Royal Dutch Shell plc: Q4 and Year End Results

    Summary results

           FOURTH                   $ million                 FULL YEAR
          QUARTER
        2005   2004    %                                    2005    2004    %

       4,368  4,571   -4 Income attributable to           25,311  18,540  +37
                         shareholders (1)
                         Estimated current cost of
                         supplies (CCS) adjustment for
                         Oil Products segment - see note
     (1,027)  (649)      2                                 2,371     945
       5,395  5,220   +3 CCS earnings (1)                 22,940  17,595  +30

       8,465  6,349      Cash from operating activities   30,113  26,537
                         Cash from operating activities
                         excluding net working capital
                         movements and taxation
       7,344  6,651      paid/accrued - see note 7        35,585  28,278
       5,956  5,185      Capital investment               17,436  15,275

                         Upstream production (thousand
       3,500  3,837      boe/d) (2)                        3,518   3,772

    1. including discontinued operations - see note 3

    2. 100% of Shell companies production plus Shell share of associates
    production


    Delivering good results in the quarter; building the future

- Record full year results with basic earnings per share of $3.79 for 2005 and $0.67 for the fourth quarter

- Solid Upstream performance in the quarter captures oil and gas price increases

- Good Oil Products earnings in the quarter reflect operational delivery and favourable market conditions

- 3.52 million barrels of oil equivalent (boe) per day production 2005 in line with guidance

- Fourth quarter dividend of EUR0.23 per share equivalent to some $1.9 billion (subject to exchange rates)

- $2.6 billion or 1.2% of Royal Dutch Shell (NYSE: RDS.A; RDS.B) shares bought back for cancellation in the fourth quarter and $1.7 billion paid for Royal Dutch shares

Chief Executive Jeroen van der Veer said "Our good performance in the fourth quarter 2005 gives us a solid platform to build on in 2006. We delivered record cash and earnings. Success in exploration and gaining access to new resources continues. We met our production expectations for the quarter and the year despite the impact of the hurricanes. Our leading LNG and Oil Products businesses had good operational and financial performance. We continue to expand our portfolio of integrated gas, unconventional resources, material oil projects and new energy technologies and expect to invest around $19 billion in 2006. Our financial position is solid, and we returned over $17 billion to our shareholders through dividends, buybacks and the payment to Royal Dutch minority shareholders in 2005. We focus on delivery now and building the future."

    Segment earnings

        FOURTH                  $ million                  FULL YEAR
        QUARTER
     2005  2004   %                                      2005    2004   %

                    Segment earnings
    3,561 2,918     Exploration & Production           14,238   9,823
      530   605     Gas & Power                         1,573   1,815
                    Oil Products (CCS basis - see
    1,898 2,338     note 2)                             7,532   6,592
     (38)  (20)     Chemicals                             991   1,148
                    Other segments/Corporate/Minority
    (556) (621)     interest                          (1,394) (1,783)

    5,395 5,220  +3 CCS earnings                       22,940  17,595 +30

Earnings in the fourth quarter 2005 reflected the following items, which in aggregate were a net gain of $34 million (compared to a net gain of $499 million in the fourth quarter 2004):

- Exploration & Production earnings included a net gain of $152 million, mainly related to tax credits, partly offset by a charge related to the mark-to-market valuation of certain UK gas contracts of $154 million, versus a gain of $405 million in 2004 mainly due to the reversal in 2004 of earlier impairments.

- Gas & Power fourth quarter 2004 earnings included a net gain of $157 million related to divestments partly offset by impairment charges.

- Oil Products fourth quarter 2004 earnings included a net gain of $391 million mainly related to divestments.

- Chemicals earnings included net charges of $84 million mainly for legal charges versus a net charge of $353 million in the fourth quarter 2004 for the impairment of the polyolefins joint venture Basell.

- Other Industry and Corporate segments included a net gain of $2 million mainly related to impairment charges of $91 million offset by a net gain from tax and insurance. The fourth quarter 2004 included charges of $101 million.

- Income attributable to shareholders and CCS earnings include a deduction of minority income attributable to the former Royal Dutch shareholders of $36 million (in the third quarter of 2005 this amounted to $46 million). The minority interest was eliminated in the fourth quarter 2005.

Key features of the fourth quarter and full year 2005

- Fourth quarter basic earnings per share for Royal Dutch Shell (see note 9) in 2005 were $0.67. Fourth quarter basic CCS earnings per share for Royal Dutch Shell were $0.82.

