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Royal Dutch Shell Plc: 1st Quarter 2007 results

Thursday 3 May 2007

Royal Dutch Shell’s first quarter 2007 CCS earnings were $6.9 billion compared to $6.1 billion a year ago. CCS earnings per share increased by 17% versus the same quarter a year ago.

From 2007 onwards the Group is declaring its dividends in US dollars rather than in euros. A first quarter 2007 dividend has been announced of $0.36 per share, an increase of 14% over the US dollar dividend for the same period in 2006.

$0.5 billion or 0.2% of Royal Dutch Shell shares were bought back for cancellation during the quarter.

Royal Dutch Shell Chief Executive Jeroen van der Veer commented: “These are again competitive results, driven by operating performance.” He continued: “We have progressed two large and complex transactions, Sakhalin II and Shell Canada, which consolidate our position in two major resources areas. Our strategy is on track. We continue to refocus our portfolio, through disciplined capital choices.”

Key features of the first quarter 2007

  • First quarter 2007 CCS earnings were $6,932 million or 14 % higher than the same quarter a year ago.
  • First quarter 2007 reported income was $7,281 million or 6% higher than the same quarter a year ago.
  • Exploration & Production segment earnings were $3,508 million compared with $3,743 million in the first quarter 2006. Earnings, when compared to the first quarter 2006, were mainly impacted by lower oil and gas price realisations, lower volumes and higher costs, reflecting current industry conditions.
  • Gas & Power segment earnings were $803 million compared to $760 million a year ago. Earnings, when compared to the same quarter in 2006, reflected increased LNG sales volumes and LNG equity dividends, which were offset by lower marketing and trading results.
  • Oil Products CCS earnings were $1,488 million compared to $1,333 million in 2006. Earnings reflected higher refinery and marketing margins partly offset by lower refinery utilisation and higher operational costs when compared to the first quarter 2006. Also in Downstream, Chemicals CCS earnings were $480 million compared to $139 million in 2006. Chemicals earnings reflected higher unit margins and full operations in the quarter at the Nanhai petrochemicals complex in China when compared to the same quarter in 2006.
  • Cash flow from operating activities was $11.2 billion compared to $7.8 billion in the first quarter 2006. Excluding working capital movements and taxation effects, cash flow from operating activities was $9.7 billion compared to $9.2 billion a year ago (see note 7).
  • Total cash returned to shareholders in the first quarter 2007 was $2.6 billion in the form of dividends and share repurchases.
  • Capital investment for the first quarter 2007 was $5.6 billion, excluding the minority share of Sakhalin of $0.4 billion. Approximately $0.4 billion of proceeds were realised from divestments, and some $7.1 billion was used for acquisitions, mainly related to Shell Canada.
  • Return on average capital employed (ROACE), on a reported income basis (see note 3), was 23.2%.
  • Gearing (see note 5) was 14.6% at the end of the first quarter 2007 versus 12.0 % at the end of the first quarter 2006.
  • As at March 31, 2007 Shell Investments Ltd (SIL), a wholly owned subsidiary of Royal Dutch Shell plc, had taken up and accepted for payment approximately 94.5% of the outstanding common shares of Shell Canada not already owned by SIL. SIL has since exercised its right to acquire the remaining shares not already owned by SIL or its affiliates at the same price of C$45 per common share. The cash purchase price for the shares amounts to some $7.1 billion (See note 6).
  • On April 11, 2007, Royal Dutch Petroleum Company (now merged into Shell Petroleum N.V.) and The Shell Transport and Trading Company, Ltd., (formerly: The “Shell” Transport and Trading Company, p.l.c.) without admitting any wrongdoing, reached a settlement of asserted and unasserted claims arising out of the recategorisation of its proved reserves with representatives of shareholders who both resided and purchased Shell shares outside of the United States during the period of April 8, 1999 through March 18, 2004, inclusive. The agreement depends on the Amsterdam Court of Appeals declaring the settlement binding for all of the shareholders that it covers and is further subject to agreed opt-out and termination provisions.
  • On April 18, 2007, Royal Dutch Shell completed the farm-out to OAO Gazprom of a 50% stake (plus 1 share) in the Sakhalin project in Russia. Royal Dutch Shell diluted its stake in the project from 55% to 27.5% for a total sale price of $4.1 billion. This transaction will be accounted for in the second quarter 2007. In addition, the Ministry of Natural Resources of the Russian Federation has announced its approval of the revised Environmental Action Plan, and the Supervisory Board of Sakhalin Energy has approved the Amended Development Budget. Additional agreements were also signed with the Russian Government, addressing the economic balance of the project.
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