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American, Chad Holliday, replacing Jorma Ollila as Shell Chairman

Screen Shot 2014-10-30 at 09.22.43By John Donovan

Chad Holliday, the former chairman of Bank of America, is replacing the Finn Jorma Ollila as chairman of Royal Dutch Shell Plc.

Before his four year stint as chairman at Bank of America, Holliday was chairman and chief executive of Dupont.

Commenting, Mr Ollila said, ‘I am delighted that the Board has appointed Chad Holliday to succeed me as Chairman. He has a distinguished track record as an international businessman and I am sure he is the right person to chair the Board going forward after the 2015 AGM.’

Chad Holliday commented ‘I am honoured to be appointed Chairman of this great company, and I look forward to working with Ben van Beurden and the whole Board to deliver the strategy.’

The announcement was included in Shell’s third quarter results with earnings of $5.3 billion compared to $4.2 billion for the same quarter in 2013.

EXTRACTS FROM ROYAL DUTCH SHELL PLC
3RD QUARTER 2014 UNAUDITED RESULTS

* Royal Dutch Shell’s third quarter 2014 earnings, on a current cost of supplies (CCS) basis (see Note 2), were $5.3 billion compared with $4.2 billion for the same quarter a year ago.

* Third quarter 2014 CCS earnings excluding identified items (see page 5) were $5.8 billion compared with $4.5 billion for the third quarter 2013, an increase of 31%.

* Compared with the third quarter 2013, CCS earnings excluding identified items benefited from improved Downstream and Upstream results. In Downstream, earnings benefited from increased contributions from refining including improved operating performance, and trading. In Upstream, earnings increased due to the impact of new, higher-margin production, lower exploration expenses, and higher earnings from Integrated Gas, despite the effect of lower oil prices and volumes overall. The increase of a deferred tax liability as a result of the weakening Australian dollar reduced earnings by some $400 million compared with the third quarter 2013.

* Basic CCS earnings per share excluding identified items increased by 30% versus the third quarter 2013.

* Cash flow from operating activities for the third quarter 2014 was $12.8 billion, compared with $10.4 billion for the same quarter last year.
Excluding working capital movements, cash flow from operating activities for the third quarter 2014 was $11.1 billion, compared with $9.9 billion for the third quarter 2013.

* Capital investment for the third quarter 2014 was $8.5 billion. Net capital investment (see Note 2) for the third quarter was $4.8 billion, compared with $9.4 billion for the same period a year ago.

* Total cash dividends paid to shareholders in the third quarter 2014 were $3.0 billion. During the third quarter some 18.5 million shares were bought back for cancellation for a consideration of $0.8 billion.

* Gearing at the end of the third quarter 2014 was 11.7%.

* A third quarter 2014 dividend has been announced of $0.47 per ordinary share and $0.94 per American Depositary Share (“ADS”), an increase of 4% compared with the third quarter 2013.

Royal Dutch Shell Chief Executive Officer Ben van Beurden commented:

“Shell is proud to deliver high-quality fuels, lubricants and petrochemicals, for transportation, power generation and manufacturing industries. With over 90,000 employees in more than 70 countries around the world, Shell is dedicated to delivering low-cost, safe and reliable energy for our customers.

The recent decline in oil prices is part of the volatility in our industry. It underlines the importance of our drive to get a tighter grip on performance management, keep a tight hold on costs and spending, and improve the balance between growth and returns.

Our results today show that we are delivering on the three priorities I set out at the start of 2014 – better financial performance, enhanced capital efficiency and continued strong project delivery.

We have moderated our spending on growth and accelerated disposals of our non-strategic portfolio as part of a drive to improve capital efficiency.

Proceeds from asset sales so far this year total $11.6 billion, with further disposals ongoing.

Our plans to exit from Pinedale and Haynesville mark the completion of the major sales programme in our North America resources plays portfolio. We are now focusing on creating value from this slimmed-down position. Restructuring in Oil Products continues, with the completion of the divestment of Shell’s Australia positions in the quarter.

Our new investments are delivering benefits to the bottom line. We have brought four new deep-water fields on-stream this year. We are also adding new potential to the portfolio through exploration and appraisal successes.

Shell’s strategy is founded on creating value for the long term.

