TIDMRDSA TIDMRDSB
The following is an update to the fourth quarter 2021 outlook.
Impacts presented may vary from the actual results and are subject
to finalisation of the fourth quarter 2021 results, published on
February 3, 2022. Unless otherwise indicated, all outlook
statements exclude identified items.
The remaining $5.5 billion of proceeds from the Permian
divestment will be distributed in the form of share buybacks at
pace. This decision was taken on December 31, 2021, at the first
Board meeting held in the UK following the decision to implement
the simplification of the company's share structure.
The Permian related distributions are in addition to the
distributions of 20-30% of cash flow from operations as per our
existing capital allocation framework. Further details of the
amount and pace of total shareholder distributions will be
disclosed at the fourth quarter results announcement.
Integrated Gas
Adjusted EBITDA
-- Production is expected to be between 910 and 950 thousand barrels of oil
equivalent per day.
-- LNG liquefaction volumes are expected to be between 7.7 and 8.3 million
tonnes.
-- Production and liquefaction volumes were impacted by unplanned
maintenance, mainly in Australia.
-- Trading and optimisation results in Integrated Gas are expected to be
significantly higher compared to the third quarter 2021, overcoming
ongoing supply issues and capturing unique optimisation opportunities
generated through the large scale and scope of our LNG trading portfolio
in the prevailing high LNG spot price environment.
-- Underlying Opex is expected to be between $1.6 and $1.8 billion.
Adjusted Earnings
-- Pre-tax depreciation is expected to be between $1.2 and $1.4 billion.
-- Taxation charge is expected to be between $600 and $1,000 million.
Cash flow from operations
-- CFFO excluding working capital is expected to have significant outflows
from variation margin impacts on the back of the prevailing gas and
electricity price environment, including the unprecedented gas price
volatility at the end of the fourth quarter.
-- Tax paid is expected to be between $200 and $300 million.
Upstream
Adjusted EBITDA
-- Production is expected to be between 2,150 and 2,250 thousand barrels of
oil equivalent per day.
-- Underlying Opex is expected to be between $2.7 and $3.0 billion.
Adjusted Earnings
-- Pre-tax depreciation is expected to be between $2.8 and $3.1 billion.
-- Taxation charge is expected to be between $2.4 and $2.8 billion.
Cash flow from operations
-- Tax paid is expected to be between $1.1 and $1.4 billion.
Oil Products
Adjusted EBITDA
-- Marketing results are expected to be in line with the fourth quarter 2020
but lower compared with the third quarter 2021 due to seasonal trends,
the demand impact due to the Omicron virus and foreign exchange impacts
in Turkey.
-- The indicative refining margin is around $6.55/bbl, compared to $5.7/bbl
in the third quarter 2021.
-- Refinery utilisation is expected to be between 69% and 73%, in line with
the third quarter 2021. However, the realised refining margins are
expected to be adversely impacted by the extended turnaround in Scotford
and Hurricane Ida recovery efforts in Norco.
-- Oil Products Trading and optimisation results are expected to be
significantly lower than the third quarter 2021.
-- Underlying Opex is expected to be between $3.4 and $3.8 billion.
-- Oil Products sales volumes are expected to be between 4.0 and 5.0 million
barrels per day.
Adjusted Earnings
-- Pre-tax depreciation is expected to be between $800 and $1,000 million.
-- Taxation charge is expected to be up to $300 million.
-- Refining and Trading Adjusted Earnings are expected to be negative
despite higher indicative refining margins.
Cash flow from operations
-- Tax paid is expected to be between $250 and $400 million.
-- CFFO excluding working capital is expected to be impacted by around $1
billion of outflows due to the timing of payments relating to emission
schemes1 on product sales in Europe and North America.
-- Working capital is expected to have outflows of about $1 billion due to
annual payments of the German Mineral Oil Tax in the fourth quarter.
Working capital is expected to be additionally impacted by movements
between the quarter opening and closing price of crude along with changes
in inventory volumes.
Chemicals
Adjusted EBITDA
-- Chemicals margins as well as associated JV earnings are expected to be
significantly lower than the third quarter 2021, primarily due to weaker
base chemicals margins.
-- Chemical sales volumes are expected to be between 3,300 and 3,600
thousand tonnes.
-- Chemicals manufacturing plant utilisation is expected to be between 74%
and 78%, lower compared to third quarter 2021 due to Hurricane Ida
recovery efforts in US Gulf Coast and extended turnaround in Scotford.
-- Underlying Opex is expected to be between $800 and $1,000 million.
Adjusted Earnings
-- Pre-tax depreciation is expected to be between $250 and $300 million.
-- Taxation charge is expected to be a credit of up to $100 million.
