ROYAL DUTCH SHELL PLC: Shell delivering a competitive and innovative strategy
Shell delivering a competitive and innovative strategy
The Hague, 31 January 2013
In an update with investors today, Shell CEO
Peter Voser said the company is delivering on its strategy and he reiterated
growth plans while spelling out strategic priorities.
"With the first year of our 2012-2015 growth targets completed, Shell is on
track for plans we set out in early 2012, despite headwinds last year," said
Voser. "Shell is competitive and innovative. We are delivering a strategy that
others can't easily repeat, with unique skills in technology and integration
and a worldwide set of opportunities for new investment".
Although the economic outlook remains uncertain for some of Shell's key
markets, Voser said the prospects for long-term growth in global energy demand
remained unchanged, driven by rising world population and improving standards
of living in developing countries. "Meeting this demand growth with clean and
affordable energy is a formidable challenge for our industry and it is a major
opportunity for Shell," he said.
He confirmed Shell's growth agenda, which aims to deliver $175-$200 billion of
total cash flow from operations for 2012-2015, a net capital spending programme
of $120-$130 billion, and a competitive dividend for shareholders.(1)
Shell's efforts to expand its pipeline of potential energy projects are paying
off, said Voser. "Our drive to increase our options for future projects means
that we are more constrained by limits on capital than by limits on
opportunities," he said. "This allows us to prioritise the most attractive
opportunities, and reconfigure or exit from less attractive ones."
Voser said Shell will continue to maintain its investment programme through the
economic cycle. "We make long-term decisions on capital allocation and growth
choices, and we look through short-term market volatility," he said. "As our
cash flow momentum builds we expect to increase our dividends for shareholders
in measured, affordable steps. There is more to come from Shell."
Key operational milestones in 2012:
* We continued to focus on safe and reliable operations in all of our
* Cash flow from operations (CFFO) of $46 billion, net capital investment of
$30 billion, dividends announced of $11 billion.
* New start-ups in 2010-12 added $ 6 billion of cash flow and 600 thousand
barrels of oil equivalent per day (boe/d) of production in 2012, around 10%
and 20% of the company's totals. There is more growth to come from these
* Exploration, appraisal and commercial activities in 2012 added ~4 billion
barrels of oil equivalent (boe) of potential new resources, comprising 1.5
billion boe in conventional basins, and 2.5 billion boe in resources plays,
underpinning Shell's longer-term growth plans.
* Rigorous portfolio management continues, with $7 billion of exits from
non-core positions and strategic partnering, and $5 billion in acquisitions
in 2012. Divestments in the last 3 years totalled $21 billion, or around
10% of capital employed, and acquisitions were $17 billion.
Outlook for 2013 and beyond:
Voser said Shell will continue the strategic drive to grow its upstream
businesses, with ongoing selective investment in downstream.
At the end of 2012, the company had 12.4 billion boe of resources on stream,
averaging 3.4 million boe/d of production, and 20 billion boe of resources
potential in our active development funnel. Total resources in these two
categories represent 26 years of current production.
Shell has ~30 new projects under construction, which should unlock 7 billion
barrels of resources, and drive continued financial and production growth.
Upstream start-ups in 2010-15 are expected to add some $15 billion of cash flow
in 2015, in a $100 oil price scenario. Some 50% of our 2013 capital investment
will contribute to cash flow by 2015.
Oil & gas production is expected to average ~4 million boe/d in 2017-2018
compared to 3.3 million boe/d in 2012. Shell's strategy in upstream is designed
to drive financial growth, irrespective of production entitlement, with
production growth regarded as a long term proxy for financial growth.
Shell expects to announce a dividend of $0.45 per share for the first quarter
of 2013, a 4.7% increase over the fourth quarter of 2012 and year-ago levels.
Shell is allocating capital according to specific strategic themes, with unique
technology, fiscal and market characteristics, and executing a global portfolio
strategy. By looking at strategy through this thematic lens, Shell can allocate
capital and technology most effectively in each play.
* For 2013, we expect $33 billion of net capital investment. Organic capital
investment in 2013 is expected to be $34 billion, with a further $2 billion
for previously-announced acquisitions, and some $3 billion of asset sales.
* Capital allocation, including exploration, will follow a similar pattern to
2012, with investment directed to Shell's distinct strategic themes.
- $12 billion in upstream and downstream engines - the mature,
cash-generative businesses in Shell, plus corporate.
- Some $18 billion directed at growth priorities, in integrated gas, deep
water and resources plays, allocated evenly between these three.
- Future opportunities, such as Nigeria onshore, Kazakhstan, Iraq, the
Arctic and heavy oil will see some $4 billion of total spending in
- The increased spending from 2012-13 will be driven by higher investment
in deep water and upstream engines, reflecting Shell's project flow,
and an increase in core exploration spending from $6.4 to $7 billion,
allocated to Shell's strategic themes. The 2013 capital investment
programme includes an increase of some $1 billion for non-cash
capitalized leases, predominantly in deep water growth projects.
- Exploration drilling activity will step up in 2013-14. Shell expects to
drill over 40 high-potential wells in 18 conventional basins, and test
10 key resources plays for tight gas and liquids-rich shales.
(1) Cash Flow From Operations (CFFO) and net capital spending outlook at $80-
bbl Brent, and assumes improved US gas and downstream environment from 2012.
CFFO excludes working capital movements.
Reserves: Our use of the term "reserves" in this presentation means SEC proved
oil and gas reserves.
Resources: Our use of the term "resources" in this presentation includes
quantities of oil and gas not yet classified as SEC proved oil and gas
reserves. Resources are consistent with the Society of Petroleum Engineers 2P
and 2C definitions.
Organic: Our use of the term Organic includes SEC proved oil and gas reserves
excluding changes resulting from acquisitions, divestments and year-average
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 (for example, through our 23 per cent shareholding in Woodside
Petroleum Ltd.) 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 2011 (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, 31
January 2013. 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
Shell may have used certain terms, such as resources, in this announcement that
the SEC strictly prohibits Shell from including in its filings with the SEC.
U.S. investors are urged to consider closely the disclosure in Shell's Form
20-F, File No 1-32575, available on the SEC website www.sec.gov. You can also
obtain these forms from the SEC by calling 1-800-SEC-0330.
January 31, 2013
- Investor Relations International + 31 (0) 70 377 4540;
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-0- Jan/31/2013 07:00 GMT
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