SHELL PLC
(118) 52 (76) Corporate 460 109
(4,871) (778) (2,060) Impact on CCS earnings attributable to shareholders (24,767) (1,192)
(10) -- -- Impact on CCS earnings attributable to non-controlling (10) 22
interest
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1. Includes certain provisions for onerous contracts of post-tax $994
million (pre-tax $1,259 million) for the fourth quarter 2020, post-tax
$126 million (pre-tax $133 million) for the third quarter 2020 and
post-tax $1,120 million (pre-tax $1,392 million) for the full year 2020.
There were no provisions for onerous contracts in 2019.
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ROYAL DUTCH SHELL PLC 4TH QUARTER 2020 AND FULL YEAR
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 and can include items
such as certain provisions for onerous contracts or litigation, the
impact arising from changes in tax legislation, the impact of changes in
discount rate used for provisions, as well as other credits or charges.
The fourth quarter 2020 mainly reflects provisions for onerous contracts
($994 million charge post-tax) in Integrated Gas and Oil Products.
B. Adjusted Earnings per share
Adjusted Earnings per share is calculated as Adjusted Earnings (see
Reference A), 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 Full year
Q4 2020 Q3 2020 Q4 2019 2020 2019
5,206 3,679 6,707 Capital expenditure 16,585 22,971
Investments in joint
ventures and
269 34 112 associates 1,024 743
Investments in
28 23 65 equity securities 218 205
Cash capital
5,503 3,737 6,883 expenditure 17,827 23,919
Of which:
1,664 1,020 1,323 Integrated Gas 4,301 4,299
1,654 1,245 2,768 Upstream 7,296 10,205
1,310 832 1,628 Oil Products 3,328 4,908
830 595 1,023 Chemicals 2,640 4,090
46 45 141 Corporate 262 418
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ROYAL DUTCH SHELL PLC 4TH QUARTER 2020 AND FULL YEAR
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
Q4 2020 Q3 2020 Q4 2019
Income - current and previous three quarters (21,534) (16,489) 16,432
Interest expense after tax - current and previous
three quarters 2,822 2,933 3,024
Income before interest expense - current and previous
three quarters (18,712) (13,556) 19,456
Capital employed -- opening 286,887 281,505 295,398
Capital employed -- closing 266,551 269,397 286,887
Capital employed -- average 276,719 275,451 291,142
ROACE on a Net income basis (6.8)% (4.9)% 6.7%
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ROACE on a CCS basis excluding identified items
In this calculation, the sum of CCS earnings excluding identified items
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
Q4 2020 Q3 2020 Q4 2019
CCS earnings - current and previous three quarters (19,702) (14,272) 15,827
Identified items - current and previous three quarters (24,777) (21,957) (1,170)
Interest expense after tax -- current and previous
three quarters 2,822 2,933 3,024
CCS earnings excluding identified items before interest
expense - current and previous three quarters 7,898 10,618 20,021
Capital employed -- average 276,719 275,451 291,142
ROACE on a CCS basis excluding identified items 2.9% 3.9% 6.9%
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E. Gearing
Gearing is a key measure of Shell's capital structure and is defined as
net debt as a percentage of total capital. Net debt is defined as the
sum of current and non-current debt, less cash and cash equivalents,
adjusted for the fair value of derivative financial instruments used to (MORE TO FOLLOW) Dow Jones Newswires
02-04-21 0216ET