- Fourth quarter 2005 dividends have been announced of EUR0.23 per share for Royal Dutch Shell. For 2005 total dividends are equivalent to an aggregate of EUR0.92 per share.

- Fourth quarter reported income of $4,368 million was 4% lower than a year ago.

- Fourth quarter CCS earnings (i.e. on an estimated current cost of supplies basis for the Oil Products segment earnings) were $5,395 million or 3% higher.

- Full year 2005 reported income of $25,311 million was 37% higher than a year ago.

- Full year 2005 CCS earnings were $22.94 billion, 30% higher than a year ago. Upstream earnings in Exploration & Production and Gas & Power reflected high price realisations and increased LNG volumes partly offset by lower oil and gas production volumes. Downstream earnings were very strong on good operational performance. Income in 2005 included a net gain of $1.27 billion mainly from divestments partly offset by mark-to-market valuations in Exploration & Production and charges mainly in Chemicals and Gas & Power, versus a net gain of $391 million mainly from divestments included in 2004 earnings.

- Return on average capital employed (ROACE) on a reported income basis (see note 4) was 25.6% for 2005.

- Exploration & Production 2005 segment earnings of $14,238 million were 45% higher than a year ago mainly reflecting higher prices partly offset by lower volumes and higher costs. Earnings in 2005 included a net gain of $1,727 million, mainly from the divestment gain in the Netherlands (Gasunie), partly offset by a charge related to the mark-to-market valuation of certain UK gas contracts ($492 million).

- Hydrocarbon production in 2005 was 3,518 thousand boe per day in line with guidance for production for 2005. Excluding the loss of production due to hurricanes in the Gulf of Mexico, the end of a production sharing contract in the Middle East, lower entitlements due to higher hydrocarbon prices and the impact of divestments, production would be 3,738 thousand boe per day or 1% lower than a year ago.

- During 2005, a total of between 750-850 million boe is expected to be added to proved reserves. Around 75%-85% of these proved reserves are expected to come from Group companies and the remainder from associates. In addition, net proved mineable reserves of 166 million boe were added from Athabasca Oil Sands in 2005. The Reserves Replacement Ratio (see note 10) for 2005 is expected to be in the range of 70%-80%, including mineable reserves from Athabasca Oils Sands and also including year-end pricing impact and acquisitions and divestments. Excluding mineable reserves from Athabasca Oil Sands the Reserves Replacement Ratio is expected to be in the range of 60%-70%. Year-end pricing effects amount to between 40-80 million boe and impact the Reserves Replacement Ratio by 3-6% points.

- The Group continues to target 100% Reserves Replacement over the period 2004-2008. Most proved reserves are expected to be added in the latter part of the period as new projects are developed and brought on stream.

- The exploration discoveries, appraisals programme and new business development in 2005 added over 2 billion boe resources.

- Gas & Power segment earnings were $1,573 million in 2005, compared to $1,815 million in 2004. 2005 earnings reflected record LNG volumes and strong prices, and favourable Marketing and Trading conditions. Earnings in 2005 included net charges of $84 million mainly related to divestments including the power generation assets held through the joint venture company InterGen. Earnings in 2004 included net gains of $444 million also mainly related to divestments.

- Full year 2005 Oil Products CCS earnings were $7,532 million, up $940 million from earnings of $6,592 million in 2004, reflecting strong refining margins and operational performance. Earnings included $427 million of net gains from divestments in 2005 compared to net gains of $540 million last year. Increased refining earnings and higher trading profits were partially offset by lower marketing results.

- Full year 2005 Chemicals segment earnings were $991 million and included $565 million of net charges, mainly from the divestment of the polyolefins joint venture Basell and legal provisions. 2004 earnings were $1,148 million and included charges of $368 million mainly from impairments. Excluding these effects, 2005 earnings were 3% higher than a year ago reflecting improved margins and chemicals feedstock trading partly offset by the loss of earnings from discontinued operations.

- Cash flow from operating activities, excluding net working capital movements, taxation and taxation paid, was $35.6 billion, compared to $28.3 billion a year ago.

- The 2004-2006 divestment target of $12-$15 billion has been achieved ahead of plan in 2005. Proceeds from the divestment programme to date were $14.3 billion, with proceeds of $6.6 billion in 2005.

