SHELL PLC
721 (1,884) 47 certain gas contracts (195) (14)
25 (518) 6 Redundancy and restructuring (511) (74)
(267) (427) -- Other (694) (437)
(1,055) (25,033) 1,584 Total identified items before tax (25,963) 744
276 6,018 (271) Total tax impact of identified items 6,066 146
Identified items after tax
46 10 1,756 Divestment gains/(losses) 24 2,058
(1,143) (16,842) (430) Impairments (18,521) (921)
Fair value accounting of commodity derivatives and
532 (1,540) 91 certain gas contracts (171) 124
4 (375) 2 Redundancy and restructuring (378) (43)
13 (44) (106) Impact of exchange rate movements on tax balances (397) (98)
(230) (224) -- Other (454) (229)
(778) (19,015) 1,313 Impact on CCS earnings (19,897) 890
Of which:
(920) (8,321) (77) Integrated Gas (9,572) (237)
(226) (5,209) 818 Upstream (6,590) 966
411 (5,433) 430 Oil Products (4,174) 226
(96) (41) (13) Chemicals (140) (250)
52 (9) 154 Corporate 578 185
(778) (19,015) 1,313 Impact on CCS earnings attributable to shareholders (19,897) 868
Impact on CCS earnings attributable to non-controlling
-- -- -- interest -- 22
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ROYAL DUTCH SHELL PLC 3RD QUARTER 2020
UNAUDITED RESULTS
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The identified items categories above may include after-tax impacts of
identified items of joint ventures and associates which are fully
reported within "Share of profit of joint ventures and associates" in
the Consolidated Statement of Income, and fully reported as identified
items before tax in the table above. Identified items related to
subsidiaries are consolidated and reported across appropriate lines of
the Consolidated Statement of Income. Only pre-tax identified items
reported by subsidiaries are taken into account in the calculation of
underlying operating expenses (Reference F).
Fair value accounting of commodity derivatives and certain gas
contracts: In the ordinary course of business, Shell enters into
contracts to supply or purchase oil and gas products, as well as power
and environmental products. Shell also enters into contracts for tolling,
pipeline and storage capacity. Derivative contracts are entered into for
mitigation of resulting economic exposures (generally price exposure)
and these 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, as well as contracts for tolling, pipeline and storage
capacity, are, by contrast, recognised when the transaction occurs;
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 contracts 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 are
reported as identified items.
Impacts of exchange rate movements on tax balances represent the impact
on tax balances of exchange rate movements arising on (a) the conversion
to dollars of the local currency tax base of non-monetary assets and
liabilities, as well as losses (this primarily impacts the Upstream and
Integrated Gas segments) and (b) the conversion of dollar-denominated
inter-segment loans to local currency, leading to taxable exchange rate
gains or losses (this primarily impacts the Corporate segment).
Other identified items represent other credits or charges that based on
Shell management's assessment hinder the comparative understanding of
Shell's financial results from period to period. The third quarter 2020
reflects the impacts of a provision for an onerous contract in
Integrated Gas and provisions for litigation in Chemicals.
B. Basic CCS earnings per share
Basic CCS earnings per share is calculated as CCS earnings attributable
to Royal Dutch Shell plc shareholders (see Note 2), divided by the
weighted average number of shares used as the basis for basic earnings
per share (see Note 3).
C. Cash capital expenditure
Cash capital expenditure represents cash spent on maintaining and
developing assets as well as on investments in the period. Management
regularly monitors this measure as a key lever to delivering sustainable
cash flows. Cash capital expenditure is the sum of the following lines
from the Consolidated Statement of Cash flows: Capital expenditure,
Investments in joint ventures and associates and Investments in equity
securities.
With effect from the first quarter 2020, "Capital investment" is no
longer presented in this announcement since Cash capital expenditure is
considered to be more closely aligned with management's focus on free
cash flow generation.
Quarters $ million Nine Months
Q3 2020 Q2 2020 Q3 2019 2020 2019
3,679 3,436 5,992 Capital expenditure 11,379 16,264
Investments in joint
ventures and
34 161 30 associates 754 631
Investments in
23 20 76 equity securities 190 141
Cash capital
3,737 3,617 6,098 expenditure 12,324 17,036
Of which:
1,020 736 894 Integrated Gas 2,638 2,976
1,245 1,876 2,625 Upstream 5,642 7,437
832 606 1,308 Oil Products 2,019 3,279
595 369 1,160 Chemicals 1,810 3,067
45 30 111 Corporate 215 277
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ROYAL DUTCH SHELL PLC 3RD QUARTER 2020
UNAUDITED RESULTS
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D. Return on average capital employed
Return on average capital employed (ROACE) measures the efficiency of
Shell's utilisation of the capital that it employs. Shell uses two ROACE
measures: ROACE on a Net income basis and ROACE on a CCS basis excluding
identified items, both adjusted for after-tax interest expense. With
effect from the second quarter 2020, the after-tax interest expense
adjustment is calculated using an applicable blended statutory tax rate.
This change is implemented to eliminate the distorting volatility
effects of the effective tax rate. There is no significant impact on
prior periods comparatives, which therefore have not been revised.
Both measures refer to Capital employed which consists of total equity,
current debt and non-current debt.
ROACE on a Net income basis
In this calculation, the sum of income for the current and previous
three quarters, adjusted for after-tax interest expense, is expressed as
a percentage of the average capital employed for the same period.
$ million Quarters
Q3 2020 Q2 2020 Q3 2019
Income - current and previous three quarters (16,489) (11,011) 20,989
Interest expense after tax - current and previous
three quarters 2,933 3,014 3,115
Income before interest expense - current and previous
three quarters (13,556) (7,997) 24,105
Capital employed -- opening 281,505 288,900 279,864
Capital employed -- closing 269,397 265,435 281,505
Capital employed -- average 275,451 277,168 280,684
ROACE on a Net income basis (4.9)% (2.9)% 8.6% (MORE TO FOLLOW) Dow Jones Newswires
10-29-20 0315ET
