Shell's 2Q Earnings Nearly Double to $8.7B
Royal Dutch Shell's second quarter 2011 earnings, on a current cost of supplies (CCS) basis, were $8.0 billion compared with $4.5 billion the same quarter a year ago. Basic CCS earnings per share increased by 74% versus the second quarter of 2010.
- Second quarter 2011 CCS earnings, excluding identified items, were $6.6 billion compared with $4.2 billion in the second quarter 2010, an increase of 56%. Basic CCS earnings per share excluding identified items increased by 52% versus the same quarter a year ago.
- Cash flow from operating activities for the second quarter 2011 was $10.0 billion. Excluding net working capital movements, cash flow from operating activities in the second quarter 2011 was $12.3 billion, compared with $8.6 billion in the same quarter last year.
- Net capital investment for the quarter was $6.0 billion. Total cash dividends paid to shareholders during the second quarter 2011 were $1.8 billion. Some 23.9 million Class A shares, equivalent to $0.8 billion, were issued under the Scrip Dividend Program for the first quarter 2011.
- Gearing at the end of the second quarter 2011 was 12.1%.
- A second 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 second quarter 2011 earnings were higher than year-ago levels, driven by increased energy prices and Shell's operating performance. Shell reinvests its profits to meet customer demand for low cost energy, and to pay attractive returns to shareholders.
"In Upstream, our volumes increased by 2% excluding asset sales impacts, driven by new growth projects. In Downstream, maintenance activities and weak industry refining margins masked a resilient performance from Oil Products marketing and Chemicals in the quarter.
"Shell's strategy is on track; performance focus, delivering a new wave of production growth, and maturing the next generation of growth projects for shareholders.
"We continue with company-wide initiatives to reduce costs, and to improve our operating performance. Asset sales are a key driver of Shell's capital efficiency and portfolio enhancement program. The company has sold some $4 billion of non-core positions in the first half of 2011, in Upstream and Downstream.
"2011 is an important year for Shell's growth program, and the first half of 2011 saw the successful start-up of three of the largest-scale projects anywhere in our industry today.
"In Canada's oil sands, the successful start-up of the 100 thousand barrels per day (b/d) expansion of the Scotford Upgrader marked the completion of the AOSP Expansion 1 project which will continue to ramp up across 2011.
"In Qatar, the Qatargas 4 project, which came on stream during the first quarter 2011, has now fully ramped up, reaching planned capacity of 7.8 million tonnes per annum (mtpa) of LNG. In the second quarter 2011 the new Pearl Gas-To-Liquids (GTL) project in Qatar sold its first GTL gasoil shipment from Train 1.
"In total, these three projects are expected to contribute peak production of over 400 thousand barrels of oil equivalent per day (boe/d) for Shell, after some $30 billion of investment, underpinning our targets for financial and production growth to 2012."
Voser continued, "We have made important progress with new production in 2011, and the ramp-up of our new projects should drive our financial performance in the coming quarters.
Shell continues to mature new projects for medium-term growth.
"In Downstream, we have launched the Raízen joint venture, which will be a leading biofuels producer and fuels retailer in Brazil, underscoring Shell's commitment to sustainable growth.
"In Upstream, we have taken final investment decisions on 9 new projects this year, including the 3.6 mtpa Prelude Floating LNG project, in Australia, which is a first for our industry. These investments are part of Shell's project flow that underpins Shell's Upstream production targets of 3.7 million boe/d in 2014, and longer-term growth potential.
"Shell's net capital investment for the first half of 2011 was $8 billion, and spending is anticipated to build across the year as new projects move into construction. Net capital spending for 2011-14 is expected to be at least $100 billion, as previously indicated, underlining Shell's commitment to medium-term growth in new energy supplies."
Voser concluded, "Investments such as Pearl, Prelude and Raízen are unique in our industry. They are a great testament to our staff and our stakeholders, and reflect Shell's core strengths. Shell adds value through innovative technology, sustainable growth, integration across value chains to bring value-added products to our customers and partners, and creating long-life returns for shareholders. Our strategy is competitive and innovative."
Second Quarter 2011 Portfolio Developments for Upstream
In Australia, Shell announced the final investment decision on the Prelude Floating LNG (FLNG) project (Shell interest 100%). The Prelude FLNG project is expected to produce some 110 thousand boe/d of natural gas and natural gas liquids, delivering some 3.6 mtpa of LNG, 1.3 mtpa of condensate and 0.4 mtpa of liquefied petroleum gas (LPG).