- Gearing, including other commitments such as operating leases and retirement benefits, and net of cash holdings minus operational cash requirements, was 12.0% versus, on a comparable Royal Dutch Shell basis, 15.4% at the end of 2004. In 2005 cash and cash equivalents increased by $2.5 billion to $11.7 billion and debt decreased by $1.7 billion. Total cash returned to shareholders was over $17 billion.

- Capital investment for 2005 was $15.6 billion (excluding the minority share of Sakhalin of $1.8 billion). Increases reflected exploration expenditure of $2.1 billion, including Australia and Canada.

- Share purchases for cancellation amounted to $5 billion (or 2.3% of shares) plus $1.7 billion for the cash payment for the minority interest in Royal Dutch in 2005.

- In December 2005 the restructuring of certain of Royal Dutch Shell's subsidiaries, including the merger of Royal Dutch Petroleum Company (Royal Dutch) and Shell Petroleum N.V. (SPNV) was completed. As a result of the merger of Royal Dutch and SPNV, former minority shareholders in Royal Dutch were paid EUR52.21 per Royal Dutch share held (or the equivalent in exchangeable loan notes of SPNV) in consideration for their shares. The total cash amount paid to minority shareholders was $1.7 billion and subsequently, in January 2006, the loan notes were exchanged into 4,827,974 new Royal Dutch Shell A shares or approximately 0.07% of the total A and B shares outstanding at the time.

Royal Dutch Shell outlook 2006

- Share buyback plans will be reviewed periodically, and are subject to market conditions and the capital requirements of the company. Royal Dutch Shell currently expects to return up to $5 billion to shareholders via buy back of shares for cancellation in 2006. In line with the financial framework, the target for gearing over time in the 20%-25% range remains unchanged, including other commitments such as operating leases, contingent liabilities and retirement benefits and operating cash requirements.

- Including the impact on production from the hurricanes in the Gulf of Mexico in 2005, the production outlook for 2006 is unchanged from earlier guidance and in the lower half of the range of 3.5 to 3.8 million boe per day. Due to the hurricanes in the Gulf of Mexico in 2005, 7-8 million barrels (Shell share) are expected to be deferred in the first quarter 2006. The Mars platform is expected to start production by the middle of 2006 with full production restored in the second half of 2006.

- LNG sales are expected to benefit from recently completed expansions in Nigeria and Oman. LNG capacity growth remains in line with guidance of 14% average annual increase for 2004 to 2009.

- Guidance for 2006 capital expenditure is $19 billion excluding the minority share of Sakhalin and reflects new project opportunities under development, existing project progress and market conditions.

Fourth quarter 2005 investments and portfolio developments

Upstream portfolio developments during the quarter:

In Nigeria, Shell started oil production from the Bonga offshore deepwater field (Shell share 55%) which is expected to ramp up production to over 200 thousand barrels of oil per day in 2006. The Bonga development and the discoveries in and around the Bonga Main facility are likely to develop over 1 billion barrels of recoverable resources.

In the USA, Shell exchanged its interest of 17% in the Tahiti field, deepwater Gulf of Mexico, for Total's 100% interest in four producing natural gas fields in South Texas with current production of 107 million standard cubic feet (scf) per day. The swap will be completed in the first quarter of 2006.

In Russia, Salym Petroleum Development (Shell share 50%) achieved commercial production in West Salym, when the Central Processing Facility (CPF) and the oil export pipeline commenced operations on schedule. In 2006, Upper Salym and Vadelyp will be tied-in to the CPF. The production is expected to ramp up with the development of fields over the coming years. The Sakhalin II project (Shell share 55%) is proceeding in line with earlier guidance.

In Malaysia, Shell delivered first gas from the Shallow Clastics field which, once fully developed, is expected to produce 430 million scf per day to the E11 hub integrated gas project (Shell share 50%). The E11 hub will be further developed to reach a capacity of 2 billion scf per day (100%) from various new and existing fields.

In the Ukraine, a cooperation agreement was signed with the National Oil Company (NAK) for a farm-in by Shell into 10 NAK licences in the Dniepr-Donets Basin. Shell will acquire a 50% interest in a Joint Activity Agreement in these licences (excluding producing fields) by committing to a seismic and exploration drilling programme.

Shell Canada acquired unconventional gas leases in the Athabasca area covering 66,400 acres in the deep basin area near Hinton, Alberta and an interest in approximately 20,000 acres in the northeastern British Columbia foothills with conventional gas prospects.