Our dividend per share for the third quarter of 2014 is up 4% from year-ago levels. With $8.9 billion of dividends declared and $2.4 billion of shares repurchased in the first three quarters of this year, we are on track for a programme of over $30 billion of dividend distributions and buybacks for 2014 and 2015 combined. All of this underlines the company’s recent improved performance and potential for the future.”

THIRD QUARTER 2014 PORTFOLIO DEVELOPMENTS

Upstream

In Nigeria, Shell announced first production from the Shell-operated Bonga North West deep-water development (Shell interest 55%). Oil from the Bonga North West subsea facilities is transported by a new undersea pipeline to the existing Bonga floating production, storage and offloading (“FPSO”) export facility. The Bonga FPSO has been upgraded to handle the additional oil flow from Bonga North West which, at peak production, is expected to contribute 40 thousand barrels of oil equivalent per day (“boe/d”).

In the United States, Shell announced the second major 2014 start-up in the deep-water Gulf of Mexico with the Cardamom development first oil (Shell interest 100%). Oil from the Cardamom subsea development is piped through Shell’s Auger platform and is planned to ramp up to 50 thousand boe/d at peak production.

In October, Shell announced first production from the Shell-operated Gumusut-Kakap deep-water development (Shell interest 33%) in Malaysia. The production system is expected to reach a peak oil production of around 135 thousand boe/d. With oil production now underway, work on the gas injection facilities is continuing with an expected start-up during 2015.

In October, Shell announced the final investment decision (“FID”) on the Bonga Main phase 3 project (Shell interest 55%) offshore Nigeria. The development is expected to contribute some 40 thousand boe/d at peak production through the existing Bonga FPSO export facility.

In October, Shell commenced front end engineering and design (“FEED”) on the Vito deep-water development project (Shell interest 51%) in the Gulf of Mexico, United States. The development, which is expected to deliver peak production of 100 thousand boe/d after coming on-stream, will be a 120 thousand boe/d capacity floating production system (“FPS”) with flexibility for up to four subsea tiebacks.

In October, Shell announced a frontier exploration discovery offshore Gabon, West Africa (Shell interest 75%). The Leopard-1 well encountered a substantial gas column with around 200 metres net gas pay in a pre-salt reservoir. Shell and its partners are planning to undertake an appraisal programme to further determine the resource volumes.

During the quarter, in Shell’s heartlands exploration programme Shell made a gas discovery at the Shell-operated deep-water Marjoram-1 well (Shell interest 85%) in Malaysia. Shell also announced two oil discoveries in the Gulf of Mexico with the successful Rydberg exploration well (Shell interest 57%) in the Norphlet play, and with the Kaikias well (Shell interest 100%) in the Mars basin.

Shell had continued success with near-field exploration discoveries in a number of countries, including the successful Dhulaima drilling campaign in North Oman.

As part of its global exploration programme, Shell added new acreage positions following successful bidding results in the United States and Colombia.

In resources plays in the United States, Shell announced two gas discoveries in the Utica formation in Tioga County, Pennsylvania with the Neal and Gee exploration wells.

Shell continued to divest non-strategic Upstream positions during the third quarter 2014, with divestment proceeds totalling some $1.6 billion.

In Canada, Shell completed the divestment of its 100% interest in the Orion Steam Assisted Gravity Drainage (“SAGD”) project to Osum Oil Sands Corp. for a consideration of $0.3 billion.

Shell also completed the sale of its interest in a portion of its dry gas Deep Basin assets in Canada to Mapan Energy Ltd. for a consideration of some $0.1 billion.

In the United States, Shell completed the divestment of its entire interest in the Pinedale dry gas asset in Wyoming to Ultra Petroleum Corp. As part of the transaction, Shell received cash consideration of $0.8 billion including closing adjustments and gained an additional 155 thousand net acres in the Marcellus and Utica Shale areas in Pennsylvania. Shell now holds a 100% interest in the Tioga Area of Mutual Interest where two new gas discoveries were announced during the quarter.

Also in the United States, Shell completed the sale of its interest in 207 thousand net acres in the Slippery Rock acreage in western Pennsylvania to Rex Energy for a consideration of $0.1 billion.

Shell also agreed to sell its entire interest in the Haynesville dry gas asset in Louisiana, United States to Vine Oil & Gas LP and its partner Blackstone Group L.P. for a consideration of $1.2 billion, subject to closing. The transaction is effective from July 2014.

