1,793

1,347

892

+101

Downstream CCS earnings excluding identified items

4,715

3,908

+21

1,601

1,271

906

+77

Downstream CCS earnings

1,867

3,397

-45

3,187

262

2,969

+7

Downstream cash flow from operating activities

6,594

7,095

-7

(615)

543

1,166

-

Downstream net capital investment

704

3,314

-79

2,896

3,034

2,947

-2

Refinery processing intake (thousand b/d)

2,965

2,917

+2

6,295

6,453

6,398

-2

Oil products sales volumes (thousand b/d)

6,355

6,206

+2

4,441

4,387

4,620

-4

Chemicals sales volumes (thousand tonnes)

13,113

12,974

+1

1  Q3 on Q3 change

Third quarter Downstream earnings excluding identified items were $1,793 million compared with $892 million for the third quarter 2013. Identified items were a net charge of $192 million, compared with a net gain of $14 million for the third quarter 2013 (see page 5).

Compared with the third quarter 2013, Downstream earnings excluding identified items benefited from higher realised refining margins, reflecting the industry environment and improved operating performance. Earnings also benefited from lower operating expenses, mainly resulting from divestments, as well as increased trading contributions. Contributions from Chemicals decreased mainly as a result of weaker intermediates industry conditions, and a prior-period adjustment, partly offset by improved base chemicals industry conditions.

Refinery intake volumes were 2% lower compared with the same quarter last year. Excluding portfolio impacts, refinery intake volumes were in line with the same period a year ago. Refinery availability was 94%, compared with 93% for the third quarter 2013.

Oil products sales volumes decreased by 2% compared with the same period a year ago. Excluding portfolio impacts, oil products sales volumes were in line with the same period a year ago.

Chemicals sales volumes decreased by 4% compared with the same quarter last year, mainly as a result of lower trading activity. Chemicals manufacturing plant availability decreased to 90% from 96% for the third quarter 2013, reflecting higher unplanned downtime, primarily due to an incident in June at the Moerdijk chemical site in the Netherlands. The impact of a separate incident in October at Moerdijk is currently being assessed; however, most units will be out for the remainder of 2014 and impact on some units is expected to extend into 2015.

CORPORATE AND NON-CONTROLLING INTEREST

Quarters

$ million

Nine months

Q3 2014

Q2 2014

Q3 2013

 

2014

2013

(289)

57

99

Corporate and Non-controlling interest excl. identified items

(190)

29

 

 

 

Of which:

 

 

(306)

101

135

  Corporate

(129)

146

17

(44)

(36)

  Non-controlling interest

(61)

(117)

(284)

56

52

Corporate and Non-controlling interest

(185)

404

Third quarter Corporate results and Non-controlling interest excluding identified items were a charge of $289 million, compared with a gain of $99 million for the same period last year. Identified items for the third quarter 2014 were a net gain of $5 million, whereas earnings for the third quarter 2013 included a net charge of $47 million (see page 5).

Compared with the third quarter 2013, Corporate results excluding identified items mainly reflected adverse currency exchange rate effects and lower tax credits.

FORTHCOMING EVENTS

Fourth quarter 2014 results and fourth quarter 2014 dividend are scheduled to be announced on January 29, 2015. First quarter 2015 results and first quarter 2015 dividend are scheduled to be announced on April 30, 2015. Second quarter 2015 results and second quarter 2015 dividend are scheduled to be announced on July 30, 2015. Third quarter 2015 results and third quarter 2015 dividend are scheduled to be announced on October 29, 2015.

UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF INCOME

Quarters

$ million

Nine months

Q3 2014

Q2 2014

Q3 2013

%1

 

2014

2013

%

107,851

111,222

116,513

 

Revenue

328,731

341,992

 

1,512

1,716

1,515

 

Share of profit of joint ventures and associates

5,298

5,251

 

462

2,336

230

 

Interest and other income

3,149

877

 

109,825

115,274

118,258

 

Total revenue and other income

337,178

348,120

 

84,507

85,296

91,842

 

Purchases

253,638

267,346

 

7,555

7,839

7,416

 

Production and manufacturing expenses

22,573

20,874

 

3,350

3,755

3,566

 

Selling, distribution and administrative expenses

10,539

10,814

 

302

274

291

 

Research and development

859

890

 

846

1,128

1,636

 

Exploration

2,901

3,512

 

4,730

7,354

4,153

 

Depreciation, depletion and amortisation

19,508

15,880

 