In Canada, Shell announced the successful start of production from its Scotford Upgrader Expansion project (Shell interest 60%). The 100 thousand b/d expansion takes upgrading capacity at Scotford to 255 thousand b/d of heavy oil from the Athabasca oil sands. In addition, Shell took the final investment decision on a debottlenecking project for the Athabasca Oil Sands Project (AOSP, Shell interest 60%), which is expected to add 10 thousand b/d at peak. This project is the first of multiple debottlenecking opportunities for AOSP.
Also in Canada, Shell signed agreements with the Governments of Alberta and Canada to secure some $0.9 billion in funding for the Quest Carbon Capture and Storage (CCS) Project (Shell interest 60%), which is expected to capture and permanently store more than 1 mtpa of CO2 from Shell's Scotford Upgrader.
In China, Shell and China National Petroleum Company (CNPC) signed a Global Alliance Agreement emphasizing their shared intent to pursue mutually beneficial cooperation opportunities internationally as well as in China. The two parties also signed a Shareholders Agreement to establish a Well Manufacturing joint venture (50% CNPC and 50% Shell) subject to further corporate and government approvals.
In Malaysia, Shell approved investment in the offshore Sabah Gas Kebabangan (KBB) project (Shell interest 30%) with an expected peak production of 130 thousand boe/d of gas for Malaysia LNG and domestic markets. The Kebabangan gas field is part of the Kebabangan Cluster Production Sharing Contract.
In Mexico, Shell agreed to sell its 50% interest in the LNG import and regasification terminal in Altamira for a total consideration of $0.2 billion. The agreement is subject to the conclusion of project financing and government approvals.
In Qatar, Qatar Petroleum and Shell announced that the Pearl GTL project (Shell interest 100%) has sold its first commercial shipment of GTL Gasoil. The project is expected to reach full production capacity by the middle of 2012. Once fully operational, Pearl GTL is expected to produce 1.6 billion standard cubic feet of gas per day (scf/d), delivering 140 thousand b/d of GTL products and 120 thousand b/d of condensate, LPG and ethane.
In Singapore, Shell and CPC Corporation, Taiwan have signed a Heads of Agreement for the long-term supply of 2 mtpa of LNG for 20 years, starting in 2016, from Shell's global LNG portfolio.
In the United Kingdom, Shell approved investment in the offshore Schiehallion Redevelopment project (Shell interest 36%) with an expected peak production of 145 thousand boe/d.
In the USA, Shell announced a multi-billion dollar investment to develop its major Cardamom oil and gas field in the deep waters of the Gulf of Mexico. The Cardamom project (Shell interest 100%) is expected to produce 50 thousand boe/d at peak production.
On July 5, 2011, Shell agreed to sell its 20% participating interest in the oil and gas exploration block BM-S-8 in the Santos Basin offshore Brazil for a total consideration of $0.4 billion. The agreement is subject to regulatory approvals.
Key Features of the Second Quarter 2011
- Second quarter 2011 CCS earnings were $7,995 million, 77% higher than in the same quarter a year ago.
- Second quarter 2011 CCS earnings, excluding identified items, were $6,552 million compared with $4,208 million in the second quarter 2010.
- Basic CCS earnings per share increased by 74% versus the same quarter a year ago.
- Basic CCS earnings per share excluding identified items increased by 52% versus the same quarter a year ago.
- Cash flow from operating activities for the second quarter 2011 was $10.0 billion, compared with $8.1 billion in the same quarter last year. Excluding net working capital movements, cash flow from operating activities in the second quarter 2011 was $12.3 billion, compared with $8.6 billion in the same quarter last year.
- Total cash dividends paid to shareholders during the second quarter 2011 were $1.8 billion. During the second quarter 2011, some 23.9 million Class A shares, equivalent to $0.8 billion, were issued under the Scrip Dividend Program for the first quarter 2011.
- Net capital investment for the second quarter 2011 was $6.0 billion. Capital investment for the second quarter 2011 was $7.3 billion.
- Return on average capital employed (ROACE) at the end of the second quarter 2011, on a reported income basis, was 14.8%.
- Gearing was 12.1% at the end of the second quarter 2011 versus 16.9% at the end of the second quarter 2010.
- Oil and gas production for the second quarter 2011 was 3,046 thousand boe/d, 2% lower than in the second quarter 2010. Production for the second quarter 2011 excluding the impact of divestments was 2% higher than in the same quarter last year.
- New field start-ups and the continuing ramp-up of fields contributed some 285 thousand boe/d to production in the second quarter 2011, which more than offset the impact of field declines.
- LNG sales volumes of 4.81 million tonnes in the second quarter 2011 were 24% higher than in the same quarter a year ago.
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