TIDMRDSA TIDMRDSB 
 
   The Hague, June 30, 2020 - This is an update to the second quarter 2020 
outlook provided in the first quarter results announcement on April 30, 
2020. The impacts presented here may vary from the actual results and 
are subject to finalisation of the second quarter 2020 results. 
 
   Unless otherwise indicated, presented post-tax earnings impacts relate 
to earnings on a current cost of supplies basis, attributable to 
shareholders, excluding identified items. 
 
   In addition, given the impact of COVID-19 and the ongoing challenging 
commodity price environment, Shell continues to adapt to ensure the 
business remains resilient. In light of this, Shell is announcing today 
a revised long-term commodity prices and margin outlook, which is 
expected to result in non-cash impairments in the second quarter 
results. Details of the outlook and impairments are provided in the 
later part of this document. 
 
   Integrated Gas 
 
 
   -- Production is expected to be between 880 and 910 thousand barrels of oil 
      equivalent per day 
 
   -- LNG liquefaction volumes are expected to be between 8.1 and 8.5 million 
      tonnes 
 
   -- Additional well write-offs in the range of $250 to $350 million are 
      expected compared with the second quarter 2019. No cash impact is 
      expected in the second quarter 
 
   -- Deferred tax charges are expected to have a negative impact on earnings 
      in the range of $100 to $200 million. No cash impact is expected in the 
      second quarter 
 
   -- Trading and optimisation results are expected to be below average 
 
   -- As previously communicated, more than 90% of our term contracts for LNG 
      sales in 2019 were oil price linked with a price-lag of typically 3-6 
      months. Consequently, the impact of lower oil prices on LNG margins 
      became more prominent from June onwards 
 
   -- CFFO in Integrated Gas can be impacted by margining resulting from 
      movements in the forward commodity curves. Margining inflows are not 
      expected to be significantly different from those received in the first 
      quarter 2020 
 
 
   Upstream 
 
 
   -- Production is expected to be between 2,300 and 2,400 thousand barrels of 
      oil equivalent per day. Although this production range is higher compared 
      with the outlook previously provided, it has had a limited impact on 
      earnings in the current macro environment 
 
   -- Updates related to receivables and inventory provisions are expected to 
      have a negative earnings impact in the range of $200 to $400 million 
      compared with the second quarter 2019. No cash impact is expected in the 
      second quarter 
 
   -- As previously communicated, CFFO is expected to be negatively impacted by 
      the Lula unitisation settlement in Brazil of around $500 million, for 
      which the earnings impact was recognised in the third quarter 2018 
 
   -- While earnings are expected to show a loss, CFFO is not expected to 
      reflect equivalent cash tax receipts due to the build-up of deferred tax 
      positions in a number of countries. Additionally, due to phasing impacts, 
      tax payments are expected in the second quarter 
 
 
   Oil Products 
 
 
   -- Refinery utilisation is expected to be between 67% and 71% 
 
   -- Realised gross refining margins are expected to be significantly lower 
      compared with the first quarter 2020 and are expected to be offset by 
      higher trading and optimisation results 
 
   -- Oil Products sales volumes are expected to be between 3,500 and 4,500 
      thousand barrels per day, driven by a significant drop in demand related 
      to the impact of COVID-19 
 
   -- Updates related to receivables provisions are expected to have a negative 
      earnings impact in the range of $200 to $300 million. No cash impact is 
      expected in the second quarter 
 
   -- Working capital in Oil Products are typically impacted by movements 
      between the quarter opening and closing price of crude along with changes 
      in inventory volumes. Inventory volumes are expected to be higher 
      compared with the end of the first quarter 2020, impacting working 
      capital negatively 
 
 
   Chemicals 
 
 
   -- Chemicals manufacturing plant utilisation is expected to be between 75% 
      and 79% 
 
   -- Chemicals sales volumes are expected to be between 3,400 and 3,700 
      thousand tonnes 
 
 
   Corporate 
 
 
   -- Corporate segment earnings excluding identified items are expected to be 
      a net expense at the lower end of the $800 to $875 million range for the 
      second quarter. This excludes the impact of currency exchange rate 
      effects 
 
   -- CFFO is expected to be impacted by a working capital outflow in respect 
      of margining and settlement of operational foreign exchange instruments 
 
 
 
   Revised commodity price and margin outlook and impairments 
 
   In the second quarter 2020, Shell has revised its mid and long-term 
price and refining margin outlook reflecting the expected effects of the 
COVID-19 pandemic and related macroeconomic as well as energy market 
demand and supply fundamentals. This has resulted in the review of a 
significant portion of Shell's Upstream, Integrated Gas and Refining 
tangible and intangible assets. 
 
