Royal Dutch Shell Reports Q3 2010 Results (The Netherlands)

At 07.00 BST (08.00 CEST and 02.00 EDT) on Thursday 28 October, 2010 Royal Dutch Shell plc released its third quarter results and third quarter interim dividend announcement for 2010.

Key features of the Third quarter 2010

* Third quarter 2010 CCS earnings were $3,521 million, 18% higher than in the same quarter a year ago.

* Third quarter 2010 CCS earnings, excluding identified items (see page 5), were $4,933 million compared to $2,619 million in the third quarter 2009.

* Third quarter 2010 reported earnings were $3,463 million compared to $3,247 million in the same quarter a year ago.

* Basic CCS earnings per share increased by 16% versus the same quarter a year ago.

* Cash flow from operating activities for the third quarter 2010 was $9.0 billion, compared to $7.3 billion in the same quarter last year. Excluding net working capital movements, cash flow from operating activities in the third quarter 2010 was $8.1 billion, compared to $7.7 billion in the same quarter last year.

* Total dividends paid to shareholders during the third quarter 2010 were $2.6 billion.

* Capital investment for the third quarter 2010 was $11.0 billion. Net capital investment (capital investment, less divestment proceeds) for the third quarter 2010 was $10.3 billion, including $5.5 billion related mainly to the business acquisition of East Resources, Inc. in the USA and the joint acquisition of Arrow Energy Limited in Australia.

* Return on average capital employed (ROACE), on a reported income basis, was 8.8%.

* Gearing was 19.0% at the end of the third quarter 2010 versus 13.7% at the end of the third quarter 2009.

Third quarter Upstream earnings were $3,153 million compared to $1,543 million a year ago. Earnings included a net charge of $284 million related to identified items, compared to a net charge of $123 million in the third quarter 2009 (see page 5). Upstream earnings, excluding the impact of identified items, compared to the third quarter 2009 reflected the effect on revenues from improved crude oil and natural gas realised prices and increased production volumes, lower operating costs and lower exploration well write-off expenses which were partially offset by increased production taxes. Earnings also reflected increased LNG sales volumes, improved LNG realised prices and higher dividends received from an LNG joint venture.

Global liquids realisations were 15% higher than in the third quarter 2009. Global gas realisations were 17% higher than in the same quarter a year ago. In the Americas, gas realisations increased by 25%. Outside the Americas, gas realisations increased by 16%. Third quarter 2010 production was 3,058 thousand boe/d compared to 2,917 thousand boe/d a year ago. Crude oil production was up 3% and natural gas production was up 7% compared to the third quarter 2009. In Nigeria, Shell’s share of Shell Petroleum Development Nigeria Company (SPDC) joint venture production increased by 175 thousand boe/d driven by the ramp-up of new projects and improved security conditions.

Underlying production, compared to the third quarter 2009, increased by some 180 thousand boe/d from new field start-ups and the continuing ramp-up of fields over the past 12 months, more than offsetting field declines. LNG sales volumes of 4.26 million tonnes were 22% higher than in the same quarter a year ago. Volumes improved globally, with major contributions from the Sakhalin II LNG project and Nigeria LNG.

Third quarter Downstream CCS earnings were $325 million compared to $1,292 million in the third quarter 2009. Earnings included charges of $1,128 million related to identified items, compared to a net gain of $536 million in the third quarter 2009 (see page 5). Downstream CCS earnings, excluding the impact of identified items, compared to the third quarter 2009 reflected improved refining contributions, higher Chemicals earnings and lower operating costs. Oil Products marketing CCS earnings, excluding the impact of identified items, improved compared to the same period a year ago, mainly reflecting higher lubricants earnings and reduced trading contributions.

Oil Products sales volumes increased by 4% compared to the same quarter last year. Excluding the impact of divestments, sales volumes increased by 6%. Refining CCS results, excluding impairment charges, improved from the third quarter 2009, benefiting from higher realised refining margins globally and higher refinery plant intake volumes. Refinery availability was 93% compared to 94% in the third quarter 2009. Chemicals CCS earnings compared to the third quarter 2009 reflected improved realised chemicals margins, higher chemicals sales volumes and lower operating costs.

Chemicals sales volumes increased by 13% compared to the same quarter last year, mainly due to start-up of the Shell Eastern Petrochemicals Complex in Singapore. Chemicals manufacturing plant availability increased to 96% from 95% in the third quarter 2009.

Third quarter Corporate earnings and Non-controlling interest were $43 million compared to $155 million for the same period last year. Earnings for the third quarter 2009 included charges of $42 million related to identified items (see page 5). Corporate earnings for the third quarter 2010 reflected higher tax credits, which were more than offset by lower currency exchange gains and a lower net interest result compared to the same period in 2009.

Royal Dutch Shell Chief Executive Officer Peter Voser commented: “Our results have rebounded substantially from year-ago levels, driven by some improvement in industry conditions, and Shell’s strategy. We are seeing new growth, with improved earnings and cash flow, underpinned by a 5% increase in oil and gas production, a 22% increase in LNG sales and increased downstream volumes. This is a better performance from Shell, achieved despite continued difficult industry conditions in refining and natural gas markets.

We are making good progress on implementing our strategy, with a focus on performance improvement, delivering a new wave of growth, and maturing the next generation of growth options for shareholders, with achievements in all of these themes during the quarter. With an emphasis on continuous improvement, Shell is driving down costs and improving capital efficiency. We have achieved some $2 billion of asset sales so far in 2010, and announced the disposal of late-life oil and gas positions at Statfjord in Norway, and refining capacity at Heide in Germany during the quarter. Our cash generation from operations continues to improve.

We expect some $7-8 billion of asset sales in the 2010-11 timeframe, including exits from non-core refining and marketing positions in Europe and Africa, and rationalisation of our tight gas portfolio in North America, following recent acquisitions there.” Turning to growth delivery, Voser commented: “We are in a delivery window for new growth. Our new oil sands mine – Jackpine – started production during the quarter, part of the 100,000 boe/d Athabasca Oil Sands Project Expansion 1. AOSP-1 is the 5th start-up in a sequence of 13 new projects for 2010-11, which will drive us to achieve our cash flow and production targets for 2012.

Shell has continued to make progress with longer term growth options during the quarter, with the final investment decision on two new deep water projects – the 100,000 boe/d Mars B development in the Gulf of Mexico, and Phase 2 of the BC-10 development in Brazil. We have signed a purchase agreement with East Resources, Inc., acquiring tight gas acreage in the USA, bringing our total North America gas potential resources to some 40 tcfe, completed the joint acquisition of Arrow Energy Limited, an Australian CBM-LNG play, and progressed our Brazil retail and biofuels joint venture with Cosan.”

Voser concluded: “We are making good progress against our targets, and there is more to come from Shell.”

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Source: Shell, October 28, 2010