Royal Dutch Shell May 11, 2017
Royal Dutch Shell plc
May 11, 2017
Re-shaping Shell, to create a world-class investment caseDownstream Day – Societe Generale
John Abbott – Downstream Director
#makethefuture
Royal Dutch Shell May 11, 2017 3
Definitions & cautionary note
Reserves: Our use of the term “reserves” in this presentation means SEC proved oil and gas reserves.
Resources: Our use of the term “resources” in this presentation includes quantities of oil and gas not yet classified as SEC proved oil and gas reserves. Resources are consistent with the Society of Petroleum Engineers (SPE) 2P + 2C definitions.
Discovered and prospective resources: Our use of the term “discovered and prospective resources” are consistent with SPE 2P + 2C + 2U definitions.
Organic: Our use of the term Organic includes SEC proved oil and gas reserves excluding changes resulting from acquisitions, divestments and year-average pricing impact.
Shales: Our use of the term ‘shales’ refers to tight, shale and coal bed methane oil and gas acreage.
Underlying operating cost is defined as operating cost less identified items. A reconciliation can be found in the quarterly results announcement.
The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate legal entities. In this release “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 release refer to companies over which Royal Dutch Shell plc either directly or indirectly has control. Entities and unincorporated arrangements over which Shell has joint control are generally referred to as “joint ventures” and “joint operations” respectively. Entities over which Shell has significant influence but neither control nor joint control are referred to as “associates”. The term “Shell interest” is used for convenience to indicate the direct and/or indirect ownership interest held by Shell in a venture, partnership or company, after exclusion of all third-party interest.
This release 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 release, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for Shell’s products; (c) currency fluctuations; (d) drilling and production results; (e) reserves estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and regulatory developments including regulatory measures addressing climate change; (k) economic and financial market conditions in various countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; and (m) changes in trading conditions. No assurance is provided that future dividend payments will match or exceed previous dividend payments. All forward-looking statements contained in this release 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 20-F for the year ended December 31, 2016 (available at www.shell.com/investor and www.sec.gov ). These risk factors also expressly qualify all forward looking statements contained in this release and should be considered by the reader. Each forward-looking statement speaks only as of the date of this presentation, May 11, 2017. 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 release.
With respect to operating costs synergies indicated, such savings and efficiencies in procurement spend include economies of scale, specification standardisation and operating efficiencies across operating, capital and raw material cost areas.
We may have used certain terms, such as resources, in this release that 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.
Royal Dutch Shell May 11, 2017 4
Energy challenge
Source: UN Population Fund; UN World population Prospects (2015 revision); World Urbanisation Prospects (2014 revision); IEA, Energy Technology Perspectives 2015; Shell New Lens Scenarios
Growing population
Global population will increase from around 7.4 billion today
to nearly 10 billion by 2050, with 67% living in cities
Rising demand
Global energy demand will likely be almost 60% higher in 2060
than today, with 2 billion vehicles on the road (800 million today)
Ongoing supply