Shell agreed to sell its non-operated 20% interest in the BM-ES-23 concession in the Espirito Santos basin offshore Brazil to PTT Exploration and Production Public Company Ltd. The transaction, which is effective from January 2014, is expected to close later in the year.

Downstream

Shell (40%), together with Hyundai Oilbank (60%), announced through its joint venture, Hyundai and Shell Base Oil Company Ltd, first production from the venture’s Base Oil Manufacturing Plant (“BOMP”) in South Korea. The plant has the capacity to produce some 13 thousand barrels per day of API Group II base oils.

On October 28, 2014 Shell Midstream Partners, L.P., a limited partnership formed by Shell in the United States earlier this year, announced the pricing of its initial public offering of 40,000,000 common units representing limited partner interests at $23.00 per common unit. The common units began trading on the New York Stock Exchange on October 29, 2014 under the ticker symbol “SHLX”. The underwriters of the offering have a 30-day option to purchase up to an additional 6,000,000 common units from Shell Midstream Partners. The offering is expected to close on or around November 3, 2014, subject to customary closing conditions.

Downstream divestment proceeds totalled some $2 billion for the third quarter 2014 and included proceeds from the sale of Shell’s Downstream businesses (excluding Aviation) in Australia to Vitol.

KEY FEATURES OF THE THIRD QUARTER 2014

* Third quarter 2014 CCS earnings (see Note 2) were $5,266 million, 24% higher than for the same quarter a year ago.

* Third quarter 2014 CCS earnings excluding identified items (see page 5) were $5,847 million compared with $4,457 million for the third quarter 2013, an increase of 31%.

* Compared with the third quarter 2013, CCS earnings excluding identified items benefited from improved Downstream and Upstream results. In Downstream, earnings benefited from increased contributions from refining including improved operating performance, and trading. In Upstream, earnings increased due to the impact of new, higher-margin production, lower exploration expenses, and higher earnings from Integrated Gas, despite the effect of lower oil prices and volumes overall. The increase of a deferred tax liability as a result of the weakening Australian dollar reduced earnings by some $400 million compared with the third quarter 2013.

* Basic CCS earnings per share increased by 22% versus the same quarter a year ago.

* Basic CCS earnings per share excluding identified items increased by 30% versus the same quarter a year ago.

* Cash flow from operating activities for the third quarter 2014 was $12.8 billion, compared with $10.4 billion for the same quarter last year.
Excluding working capital movements, cash flow from operating activities for the third quarter 2014 was $11.1 billion, compared with $9.9 billion for the third quarter 2013.

* Net capital investment (see Note 2) for the third quarter 2014 was $4.8 billion. Capital investment for the third quarter 2014 was $8.5 billion and divestment proceeds were $3.6 billion.

* Total cash dividends paid to shareholders in the third quarter 2014 were $3.0 billion.

* Under our share buyback programme some 18.5 million shares were bought back for cancellation during the third quarter 2014 for a consideration of $0.8 billion.

* Return on average capital employed on a reported income basis (see Note 7) was 7.7% at the end of the third quarter 2014 compared with 10.4% at the end of the third quarter 2013.

* Gearing was 11.7% at the end of the third quarter 2014 versus 11.2% at the end of the third quarter 2013.

* Oil and gas production for the third quarter 2014 was 2,790 thousand boe/d, a decrease of 5% compared with the third quarter 2013. Excluding the impact of divestments, Abu Dhabi license expiry, PSC price effects, and security impacts in Nigeria, third quarter 2014 production volumes were 2% higher than for the same period last year.

* Equity sales of LNG of 5.68 million tonnes for the third quarter 2014 were 16% higher than for the same quarter a year ago.

* Oil products sales volumes for the third quarter 2014 were 2% lower than for the third quarter 2013. Chemicals sales volumes for the third quarter 2014 decreased by 4% compared with the same quarter a year ago.

* Supplementary financial and operational disclosure for the third quarter 2014 is available at www.shell.com/investor.

SUMMARY OF IDENTIFIED ITEMS

Earnings for the third quarter 2014 reflected the following items, which in aggregate amounted to a net charge of $581 million (compared with a net charge of $209 million for the third quarter 2013), as summarised in the table below:

* Upstream earnings included a net charge of $394 million, mainly reflecting a deferred tax liability of $349 million related to an associate company and impairments of $176 million. These were partly offset by net divestment gains of $112 million. Upstream earnings for the third quarter 2013 included a net charge of $176 million.

