Welcome to our third quarter results presentation.
With winter coming for many people and energy prices high,
consumers and businesses have been trying to find solutions
This requires collaboration across all parts of our society.
So we continue to engage with governments to help make their new policies effective...
and avoid unintended consequences
in the energy markets.
A good example of such collaboration
is our gas storage agreements for the upcoming winter in Europe
particularly in Germany and Austria
And in the Netherlands, we have started to supply liquefied natural gas to the recently created LNG import hub.
We have also been providing support to our customers
For example, we have increased the hardship fund for our Shell Energy Retail customers
and we will double the payment of the government's Warm Home Discount scheme
to the account of more than 150,000 customers in the UK.
To address the short- and long-term energy needs
we must have a resilient portfolio of assets
We will achieve this through focused and competitive investments in a disciplined manner.
For example, we are further growing our partnership with Qatar Energy
with our involvement in the North Field South expansion…
And we took a final investment decision on developing the Rosmari-Marjoram gas project in Malaysia
which will be primarily powered by renewable energy
Once built, the offshore platform will use power from 240 solar panels
while the onshore plant will be connected to the Sarawak grid system, supplied from hydroelectric plants.
Also, we announced the acquisition of Shell Midstream Partners in the US to further simplify our organisation
We are more disciplined and that sometimes means taking tough decisions when activities
don’t meet our investment criteria or don’t perfectly fit our strategy.
For example, in the US, we have sold our majority interest in the oil and gas company Aera Energy…
We have ended our participation in the early-stage wind projects in Ireland
And we have withdrawn from a deal to take liquefied natural gas from developer Tellurian.
We do mot take these difficult decisions lightly.
When I think about focus and competitiveness I also think about our Marketing Business Update earlier this month.
Our Marketing Business reaches millions of customers with a vast range of products and services
We are already number one in many areas and intend to be competitive in the emerging ones.
Such as e-fluids, electric vehicle charging as well as biofuels.
These solutions will help sectors that are hard to decarbonise
Over the past 3 years, around half of Marketing’s combined capital and operational expenditure
went towards activities that generate low-carbon products
Impressively, these activities contributed almost 60% to Marketing earnings during the same period.
With all these offering Marketing has that perfect combination of strong growth and returns...
diversifying our portfolio.
It is the quality of our portfolio together with our strong operational delivery
that has allowed us to significantly increase our shareholder distributions this year.
We have now completed $6 billion of share buybacks for the third quarter.
And today, we are increasing our shareholder distributions even further.
We have announced a new $4 billion share buyback programme
which we expect to complete by our Q4 results
This is expected to bring our total announced shareholder distributions for 2022 to $26 billion
in excess of 30% of our CFFO for the last four quarters.
Through our share buybacks announced in 2022, we expect to repurchase some 10% of our share capital.
And as indicated before, the reduction in share count allows us to increase our dividend in the future.
So today, reflecting our progressive dividend policy, we have also announced our plan to increase our dividend per share
by an expected 15% at Q4 results, reflecting our progressive dividend policy, subject to Board approval.
These increased distributions show our confidence in our business
its ability to fund both our energy transition and our shareholder distributions.
Now let’s see the results for the quarter.
In the third quarter, we delivered robust results in a volatile market environment.
Our Adjusted Earnings were $9.5 billion
In Integrated Gas, after a strong first half of the year,
Adjusted Earnings were lower compared with the second quarter, primarily driven by trading and optimisation.
Due to increasing market volatility, there was a significant dislocation in historically correlated gas markers.
This dislocation arose as a result of Russia's invasion of Ukraine
and the subsequent impact on the energy markets and regional gas prices.
Our trading and optimisation organisation manages risk through hedging our physical volumes.
Due to a breakdown in correlations, some hedges were less effective.
LNG trading and optimisation were also impacted by a combination of seasonality and supply constraints
where the business is geared towards supplying the northern hemisphere during the winter.
Our Upstream business performed extremely well, delivering $5.9 billion
despite a decrease in Brent prices since the previous quarter.
Our focus on value over volume as well as operational excellence continues to deliver strong cash flows and earnings
To give you an example, This quarter, in our operated assets in the Gulf of Mexico,
we achieved the highest production in a decade.
This quarter, we delivered a very strong Adjusted EBITDA of $21.5 billion.
And our cash flow from operations was $12.5 billion.
Working capital outflows were mainly due to seasonal gas inventory build-up as well as higher initial margin requirements
in Renwables and Energy Solutions
That brings me to our financial framework.
Our capital allocation priorities are unchanged, we will remain disciplined
and invest in opportunities that align with our returns framework.
This year, we expect our cash capital expenditure to be in the range of $23 to $27 billion.
Another important aspect of our financial framework is Net debt
It is now around $48 billion, which is slightly higher than last quarter.
Having a strong balance sheet and maintaining AA credit rating remains one of our priorities.
So, this quarter clearly shows our financial framework in action.
And we have demonstrated discipline and focus in managing our investments and financial position.
We have confidence in our business and its delivery which is why we are enhancing our shareholder distributions
with new share buybacks and planned dividend increase for the fourth quarter.
As we transform our business, we will continue to deliver the secure supply of energy
that the world needs today and in the decades ahead.
Thank you.