Royal Dutch Shell - THIRD QUARTER 2018 UNAUDITED RESULTS

SUMMARY OF UNAUDITED RESULTS
Quarters $ million   Nine months
Q3 2018 Q2 2018 Q3 2017 %1   Definition 2018 2017 %
5,839 6,024 4,087 +43 Income/(loss) attributable to shareholders   17,762 9,170 +94  
5,570 5,226 3,698 +51 CCS earnings attributable to shareholders Note 2 16,499 8,999 +83  
(54) 535 (405)   Of which: Identified items A 783 (2,462)    
5,624 4,691 4,103 +37 CCS earnings attributable to shareholders excluding identified items   15,716 11,461 +37  
169 121 105   Add: CCS earnings attributable to non-controlling interest   411 324    
5,793 4,812 4,208 +38 CCS earnings excluding identified items   16,127 11,785 +37  
        Of which:          
2,292 2,305 1,282   Integrated Gas   7,036 3,632    
1,886 1,457 562   Upstream   4,894 1,441    
2,010 1,660 2,668   Downstream   5,436 7,686    
(395) (610) (304)   Corporate   (1,239) (974)    
12,092 9,500 7,582 +59 Cash flow from operating activities   31,064 28,375 +9  
(4,082) 29 (3,912)   Cash flow from investing activities   (8,347) (7,364)    
8,010 9,529 3,670   Free cash flow H 22,717 21,011    
0.70 0.72 0.50 +40 Basic earnings per share ($)   2.14 1.12 +91  
0.67 0.63 0.45 +49 Basic CCS earnings per share ($) B 1.99 1.10 +81  
0.68 0.56 0.50 +36 Basic CCS earnings per share excl. identified items ($)   1.89 1.40 +35  
0.47 0.47 0.47 - Dividend per share ($)   1.41 1.41 -

 

CCS earnings attributable to shareholders excluding identified items were $5.6 billion, compared with $4.1 billion in the third quarter 2017. Earnings primarily benefited from increased realised oil, gas and LNG prices as well as higher contributions from trading in Integrated Gas, partly offset by lower margins in Downstream, higher deferred tax charges in Upstream and adverse currency exchange effects.

Cash flow from operating activities for the third quarter 2018 was $12.1 billion, which included negative working capital movements of $2.6 billion, compared with $7.6 billion in the third quarter 2017, which included negative working capital movements of $1.3 billion[i]. Excluding working capital movements, cash flow from operations of $14.7 billion mainly reflected increased earnings and higher dividends received.

Total dividends distributed to shareholders in the quarter were $3.9 billion. In October, the first tranche of the share buyback programme was completed, with almost 61 million A ordinary shares bought back for cancellation for an aggregate consideration of $2.0 billion. Today, Shell launches the second tranche of the share buyback programme, with a maximum aggregate consideration of $2.5 billion in the period up to and including January 28, 2019.

Royal Dutch Shell Chief Executive Officer Ben van Beurden commented:

“Good operational delivery across all Shell businesses produced one of our strongest-ever quarters, with cash flow from operations of $14.7 billion, excluding working capital movements. Our strong financial performance allowed us to cover the cash dividend, interest payments, share buybacks and to further pay down debt.

Our strategy remains on track. We have completed the first tranche of share buybacks, in line with our intention to purchase $25 billion of our shares by the end of 2020, and today I’m pleased to announce the second tranche. Meanwhile, the transformation of our portfolio continued, with further divestments of non-strategic assets and the final investment decision on LNG Canada.”

THIRD QUARTER 2018 PORTFOLIO DEVELOPMENTS

Integrated Gas

In October, Shell and its partners announced a final investment decision on LNG Canada (Shell interest 40%). Construction has started, and first LNG is expected before the middle of the next decade.

Upstream

During the quarter, Shell and its partner Chevron won a 35-year production-sharing contract for the Saturno pre-salt block located off the coast of Brazil in the Santos Basin (Shell interest 50%).

In October, Shell announced the sale of its 36.8% non-operating interest in the Danish Underground Consortium to Norwegian Energy Company ASA, for a consideration of $1.9 billion, with an effective date of January 1, 2017.

In October, Shell and its partners announced first production at the Lula Extreme South deep-water development in the Brazilian pre-salt Santos Basin (Shell pre-unitisation interest 25%).

Downstream

In October, Shell completed the sale of its Downstream business in Argentina to Raízen. The business acquired by Raízen will continue the relationship with Shell through various commercial agreements, including long-term brand licence agreements as well as products supply and offtake contracts.

 

Third quarter identified items primarily reflected impairments of $131 million, mainly related to Shell’s investment in a joint venture. Other identified items mainly comprised a loss of $48 million related to the fair value accounting of commodity derivatives, as well as a gain of $26 million on sale of assets.

Compared with the third quarter 2017, Integrated Gas earnings excluding identified items benefited from higher realised oil, gas and LNG prices, as well as higher trading margins from LNG cargo diversions. This was partly offset by a decrease in production, which was 8% lower than in the third quarter 2017, mainly due to higher maintenance activity. LNG liquefaction volumes were 3% lower, largely driven by divestments.  

Cash flow from operating activities included negative working capital movements of $421 million, compared with negative movements of $58 million[ii] in the same quarter a year ago. Cash flow from operating activities excluding working capital movements increased compared with the same quarter a year ago, mainly as a result of higher earnings.