Q2 2020 RESULTS
31. Juli 2020
The Hague July 30, 2020
“Shell has delivered resilient cash flow in a remarkably challenging environment. We continue to focus on safe and reliable operations and our decisive cash preservation measures will underpin the strengthening of our balance sheet.
Our high-quality integrated portfolio, disciplined execution and forward-looking strategy enable sustained competitive free cash flow generation.”
Royal Dutch Shell Chief Executive Officer, Ben van Beurden
DECISIVE ACTIONS AND STRONG PERFORMANCE DELIVER CASH
- Robust operational delivery across the portfolio. Very strong crude and oil products trading and optimisation results and resilient Marketing performance.
- On track to deliver cost reduction targets:
- Underlying opex reduced by $1.1 billion compared with Q1 2020; delivering reduction target of $3 – $4 billion.
- Cash capex reduced by $1.4 billion compared with Q1 2020; manage cash capex to $20 billion or lower in 2020.
- Impairments of $16.8 billion post-tax (6.1% of average capital employed), reflecting revised price and margin assumptions.
- Gearing increase includes 2.8% impact from impairments and pension remeasurement.
- Net debt increase includes additional leases of $0.8 billion.
- Gearing and Net debt impacted by negative working capital movements of $4.0 billion.
Q2 2020 FINANCIALPERFORMANCE DRIVERS
INTEGRATED GAS AND NEW ENERGIES
- COVID-19 pandemic-related demand decline led to lower LNG and gas-to-liquids revenues, mostly due to lower realised prices.
- LNG trading and optimisation results marginally below average.
- Additional well write-offs and deferred tax charges had a negative impact of $0.6 billion on Adjusted earnings, but no cash impact.
OUTLOOK FOR Q3 2020
Production: 820 – 880 thousand boe/d. Liquefaction: 7.6 – 8.2 million tonnes. Due to price lag in oil-linked LNG term contracts, the impact of low oil prices is expected to become more significant in the third quarter.
- Weak macroeconomic environment driving lower Upstream Adjusted earnings.
- Despite strong Upstream operational performance, production 7%lower compared with Q2 2019 due to divestments and OPEC+ curtailments.
- Upstream sales volumes up due to timing of liftings mainly in Brazil.
OUTLOOK FOR Q3 2020
Production: 2,100 – 2,400 thousand boe/d.
Outlook reflects expected OPEC+ and economic curtailments for entire quarter.
Q2 2020 FINANCIAL PERFORMANCE DRIVERS
- Gearing increased in Q2 by 3.8%. Impairments represent 2.1%and pension remeasurement 0.7%.
- Net debt increased in Q2 by $3.4 billion to $77.8 billion.
- Long-term debt issuance in Q2 of $9.1 billion equivalent. Shell also signed a new $12 billion revolving credit facility in April 2020.
OUTLOOK FOR 2020
Adjusted earnings: net expense of $3,200 – $3,500 million for the full year 2020. This excludes the impact of currency exchange rate effect
Q2 2020 PORTFOLIO DEVELOPMENTS
- Nigeria: all conditions met for Final Investment Decision (FID) and contracts awarded on a new LNG processing unit, known as Train 7, at Nigeria LNG (Shell interest 25.6%), which will add 8 million tonnes per annum (mtpa) of capacity to the Bonny Island facility.
- USA: agreement to sell Appalachia shale gas position for $541 million, with an effective date of January 1, 2020 and expected to complete in Q3 2020.
- Impairments: $16.8 billion ($22.3 billion pre-tax), of which Integrated Gas $8.2 billion ($11.2 billion pre-tax), mainly relating to the QGC Integrated Gas project in Australia and Prelude floating LNG in Australia; Upstream $4.7 billion ($6.3 billion pre-tax), mainly relating to unconventional assets in North America, offshore assets in Brazil and Europe, a project in Nigeria(OPL245), and an asset in the US Gulf of Mexico; Oil Products $4.0 billion ($4.9 billion pre-tax), mainly relating to refineries in Europe and North America; and Corporate $5 million ($9 million pre-tax).