Royal Dutch Shell Plc: 3rd Quarter 2012 UNAUDITED Results

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 %[1]                              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

    [1] Q3 on Q3 change

Third 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 %[1]                              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

    [1] Q3 on Q3 change

Third 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.

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