Simon Henry, the Chief Financial Officer of Royal Dutch Shell, comments on the Q1 2016 results
Hello, I am Simon Henry, the Chief Financial Officer of Royal Dutch Shell.
Today we announced our quarterly financial results. These results included for the first time 2 months of contribution from BG, following the completion of the acquisition on the 15th of February this year.
Shell’s integrated activities differentiate us, with our Downstream and our Integrated Gas businesses delivering good results…
…and underpinning our financial performance despite the continued low oil and gas prices.
At the same time, we are continuing to reduce costs and our spending overall, and we have material opportunities to do so in this down-cycle.
During the quarter, we have announced several project deferrals including LNG Canada and the Browse floating LNG project in Australia, and also our exit from the Bab Sour gas project, in Abu Dhabi.
Capital investment for 2016 is clearly trending towards $30 billion.
We are looking in detail at the combined portfolio, taking costs out of projects and projects out of the development funnel.
We continue to reduce operating costs, both in the supply chain, and in reducing our headcount.
As a result of these actions, and the expected cost savings from BG,
We expect to reach a run rate of around $40 billion for our underlying operating costs by the end of 2016.
This would represent around $10 billion, or 20%, reduction compared with the pre-combination baseline of 2014.
Excluding identified items, our first quarter 2016 earnings were $1.6 billion on a Current Cost of Supplies basis.
..and earnings per share decreased by 64% from first quarter 2015.
Cash flow generated from operations was around $650 million, or $4.6 billion excluding working capital movements.
We continue to improve the underlying operational performance of our assets, production volumes are up substantially, 16% higher than 2015.
Costs are falling across the company and overall these improvements are now contributing materially to the bottom line.
We are already seeing positive effects from our acquisition of BG.
BG asset volumes were up 22% points and that growing portfolio added earnings and cash flow in the quarter.
We are now very busy with combining the two companies, to add more value for shareholders.
This will likely result in accelerated delivery of the synergies from the acquisition, and at a lower cost than we originally set out.
It’s still early days, but we very pleased with what we are seeing so far from the acquisition.
Thank you for watching.