In Brazil, Shell acquired interests in five offshore exploration blocks in the Espirito Santos Basin.

In the fourth quarter 2005, 20 successful exploration and exploratory appraisal wells were drilled in Australia, Brazil, Brunei, Egypt, Germany, Malaysia, Netherlands, Nigeria, Oman, UK and USA. The overall success rate in 2005 was 72%. Seismic operations started in Libya in the Sirte basin.

In 2005, Shell drilled or participated in 15 Big Cat prospects, of which 3 were still being drilled at year-end. Hydrocarbons were found in seven of the 12 Big Cat wells that reached target depth at year-end.

In Qatar, the final investment decision for the Qatargas 4 LNG project (Shell share 30%) was taken in December 2005. Qatargas 4 will produce 1.4 billion scf per day of natural gas including an average of approximately 70 thousand barrels per day of associated natural gas liquids from Qatar's North Field over the 25-year life of the project. The project comprises the integrated development of upstream gas production facilities, a single LNG train yielding approximately 7.8 mtpa of LNG and associated shipping. LNG deliveries are expected to commence around the end of the decade.

In the USA, Shell acquired, subject to the U.S. Federal Energy Regulatory Commission's approval, additional capacity at the Elba Island LNG import terminal bringing Shell's total regasification capacity at Elba to 0.9 billion scf per day. The capacity is intended to be utilised to import Qatargas 4 LNG volumes.

In Nigeria, production commenced from the two train 'NLNG Plus' expansion project (Shell share 26%). The first cargo from Train 4 was loaded in January 2006 for delivery to North America. Production from Train 5 is expected in the first quarter of 2006. The expansion project was completed within budget and schedule expectations. Completion of Trains 4 and 5 increases Nigeria LNG's production capacity from 9.6 mtpa to over 17 mtpa.

The 3.7 mtpa Qalhat LNG plant in Oman (Shell share 11% indirect) commenced production in the quarter. The project was delivered within budget and ahead of schedule.

Shell's equity LNG production capacity increased 13% during 2005, from 11.0 mtpa at the end of 2004, to 12.4 mtpa at the end of 2005, consistent with the outlook to deliver 14% average annual increase in LNG equity capacity from 2004 to 2009.

Shell completed the exit from InterGen (Shell share 68%) with the sale of its interest in the remaining power projects in Turkey and Colombia.

Downstream portfolio developments during the quarter:

Shell completed the sale of its marketing and distribution business in the Republic of Ireland and Northern Ireland as well as the sale of the refining, marketing and distribution business in the French Antilles and French Guyana. Combined proceeds from these sales amounted to some $220 million.

The exchange of Shell's 20% interest in its Rome refinery for Total's 18% interest in the Reichstett refinery in France was completed. The transaction increased Shell's ownership interest in the Reichstett refinery to 83%.

Shell started operations of its first retail site in Indonesia. Shell is the first international oil company to re-enter this retail fuels market. Indonesia is one of Shell's key strategic markets targeted for growth.

Agreements were signed relating to the sale of the marketing and distribution businesses in Uruguay and Paraguay, the retail and commercial fuels marketing business and lubricants blending and distribution business in Colombia and Shell's retail business in Ecuador. Agreement was also reached regarding divestments of Oil Products businesses in Rwanda, Cameroon, the Carribean (Bahamas, Turks and Caicos and Jamaica) and in Papua New Guinea. These sales are expected to be completed in 2006 with total combined proceeds of some $350 million.

In China, the CNOOC and Shell Petrochemicals Company Limited joint venture (Shell share 50%) completed the construction of the Nanhai petrochemicals complex at Daya Bay, Guangdong, within the expected schedule and budget. Start-up of the complex is in progress; when fully operational, Nanhai is expected to produce 2.3 mtpa of petrochemical products.

Shell completed the sale of the 50% share in the ethylene cracker and the butadiene business and assets at Berre in France and various related logistic assets.

