Shell plc Reports Q1 Adjusted Earnings of $9.1B

Shell (LON:RDSa) Inc (SHEL) Reports:

"The war in Ukraine is first and foremost a human tragedy, but it has also caused significant disruption to global energy markets and has shown that secure, reliable and affordable energy simply cannot be taken for granted. The impacts of this uncertainty and the higher cost that comes with it are being felt far and wide. We have been engaging with governments, our customers and suppliers to work through the challenging implications and provide support and solutions where we can.

Generating value through strong earnings and cash flow, coupled with maintaining a healthy balance sheet and continuing the disciplined delivery of our strategy, are crucial for Shell to play a leading role in the energy transition. This allows us to support our customers as they shift to cleaner energy. It's also the best way for us to contribute to the security of energy supplies. Today's results, the progress we are making with our $8.5 billion share buyback programme and the reduction of our net debt to $48.5 billion all show we remain on track, and give us the confidence to plan future shareholder distributions and disciplined investments that will accelerate our strategy."

Shell plc Chief Executive Officer, Ben van Beurden

STRONG RESULTS IN VOLATILE TIMES

• Strong Q1 2022 Adjusted Earnings of $9.1 billion in a volatile geopolitical and macroeconomic environment. Adjusted EBITDA of $19.0 billion in Q1 2022 versus $16.3 billion in Q4 2021.
• Dividend increased by ~4% to $0.25 per share for Q1 2022. Of the $8.5 billion share buyback programme announced for the first half of 2022, $4 billion has been completed to date. The remaining $4.5 billion share buybacks are expected to be completed before the Q2 2022 results announcement. With the current macro outlook and subject to Board approval, shareholder distributions for the second half of 2022 are expected to be in excess of 30% of CFFO.
• Following decisive action on Russia, taken $3.9 billion of post-tax charges in Q1 2022 as part of Identified items.
• Share simplification completed and new reporting segments launched - additional Renewables & Energy Solutions and Marketing disclosures.

1 Income/( loss) attributable to shareholders for Q1 2022 is $7.1 billion. Reconciliation of non-GAAP measures can be found in the unaudited results, available on www.shell.com/investors.

• Strong CFFO reflecting net favourable derivatives movements, mainly due to settlement of derivative contracts in Q1 2022 for which variation margins cash outflows have taken place in 2021. Tax paid & other includes a tax paid outflow of $2.2 billion, offset by current cost of supply adjustment and other movements. Working capital mainly impacted by inventory price effect of $6.4 billion and Initial Margin outflows of $1.7 billion.
• Net debt reduced by ~8%, from $52.6 billion in Q4 2021 to $48.5 billion in Q1 2022.

Q1 2022 FINANCIAL PERFORMANCE DRIVERS

INTEGRATED GAS

• Adjusted Earnings benefited from higher realised prices offset by lower production due to maintenance activities, including the planned turnaround of one of the trains at Pearl GTL and maintenance at Prelude FLNG (OL:FLNG).
• Trading and optimisation results for Integrated Gas were similar to Q4 2021, continuing to benefit from favourable trading conditions.
• The Q2 2022 outlook reflects the derecognition of Sakhalin-related volumes (a reduction of 0.8 MT in LNG liquefaction volumes compared with Q1 2022).

UPSTREAM

• Production 4% below Q4 2021, mainly driven by Permian divestment and lower demand due to a milder winter, partly offset by comparative help from Hurricane Ida recovery and lower maintenance.
• Adjusted Earnings benefited from higher prices, partly offset by impacts from the Permian divestment.
• The Q2 2022 production outlook reflects lower seasonal gas demand and higher scheduled maintenance, mainly in the US Gulf of Mexico.

MARKETING

• Marketing margins are in line with Q4 2021, with the effect of lower volumes in Mobility being offset by higher volumes in Lubricants.
• Marketing Adjusted Earnings better than Q4 2021 due to lower Opex driven by seasonal trends.

CHEMICALS & PRODUCTS

• Higher realised refining margins due to market volatility and improved utilisation. Trading and optimisation significantly higher than Q4 2021.
• Chemicals margins are in line with the Q4 2021 break-even, reflecting higher utilisation offsetting lower unit margins.
• The utilisation for both refineries and chemicals manufacturing plants in Q2 2022 is expected to be impacted by scheduled turnarounds and maintenance.

RENEWABLES & ENERGY SOUTIONS

• Adjusted Earnings and Adjusted EBITDA benefited from higher trading and optimisation margins for gas and power, due to exceptional market environment, particularly in Europe, as well as seasonality.
• Signed an agreement in April 2022, to acquire Sprng Energy group, one of India’s leading renewable power platforms.
• Won bids for 6.5 GW of offshore wind power generation, 5 GW in the UK with ScottishPower and 1.5 GW in the USA through the Atlantic Shores joint venture with a 50% Shell share in each.
• Completed the Powershop Australia acquisition and announced the acquisition of 49% of WestWind, a wind farm developer with a 3 GW project pipeline.
• Started production of green hydrogen at a 20 MW electrolyser in China, supplying fuel cell vehicles at the Olympic Games. The start-up increases Shell's decarbonised hydrogen capacity in operation to 30 MW or 10% of global electrolyser capacity today.

The Renewables and Energy Solutions segment includes Shell’s Integrated Power activities, comprising electricity generation, marketing, trading and optimisation of power and pipeline gas, and digitally enabled customer solutions. The segment also includes production and marketing of hydrogen, development of commercial carbon capture & storage hubs, trading of carbon credits and investment in nature-based projects that avoid or reduce carbon.

CORPORATE

• The Adjusted Earnings outlook is unchanged with a net expense of $2,200 - 2,600 million for the full year 2022. This excludes the impact of currency exchange rate effects.

UPCOMING INVESTOR EVENTS

USEFUL LINKS

Results materials Q1 2022

Quarterly Databook Q1 2022

Dividend announcement Q1 2022

Webcast registration Q1 2022

New reporting segments video

ALTERNATIVE PERFORMANCE (NON-GAAP) MEASURES

This announcement includes certain measures that are calculated and presented on the basis of methodologies other than in accordance with generally accepted accounting principles (GAAP) such as IFRS, including Adjusted Earnings, Adjusted EBITDA, CFFO excluding working capital movements, Cash capital expenditure, free cash flow, Divestment proceeds and Net debt. This information, along with comparable GAAP measures, is useful to investors because it provides a basis for measuring Shell plc’s operating performance and ability to retire debt and invest in new business opportunities. Shell plc’s management uses these financial measures, along with the most directly comparable GAAP financial measures, in evaluating the business performance.

This announcement contains a forward-looking Non-GAAP measure for cash capital expenditure. We are unable to provide a reconciliation of this forward-looking Non-GAAP measure to the most comparable GAAP financial measure because certain information needed to reconcile the Non-GAAP measure to the most comparable GAAP financial measure is dependent on future events some of which are outside the control of the company, such as oil and gas prices, interest rates and exchange rates. Moreover, estimating such GAAP measure with the required precision necessary to provide a meaningful reconciliation is extremely difficult and could not be accomplished without unreasonable effort. Non-GAAP measures in respect of future periods which cannot be reconciled to the most comparable GAAP financial measure are estimated in a manner which is consistent with the accounting policies applied in Shell plc’s consolidated financial statements.