417

505

392

 

Interest expense

1,374

1,172

 

8,118

9,123

8,962

-9

Income before taxation

25,786

27,632

-7

3,693

3,778

4,225

 

Taxation

11,474

12,928

 

4,425

5,345

4,737

-7

Income for the period

14,312

14,704

-3

(38)

38

60

 

Income attributable to non-controlling interest

33

114

 

4,463

5,307

4,677

-5

Income attributable to Royal Dutch Shell plc shareholders

14,279

14,590

-2

 1 Q3 on Q3 change

EARNINGS PER SHARE

Quarters

$

Nine months

Q3 2014

Q2 2014

Q3 2013

 

2014

2013

0.70

0.84

0.75

Basic earnings per share

2.26

2.32

0.70

0.84

0.75

Diluted earnings per share

2.26

2.32

SHARES1

Quarters

Millions

Nine months

Q3 2014

Q2 2014

Q3 2013

 

2014

2013

 

 

 

Weighted average number of shares as the basis for:

 

 

6,333.8

6,323.0

6,269.7

  Basic earnings per share

6,315.0

6,297.3

6,334.1

6,323.4

6,272.5

  Diluted earnings per share

6,315.3

6,300.3

6,320.3

6,341.7

6,282.2

Shares outstanding at the end of the period

6,320.3

6,282.2

1 Royal Dutch Shell plc ordinary shares of euro 0.07 each

Notes 1 to 5 are an integral part of these unaudited Condensed Consolidated Interim Financial Statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Quarters

$ million

Nine months

Q3 2014

Q2 2014

Q3 2013

 

2014

2013

4,425

5,345

4,737

Income for the period

14,312

14,704

 

 

 

Other comprehensive income net of tax:

 

 

 

 

 

Items that may be reclassified to income in later periods:

 

 

(2,963)

591

1,064

Currency translation differences

(2,923)

(1,612)

(83)

(182)

(154)

Unrealised losses on securities

(237)

(194)

(10)

(18)

25

Cash flow hedging (losses)/gains

(9)

180

(68)

5

(39)

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

(70)

(124)

(3,124)

396

896

Total

(3,239)

(1,750)

 

 

 

  Items that are not reclassified to income in later periods:

 

 

(2,672)

(253)

(557)

Retirement benefits remeasurements

(3,471)

1,463

(2,672)

(253)

(557)

Total

(3,471)

1,463

(5,796)

143

339

Other comprehensive (loss)/income for the period

(6,710)

(287)

(1,371)

5,488

5,076

Comprehensive income for the period

7,602

14,417

(104)

48

34

Comprehensive (loss)/income attributable to non-controlling interest

(27)

37

(1,267)

5,440

5,042

Comprehensive income attributable to Royal Dutch Shell plc shareholders

7,629

14,380

Notes 1 to 5 are an integral part of these unaudited Condensed Consolidated Interim Financial Statements.

CONDENSED CONSOLIDATED BALANCE SHEET

 

$ million

 

Sep 30, 2014

Jun 30, 2014

Sep 30, 2013

Assets

 

 

 

Non-current assets:

 

 

 

Intangible assets

7,135

7,423

4,348

Property, plant and equipment

190,842

193,069

186,541

Joint ventures and associates

33,316

34,455

34,010

Investments in securities

4,592

4,647

4,703

Deferred tax

7,465

6,557

5,514

Retirement benefits

2,405

3,439

3,205

Trade and other receivables

8,255

9,121

9,633

 

254,010

258,711

247,954

Current assets:

 

 

 

Inventories

27,318

31,361

29,820

Trade and other receivables

59,056

65,225

62,561

Cash and cash equivalents

19,027

15,419

14,278

 

105,401

112,005

106,659

Total assets

359,411

370,716

354,613

Liabilities

 

 

 

Non-current liabilities:

 

 

 

Debt

37,065

38,901

31,972

Trade and other payables

3,735

4,167

4,198

Deferred tax

12,970

11,950

11,678

Retirement benefits

14,064

11,967

13,738

Decommissioning and other provisions

22,156

22,714

18,839

 

89,990

89,699

80,425

Current liabilities:

 

 

 

Debt

5,917

5,221

5,106

Trade and other payables

65,741

72,495

71,988

Taxes payable

13,181

13,542

13,110

Retirement benefits

364

389

383

Decommissioning and other provisions

3,226

3,257

3,195

 

88,429

94,904

93,782

Total liabilities

178,419

184,603

174,207

Equity attributable to Royal Dutch Shell plc shareholders

180,002

185,015

179,147

Non-controlling interest

990

1,098

1,259

Total equity

180,992

186,113

180,406

Total liabilities and equity

359,411

370,716

354,613

Notes 1 to 5 are an integral part of these unaudited Condensed Consolidated Interim Financial Statements.