    Earnings by industry segment
    Exploration & Production

           FOURTH                   $ million                  FULL YEAR
          QUARTER
        2005   2004    %                                     2005   2004    %

       3,561  2,918  +22 Segment earnings                  14,238  9,823  +45

       1,986  2,163   -8 Crude oil production (thousand     2,093  2,253   -7
                         b/d)(1)
       8,784  9,710  -10 Natural gas production available   8,263  8,808   -6
                         for sale (million scf/d) (1)

    1. 100% of Shell companies production plus Shell share of
    associates production

In the fourth quarter of 2005, Shell restored Gulf of Mexico production (operated and non-operated) to 340 thousand boe per day (Shell share) of the approximately 450 thousand boe per day (Shell share) prior to hurricane Katrina and Rita and up from a level of 200 thousand boe per day at the end of the third quarter. Approximately 16 million barrels (Shell share) were deferred in the fourth quarter 2005, an improvement on earlier guidance of 18 million barrels for the quarter. In the first quarter 2006, 7-8 million barrels (Shell share) are expected to be deferred. The Mars platform is expected to start production by the middle of 2006 with full production restored in the second half of 2006.

Upstream cost after tax (Shell share) associated with hurricane evacuation, people displacement, and repairs to assets and facilities is expected to be between $250 and $300 million, prior to insurance recovery. Costs after tax were $130 million in 2005, with the remainder expected to be spent in 2006.

Fourth quarter segment earnings of $3,561 million were 22% higher than a year ago ($2,918 million), mainly reflecting strong oil and gas price realisations partly offset by lower volumes.

Exploration & Production earnings included a net gain of $152 million, mainly from tax credits offset by a charge related to the mark-to-market valuation of certain UK gas contracts ($154 million) versus a gain of $405 million in 2004. Segment unit earnings, calculated as segment earnings divided by production for the quarter, are $11.06 per boe. Excluding the net gains described above earnings increased by 36% compared to a year ago and on the same basis unit earnings were $10.59 per boe or 49 % higher than in the same quarter a year ago.

Liquids realisations were 31% higher than a year ago, exceeding increases in marker crudes Brent of 29% and WTI of 24%. Outside the USA, gas realisations increased by 47% and in the USA, gas realisations increased by 71%.

Fourth quarter 2005 production was 3,500 thousand boe per day, reflecting the loss of production from hurricanes in the Gulf of Mexico. Excluding the hurricane loss of production of some 129 thousand boe per day compared to the same quarter last year, the end of a production sharing contract in the Middle East of some 100 thousand boe per day, the impact of divestments and lower entitlements due to higher hydrocarbon prices, production was 1% lower than a year ago.

Production included first contributions from new fields at Bonga (Shell share 55%) in Nigeria, West Salym (Shell share 50%) in Russia, E11 (Shell share 50%) in Malaysia and the ramp-up of additional production mainly in Goldeneye (Shell share 49%) in the UK and Holstein (Shell share 50%) in the USA added 63 thousand boe per day versus the same quarter a year ago. Versus the same quarter a year ago, field declines were 134 thousand boe per day, mainly in the USA, Norway and the UK. Operational downtime, excluding the impact of hurricanes, was up 38 thousand boe per day mainly in the North Sea.

Capital investment in the fourth quarter of $3.8 billion, excluding the minority share of Sakhalin and including exploration expense of $0.4 billion, was 35% higher than in the corresponding period last year.

Full year segment earnings of $14,238 million were 45% higher than a year ago ($9,823 million), mainly reflecting strong oil and gas price realisations partly offset by lower volumes and higher costs.

The earnings included a net gain of $1,727 million versus a net charge of $4 million a year ago. The 2005 net gain is attributable mainly to divestment gains ($2,027 million) in the Netherlands (Gasunie), the UK, Norway and Australia, partly offset by a cumulative loss related to the mark-to-market valuation of certain UK gas contracts ($492 million). Excluding these effects earnings increased by 27% compared to a year ago.

Segment unit earnings, calculated as segment earnings divided by production for the year are $11.09 per boe. Excluding the effects described above, unit earnings were $9.74 per boe and increased by 37% compared to a year ago.

Liquids realisations in 2005 were 41% higher than a year ago in line with increases in marker crudes Brent of 43% and WTI of 36%. Gas realisations outside the USA increased by 37% and in the USA increased by 33%.

Hydrocarbon production in 2005 was 3,518 thousand boe per day. Excluding the loss of production due to hurricanes in the Gulf of Mexico of 60 thousand boe per day compared to last year, the end of a production sharing contract in the Middle East of some 100 thousand boe per day, lower entitlements due to higher hydrocarbon prices and the impact of divestments, production was 1% lower than a year ago.

