Shell Reports $6.9B in 1Q11

Shell's first quarter 2011 earnings, on a current cost of supplies (CCS) basis, were $6.9 billion compared with $4.9 billion a year ago. Basic CCS earnings per share increased by 40% versus the same quarter a year ago.

  • First quarter 2011 CCS earnings, excluding identified items, were $6.3 billion compared with $4.8 billion in the first quarter 2010, an increase of 30%. Basic CCS earnings per share, excluding identified items, increased by 29% versus the same quarter a year ago.
  • Cash flow from operating activities for the first quarter 2011 was $8.6 billion. Excluding net working capital movements, cash flow from operating activities in the first quarter 2011 was $13.1 billion, compared with $10.4 billion in the same quarter last year.
  • Net capital investment for the quarter was $1.7 billion. Total cash dividends paid to shareholders during the first quarter 2011 were $1.6 billion. Some 31.1 million Class A shares, equivalent to $1.1 billion, were issued under the Scrip Dividend Programme for the fourth quarter 2010.
  • Gearing at the end of the first quarter 2011 was 14.0%.
  • A first quarter 2011 dividend has been announced of $0.42 per ordinary share, unchanged from the US dollar dividend per share for the same period in 2010.

Royal Dutch Shell Chief Executive Officer Peter Voser commented, "Our first quarter 2011 earnings have risen from year-ago levels, driven by higher industry margins and our own operating performance.

"We continue to make good progress in implementing our strategy; improving near-term performance, delivering a new wave of production growth, and maturing the next generation of growth options for shareholders.

"We have announced new asset sales and cost savings programs, as part of Shell's focus on continuous improvement, to enhance our profitability and performance. Shell sold $3.2 billion of non-core positions, including tight gas assets in South Texas, in the quarter. Exits from non-core positions continue, with the announcements of further disposals, with proceeds mainly expected during 2011-2012. These additional disposals include refining capacity in the United Kingdom, and marketing positions in Chile and several African countries. This will enhance our competitive performance, and improve our customer and partner focus.

"Shell started commercial production at two new projects during the quarter; the 20 thousand boe/d Schoonebeek Enhanced Oil Recovery project in the Netherlands, and Qatargas 4 LNG, with a capacity of 7.8 million tonnes per year. Together, in an industry that needs sustained investment in diverse energy sources to meet customer demand, these projects are expected to add 90 thousand boe/d of peak production for Shell. These projects are part of a sequence of over 20 new Upstream start-ups planned for 2011-14, as we deliver on our plans for sustainable growth. The first gas flowed from Qatar's North Field into the new Pearl Gas-to-Liquids project during the quarter, where Shell's value-added technology is underpinning the development of the world's largest GTL facility.

"We continue to crystallize new investment options for medium-term growth, including the confirmation of the Geronggong discovery in deep water Brunei, and new LNG potential in the Wheatstone development in Australia, where our gas discoveries have been included in a new partner-operated LNG project, which is under study."

Voser concluded, "We are making good progress against our targets, to deliver a more competitive performance."

First quarter 2011 portfolio developments

Upstream

In Qatar, Shell and Qatargas announced delivery of the first cargo of LNG from the Qatargas 4 project (Shell share 30%). Production is expected to ramp up to 1.4 billion standard cubic feet of gas per day (scf/d), delivering 7.8 million tonnes per annum (mtpa) of LNG and 70 thousand barrels per day (b/d) of condensate and liquefied petroleum gas.

In the Netherlands, Shell produced its first oil from the Schoonebeek Enhanced Oil Recovery (EOR) project (Shell share 30%). The field is expected to ramp up to produce some 20 thousand barrels of oil equivalent per day (boe/d).

