• Royal Dutch Shell's fourth quarter 2009 earnings, on a current cost of supplies (CCS) basis, were $1.2 billion compared to $4.8 billion a year ago. Basic CCS earnings per share decreased by 76% versus the same quarter a year ago.
• Fourth quarter 2009 CCS earnings, excluding identified items (see page 5), were $2.8 billion compared to $3.9 billion in the fourth quarter 2008.
• Full year 2009 earnings, on a current cost of supplies (CCS) basis, were $9.8 billion compared to $31.4 billion a year ago. Basic CCS earnings per share decreased by 69% versus a year ago.
• Cash flow from operating activities for the fourth quarter 2009 was $5.7 billion.
• Net capital investment for the quarter was $7.2 billion. Total dividends paid to shareholders during the fourth quarter 2009 were $2.6 billion.
• Gearing at the end of the fourth quarter 2009 was 15.5%.
• A fourth quarter 2009 dividend has been announced of $0.42 per share, an increase of 5% over the US dollar dividend per share for the same period in 2008. The first quarter 2010 dividend is expected to be declared at $0.42 per share.
Royal Dutch Shell Chief Executive Officer Peter Voser commented:
'Our fourth quarter 2009 results were impacted by the weak global economy. Oil prices have increased compared to a year ago, but gas prices and refining margins have declined sharply, because of weaker demand and high industry inventory levels. We are not assuming that there will be a quick recovery, and the outlook for 2010 is uncertain.
Our strategy is on track, although the near-term industry outlook does remain challenging. We are taking steps to improve our performance, to bridge the company, and our shareholders, into a period of significant growth in the coming years.
We are making good progress on our plans to raise Shell's competitive performance. The Transition 2009 programme, which was launched in mid-2009, is now completed. We have reduced complexity in the company, and our new organisation, announced in July 2009, is now fully up and running. Our Upstream organisation is simpler and our new Projects & Technology organisation makes for better technical integration on bigger projects and a sharper innovation focus along the value chain.
These changes, combined with our global Downstream organisation, and continued streamlining in the corporate functions, have created a powerful platform for future performance. We're seeing a new way of working in Shell, with increased empowerment and accountability for our people.
As a result of our actions in 2009, some 5,000 employees will leave Shell, a reduction of 10% in the impacted areas. We have reduced underlying operating costs by some $1 billion in the fourth quarter 2009, and by over $2 billion in 2009 compared to 2008.
Downstream is facing some tough times. There is a significant overhang of industry refining capacity, exacerbated by the economic downturn. That's why we have initiatives underway to refocus Shell's Downstream footprint into fewer, more profitable markets with growth potential, through disposals and selective growth investment.
In 2009, Shell sold some $1.2 billion of non-core Downstream assets, bringing the five year total to $11 billion, and in early 2010 announced plans to close the 130 thousand barrels per day (b/d) Montreal East refinery in Canada. Asset sales will continue in 2010, with some 560 thousand b/d of refining capacity, 15% of Shell's total, and selected marketing positions, under review.
Cost focus is now embedded in our day-to-day operations. For 2010, we are targeting a further underlying cost reduction of at least $1 billion, and a reduction of some 1,000 employees. Much of this will come from Downstream and ongoing cost initiatives in the corporate functions.
I am pleased with the portfolio progress in 2009. We had successful start-ups of Sakhalin II in Russia and BC-10 in Brazil, and these projects, plus Ormen Lange in Norway have completed their production ramp-ups. We have taken final investment decisions on two substantial new projects; Gorgon LNG in Australia, and Caesar/Tonga in the deep water Gulf of Mexico, and launched a front-end engineering and design study for floating LNG for the Prelude gas field in Australia. Exploration and appraisal performance in 2009 has been strong, with particularly good results in North America tight gas and Western Australia gas. I see exciting opportunities for the medium-term.'
Fourth quarter 2009 portfolio developments
In Australia, Shell confirmed that it has accepted Woodside Petroleum Ltd.'s entitlement offer of new shares at a total cost of $0.8 billion, maintaining its 34.27% share in the company.
In Iraq, Shell was awarded a contract as lead operator in developing the Majnoon field (Shell share 45%). Production is expected to reach 1.8 million barrels of oil equivalent per day (boe/d), up from a current level of approximately 45 thousand boe/d (100% basis). In addition, Shell was awarded a 15% share in a contract for the development of the West Qurna 1 field.
Shell has agreed an asset swap to acquire assets in Gabon and in the UK North Sea, in return for its interest in a pair of Norwegian offshore fields. This transaction, which is still subject to government approval and other requisite consents, is a strategic trade and no cash payment is involved.
In Egypt, Shell signed agreements to acquire a 40% holding and become the operator on the Alam El Shawish West Concession, where oil and gas discoveries have been confirmed.
In Bolivia and Brazil, Shell has sold its share in a gas pipeline and in a thermoelectric power plant and its related assets for a total of $100 million.
During 2009, Shell participated in 10 discoveries, in Australia, the US Gulf of Mexico, Malaysia and Norway. Shell is seeing particularly strong results from exploration and appraisal drilling in the North American Haynesville and Groundbirch tight gas areas, and offshore Western Australia. Shell also increased its overall acreage position, completing acquisitions of new exploration licences in Australia, Brazil, Canada, Guyana, Italy, Jordan, Norway and the USA and successfully bidding for new licences in Egypt, South Africa and French Guiana.
