Royal Dutch Shell PLC

OTC:RYDAF

Earnings Call Transcript 2024-Q3

[Sinead Gorman, executive]

Welcome to Shell's third quarter results presentation. This quarter, we've delivered another strong set of results despite a less favorable macro environment. This was driven by solid operational performance across our portfolio, continuing the momentum we've built over recent quarters. We further strengthened our balance sheet, leaving us well positioned irrespective of the macro environment.

Looking at Q3 in more detail. Our adjusted earnings were $6 billion, and we delivered $14.7 billion of cash flow from operations. Our Integrated Gas business performed well with increased LNG liquefaction volumes.

In Upstream, we are pleased to complete a number of scheduled maintenance activities ahead of time. This paved the way for higher production output helping us have a good quarter.

In Downstream, results were tempered by lower refining margins and continued weak chemical margins, but our marketing business delivered strong results with adjusted earnings above $1 billion at an oil price still well above the reference price used at our Capital Markets Day. The results across our businesses were enhanced by another quarter of robust trading and optimization contributions.

Now let me give you some updates on our portfolio. In our Upstream business, we announced the start of gas production at Jerun in Malaysia, adding additional attractive volumes to this important hub. We also took a final investment decision on Vito Waterflood in the Gulf of Mexico. And we agreed to invest in Surat Phase 2 in Australia, enhancing longevity and delivering more value from our existing assets.

And we continue to strengthen our leading LNG portfolio. Following our acquisition of Pavilion and our entry into the Ruwais LNG partnership, we've also secured a 10-year supply contract in Turkey in the third quarter.

We've also seen important developments in our Downstream and Renewables and Energy Solutions businesses. One example is in Norway, where our Northern Lights joint venture has now completed construction. The project is ready to begin permanently storing CO2 to help European industries decarbonize.

And last week, we announced the acquisition of a combined cycle power plant in Rhode Island, where demand is expected to increase due to growing decarbonization efforts linked to electrification. This acquisition will allow us to provide the critical energy our customers need by leveraging our trading and optimization capabilities in the New England region.

Now moving to our financial framework. We expect our cash CapEx for the full year 2024 to come in below the lower end of the $22 billion to $25 billion range. While we continue to see many attractive investment opportunities such as the Rhode Island CCGT that we just agreed to purchase, every investment decision is benchmarked against our shares. And given where they've been trading, we continue to preferentially allocate incremental capital towards share buybacks. This shows our ability to invest for the future whilst creating value today.

As I said at the start, our balance sheet has further strengthened. Our net debt is at its lowest since 2015, less than half of what it was at the end of 2019. And if we exclude leases, our net debt was under $10 billion at the end of the third quarter. This balanced and consistent approach to capital allocation is what gives us the ability to remain resilient throughout the cycle, whilst continuing to offer compelling shareholder returns.

And so today, we have announced yet another $3.5 billion share buyback program, which we expect to complete by the Q4 results announcement in January, making this the 12th consecutive quarter in which we have announced $3 billion or more in buybacks.

To summarize, we've delivered another strong set of results this quarter, demonstrating Shell's resilience throughout the cycle. We've continued to make significant progress in strengthening our balance sheet whilst still being able to buy back another $3.5 billion worth of our shares. And we continue to further strengthen our world-class portfolio within a framework of disciplined investment.

It's still the early stages of this journey, with more to come. We will play to our strengths and where we have differentiated capabilities as we aim to be the investment case through the energy transition.

Thank you.