-- Consequently Chemicals Adjusted Earnings are expected to be around
break-even in the fourth quarter, reflecting the weak base chemicals
margins and lower utilisation.
Cash flow from operations
-- CFFO is expected to be positively impacted by $50 to $150 million,
compared to third quarter 2021, due to timing impact of dividends from
Joint Venture and Associates.
-- Tax paid is expected to be up to $50 million.
Corporate
-- Corporate segment Adjusted Earnings are expected to be a net expense of
$900 to $1,000 million for the fourth quarter. This excludes the impact
of currency exchange rate effects.
-- The fourth quarter corporate segment Adjusted Earnings includes
additional charges of around $150 million associated with early
redemption of $4.5 billion debt and an expected deferred tax
charge of up to $100 million.
(1) Details of previous year emissions schemes available in Note
29 (pages 263-264) of the Shell Annual Report and Accounts 2020
Full-year price and margin sensitivities
The Adjusted Earnings and CFFO price and margin sensitivities
are indicative and subject to change. These are in relation to the
full-year results and exclude short-term impacts from working
capital movements, production seasonality, cost-of-sales
adjustments and derivatives. Sensitivity accuracy is subject to
trading and optimisation performance, including short-term
opportunities, depending on market conditions. These sensitivities
are reviewed and updated annually.
Adjusted Earnings CFFO
Marker sensitivity $ million $ million
----------------- ------------
Integrated Gas
+$10/bbl Brent 1,100 1,200
+$10/bbl Japan Customs-cleared Crude
- 3 months 1,100 1,200
Upstream
+$10/bbl Brent 3,000 4,000
+$1/mmbtu Henry Hub 350 450
+$1/mmbtu EU TTF 150 200
Refining
+$1/bbl indicative refining margin 500 --
Indicative refining margin
The indicative margin is an approximation of Shell's global net
realised refining margin, calculated using price and margin markers
from third parties' databases. It is based on an approximation of
Shell's crude intake and production from refinery units. The actual
margins realised by Shell may vary due to factors including
specific local market effects, refinery configuration, crude diet,
operating decisions and production.
Q4 2021: $6.55/bbl
Q3 2021: $5.70/bbl
Q2 2021: $4.17/bbl
Q1 2021: $2.65/bbl
The formula provided will be reviewed and updated annually,
reflecting any changes in our refining portfolio.
Calculation formula ($/bbl) - note that brackets indicate a
negative sign
Brent*(25%) + MSW*(11%) + LLS*(24.5%) + Dubai*(24.5%) + Urals
CIF EU*(13%) + NWE Naphtha (RDAM FOB Barge)*8% + NWE Mogas premium
unleaded*12.50% + NWE Kero*11.50% + NWE AGO*24.5% + NWE Benzene*1%
+ Sing Fueloil 380 cst*6.50% + Edmonton ULG Reg*3.50% + Edmonton
ULSD*3.50% + USGC Normal Butane*1.50% + USGC LS No 2 Gasoil*7% +
USGC Natural Gas*(2%) + USGC CBOB*15% + RINS*(20.50%) + NWE
Propylene Platts*0.50% -- $1.7/bbl
Consensus
The consensus collection for quarterly Adjusted Earnings,
Adjusted EBITDA (NEW since Q3 2021) and CFFO excluding working
capital movements, managed by Vara research, will be published on
27 January 2022.
Enquiries
Media International: +44 (0) 207 934 5550
Media Americas: +1 832 337 4355
Cautionary Note
The companies in which Royal Dutch Shell plc directly and
indirectly owns investments are separate legal entities. In this
announcement "Shell", "Shell Group" and "Group" 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 interest.
Alternative Performance (non-GAAP) Measures
This announcement includes certain forward-looking non-GAAP
measures that are calculated and presented on the basis of
methodologies other than in accordance with generally accepted
accounting principles (GAAP) such as IFRS, including Adjusted
Earnings, "Adjusted EBITDA", Cash flow from operating activities
excluding working capital movements, Cash capital expenditure, Net
debt and Underlying opex.
Adjusted Earnings and Adjusted EBITDA are measures used to
evaluate Shell's performance in the period and over time.
The "Adjusted Earnings" and Adjusted EBITDA are measures which
aim to facilitate a comparative understanding of Shell's financial
performance from period to period by removing the effects of oil
price changes on inventory carrying amounts and removing the
effects of identified items.
Adjusted Earnings is defined as income/(loss) attributable to
shareholders adjusted for the current cost of supplies and
excluding identified items. "Adjusted EBITDA (CCS basis)" is
defined as "Income/(loss) for the period" adjusted for current cost
of supplies; identified items; tax charge/(credit); depreciation,
amortisation and depletion; exploration well write-offs and net
interest expense. All items include the non-controlling interest
component.