   The Refining asset valuation updates reflect Shell's strategy to reshape 
and focus its refining portfolio to support the decarbonization of its 
energy product mix, leveraging assets and value chains in key markets. 
The Upstream and Integrated Gas asset valuation updates, including of 
related exploration and evaluation assets, are largely driven by the 
change in long-term prices with some impacts due to a changed view on 
the development attractiveness. A revision in the decommissioning and 
restoration provision discount rate assumption from 3% to 1.75%, 
reflecting a lower interest rate environment, has impacted the asset 
values tested for impairment. 
 
 
   -- The following price and margin outlook have been assumed for impairment 
      testing: 
 
          -- Brent: $35/bbl (2020), $40/bbl (2021), $50/bbl (2022), $60/bbl 
             (2023) and long-term $60 (real terms 2020) 
 
          -- Henry Hub: $1.75/MMBtu (2020), $2.5/MMBtu (2021 and 2022), 
             2.75/MMBtu (2023) and long-term $3.0/MMBtu (real terms 2020) 
 
          -- Average long-term refining margins revised downwards by around 30% 
             from previous midcycle downstream assumption 
 
   -- Based on these reviews, aggregate post-tax impairment charges in the 
      range of $15 to $22 billion are expected in the second quarter. 
      Impairment charges are reported as identified items and no cash impact is 
      expected in the second quarter. Indicative breakdown per segment is as 
      follows: 
 
          -- Integrated Gas $8 -- $9 billion, primarily in Australia including 
             partial impairment of QGC and Prelude 
 
          -- Upstream $4 -- $6 billion, largely in Brazil and North America 
             Shales 
 
          -- Oil Products $3 -- $7 billion across the refining portfolio 
 
   -- These impairments are expected to have a pre-tax impact in the range of 
      $20 to $27 billion. No impairment charge on Goodwill is expected to be 
      recorded in the second quarter 
 
   -- Impairment calculations are being progressed: the range and timing of the 
      recognition of impairments in the second quarter are uncertain and 
      assessments are currently ongoing 
 
   -- The revised outlook for commodity prices and refining margins could 
      impact overall deferred tax positions, which will be reviewed after the 
      finalisation of the operating plan later in 2020 
 
 
   Other 
 
 
   -- Gearing is expected to increase by up to 3% due to the impairments. 
      Additional impacts to reported gearing levels are expected due to 
      pensions revaluations associated with the current interest rate 
      environment along with other usual quarterly movements 
 
   -- As per previous disclosures, CFFO price sensitivity at Shell Group level 
      is still estimated to be $6 billion per annum for each $10 per barrel 
      Brent price movement 
 
          -- Note that this price sensitivity is indicative, is most applicable 
             to smaller price changes than those in the current environment and 
             in relation to the full-year results. This excludes short-term 
             impacts from working capital movements and cost-of-sales 
             adjustments 
 
   -- In order to enhance our disclosures and market communications, a 
      quarterly press release will be published as of the second quarter 2020, 
      in addition to the quarterly unaudited results. The quarterly press 
      release will provide a summary of key messages and key performance 
      drivers and should not be considered in isolation from, or a substitute 
      for, financial information presented in compliance with Generally 
      Accepted Accounting Principles (GAAP). To further simplify market 
      communications, with effect from the second quarter, "CCS earnings 
      attributable to shareholders excluding identified items" will be renamed 
      to "Adjusted earnings" while the definition remains unchanged 
 
   Consensus 
 
   The consensus collection for quarterly earnings and CFFO excluding 
working capital movements, managed by VARA research, is scheduled to be 
opened for submission on July 8, 2020, closed on July 22, 2020, and made 
public on July 23, 2020. 
 