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, 2014

542

(1,932)

(2,037)

183,474

180,047

1,101

181,148

Comprehensive income for the period

  -

  -

(6,650)

14,279

7,629

(27)

7,602

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

  -

  -

  -

3

3

(7)

(4)

Dividends paid

- -

-

-

(8,856)

(8,856)

(77)

(8,933)

Scrip dividends1

6

-

(6)

2,399

2,399

-

2,399

Repurchases of shares2

(5)

-

5

(2,010)

(2,010)

-

(2,010)

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

  -

807

  -

77

884

  -

884

Share-based compensation

-

-

(122)

28

(94)

-

(94)

At September 30, 2014

543

(1,125)

(8,810)

189,394

180,002

990

180,992

At January 1, 2013

542

(2,287)

(3,752)

180,246

174,749

1,433

176,182

Comprehensive income for the period

-

-

(210)

14,590

14,380

37

14,417

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

-

-

-

-

-

5

5

Dividends paid

-

-

-

(8,481)

(8,481)

(216)

(8,697)

Scrip dividends1

8

-

(8)

2,893

2,893

-

2,893

Repurchases of shares2

(10)

- -

10

(4,226)

(4,226)

-

(4,226)

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

-

322

-

92

414

-

414

Share-based compensation

-

-

(256)

(326)

(582)

-

(582)

At September 30, 2013

540

(1,965)

(4,216)

184,788

179,147

1,259

180,406

1 Under the Scrip Dividend Programme some 64.6 million A shares, equivalent to $2.4 billion, were issued during the first nine months 2014 and some 88.3 million A shares, equivalent to $2.9 billion, were issued during the first nine months 2013. On May 22, 2014, Shell announced the cancellation of its Scrip Dividend Programme with effect from the second quarter 2014 interim dividend onwards.

2 Includes shares committed to repurchase and repurchases subject to settlement at the end of the quarter

 

Notes 1 to 5 are an integral part of these unaudited Condensed Consolidated Interim Financial Statements.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

Quarters

$ million

Nine months

Q3 2014

Q2 2014

Q3 2013

 

2014

2013

 

 

 

Cash flow from operating activities

 

 

4,425

5,345

4,737

Income for the period

14,312

14,704

 

 

 

Adjustment for:

 

 

2,691

4,336

4,965

- Current taxation

11,427

13,905

377

468

354

- Interest expense (net)

1,223

1,012

4,729

7,355

4,153

- Depreciation, depletion and amortisation

19,508

15,880

(78)

(2,203)

(38)

- Net gains on sale of assets

(2,240)

(295)

1,741

(2,335)

551

- Decrease/(increase) in working capital

281

4,670

(1,512)

(1,716)

(1,515)

- Share of profit of joint ventures and associates

(5,298)

(5,251)

2,096

1,768

1,307

- Dividends received from joint ventures and associates

5,371

5,252

689

(396)

(907)

- Deferred taxation, retirement benefits, decommissioning

  and other provisions

(15)

(1,763)

572

399

788

- Other

1,500

1,599

15,730

13,021

14,395

Net cash from operating activities (pre-tax)

46,069

49,713

(2,919)

(4,380)

(3,986)

Taxation paid

(10,633)

(15,301)

12,811

8,641

10,409

Net cash from operating activities

35,436

34,412

 

 

 

Cash flow from investing activities

 

 

(7,867)

(7,872)

(8,788)

Capital expenditure

(23,136)

(25,637)

(151)

(493)

(352)

Investments in joint ventures and associates

(1,533)

(1,015)

3,783

3,539

79

Proceeds from sales of assets

7,628

780

157

3,671

212

Proceeds from sales of joint ventures and associates

3,884

429

(278)

188

(63)

Other investments (net)

62

(390)

29

31

31

Interest received

118

138

(4,327)

(936)

(8,881)

Net cash used in investing activities

(12,977)

(25,695)

 

 

 

Cash flow from financing activities

 

 

(465)

(1,397)

124

Net (decrease)/increase in debt with maturity period within three months

(3,159)

(113)