Production benefited from new fields, mainly from Goldeneye (Shell share 49%) in the UK, Jintan (Shell share 37.5%) in Malaysia and Holstein (Shell share 50%) in the USA and ramp-up of production in the USA, totalling some 131 thousand boe per day versus a year ago. Field declines were 145 thousand boe per day, mainly in the USA, Brazil, Norway and the UK. Operational downtime, excluding the impact of hurricanes, was an additional 66 thousand boe per day versus last year, mainly in the North Sea.

Cost increases reflect increased market rates and commodity prices, the build-up of new production and the development of future projects.

    Capital investment of $10.8 billion, excluding the minority share of
Sakhalin and including exploration expenditure of $2.1 billion, was 25%
higher than last year.

    Gas & Power

       FOURTH            $ million            FULL YEAR
      QUARTER

    2005 2004   %                                    2005  2004   %

     530  605 -12 Segment earnings                  1,573 1,815 -13

    2.81 2.76  +2 Equity LNG sales volume (million  10.65 10.15  +5
                  tonnes)

Fourth quarter Gas & Power segment earnings were $530 million compared to $605 million a year ago, reflecting record fourth quarter LNG volumes of 2.81 million tonnes, strong LNG prices and continued favourable Marketing and Trading conditions in the USA. Earnings in 2004 included net gains of $157 million mainly related to asset divestments partly offset by impairment charges. Excluding these effects earnings were up 18%. LNG volumes increased by 2% due to higher production in Brunei and Oman.

Full year Gas & Power segment earnings were $1,573 million, compared to $1,815 million in 2004. 2005 reflected record LNG volumes and strong prices, and favourable Marketing and Trading conditions. 2005 earnings included net charges of $84 million mainly related to divestments including the power generation assets held through the joint venture company InterGen. Earnings in 2004 included net gains of $444 million also mainly related to divestments.

Record LNG sales volumes were up 5% on last year driven by the ramp up of the fourth train at the North West Shelf project (Shell share 22%) in Australia. Marketing and Trading benefited from price volatility and favourable trading conditions.

    Oil Products

        FOURTH                  $ million                  FULL YEAR
        QUARTER
     2005  2004   %                                      2005    2004   %

      828 1,673 -51 Segment earnings                    9,982   7,597 +31

    1,070   665     CCS adjustment - see note 2       (2,450) (1,005)

    1,898 2,338 -19 Segment CCS earnings                7,532   6,592 +14

    3,978 4,124  -4 Refinery intake (thousand b/d)      3,981   4,162  -4
    6,695 7,699 -13 Oil product sales (thousand b/d)(1) 7,057   7,600  -7

    1) Certain contracts are classified as held for trading purposes
    and reported net rather than gross with effect from Q3 2005.
    The effect in Q4 2005 is a reduction in Total Oil products
    sales of approximately 820 thousand b/d.

In the fourth quarter of 2005, lost refinery intake due to the hurricanes was some 3.3 million barrels (Shell share) versus earlier guidance of 4.5 million barrels (Shell share). Downstream costs after tax and prior to insurance recovery associated with the hurricanes were around $50 million (Shell share). All assets are back to normal operations except for some onshore product pipeline sections.

Fourth quarter segment earnings were $828 million compared to $1,673 million for the same period last year.

Fourth quarter CCS earnings were $1,898 million compared to $2,338 million for the fourth quarter of 2004 which included net gains of $391 million. The fourth quarter 2005 reflected higher trading profits offset by lower refining and lower marketing earnings.

In Manufacturing, Supply and Distribution, fourth quarter 2005 average industry refining margins declined in Europe, Asia Pacific and on the US West Coast. Refinery intake increased 0.5% excluding refineries divested in 2004 and 2005 which amounted to about 4% of global intake in the fourth quarter of 2004. Lower intake due to hurricanes in the Gulf of Mexico amounted to 1%. Despite hurricane related downtime at the start of the fourth quarter, refinery utilisation on an Equivalent Distillation Capacity (EDC) basis increased to 78.9%.

In Marketing including Lubricants and B2B, earnings declined in the fourth quarter of 2005 compared to the same period a year ago. The decrease was due to lower volumes, lower bitumen and LPG margins and higher costs in Lubricants. These were partially offset by higher earnings in Commercial Fuels, Aviation and Marine due to higher margins. Marketing sales volumes declined 4.2% compared to the fourth quarter of 2004 including an impact from divested volumes of 1.3%.

Full year segment earnings were $9,982 million compared to $7,597 million for the same period last year.

