Summary of identified items
Earnings in the third quarter 2012 reflected the following items, which in aggregate amounted to a net charge of $432 million (compared with a net gain of $245 million in the third quarter 2011), as summarised in the table below:
- Upstream earnings included a net charge of $298 million, reflecting impairments of $354 million mainly related to onshore gas properties in North America, a tax charge of $329 million related to the enactment of legislation in the United Kingdom restricting tax relief on decommissioning costs, an update to provisions related to decommissioning and restoration in the United States and the estimated fair value accounting of commodity derivatives. These items were partially offset by divestment gains of $554 million and the mark-to-market valuation of certain gas contracts. Upstream earnings for the third quarter 2011 included a net gain of $636 million.
- Downstream earnings included a net charge of $134 million, reflecting legal and environmental provisions. Downstream earnings for the third quarter 2011 included a net charge of $338 million.
- Corporate results and Non-controlling interest included a net charge of $53 million for the third quarter 2011.
SUMMARY OF IDENTIFIED ITEMS Quarters $ million Nine months Q3 2012 Q2 2012 Q3 2011 2012 2011 Segment earnings impact of identified items: (298) 181 636 Upstream 336 2,397 (134) 64 (338) Downstream 128 (19) Corporate and Non-controlling - - (53) interest (271) (53) (432) 245 245 Earnings impact 193 2,325
These identified items generally relate to events with an impact of more than $50 million on Royal Dutch Shell's CCS earnings and are shown to provide additional insight into segment earnings and income attributable to shareholders. Further comments on the business segments are provided in the section 'Earnings by Business Segment' on page 7 to 9.
EARNINGS BY BUSINESS SEGMENT
UPSTREAM Quarters $ million Nine months Q3 2012 Q2 2012 Q3 2011 % 2012 2011 % Upstream earnings excluding 4,888 4,507 5,435 -10 identified items 15,648 15,493 +1 4,590 4,688 6,071 -24 Upstream earnings 15,984 17,890 -11 Upstream cash flow from 8,278 9,830 8,520 -3 operating activities 26,896 24,094 +12 Upstream net capital 6,932 5,293 5,944 +17 investment 15,997 11,720 +36 Liquids production available for sale 1,599 1,612 1,676 -5 (thousand b/d) 1,631 1,674 -3 Natural gas production available for sale (million 8,022 8,647 7,749 +4 scf/d) 9,167 8,769 +5 Total production available 2,982 3,103 3,012 -1 for sale (thousand boe/d) 3,211 3,186 +1 LNG sales volumes (million 4.97 4.57 4.76 +4 tonnes) 14.71 13.99 +5  Q3 on Q3 changeThird quarter Upstream earnings excluding identified items were $4,888 million compared with $5,435 million a year ago. Identified items were a net charge of $298 million, compared with a net gain of $636 million in the third quarter 2011 (see page 6). Compared with the third quarter 2011, Upstream earnings excluding identified items benefited from the increased contribution from Integrated Gas, which included an additional dividend from an LNG venture. Upstream Americas incurred a loss as a result of higher depreciation, increased operating expenses, lower gas realisations and the impact of hurricane Isaac on offshore operations in the Gulf of Mexico. Upstream earnings also reflected higher maintenance activities and increased exploration expenses. Global liquids realisations were 5% lower and synthetic crude oil realisations in Canada were 8% lower than in the third quarter 2011. Global natural gas realisations were 3% lower than in the same quarter a year ago. Natural gas realisations in the Americas decreased by 38%, whereas natural gas realisations outside the Americas increased by 8%. Third quarter 2012 production was 2,982 thousand boe/d compared with 3,012 thousand boe/d a year ago. Liquids production decreased by 5% and natural gas production increased by 4% compared with the third quarter 2011. Excluding the impact of divestments, exits, PSC price effects and security impacts onshore Nigeria, third quarter 2012 production volumes were 1% higher compared with the same period last year. New field start-ups and the continuing ramp-up of fields contributed some 163 thousand boe/d to production in the third quarter 2012, in particular from the ramp-up of Pearl GTL in Qatar and Pluto LNG in Australia, which more than offset the impact of field declines. LNG sales volumes of 4.97 million tonnes were 4% higher than in the same quarter a year ago. LNG sales volumes mainly reflected the contribution from Pluto LNG.
DOWNSTREAM Quarters $ million Nine months Q3 2012 Q2 2012 Q3 2011 % 2012 2011 % Downstream CCS earnings 1,731 1,296 1,818 -5 excluding identified items 4,148 4,552 -9 1,597 1,360 1,480 +8 Downstream CCS earnings 4,276 4,533 -6 Downstream cash flow from 335 3,265 2,069 -84 operating activities 6,808 4,597 +48 Downstream net capital 1,051 967 149 +605 investment 2,804 1,980 +42 Refinery processing intake 2,880 2,810 2,854 +1 (thousand b/d) 2,824 2,905 -3 Oil products sales volumes 6,290 6,321 6,374 -1 (thousand b/d) 6,191 6,210 - Chemicals sales volumes 4,699 4,671 4,832 -3 (thousand tonnes) 14,049 14,391 -2  Q3 on Q3 changeThird quarter Downstream earnings excluding identified items were $1,731 million compared with $1,818 million in the third quarter 2011. Identified items were a net charge of $134 million, compared with a net charge of $338 million in the third quarter 2011 (see page 6). Compared with the third quarter 2011, Downstream earnings excluding identified items benefited from a recovery in industry refining margins and Shell's operating performance. Earnings were also supported by lower operating expenses, mainly as a result of favourable currency exchange rate effects. These items were more than offset by lower Chemicals earnings and reduced contributions from marketing and trading. Rising oil prices during the third quarter 2012 and the global economic slowdown impacted marketing contributions. Compared with the third quarter 2011, Chemicals earnings decreased due to rising feedstock prices in Europe, the impact of hurricane Isaac on operations in the Gulf of Mexico as well as the global economic slowdown. Oil products sales volumes were 1% lower compared with the same period a year ago. Lower marketing volumes, as a result of weaker demand as well as portfolio divestments, were largely offset by higher trading volumes.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV