TIDMRDSA TIDMRDSB SHELL SETS OUT A COMPELLING INVESTMENT CASE The Hague, October 29, 2020 - Shell today announced a cash allocation framework that will enable it to reduce debt, increase distributions to shareholders, and allow for disciplined growth as it reshapes its business for the future of energy. Ongoing work to reshape Shell's portfolio is expected to deliver continued cash generation to grow its low-carbon businesses as well as to increase shareholder distributions, making a compelling investment case. In confirming its progressive dividend policy, Shell announces a dividend per share growth by around 4% to 16.65 US cents for the third quarter 2020 and annually thereafter, subject to Board approval. The cash allocation framework includes a target to reduce net debt to $65 billion (from $73.5 billion as of September 30, 2020) -- and, on achieving this milestone, a target to distribute a total of 20-30% of cash flow from operations to shareholders. Increased shareholder distributions will be achieved through a combination of Shell's progressive dividend and share buybacks. Remaining cash will be allocated to disciplined and measured capex growth and further debt reduction, targeting AA credit metrics through the cycle. Shell's decisive steps this year have significantly strengthened its financial resilience, allowing the acceleration of strategic plans and providing clarity on cash priorities. These actions support Shell's ambition to become a net-zero energy emissions business by 2050 or sooner, in step with society and its customers. "Our sector-leading cash flows will enable us to grow our businesses of the future while increasing shareholder distributions, making us a compelling investment case," said Royal Dutch Shell Chief Executive Officer, Ben van Beurden. "We must continue to strengthen the financial resilience of our portfolio as we make the transition to become a net-zero emissions energy business. Our decisive actions taken earlier in the year have solidified our operational and cash delivery. The strength of our performance gives us the confidence to lay out our strategic direction, resume dividend growth and to provide clarity on the cash allocation framework, with clear parameters to increase shareholder distributions." Chair of the Board of Royal Dutch Shell, Chad Holliday commented: "The Board has reviewed Shell's recent performance and its plans to grow its businesses of the future, and we are confident that Shell can sustainably grow its shareholder distributions as well as invest for growth. As a result, the Board has decided to increase the dividend per share to 16.65 US cents for the third quarter 2020. The Board has additionally approved a cash allocation framework for Shell which, on reducing its net debt to $65 billion, will target total shareholder distributions of 20-30% of cash flow from operations." Shell will continue with its strong capital discipline, including annual Cash capex of between $19 and $22 billion in the near term and a focus on reducing net debt. Shell will continue its relentless high grading of the portfolio with expected divestment proceeds of $4 billion a year on average. LEADING ENERGY TRANSITION STRATEGY AND A STRONG PORTFOLIO Shell will reshape its portfolio of assets and products to meet the cleaner energy needs of its customers in the coming decades. The key elements of Shell's strategic direction include: --Ambition to be a net-zero emissions energy business by 2050 or sooner, in step with society and its customers. --Grow its leading marketing business, further develop the integrated power business and commercialise hydrogen and biofuels to support customers' efforts to achieve net-zero emissions. --Transform the Refining portfolio from the current fourteen sites into six high-value energy and chemicals parks, integrated with Chemicals. Growth in Chemicals will pivot to more performance chemicals and recycled feedstocks. --Extend leadership in liquefied natural gas (LNG) to enable decarbonisation of key markets and sectors. --Focus on value over volume by simplifying Upstream to nine significant core positions, generating more than 80% of Upstream cash flow from operations. --Enhanced value delivery through Trading and Optimisation. A comprehensive strategy update, with details on the future shape of the Shell portfolio, actions to deliver the net-zero ambition, and a full financial outlook will be presented on February 11, 2021. Page 1 NOTES TO EDITOR --Our nine core Upstream positions are: Brazil, Brunei, Gulf of Mexico (US/Mexico GoM), Kazakhstan, Malaysia, Nigeria, Oman, Permian and UK North Sea. --The six sites expected to form our energy and chemicals parks include: Deer Park (US), Norco (US), Pernis (NL), Pulau Bukom (Singapore), Rheinland (Germany) and Scotford (Canada). --The chemicals-only production sites, which sit alongside the energy and chemicals parks are: CSPC (China- JV with CNOOC), Fife Ethylene Plant (Scotland - JV with Exxon), Geismar (US), Jurong Island (Singapore), Moerdijk (NL), and Pennsylvania Chemicals (US - under construction). Page 2 ROYAL DUTCH SHELL PLC 3RD QUARTER 2020 UNAUDITED RESULTS --------------------------------------- SUMMARY OF UNAUDITED RESULTS Quarters $ million Nine Months Q3 2020 Q2 2020 Q3 2019 %(1) Reference 2020 2019 % Income/(loss) attributable to 489 (18,131) 5,879 -92 shareholders (17,666) 14,878 -219 CCS earnings attributable to 177 (18,377) 6,081 -97 shareholders Note 2 (15,443) 14,399 -207 955 638 4,767 -80 Adjusted Earnings(2) A 4,453 13,530 -67 Cash flow from operating 10,403 2,563 12,252 -15 activities 27,818 31,913 -13 Cash flow from investing (2,833) (2,320) (2,130) activities (7,871) (10,918) 7,571 243 10,122 Free cash flow G 19,947 20,995 3,737 3,617 6,098 Cash capital expenditure C 12,324 17,036 Underlying operating 7,854 7,504 8,657 -9 expenses F 23,958 27,000 -11 (4.9)% (2.9)% 8.6% ROACE (Net income basis) D (4.9)% 8.6% ROACE (CCS basis excluding identified 3.9% 5.3% 8.1% items) D 3.9% 8.1% 31.4% 32.7% 27.9% Gearing E 31.4% 27.9% Total production available for sale 3,081 3,379 3,563 -14 (thousand boe/d) 3,392 3,632 -7 Basic earnings per share 0.06 (2.33) 0.73 -92 ($) (2.27) 1.84 -223 0.1665 0.16 0.47 -65 Dividend per share ($) 0.4865 1.41 -65 --------- ---------- --------- -------- ------------------------ ------------- ---------- ---------- -------- 1. Q3 on Q3 change. 2. Adjusted Earnings is defined as income/(loss) attributable to shareholders plus cost of supplies adjustment (see Note 2) and excluding identified items (see Reference A). Income attributable to Royal Dutch Shell plc shareholders was $0.5 billion for the third quarter 2020, which reflected lower realised prices for oil and LNG as well as lower realised refining margins and production volumes compared with the third quarter 2019. This was partly offset by lower operating expenses, well write-offs, depreciation and strong marketing margins. Income attributable to Royal Dutch Shell plc shareholders included an impairment charge of $1.1 billion, partly offset by gains on fair value accounting of commodity derivatives of $0.5 billion. Cost of supplies adjustment attributable to Royal Dutch Shell plc shareholders for the third quarter 2020 was negative $0.3 billion. Adjusted Earnings were $1.0 billion for the third quarter 2020, reflecting lower realised prices for oil and LNG as well as lower realised refining margins and production volumes compared with the third quarter 2019. This was partly offset by lower operating expenses, well write-offs, depreciation and strong marketing margins. Cash flow from operating activities for the third quarter 2020 was $10.4 billion, which included positive working capital movements of $1.4 billion. Cash flow from investing activities for the quarter was an outflow of $2.8 billion, driven mainly by capital expenditure, partly offset by proceeds from divestments. Gearing was 31.4% at the end of the third quarter 2020, compared with 32.7% at the end of the second quarter 2020, mainly driven by strong
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