* Downstream earnings included a net charge of $192 million, primarily reflecting losses related to divestments of $92 million and impairments of $75 million. Downstream earnings for the third quarter 2013 included a net gain of $14 million.

* Corporate results and Non-controlling interest included a net gain of $5 million. Earnings for the third quarter 2013 included a net charge of $47 million.

1 Q3 on Q3 change

Third quarter Upstream earnings excluding identified items were $4,343 million compared with $3,466 million a year ago. Identified items were a net charge of $394 million, compared with a net charge of $176 million for the third quarter 2013 (see page 5).

Compared with the third quarter 2013, earnings excluding identified items benefited from new, high-margin production despite the effect of lower oil prices and volumes overall. Earnings also reflected lower exploration expenses, primarily driven by fewer well write-offs and increased dividends from an LNG venture including the phasing of a dividend from the second quarter 2014. These items were partly offset by higher depreciation. The increase of a deferred tax liability as a result of the weakening Australian dollar reduced earnings by some $400 million.

Global liquids realisations were 8% lower than for the third quarter 2013.

Global natural gas realisations were 7% lower than for the same quarter a year ago, with a 17% increase in the Americas and an 11% decrease outside the Americas.

Third quarter 2014 production was 2,790 thousand boe/d compared with 2,931 thousand boe/d a year ago. Liquids production decreased by 4% and natural gas production decreased by 6% compared with the third quarter 2013. Excluding the impact of divestments, Abu Dhabi license expiry, PSC price effects, and security impacts in Nigeria, third quarter 2014 production was 2% higher than for the same period last year. Underlying production was driven by increased high-margin liquids production in the Americas, including the impact of substantially lower downtime, partly offset by higher downtime elsewhere.

New field start-ups and the continuing ramp-up of existing fields, in particular Majnoon in Iraq, Mars B and BC-10 in the Americas, contributed some 139 thousand boe/d to production for the third quarter 2014, which more than offset the impact of field declines.

Equity LNG sales volumes of 5.68 million tonnes increased by 16% compared with the same quarter a year ago, mainly reflecting the contribution from the acquisition of Repsol’s LNG business.

1 Q3 on Q3 change

Third quarter Downstream earnings excluding identified items were $1,793 million compared with $892 million for the third quarter 2013. Identified items were a net charge of $192 million, compared with a net gain of $14 million for the third quarter 2013 (see page 5).

Compared with the third quarter 2013, Downstream earnings excluding identified items benefited from higher realised refining margins, reflecting the industry environment and improved operating performance. Earnings also benefited from lower operating expenses, mainly resulting from divestments, as well as increased trading contributions. Contributions from Chemicals decreased mainly as a result of weaker intermediates industry conditions, and a prior-period adjustment, partly offset by improved base chemicals industry conditions.

Refinery intake volumes were 2% lower compared with the same quarter last year.
Excluding portfolio impacts, refinery intake volumes were in line with the same period a year ago. Refinery availability was 94%, compared with 93% for the third quarter 2013.

Oil products sales volumes decreased by 2% compared with the same period a year ago.

Excluding portfolio impacts, oil products sales volumes were in line with the same period a year ago.

Chemicals sales volumes decreased by 4% compared with the same quarter last year, mainly as a result of lower trading activity. Chemicals manufacturing plant availability decreased to 90% from 96% for the third quarter 2013, reflecting higher unplanned downtime, primarily due to an incident in June at the Moerdijk chemical site in the Netherlands. The impact of a separate incident in October at Moerdijk is currently being assessed; however, most units will be out for the remainder of 2014 and impact on some units is expected to extend into 2015.

At Royal Dutch Shell plc’s Annual General Meeting on May 20, 2014, the Board was authorised to allot ordinary shares in Royal Dutch Shell plc, and to grant rights to subscribe for or to convert any security into ordinary shares in Royal Dutch Shell plc, up to an aggregate nominal amount of euro 147 million (representing 2,100 million ordinary shares of euro 0.07 each), and to list such shares or rights on any stock exchange. This authority expires at the earlier of the close of business on August 20, 2015, and the end of the Annual General Meeting to be held in 2015, unless previously renewed, revoked or varied by Royal Dutch Shell plc in a general meeting.

