Royal Dutch Shell Shell full year 2014 update: Balancing growth & returns

 
TIDMRDSA TIDMRDSB 
 
Shell full year 2014 update: Balancing growth and returns 
 
The Hague, 29 January 2015. Shell's CEO Ben van Beurden today updates on 2014 
performance and his priorities for the company, in presentations to financial 
markets. 
 
 
Van Beurden commented: "Shell has delivered where it counts in 2014. We are 
stepping up our drive for stronger capital efficiency, whilst being careful not 
to over-react to the recent fall in oil prices. 
 
  * Successful delivery of 2014 programme. Improved financial and operating 
    performance including $25 billion free cash flow: strengthening of the 
    balance sheet; $15 billion of dividends and share buybacks; reduction of 
    capital investment; early completion of $15 billion divestment target; and 
    implementation of tighter performance management. 
 
  * 2015 to see continuation of 2014 drive to balance growth and returns. New 
    restructuring programmes in world-wide resources plays and upstream 
    engines, leveraging oil price downturn to capture multi-billion supply 
    chain cost opportunities world-wide, and plans to reduce Shell's operating 
    costs in 2015. 
 
  * Organic capital investment in 2015 is expectedto be lower than2014 levels, 
    and we havecurtailedover $15billion of potential spendingover the next 
    three years. Shell has options to further reduce spending, but we are not 
    over-reacting to current low oil prices and keeping our best opportunities 
    on the table. 
 
Shell's strategy is founded on disciplined capital investment, integrated 
operations, technological expertise and large scale. This is underpinned by an 
unrelenting focus on safety. Investment in long term opportunities is balanced 
with short term delivery. 
 
Van Beurden continued: "We set out an agenda in 2014 to balance growth and 
returns in Shell, and our results in 2014 show that this strategy is impactful 
where it matters: at the bottom line. By successfully delivering against our 
three key priorities of better financial performance, enhanced capital 
efficiency and continued strong project delivery, we are improving Shell's 
competitive position in the oil & gas industry." 
 
Delivery in 2014 included: 
 
  * Improved earnings and returns, including $25 billion of free cash flow, 
    underpinning $15 billion of dividends and share buybacks. 
 
  * Tighter performance management and accountability implemented across the 
    company, including increased shareholding requirements for senior 
    management to further align interests with shareholders. 
 
  * Restructuring programmes and cost reduction in North America resources 
    plays, where major portfolio changes are now complete; and in Oil Products, 
    where substantial progress has been made and new cost programmes were 
    launched at the end of 2014. 
 
  * Increased asset sales - some $15 billion in 2014, completed before markets 
    weakened across the end of the year, and reduced capital spending, as we 
    make decisions on portfolio to improve Shell's capital efficiency. 
 
  * Successful delivery of new projects including deep water, and successful 
    integration of the LNG portfolio purchased from Repsol, which delivered 
    over $1 billion to CFFO in 2014. 
 
  * A firm uptick in the 2014 exploration performance, with 10 material 
    discoveries in frontier and heartland basins, and a further 41 near-field 
    discoveries. 
 
Van Beurden continued: "Our strategy is delivering, but we're not complacent. 
Weaker oil prices underline that there's a lot more to do. The three themes of 
financial performance, capital efficiency and project delivery will remain as 
Shell's priorities in 2015." 
 
In 2015, these priorities will include a focus on the following: 
 
Financial performance 
 
  * This will include a continued drive to improve performance in Oil Products 
    and North America resources plays, and new restructuring programmes in 
    Upstream engines and International resources plays. 
 
  * Cost competitiveness is integral to our tighter performance management 
    drive. Our established programmes and new initiatives are expected to move 
    operating costs down in 2015. 
 
Capital efficiency 
 
  * Given Shell's rich portfolio funnel and today's lower oil prices, 
    investment levels are under severe pressure in the near term. Today's lower 
    prices are creating opportunities to reduce our own costs and to take costs 
    out of the supply chain, where there is multi-billion dollar savings 
    potential for Shell. 
 
  * In addition, the company is deferring spending in many areas, without 
    compromising on HSSE, exiting selective growth positions, and driving costs 
    down in the supply chain. This should result in reduction of potential 
    capital investment for 2015-17 of over $15 billion. 
 
  * 2015 organic capital investment is expected to be lower than 2014 levels. 
    Shell is considering further reductions to capital spending should the 
    evolving market outlook warrant that step, but is aiming to retain growth 
    potential for the medium term. 
 
Project delivery 
 
  * 2015 should see further ramp-up from the new fields brought on line in 
    2014. The company continues to invest in a competitive suite of new oil & 
    gas fields and LNG, with the next wave of significant start-ups in the 
    2016-18 timeframe. 
 
Van Beurden continued: "The agenda we set out in early 2014 to balance growth 
and returns has positioned us well for the current oil market downturn. 
However, lower oil prices and the impact of our 2014 divestments will likely 
reduce this year's cash flow." 
 
Shell announced dividends of $12 billion in 2014 and repurchased $3.3 billion 
of shares. We slowed our buyback program at the end of 2014 to conserve cash, 
and near-term oil prices will dictate the buyback pace. 
 
Van Beurden concluded: "We are taking a prudent approach here and we must be 
careful not to over-react to the recent fall in oil prices. Shell is taking 
structured decisions to balance growth and returns." 
 
Enquiries 
 
Shell Media Relations 
 
International: [phone] 
 
Americas: [phone] 
 
Shell Investor Relations 
 
International: [phone] 
 
North America: [phone] 
 
Cautionary note 
 
The companies in which Royal Dutch Shell plc directly and indirectly owns 
investments are separate 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 subsidiaries in general or 
to those who work for them. These expressions are also used where no useful 
purpose is served by identifying the particular company or companies. 
"Subsidiaries", "Shell subsidiaries" and "Shell companies" as used in this 
announcement refer to companies in which Shell either directly or indirectly 
has control, by having either a majority of the voting rights or the right to 
exercise a controlling influence. The companies in which Shell has significant 
influence but not control are referred to as "associated companies" or 
"associates" and companies in which Shell has joint control are referred to as 
"jointly controlled entities". In this announcement, associates and jointly 
controlled entities are also referred to as "equity-accounted investments". The 
term "Shell interest" is used for convenience to indicate the direct and/or 
indirect ownership interest held by Shell in a venture, partnership or company, 
after exclusion of all third-party interest. 
 
This announcement contains forward looking statements concerning the financial 
condition, results of operations and businesses of Shell and the Shell Group. 
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 and 
the Shell Group 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 "anticipate", "believe", "could", "estimate", "expect", "goals", 
"intend", "may", "objectives", "outlook", "plan", "probably", "project", 
"risks", "seek", "should", "target", "will" and similar terms and phrases. 
There are a number of factors that could affect the future operations of Shell 
and the Shell Group 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, 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; and (m) changes in trading conditions. 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 factors that may affect future results are contained in Shell's 20-F 
for the year ended 31 December 2013 (available at www.shell.com/investor and 
www.sec.gov ). These factors also should be considered by the reader. Each 
forward looking statement speaks only as of the date of this announcement, 29 
January 2015. Neither Shell nor any of its subsidiaries nor the Shell Group 
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. 
 
 
 
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