Cash flow from operating activities excluding working capital
movements is a measure used by Shell to analyse its operating cash
generation over time excluding the timing effects of changes in
inventories and operating receivables and payables from period to
period. Working capital movements are defined as the sum of the
following items in the Consolidated Statement of Cash Flows: (i)
(increase)/decrease in inventories, (ii) (increase)/decrease in
current receivables, and (iii) increase/(decrease) in current
payables. 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. 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 hedge foreign exchange and interest rate risks relating to
debt, and associated collateral balances. Underlying operating
expenses is a measure of Shell's cost management performance and
aimed at facilitating a comparative understanding of performance
from period to period by removing the effects of identified items,
which, either individually or collectively, can cause volatility,
in some cases driven by external factors. Underlying operating
expenses comprises the following items from the Consolidated
statement of Income: production and manufacturing expenses;
selling, distribution and administrative expenses; and research and
development expenses and removes the effects of identified items
such as redundancy and restructuring charges or reversals,
provisions or reversals and others.We are unable to provide a
reconciliation of these forward-looking Non-GAAP measures to the
most comparable GAAP financial measures because certain information
needed to reconcile the above Non-GAAP measure to the most
comparable GAAP financial measure is dependent on future events,
some of which are outside the control of Shell, such as oil and gas
prices, interest rates and exchange rates. Moreover, estimating
such GAAP measures with the required precision necessary to provide
a meaningful reconciliation is extremely difficult and could not be
accomplished without unreasonable effort. Non-GAAP measures in
respect of future periods, which cannot be reconciled to the most
comparable GAAP financial measure are estimated in a manner which
is consistent with the accounting policies applied in Royal Dutch
Shell plc's consolidated financial statements.
Forward-looking statements
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 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 Shell to
market risks and statements expressing management's expectations,
beliefs, estimates, forecasts, projections and assumptions. These
forward-looking statements are identified by their use of terms and
phrases such as "aim", "ambition", "anticipate", "believe",
"could", "estimate", "expect", "goals", "intend", "may",
"milestones", "objectives", "outlook", "plan", "probably",
"project", "risks", "schedule", "seek", "should", "target", "will"
and similar terms and phrases. There are a number of factors that
could affect the future operations of Shell and could cause those
results to differ materially from those expressed in the
forward-looking statements included in this announcement, including
(without limitation): (a) price fluctuations in crude oil and
natural gas; (b) changes in demand for Shell's products; (c)
currency fluctuations; (d) drilling and production results; (e)
reserves estimates; (f) loss of market share and industry
competition; (g) environmental and physical risks; (h) risks
associated with the identification of suitable potential
acquisition properties and targets, and successful negotiation and
completion of such transactions; (i) the risk of doing business in
developing countries and countries subject to international
sanctions; (j) legislative, judicial, fiscal and regulatory
developments including regulatory measures addressing climate
change; (k) economic and financial market conditions in various
countries and regions; (l) political risks, including the risks of
expropriation and renegotiation of the terms of contracts with
governmental entities, delays or advancements in the approval of
projects and delays in the reimbursement for shared costs; (m)
risks associated with the impact of pandemics, such as the COVID-19
(coronavirus) outbreak; and (n) changes in trading conditions. No
assurance is provided that future dividend payments will match or
exceed previous dividend payments. All forward-looking statements
contained in this announcement are expressly qualified in their
entirety by the cautionary statements contained or referred to in
this section. Readers should not place undue reliance on
forward-looking statements. Additional risk factors that may affect
future results are contained in Royal Dutch Shell plc's Form 20-F
for the year ended December 31, 2020 (available at
www.shell.com/investors and www.sec.gov). These risk factors also
expressly qualify all forward-looking statements contained in this
announcement and should be considered by the reader. Each
forward-looking statement speaks only as of the date of this
announcement, January 7, 2022. Neither Royal Dutch Shell plc nor
any of its subsidiaries undertake any obligation to publicly update
or revise any forward-looking statement as a result of new
information, future events or other information. In light of these
risks, results could differ materially from those stated, implied
or inferred from the forward-looking statements contained in this
announcement.
The content of websites referred to in this announcement does
not form part of this announcement.
We may have used certain terms, such as resources, in this
announcement that the United States Securities and Exchange
Commission (SEC) strictly prohibits us from including in our
filings with the SEC. Investors are urged to consider closely the
disclosure in our Form 20-F, File No 1-32575, available on the SEC
website www.sec.gov.
LEI number of Royal Dutch Shell plc: 21380068P1DRHMJ8KU70
(END) Dow Jones Newswires
January 07, 2022 02:00 ET (07:00 GMT)
Copyright (c) 2022 Dow Jones & Company, Inc.
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