Welcome to our third quarter 2021 results presentation.
Q3 has again shown the dynamic nature of energy markets.
With demand and supply factors leading to strengthened oil and gas prices.
At the same time, the world prepares for COP26 as we look to rebuild the energy system for a net-zero future.
In this context, businesses with a strong strategy, competitive portfolio, distinct capabilities and solid delivery will thrive.
Today, I will share how we are delivering on our strategy.
how we are expanding our absolute emissions target as part of our net-zero ambition.
And how in Q3 we continued to deliver strong results in dynamic market conditions.
Let me start with an update on how we are delivering on our Powering Progress strategy.
We are moving at pace to become a net-zero emissions energy business.
Purposefully and profitably.
And today, I want to focus on the progress we are making in Mobility and in our Energy and Chemicals park Rotterdam.
Mobility is the face of Shell. It is the part of our Marketing business that serves consumers while they are on the move.
In our retail sites, we offer traditional and low-carbon fuels as well as coffee, food and other everyday products in our convenience shops.
Mobility is a key growth business for Shell and we have distinct competitive advantages with our differentiated offerings...
market presence and customer access.
To offer what our customers want today and in the future.
Through challenging market conditions, mobility has demonstrated impressive resiliency.
For example, our V-Power premium fuel penetration increased by 2 percentage points since 2020 to approximately 20% of all fuel sold.
We have grown our loyalty program and have over 80 million members worldwide.
While reaching around 8 million fleet card holders.
We are also pursuing higher margins from our existing sites...
by expanding our convenience shops and adding new offers such as the Shell Café.
Which is now being launched in 13 markets at more than 700 locations.
And we are profitability growing our low-carbon businesses, including bio-fuels, hydrogen or electric vehicle charging.
Helping our customers decarbonize and reducing our scope 3 emissions.
We successfully launched an IPO of our biofuels joint venture Raízen in Brazil, to fund further expansion in a key biofuels market.
And we are also expanding our electric vehicle charging points, from around 80 thousand today to over 500 thousand globally by 2025.
This growth in our electric vehicle charging business comes with an attractive integrated margin.
So, while we help our customers decarbonise, we are increasing our returns.
Overall, our Marketing business is expected to deliver returns between 15 and 25%.
Now let's look at how we are transforming our Pernis refinery into the Energy and Chemicals Park Rotterdam.
At this site, we are building a biofuels plant to produce renewable diesel...
and sustainable aviation fuel made from waste and certified vegetable oils.
This is a step towards our ambition to produce around 2 million tonnes of sustainable aviation fuel a year by 2025...
and help our customers decarbonise.
Another step we took in Q3 is our partnership with BlueAlp to turn plastic waste into feedstock for sustainable chemicals.
Further, we are working to integrate our Energy and Chemicals Park Rotterdam with Hydrogen Holland 1...
as well as the Aramis and Porthos projects, which will capture carbon and store it under the North Sea.
This is a great example of how we are transforming our refining portfolio...
into 5 integrated Energy and Chemical parks by the end of the decade from 12 today.
We aim to reduce traditional fuel production from 100 million tonnes a year today to 45 by 2030.
While also expanding our low-carbon products.
We expect to generate an internal rate of return, or IRR, between 10 and 15% in our Chemicals & Products business.
All of this demonstrates the investments we are making...
into tangible assets, infrastructure, technology, business models and capability,
in order to provide real low carbon energy solutions to our customers, today and tomorrow.
This brings me to my update on Shell's absolute emissions reduction target.
Since the launch of Shell's Powering Progress strategy in February,
we've engaged extensively with our stakeholders,
especially with our Investors.
We received the clear message to do more.
That is why today we announce an absolute emissions reduction target of 50%...
on all Scope 1 and 2 emissions under Shell's operational control by 2030,
compared to 2016 levels on a net basis...
which complements our existing carbon intensity targets and is another step to become a net-zero emissions energy business.
We will achieve this target through a combination of measures,
some I’ve already talked about, like transforming our refineries into 5 integrated Energy and Chemicals parks.
Other measures include eliminating routine gas flaring from our Upstream operated assets by 2025...
improving energy efficiency and carefully using carbon offsets through quality nature-based solutions.
It is also an important step as we address the challenge of the Dutch Court’s ruling...
for our scope 1 and 2 emissions, which Shell expects to meet by 2030.
And let me also confirm that the capex and return profiles that we laid out in our Strategy Day earlier this year remain the same.
The investments required to meet this target are part of our existing capex guidance...
and go hand in hand with our Powering Progress strategy.
As we continue transforming our businesses to deliver value in the future, we also deliver value today.
So let me now talk about our Q3 performance.
In Q3 we saw a dynamic energy market resulting in higher oil and gas prices, improved refining margins and mixed Chemicals margins.
Throughout this we again delivered solid financial results for the quarter.
Our Adjusted Earnings were $4.1 billion, and our adjusted EBITDA was $13.5 billion...
boosted by another outstanding quarterly performance in our Marketing business...
which has delivered record Q3 year-to-date Adjusted Earnings.
In Integrated Gas, our trading and optimisation results continued to be impacted by gas and LNG supply shortages...
while the assets benefited from higher prices.
With most of our LNG sales linked to oil prices in long-term contracts, we saw limited benefit from higher spot gas prices in Q3.
Looking forward, the supply shortages are expected to be mostly resolved over the course of 2022.
Moving to cash, we saw once again very strong cash conversion across all of our businesses.
We delivered $17.5 billion of cash flow from operations excluding working capital movements...
boosted by some $4 billion from commodity derivatives.
This was our highest cash generation on record.
In Upstream, despite divestments and impacts from Hurricane Ida...
we generated the highest cash flow from operations excluding working capital movements since Q3 2018.
Also, in Q3 we announced the divestment of the Permian shales assets for some $9.5 billion.
We will distribute $7 billion of the divestment proceeds to our shareholders...
with the remaining going towards balance sheet strengthening.
In demonstrating capital discipline, we expect cash capex to be around $20 billion in 2021.
So today, I hope to have shown you how Shell is delivering on its strategic goals, purposefully and profitably.
By serving our customers in our Mobility businesses, with premium fuels, electric vehicle charging and convenience retail.
By transforming our traditional refineries so we can offer our customers the most advanced and low-emissions products.
And by setting an absolute emissions reduction target, further bolstering our commitment to net-zero emissions by 2050.
All of this is supported by businesses that generate leading cash flows, quarter after quarter.
Our established businesses generate the energy needed today, while providing the cash to invest in the low carbon energy of tomorrow....
That is what we call creating value for our customers, for wider society and for our shareholders.
That is what we call Powering Progress.
Thank you.