442

140

4,402

Other debt: New borrowings

3,777

4,780

(334)

(251)

(672)

  Repayments

(3,518)

(6,413)

(404)

(398)

(323)

Interest paid

(1,170)

(657)

-

(13)

8

Change in non-controlling interest

(13)

9

 

 

 

Cash dividends paid to:

 

 

(2,994)

(1,964)

(1,637)

- Royal Dutch Shell plc shareholders

(6,457)

(5,588)

(4)

(45)

(136)

- Non-controlling interest

(77)

(216)

(770)

(346)

(1,525)

Repurchases of shares

(2,357)

(4,004)

48

90

(189)

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

261

(631)

(4,481)

(4,184)

52

Net cash used in financing activities

(12,713)

(12,833)

(395)

(26)

158

Currency translation differences relating to cash and

cash equivalents

(415)

(156)

3,608

3,495

1,738

Increase/(decrease) in cash and cash equivalents

9,331

(4,272)

15,419

11,924

12,540

Cash and cash equivalents at beginning of period

9,696

18,550

19,027

15,419

14,278

Cash and cash equivalents at end of period

19,027

14,278

Notes 1 to 5 are an integral part of these unaudited Condensed Consolidated Interim Financial Statements.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Basis of preparation

These unaudited Condensed Consolidated Interim Financial Statements (“Interim Statements”) of Royal Dutch Shell plc and its subsidiaries (collectively referred to 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, 2013 (pages 105 to 110) as filed with the U.S. Securities and Exchange Commission.

The financial information presented in the Interim Statements does not constitute statutory accounts within the meaning of section 434(3) of the Companies Act 2006. Statutory accounts for the year ended December 31, 2013 were published in Shell’s Annual Report and a copy was 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 498(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 other investments (net) in the Corporate segment); 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.

Information by business segment:

Quarters

$ million

Nine months

Q3 2014

Q3 2013

 

2014

2013

 

 

Third-party revenue

 

 

10,318

11,563

  Upstream

33,989

36,024

97,508

104,914

  Downstream

294,659

305,857

25

36

  Corporate

83

111

107,851

116,513

Total third-party revenue

328,731

341,992

 

 

Inter-segment revenue

 

 

12,758

11,569

  Upstream

37,630

34,064

627

76

  Downstream

1,698

477

-

-

  Corporate

-

-

 

 

Segment earnings

 

 

3,949

3,290

  Upstream1

13,196

10,792

1,601

906

  Downstream2

1,867

3,397

(301)

88

  Corporate

(124)

506

5,249

4,284

Total segment earnings

14,939

14,695

Second quarter 2014 Upstream earnings included an impairment charge of $1,943 million after taxation, partly offset by divestment gains of $1,230 million after taxation. Second quarter 2013 Upstream earnings included an impairment charge of $2,071 million after taxation.

First quarter 2014 Downstream earnings included an impairment charge of $2,284 million related to refineries in Asia and Europe.

Quarters

$ million

Nine months

Q3 2014

Q3 2013

 

2014

2013

5,249

4,284

Total segment earnings

14,939

14,695

 

 

Current cost of supplies adjustment:

 

 

(894)

541

  Purchases

(751)

(140)

246

(137)

  Taxation

203

53

(176)

49

  Share of profit of joint ventures and associates

(79)

96

4,425

4,737

Income for the period

14,312

14,704

Share capital

Issued and fully paid

 

Ordinary shares of euro 0.07 each

Sterling deferred shares

Number of shares

A

B

of £1 each

At January 1, 2014

3,898,011,213

2,472,839,187

50,000

Scrip dividends

64,568,758

-

-

Repurchases of shares

(27,917,878)

(32,428,573)

-

At September 30, 2014

3,934,662,093

2,440,410,614

50,000

At January 1, 2013

3,772,388,687

2,617,715,189

50,000

Scrip dividends

88,288,316

-

-

Repurchases of shares

-

(117,715,539)

-

At September 30, 2013

3,860,677,003

2,499,999,650

50,000

Nominal value

 

Ordinary shares of euro 0.07 each

$ million

A

B

Total

At January 1, 2014

333

209

542

Scrip dividends

6

-

6

Repurchases of shares

(2)

(3)

(5)

At September 30, 2014

337

206

543

At January 1, 2013

321

221

542

Scrip dividends

8

-

8

Repurchases of shares

-

(10)

(10)

At September 30, 2013

329

211

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 20, 2014, 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 euro 147 million (representing 2,100 million ordinary shares of euro 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 20, 2015, and the end of the Annual General Meeting to be held in 2015, unless previously renewed, revoked or varied by Royal Dutch Shell plc in a general meeting.