 
 
   Royal Dutch Shell plc 
 
   Enquiries: 
 
   Media: 
 
   International +44 (0) 207 934 5550 
 
   Americas +1 832 337 4355 
 
   Cautionary Note 
 
   The companies in which Royal Dutch Shell plc directly and indirectly 
owns investments are separate legal entities. In this announcement 
"Shell", "Shell Group" and "Royal Dutch Shell" are sometimes used for 
convenience where references are made to Royal Dutch Shell plc and its 
subsidiaries in general. Likewise, the words "we", "us" and "our" are 
also used to refer to Royal Dutch Shell plc and its subsidiaries in 
general or to those who work for them. These terms are also used where 
no useful purpose is served by identifying the particular entity or 
entities. "Subsidiaries", "Shell subsidiaries" and "Shell companies" 
as used in this announcement refer to entities over which Royal Dutch 
Shell plc either directly or indirectly has control. Entities and 
unincorporated arrangements over which Shell has joint control are 
generally referred to as "joint ventures" and "joint operations", 
respectively.  Entities over which Shell has significant influence but 
neither control nor joint control are referred to as "associates". The 
term "Shell interest" is used for convenience to indicate the direct 
and/or indirect ownership interest held by Shell in an entity or 
unincorporated joint arrangement, after exclusion of all third-party 
interest. 
 
   This announcement contains forward-looking statements (within the 
meaning of the U.S. Private Securities Litigation Reform Act of 1995) 
concerning the financial condition, results of operations and businesses 
of Royal Dutch Shell. All statements other than statements of historical 
fact are, or may be deemed to be, forward-looking statements. 
Forward-looking statements are statements of future expectations that 
are based on management's current expectations and assumptions and 
involve known and unknown risks and uncertainties that could cause 
actual results, performance or events to differ materially from those 
expressed or implied in these statements. Forward-looking statements 
include, among other things, statements concerning the potential 
exposure of Royal Dutch Shell to market risks and statements expressing 
management's expectations, beliefs, estimates, forecasts, projections 
and assumptions. These forward-looking statements are identified by 
their use of terms and phrases such as "aim", "ambition", "anticipate", 
"believe", "could", "estimate", "expect", "goals", "intend", 
"may", "objectives", "outlook", "plan", "probably", 
"project", "risks", "schedule", "seek", "should", "target", 
"will" and similar terms and phrases. There are a number of factors 
that could affect the future operations of Royal Dutch Shell and could 
cause those results to differ materially from those expressed in the 
forward-looking statements included in this announcement, including 
(without limitation): (a) price fluctuations in crude oil and natural 
gas; (b) changes in demand for Shell's products; (c) currency 
fluctuations; (d) drilling and production results; (e) reserves 
estimates; (f) loss of market share and industry competition; (g) 
environmental and physical risks; (h) risks associated with the 
identification of suitable potential acquisition properties and targets, 
and successful negotiation and completion of such transactions; (i) the 
risk of doing business in developing countries and countries subject to 
international sanctions; (j) legislative, fiscal and regulatory 
developments including regulatory measures addressing climate change; 
(k) economic and financial market conditions in various countries and 
regions; (l) political risks, including the risks of expropriation and 
renegotiation of the terms of contracts with governmental entities, 
delays or advancements in the approval of projects and delays in the 
reimbursement for shared costs; (m) risks associated with the impact 
pandemics, such as the COVID-19 (coronavirus) outbreak; and (n) changes 
in trading conditions. No assurance is provided that future dividend 
payments will match or exceed previous dividend payments. All 
forward-looking statements contained in this announcement are expressly 
qualified in their entirety by the cautionary statements contained or 
referred to in this section. Readers should not place undue reliance on 
forward-looking statements. Additional risk factors that may affect 
future results are contained in Royal Dutch Shell's Form 20-F for the 
year ended December 31, 2019 (available at www.shell.com/investor and 
www.sec.gov). These risk factors also expressly qualify all 
forward-looking statements contained in this announcement and should be 
considered by the reader. Each forward-looking statement speaks only as 
of the date of this announcement, June 30, 2020. Neither Royal Dutch 
Shell plc nor any of its subsidiaries undertake any obligation to 
publicly update or revise any forward-looking statement as a result of 
new information, future events or other information. In light of these 
risks, results could differ materially from those stated, implied or 
inferred from the forward-looking statements contained in this 
announcement. 
 
   We may have used certain terms, such as resources, in this announcement 
that the United States Securities and Exchange Commission (SEC) strictly 
prohibits us from including in our filings with the SEC. Investors are 
urged to consider closely the disclosure in our Form 20-F, File No 
1-32575, available on the SEC website www.sec.gov. 
 
   LEI number of Royal Dutch Shell plc: 21380068P1DRHMJ8KU70 
 
 
 
 

(END) Dow Jones Newswires

June 30, 2020 02:15 ET (06:15 GMT)

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