In Singapore, Shell announced the successful start-up of its new world-scale monoethylene glycol (MEG) unit at the Shell Eastern Petrochemicals Complex with a nameplate capacity of 750 thousand tonnes per annum.
Also in Singapore, Shell sold 49% of its share in two chemicals joint ventures (Petrochemical Corporation of Singapore and The Polyolefin Company).
In Australia and New Zealand, Shell announced the sale of its share in two bitumen joint ventures. The sale will be concluded in several phases and finalised by 2014.
Key features of the Fourth quarter and full year 2009
Financial
• Fourth quarter 2009 CCS earnings were $1,177 million, 75% lower than in the same quarter a year ago. Full year 2009 CCS earnings were $9,804 million, 69% lower than in 2008.
• Fourth quarter 2009 CCS earnings, excluding identified items (see page 5), were $2,774 million compared to $3,888 million in the fourth quarter 2008.
• Fourth quarter 2009 reported earnings were $1,961 million compared to a loss of $2,810 million in the same quarter a year ago. Full year 2009 reported earnings were $12,518 million compared to earnings of $26,277 million in 2008.
• Basic CCS earnings per share decreased by 76% versus the same quarter a year ago. Full year 2009 basic CCS earnings per share decreased by 69% compared to 2008.
• Cash flow from operating activities for the fourth quarter 2009 was $5.7 billion, compared to $10.3 billion in the same quarter last year. Excluding net working capital movements, cash flow from operating activities in the fourth quarter 2009 was $4.4 billion. Full year 2009 cash flow from operating activities was $21.5 billion compared to $43.9 billion in 2008.
• Total dividends paid to shareholders during the fourth quarter 2009 were $2.6 billion, bringing the total for the full year 2009 to $10.5 billion.
• Capital investment for the fourth quarter 2009 was $8.8 billion. Net capital investment (capital investment, less divestment proceeds) for the fourth quarter 2009 was $7.2 billion, bringing the total for the full year 2009 to some $29 billion.
• Return on average capital employed (ROACE), on a reported income basis, was 8.0%.
• Gearing was 15.5% at the end of the fourth quarter 2009 versus 5.9% at the end of the fourth quarter 2008.
Upstream
• Oil and gas production for the fourth quarter 2009 was 3,331 thousand boe/d.
• Full year 2009 oil and gas production was 3,152 thousand boe/d. Production for the fourth quarter and the full year 2009 excluding the impact of divestments, production sharing contracts (PSC) pricing effects and OPEC quota restrictions was 2% lower compared to the same periods last year.
• Underlying production, in the fourth quarter and full year 2009, increased by some 200 thousand boe/d from new field start-ups and the continuing ramp-up of fields, more than offsetting the impact of field declines.
• LNG sales volumes of 3.96 million tonnes in the fourth quarter 2009 were 18% higher than in the same quarter a year ago. Full year 2009 LNG sales volumes were 13.40 million tonnes compared to 13.05 million tonnes in 2008, an increase of 3%.
Downstream
• Oil Products sales volumes were 2% lower than in the fourth quarter 2008. Chemical product sales volumes in the fourth quarter 2009 increased by 8% compared to the fourth quarter 2008.
• The weak global economy impacted downstream sales volumes in 2009. Full year 2009 Oil Products sales volumes were 6% lower than in 2008. Full year 2009 Chemical product sales volumes decreased by 10% compared to 2008.
• Oil Products refinery availability was 93% compared to 90% in the fourth quarter 2008 (93% for the full year 2009 versus 91% in 2008). Chemicals manufacturing plant availability was 95%, 2% higher than in the fourth quarter 2008 (92% for the full year 2009 versus 94% in 2008).
Upstream earnings
Full year Upstream earnings were $8,354 million compared to $26,506 million in 2008. Earnings included a net charge of $134 million related to identified items, compared to a net gain of $3,487 million in the full year 2008.
Upstream earnings compared to the full year 2008 reflected the impact of significantly lower oil and gas prices and lower oil production volumes. These impacts were partially offset by increased LNG sales volumes, reflecting the continuous ramp-up in sales volumes from the Sakhalin II LNG project and Train 5 at the North West Shelf project, lower royalty and tax expenses and higher natural gas trading contributions compared to the full year 2008.
Global liquids realisations were 38% lower than in the full year 2008. Global gas realisations were 34% lower than a year ago. In the Americas, gas realisations decreased by 53% whereas outside the Americas, gas realisations decreased by 24%.
Full year 2009 production was 3,152 thousand boe/d compared to 3,248 thousand boe/d a year ago. Crude oil production was down 5% and natural gas production was in line with full year 2008 production.
Underlying production, compared to the full year 2008, increased by some 200 thousand boe/d from new field start-ups and the continuing ramp-up of fields in 2009, more than offsetting field declines.
LNG sales volumes of 13.40 million tonnes were 3% higher than in 2008. Volumes reflected the ramp-up in sales volumes from the Sakhalin II LNG project and Train 5 at the North West Shelf project, which was partly offset by lower volumes from Nigeria LNG and reduced LNG demand.