Renewable energy could triple by 2050, but we will still need large amounts
of oil and gas to provide the full range of energy products we need
Mitigating climate change
Net-zero emissions is a potentially achievable societal ambitionGrowing global demand for energy as population and living standards increase
Royal Dutch Shell May 11, 2017
Strategy
“Let’s make the future” STRATEGIC
� Focus portfolio on resilient positions
� Invest in advantaged projects
� Value chain integration
OPERATIONAL
� Reset cost and capital spending
� First class execution projects
and operations
� Unrelenting focus on HSSE and
licence to operate
Leader: value + influence
Reducing our carbon intensity
Shared value with society
World-class investment case
� FCF/share + ROCE growth
� Conservative financial
management
5
Royal Dutch Shell May 11, 2017
Strong free cash flow and returns
Driving strategy in multiple time horizons
CONVENTIONALOIL + GAS
CHEMICALS
OIL PRODUCTS
DEEP WATERINTEGRATED GAS
OIL SANDS MINING
SHALES NEW ENERGIES
Cash engines:today
Growth priorities: 2016+
Future opportunities: 2020+
Competitive + resilient
Funds dividends + balance sheet
FCF + ROACE pathway
Affordable growth in
advantaged positions
Material value + upside
Managed exposure
Path to profitability
Cash engines 2020+
Relentless portfolio high-grading
6
Royal Dutch Shell May 11, 2017 7
Downstream Cash engine
� Improve our financial performance
� Upgrading our portfolio
� Returns + free cash flow improvement
� Chemicals growth priority
Marketing Refining & Trading Chemicals
Growth priority
� Differentiated products
� Brand leverage + customer offer
� Selective growth
� Full integration with trading
� Improve retained assets
� Reducing refining capacity
� Feedstock plays
� Capacity growth
Royal Dutch Shell May 11, 2017 8
Downstream financial performance
Earnings and ROACE on CCS basis, excluding identified items
$ billion
Earnings + ROACE Cash flow
$55 billion as at end Q117
Capital employed
� Contribute sustainable and growing cash surplus
� Deliver competitive returns
0
10
20
0
5
10
2013 2014 2015 2016 17Q14Q rolling
-10
-5
0
5
10
15
2013 2014 2015 2016 17Q14Q rolling
Working capital movements
Cash flow excluding working capital
Free cash flow
Refining & trading
Chemicals
Marketing
ROACE (RHS)Refining & Trading
ChemicalsMarketing
$ billion %
Royal Dutch Shell May 11, 2017
0
10
20
0
5
10
2013 2014 2015 2016 17Q14Q rolling
9
Improving our Downstream footprint and performance
Earnings and ROACE on CCS basis, excluding identified items
Portfolio change
$ billion
Earnings + ROACE
2016:
� Showa Shell ����
� Motiva split ����
� Denmark refining
� Malaysia refining ����
� PSPC IPO ����
� Denmark marketing ����
� MLP dropdowns (3) ����
� Vivo Energy (Africa) ����
� Australia Aviation
2017:
� SADAF
� Hong Kong LPG
Resilience
Attr
act
iven
ess
Backbone / grow:� Chemicals� China� LNG for transport� Premium fuels + lubes� Refinery crude flexibility� others
Fix:� Singapore - manufacturing� USGC restructuring post Motiva JV� others
Exit:� Australia ����� Denmark marketing ����� Harburg ����
� Italy ����
� LPG France ����
� Norway ����� Selected UK retail sites ����� Tongyi lubricants China ����� Showa Shell ����� Malaysia refining ����� Denmark refining� SADAF petrochemicals JV� Hong Kong LPG� others
���� completedROACE (RHS)Refining & Trading
ChemicalsMarketing
%
Royal Dutch Shell May 11, 2017 10
Oil Products
Optimization of footprint
Showa Shell divestment Motiva JV split SADAF
� Sale of ~33% of Showa Shell
Sekiyu KK to Idemitsu
� Lubricants and fuel brand
licensing agreements
� ~$1.4 billion
� Completion in 2016
� Integrate retained assets with
Shell
� Brand licensing agreement
� Balancing payment ~$2.2
billion
� Completed May 1, 2017
� Sale of 50% petrochemicals
SADAF joint venture to SABIC
� ~$800 million
� Completion expected in 2017
SADAF Petrochemicals facility, Kingdom of Saudi Arabia
Royal Dutch Shell May 11, 2017 11
Chemicals Ethylene oxide/ glycols