As disclosed in the Consolidated Financial Statements for the year ended December 31, 2013, presented in the Annual Report and Form 20-F for that year, Shell is exposed to the risks of changes in fair value of its financial assets and liabilities. The fair values of the financial assets and liabilities are defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Methods and assumptions used to estimate the fair values at September 30, 2014 are consistent with those used in the year ended December 31, 2013, and the carrying amounts of derivative contracts measured using predominantly unobservable inputs has not changed materially since that date.

The fair value of debt excluding finance lease liabilities at September 30, 2014, was $38,013 million (June 30, 2014: $39,047million; September 30, 2013: $33,604 million). Fair value is determined from the prices quoted for those securities.

6. Impacts of accounting for derivatives

In the ordinary course of business Shell enters into contracts to supply or purchase oil and gas products, and also enters into derivative contracts to mitigate resulting economic exposures (generally price exposure). Derivative contracts are carried at period-end market price (fair value), with movements in fair value recognised in income for the period. Supply and purchase contracts entered into for operational purposes are, by contrast, recognised when the transaction occurs (see also below); furthermore, inventory is carried at historical cost or net realisable value, whichever is lower.

As a consequence, accounting mismatches occur because: (a) the supply or purchase transaction is recognised in a different period; or (b) the inventory is measured on a different basis.

In addition, certain UK gas contracts held by Upstream are, due to pricing or delivery conditions, deemed to contain embedded derivatives or written options and are also required to be carried at fair value even though they are entered into for operational purposes.

The accounting impacts of the aforementioned are reported as identified items in this Report.

7. Return on average capital employed

Return on average capital employed (ROACE) measures the efficiency of Shell’s utilisation of the capital that it employs and is a common measure of business performance. In this calculation, ROACE is defined as the sum of income for the current and previous three quarters, adjusted for after-tax interest expense, as a percentage of the average capital employed for the same period. Capital employed consists of total equity, current debt and non-current debt.

8. Liquidity and capital resources

Third quarter net cash from operating activities was $12.8 billion compared with $10.4 billion for the same period last year.

Total current and non-current debt decreased to $43.0 billion at September 30, 2014 from $44.1 billion at June 30, 2014 while cash and cash equivalents increased to $19.0 billion at September 30, 2014 from $15.4 billion at June 30, 2014. No new debt was issued under the US shelf registration or under the euro medium-term note programme during the third quarter of 2014.

Net capital investment for the third quarter 2014 was $4.8 billion, of which $5.4 billion in Upstream, and ($0.6) billion in Downstream. Net capital investment for the same period of 2013 was $9.4 billion, of which $8.1 billion in Upstream, $1.2 billion in Downstream and $0.1 billion in Corporate.

Dividends of $0.47 per share are announced on October 30, 2014 in respect of the third quarter. These dividends are payable on December 22, 2014. In the case of B shares, the dividends will be payable through the dividend access mechanism and are expected to be treated as UK-source rather than Dutch-source.

See the Annual Report and Form 20-F for the year ended December 31, 2013 for additional information on the dividend access mechanism.

Nine months net cash from operating activities was $35.4 billion compared with $34.4 billion for the same period last year.

Total current and non-current debt decreased to $43.0 billion at September 30, 2014 from $44.6 billion at December 31, 2013 while cash and cash equivalents increased to $19.0 billion at September 30, 2014 from $9.7 billion at December 31, 2013. New debt was issued under the euro medium-term note programme during the first nine months 2014.

Net capital investment in the first nine months 2014 was $16.1 billion, of which $15.3 billion in Upstream, $0.7 billion in Downstream and $0.1 billion in Corporate. Net capital investment for the same period of 2013 was $28.5 billion, of which $25.1 billion in Upstream, $3.3 billion in Downstream and $0.1billion in Corporate.

We may have used certain terms, such as resources, in this document that the United States Securities and Exchange Commission (SEC) strictly prohibits us from including in our filings with the SEC. U.S. investors are urged to consider closely the disclosure in our Form 20-F, File No 1-32575, available on the SEC website www.sec.gov. You can also obtain this form from the SEC by calling 1-800-SEC-0330.

October 30, 2014

The information in this Report reflects the unaudited consolidated financial position and results of Royal Dutch Shell plc. Company No. 4366849, Registered Office: Shell Centre, London, SE1 7NA, England, UK.

Contacts:

– Investor Relations: International + 31 (0) 70 377 4540; North America +1 832 337 2034

– Media: International +44 (0) 207 934 5550; USA +1 713 241 4544

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