Shell sold non-core Upstream assets, with proceeds totalling $2.4 billion in the quarter. As previously announced, Shell completed the sale of a group of predominately mature tight gas fields in South Texas in the USA, producing some 200 million scf/d (Shell share), for some $1.8 billion. In addition, Shell sold various other non-core assets in Canada, Pakistan, the United Kingdom and the USA (combined Shell share of production of some 25 thousand boe/d) as well as exploration acreage in Colombia.

During the first quarter 2011, Shell confirmed a significant oil and gas discovery, Geronggong, drilled in 2010 in deep water Brunei.

Key features of the FIRST quarter 2011

  • First quarter 2011 CCS earnings were $6,925 million, 41% higher than in the same quarter a year ago.
  • First quarter 2011 CCS earnings excluding identified items, were $6,288 million compared with $4,822 million in the first quarter 2010.
  • Basic CCS earnings per share increased by 40% versus the same quarter a year ago.
  • Basic CCS earnings per share excluding identified items increased by 29% versus the same quarter a year ago.
  • Cash flow from operating activities for the first quarter 2011 was $8.6 billion, compared with $4.8 billion in the same quarter last year. Excluding net working capital movements, cash flow from operating activities in the first quarter 2011 was $13.1 billion, compared with $10.4 billion in the same quarter last year.
  • Total cash dividends paid to shareholders during the first quarter 2011 were $1.6 billion. During the first quarter 2011, some 31.1 million Class A shares, equivalent to $1.1 billion, were issued under the Scrip Dividend Program for the fourth quarter 2010.
  • Net capital investment for the first quarter 2011 was $1.7 billion. Capital investment for the first quarter 2011 was $4.9 billion.
  • Return on average capital employed (ROACE) at the end of the first quarter 2011, on a reported income basis, was 12.9%.
  • Gearing was 14.0% at the end of the first quarter 2011 versus 17.1% at the end of the first quarter 2010.

Upstream

  • Oil and gas production for the first quarter 2011 was 3,504 thousand boe/d, 3% lower than in the first quarter 2010. Production for the first quarter 2011 excluding the impact of divestments was in line with the same period last year.

Production in the first quarter 2011 increased by some 230 thousand boe/d from new field start-ups and the continuing ramp-up of fields, which more than offset the impact of field declines.

  • LNG sales volumes of 4.42 million tonnes in the first quarter 2011 were 4% higher than in the same quarter a year ago.

First quarter Upstream earnings excluding identified items were $4,638 million compared with $4,305 million a year ago. Identified items were a net gain of $1,120 million, compared with a net gain of $110 million in the first quarter 2011.

Upstream earnings excluding identified items, compared with the first quarter 2010, reflected the effect of higher crude oil and natural gas realizations on revenues, higher dividends from an LNG venture and increased realized LNG prices. These items were partly offset by lower crude oil and natural gas production volumes, higher production taxes, lower trading contributions, and higher operating expenses, mainly related to the start-up of new projects.

Global liquids realizations were 32% higher than in the first quarter 2010. Global natural gas realizations were 11% higher than in the same quarter a year ago. Natural gas realizations in the Americas decreased by 25%, whereas natural gas realizations outside the Americas increased by 20%.

First quarter 2011 production was 3,504 thousand boe/d compared with 3,594 thousand boe/d a year ago. Crude oil production was down 3% and natural gas production decreased by 2% compared with the first quarter 2010. Excluding the impact of divestments, the first quarter 2011 production was in line with the same period last year.

New field start-ups and the continuing ramp-up of fields contributed to the production in the first quarter 2011 by some 230 thousand boe/d, in particular from the ramp-up of Gbaran Ubie in Nigeria, the start-up of the Qatargas 4 project in Qatar, and the ramp-up of the Jackpine Mine at the Athabasca Oil Sands Project in Canada, which more than offset the impact of field declines.

LNG sales volumes of 4.42 million tonnes were 4% higher than in the same quarter a year ago, reflecting higher volumes from Nigeria LNG and the Sakhalin II project as well as the successful start-up of the Qatargas 4 project.

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