Higher olefins
Styrene monomer
Base chemicals
Solvents PhenolPropylene oxide
feedstock for packaging films
carrier bags
plastic buckets
food containers
drainpipes
brake fluids
plastic bottles
polyester
packaging
antifreeze
sunscreen
shower gel
automobile interiors
wire insulation
detergents
polystyrene
fridge insulation
tyres
food containers
crash helmets
insulation
foam for bedding and car interiors
engineering plastics
aeroplane de-icers
cosmetics
pharmaceuticals
paints
mining and metalworking fluids
adhesives
inks
hand sanitisers
plywood
kitchen worktops
fibreglass boats
car parts
circuit boards
Royal Dutch Shell May 11, 2017
Chemicals
� Petrochemicals are the key ingredients for thousands of essential products
� Faster growth than GDP, Oil and Gas
� Shell produces important petrochemical building blocks
� Some products made from these chemicals can enable CO2 savings over their lifetime
Increasing standards of living driving growth Innovative solutions that support a lower carbon future
Cold wash laundry
detergents
Modern home
insulation
Lightweight
plastics in cars
Vital role to meet the growing population’s demands
12
Royal Dutch Shell May 11, 2017
Growth priority
Chemicals
Earnings and ROACE on CCS basis, excluding identified items
$ billion
Earnings + ROACE Under construction
Geismar, USA
Nanhai, China
Pennsylvania, USA
� 425,000 tonnes additional Alpha Olefins capacity
� New liquids cracker and derivatives units
� Capacity: ~1.2 million tonnesethylene per annum
� 50/50 JV CNOOC
� Greenfield FID 2016
� Capacity: ~1.5 million tonnes ethylene per annum and polyethylene derivatives
132006Nanhai
2010 USGC go-light strategy
2010 Singapore
2016+ China + USA
13
0
5
10
15
20
0
1
2
2013 2014 2015 2016 17Q14Q rolling
%
Earnings ROACE (RHS)
Royal Dutch Shell May 11, 2017
1,055,000 bpd 875,000 bpd 460,000 bpd
Deer Park ( 50%)
Buenos Aires (100%)
Miro (32%)Rheinland (100%)
Schwedt (38%)
Pernis (100%)
Pulau Bukom(100%)
Tabangao (55%)
Fredericia (100%)
Puget Sound(100%)
Martinez (100%)
Scotford (100%)
Sarnia (100%)
Durban (36%)
Mizue (Toa) (2%) Yamaguchi (1%)Yokkaichi (3%)
Karachi (30%)
Al Jubail (50%)
14
Investing in selective growth
Refining and Trading
Shell capacity as at end Q1 2017
Refinery capacity in thousand barrels per day (100%)
Retain competitive sites
0
100
200
300
400
500
600
Exits 2005–17Q1Announced exits
Retained site Q1 2017
Refineries (barrels per day)
Announced exits
London Rotterdam
Singapore
Dubai
Houston
Convent (100%)Norco (100%)
Trading offices
0 – 100,000
101,000 – 200,000
201,000+
Calgary
Beijing
Royal Dutch Shell May 11, 2017 15
Investing in selective growth
Shell Oil Products – marketing
ROACE on CCS basis, excluding identified items
%
Marketing – ROACE
$ billion
Marketing – free cash flow
No.1 market share in global retail + global lubricants
0%
10%
20%
30%
2013 2014 2015 2016 17Q1 4Qrolling
0
2
4
6
2013 2014 2015 2016 17Q1 4Qrolling
Royal Dutch Shell May 11, 2017
Oil Products
Retail’s 5 ambitions for 2025
17
50%
Increase margin share from
convenience retail to 50%
20%
Fuels margin from low-emission
energy solutions
LOWER CARBON
Reduce carbon intensity of our
retail outlets by at least 50%
EVERY CUSTOMER
Treated like a guest on site & in the digital world
100%
Sites committed to local communities
unified by a global social
cause
11 22 33 44 55
Royal Dutch Shell May 11, 2017 18
Downstream Cash engine
� Improve our financial performance
� Upgrading our portfolio
� Returns + free cash flow improvement
� Chemicals growth priority
Marketing Refining & Trading Chemicals
Growth priority
� Differentiated products
� Brand leverage + customer offer
� Selective growth
� Full integration with trading
� Improve retained assets
� Reducing refining capacity
� Feedstock plays
� Capacity growth
Royal Dutch Shell May 11, 2017
Royal Dutch Shell plc
May 11, 2017
Re-shaping Shell, to create a world-class investment caseDownstream Day – Societe Generale
John Abbott – Downstream Director
#makethefuture