The Hague, September 30, 2020 - This is an update to the third quarter
2020 outlook provided in the second quarter results announcement on July
30, 2020. The impacts presented here may vary from the actual results
and are subject to finalisation of the third quarter 2020 results.
Unless otherwise indicated, presented impacts relate to Adjusted
Earnings on a post-tax basis.
-- Production is expected to be between 820 and 860 thousand barrels of oil
equivalent per day.
-- LNG liquefaction volumes are expected to be between 7.9 and 8.3 million
-- Trading and optimisation results are expected to be below average.
-- A one-off tax charge is expected to have a negative impact on Adjusted
Earnings in the range of $100 to $200 million, no cash impact is expected
in the third quarter.
-- Approximately 80% of our term sales of LNG in 2020 have been oil price
linked with a price-lag of up to 6 months. Consequently, lower realised
prices due to this price-lag are expected to have a significant impact on
LNG margins in the third quarter.
-- CFFO can be impacted by margining resulting from movements in the forward
commodity curves up until the last day of the quarter. Margining inflows
are expected to be in line with the second quarter 2020.
-- Production is expected to be between 2,150 and 2,250 thousand barrels of
oil equivalent per day, which includes a production impact of 60 to 70
thousand barrels of oil equivalent per day from hurricanes in the US Gulf
-- Realised liquids prices in the first two months of this quarter reflected
a 15 to 20 percent discount to Brent, similar to the discount in the
second quarter 2020. Realised gas prices are trending in line with Henry
-- Depreciation is expected to be at a similar level as in the second
-- Similar to the second quarter 2020, while Adjusted Earnings are expected
to show a loss, CFFO is not expected to reflect equivalent cash tax
effects due to the build-up of deferred tax positions in a number of
-- Refinery utilisation is expected to be between 64% and 68%.
-- Realised gross Refining margins are expected to be significantly lower
compared with the second quarter 2020.
-- Sales volumes are expected to be between 4,000 and 5,000 thousand barrels
-- Trading and optimisation results are expected to be lower than the
historical average and significantly lower compared with the second
-- Marketing margins are expected to be significantly higher compared with
the second quarter 2020.
-- Compared with the second quarter 2020, Adjusted Earnings are expected to
be negatively impacted by $200 to $400 million due to higher volume
driven activity, phasing of maintenance activities and provisions.
-- A one-off deferred tax benefit is expected to have a positive impact on
Adjusted Earnings of around $100 million, no cash impact is expected in
the third quarter.
-- Working capital movements are typically impacted by movements between the
quarter opening and closing price of crude along with changes in
inventory volume. Inventory volumes are expected to be lower compared
with the end of the second quarter 2020, impacting working capital
-- Chemicals manufacturing plant utilisation is expected to be between 79%
-- Chemicals sales volumes are expected to between 3,700 and 4,000 thousand
-- Compared with the second quarter 2020, Adjusted Earnings are expected to
be negatively impacted by around $100 million due to increased activity,
provisions and phasing of maintenance activities.
-- Corporate segment Adjusted Earnings are expected to be a net expense at
the lower end of the $800 to $875 million range for the third quarter.
This excludes the impact of currency exchange effects.
-- As per previous disclosures, CFFO price sensitivity at Shell Group level
is estimated to be $6 billion per annum for each $10 per barrel Brent
-- Note that this price sensitivity is indicative and is most
applicable to smaller price changes than those in the current
environment and in relation to the full-year results. This
excludes the short-term impacts from working capital movements and
-- Post-tax impairment charges in the range of $1.0 to $1.5 billion are
expected for the third quarter. Impairment charges are reported as
The consensus collection for quarterly Adjusted Earnings and CFFO
excluding working capital movements, managed by VARA research, is
scheduled to be opened for submission on 8 October 2020, closed on 21
October 2020, and made public on 22 October 2020.
Two recent news publications are highlighted below. They do not to
impact the third quarter 2020 results.
-- In an interview published today, Ben van Beurden, Chief Executive Officer
of Royal Dutch Shell, discusses how Shell has responded to the COVID-19
pandemic, explains the drive behind the enhanced ambition to be a
net-zero emissions energy business, and outlines the direction of the
ongoing restructuring of Shell's ways of working and organisation.
Specifically, the simpler, streamlined and lower-cost organisation will
-- Upstream providing strong and resilient cash generation, focused
on accelerating value;
-- reducing the Refining footprint to less than 10 sites, keeping
those sites that are strategically essential in key locations,
with flexibility to adapt and further integrate with the growing
Chemicals and Trading businesses;
-- Integrated Gas having a larger focus on unlocking new and
expanding existing LNG markets and furthering customer-led energy
-- a customer-focused organisation, providing lower and zero carbon
solutions through the Integrated Power, Biofuels and Hydrogen
businesses that are significant, competitive, and complement
existing businesses like Marketing.
Reduced organisational complexity, along with other measures, are
expected to deliver sustainable annual cost savings of between $2.0 to
$2.5 billion by 2022. This will partially contribute to the announced
underlying operating cost reduction of $3.0 to $4.0 billion by the first
quarter 2021. Job reductions of 7,000 to 9,000 are expected (including
around 1,500 people who have agreed to take voluntary redundancy this
year) by the end of 2022.
The full interview is available here: https://www.shell.com/reshape
-- Our Shell Scenarios team considered the implications of choices societies
could make while living with COVID-19 and explored what this might mean
for energy demand and the energy transition. Explore the Rethinking the
2020s publication here: https://www.shell.com/rethinking
Media International: +44 (0) 207 934 5550
Media Americas: +1 832 337 4355
The companies in which Royal Dutch Shell plc directly and indirectly
owns investments are separate legal entities. In this announcement
"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 Royal Dutch Shell plc and its subsidiaries in
general or to those who work for them. These terms are also used where
no useful purpose is served by identifying the particular entity or
entities. "Subsidiaries", "Shell subsidiaries" and "Shell companies"
as used in this announcement refer to entities 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 an entity or
unincorporated joint arrangement, after exclusion of all third-party
This announcement contains forward-looking statements (within the
meaning of the U.S. Private Securities Litigation Reform Act of 1995)
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
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