Other reserves

$ million

Merger reserve1

Share premium reserve1

Capital redemption reserve2

Share plan reserve

Accumulated other comprehensive income

Total

At January 1, 2014

3,411

154

75

1,871

(7,548)

(2,037)

Other comprehensive loss attributable to Royal Dutch Shell plc shareholders

-

-

-

-

(6,650)

(6,650)

Scrip dividends

(6)

- -

-

-

-

(6)

Repurchases of shares

-

- -

5

-

-

5

Share-based compensation

-

-

-

(122)

-

(122)

At September 30, 2014

3,405

154

80

1,749

(14,198)

(8,810)

At January 1, 2013

3,423

154

63

2,028

(9,420)

(3,752)

Other comprehensive loss attributable to Royal Dutch Shell plc shareholders

-

-

-

-

(210)

(210)

Scrip dividends

(8)

-

-

-

-

(8)

Repurchases of shares

-

-

10

-

-

10

Share-based compensation

-

-

-

(256)

-

(256)

At September 30, 2013

3,415

154

73

1,772

(9,630)

(4,216)

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.

 

Derivative contracts

The table below provides the carrying amounts of derivatives contracts held, disclosed in accordance with IFRS 13 Fair Value Measurement.

$ million

Sep 30, 2014

Jun 30, 2014

Sep 30, 2013

Included within:

 

 

 

Trade and other receivables – non-current

1,003

1,587

1,683

Trade and other receivables – current

7,000

8,393

7,218

Trade and other payables – non-current

589

497

583

Trade and other payables – current

6,230

8,949

7,200

As disclosed in the Consolidated Financial Statements for the year ended December 31, 2013, presented in the Annual Report and Form 20-F for that year, Shell is exposed to the risks of changes in fair value of its financial assets and liabilities. The fair values of the financial assets and liabilities are defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Methods and assumptions used to estimate the fair values at September 30, 2014 are consistent with those used in the year ended December 31, 2013, and the carrying amounts of derivative contracts measured using predominantly unobservable inputs has not changed materially since that date.

The fair value of debt excluding finance lease liabilities at September 30, 2014, was $38,013 million (June 30, 2014: $39,047million; September 30, 2013: $33,604 million). Fair value is determined from the prices quoted for those securities.

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.

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.

Liquidity and capital resources

Third quarter net cash from operating activities was $12.8 billion compared with $10.4 billion for the same period last year.

Total current and non-current debt decreased to $43.0 billion at September 30, 2014 from $44.1 billion at June 30, 2014 while cash and cash equivalents increased to $19.0 billion at September 30, 2014 from $15.4 billion at June 30, 2014. No new debt was issued under the US shelf registration or under the euro medium-term note programme during the third quarter of 2014.

Net capital investment for the third quarter 2014 was $4.8 billion, of which $5.4 billion in Upstream, and ($0.6) billion in Downstream. Net capital investment for the same period of 2013 was $9.4 billion, of which $8.1 billion in Upstream, $1.2 billion in Downstream and $0.1 billion in Corporate.

Dividends of $0.47 per share are announced on October 30, 2014 in respect of the third quarter. These dividends are payable on December 22, 2014. In the case of B shares, the dividends will be payable through the dividend access mechanism and are expected to be treated as UK-source rather than Dutch-source. See the Annual Report and Form 20-F for the year ended December 31, 2013 for additional information on the dividend access mechanism.

Nine months net cash from operating activities was $35.4 billion compared with $34.4 billion for the same period last year.

Total current and non-current debt decreased to $43.0 billion at September 30, 2014 from $44.6 billion at December 31, 2013 while cash and cash equivalents increased to $19.0 billion at September 30, 2014 from $9.7 billion at December 31, 2013. New debt was issued under the euro medium-term note programme during the first nine months 2014.

Net capital investment in the first nine months 2014 was $16.1 billion, of which $15.3 billion in Upstream, $0.7 billion in Downstream and $0.1 billion in Corporate. Net capital investment for the same period of 2013 was $28.5 billion, of which $25.1 billion in Upstream, $3.3 billion in Downstream and $0.1billion in Corporate.

CAUTIONARY STATEMENT

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

The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate 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 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, 2013 (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, October 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.

October 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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