Full year CCS earnings were $7,532 million, up $940 million from earnings of $6,592 million in 2004 reflecting strong refining margins and operational performance. Earnings included $427 million of net gains from divestments in 2005 compared to net gains of $540 million last year. Increased refining earnings and higher trading profits were partially offset by lower marketing results.

In Manufacturing, Supply and Distribution, average industry refining margins for the year increased in all regions, with the most significant increases in the USA. Refinery intake increased by almost 1% compared to a year ago excluding lost intake from divested refineries in 2004 and 2005, which amounted to some 5% of global intake in 2004. Refinery utilisation on an EDC basis was at 79.6% versus 80.0% in 2004. Overall unplanned downtime excluding hurricanes improved to 4.0% compared to 4.4% last year reflecting improved asset performance and operational excellence initiatives.

In Marketing including Lubricants and B2B, earnings declined in 2005 compared to 2004 mainly due to lower retail margins in the USA and Europe, lower earnings from Lubricants and lower volumes mainly due to divestments. Marketing sales volumes declined 3.6% compared to 2004 largely due to divestments in 2004 and 2005 which accounted for 2.2 percentage points of the reduction.

    Chemicals

        FOURTH                 $ million                FULL YEAR
        QUARTER
     2005  2004   %                                   2005   2004   %

     (38)  (20)     Segment earnings                   991  1,148 -14

    5,729 5,964  -4 Sales volumes (thousand tonnes) 22,826 24,160  -6


In the fourth quarter the impact of the hurricanes in the USA reduced asset utilisation by 3.4%, above the earlier expected range of 2-3%. All assets were back to normal operations by the end of the quarter.

Fourth quarter Chemicals segment earnings were a loss of $38 million and included net charges of $84 million mainly from legal provisions, compared to a loss of $20 million in the same quarter last year, which included the $353 million impairment of the investment in Basell.

Compared to the same quarter a year ago lower earnings reflected reduced sales volumes and lower margins, higher fixed costs and the loss of earnings from discontinued operations. Asset utilisation was below last year as operations in the USA recovered from the disruptions caused by the hurricanes. Although industry margins improved compared to third quarter, production downtime combined with inventory effects resulted in higher cost of sales impacting margin realisations. Trading results increased versus a year ago but were $43 million lower than the strong third quarter. The fourth quarter 2005 included costs of some $90 million mainly related to progress in project development, portfolio changes and tax. The estimated effect of changing prices negatively impacted fourth quarter earnings as reported on a first-in, first-out (FIFO) inventory valuation basis, by $46 million.

Full year Chemicals segment earnings were $991 million and included $565 million of net charges, mainly from the divestment of the polyolefins joint venture Basell and legal provisions. 2004 earnings were $1,148 million and included charges of $368 million mainly from impairments.

Excluding these effects 2005 earnings were 3% higher than a year ago reflecting higher margins and improved chemicals feedstock trading partly offset by the loss of earnings ($155 million) from discontinued operations.

Asset utilisation declined by some 3% mainly due to the impact of the hurricanes on operations in the USA. Sales volumes declined by 6%, however, excluding product trading they were in line with last year.

    Other Industry
    & Corporate segments

       FOURTH                  $ million                FULL YEAR
       QUARTER
     2005  2004                                        2005    2004

    (110)  (82)     Other Industry segment earnings   (202)   (145)
    (167) (354)     Corporate segment earnings        (321)   (983)

    (277) (436)     Other Industry and Corporate      (523) (1,128)
                    segments earnings

Fourth quarter Other Industry and Corporate segments results were a loss of $277 million and included a net gain of $2 million mainly related to impairment charges ($91 million) offset by a net gain from tax and insurance, compared to a loss of $436 million a year ago which included charges of $101 million. Net interest income reflected improved cash balances and lower debt levels.

Full year Other Industry and Corporate segments results were a loss of $523 million and included charges of $154 million, compared to a loss of $1,128 million a year ago which included charges of $221 million. Net interest expense reflected lower debt levels resulting from strong cash generation and divestment of debt in divested associates, InterGen and Basell, which more than offset currency exchange losses.

Note

All amounts shown throughout this report are unaudited.

First quarter results for 2006 are expected to be announced on May 4, 2006, second quarter results for 2006 are expected to be announced on July 27, 2006 and third quarter results for 2006 are expected to be announced on October 26, 2006.

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