“Our strategy remains robust, but 2014 will signal a change of emphasis.”
At Shell we aim to provide investors with a clear understanding of the Company. Our Investors’ Handbook includes financial data going back five years, an overview of how Shell is currently performing and our plans for the future.
For Shell, 2013 proved to be a challenging year, in part due to a complex and difficult operating environment. We faced a deteriorating security situation in Nigeria. In Downstream, refining margins in Asia and Europe were depressed by an oversupply of global refining capacity and lower demand. There were also areas where we as a company could have been more competitive, including our day-to-day operational performance and our capital efficiency. Some of our businesses demonstrated outstanding operational and financial performance. The reality, however, is that several operated below their full potential in 2013. Our overall performance was frankly not what I expect from Shell.
For 2013, our earnings on a current cost of supplies basis attributable to shareholders were $17 billion, compared with $27 billion in 2012. Net cash flow from operating activities also fell, to $40 billion from $46 billion in 2012. However, our combined net cash flow from operating activities in 2012 and 2013 marked a 35% increase compared with 2010 and 2011, as new large-scale projects such as Pearl GTL made a significant contribution. Capital investment totalled $46 billion, including $8 billion of acquisitions.
We produced 3.2 million barrels of oil equivalent a day (boe/d) in 2013. Sales of liquefied natural gas (LNG) totalled 19.6 million tonnes. Both were lower than the previous year, mainly due to the difficult operating environment in Nigeria.
Underlining our commitment to shareholder returns, in 2013 we distributed more than $11 billion to shareholders in dividends – including those taken as shares under our Scrip Dividend Programme – and spent $5 billion on share repurchases. This compares with $11 billion of dividends and $1 billion of share repurchases in 2012.
Our strategy remains robust, but 2014 will signal a change of emphasis. We will concentrate on improving returns and cash flow performance, with a focus on three main priorities:
- improving our financial performance, including restructuring our Oil Products and North American shale oil and gas businesses;
- enhancing our capital efficiency; and
- maintaining our strong track record of delivering new projects, while integrating our recent acquisitions.
Our first goal is to improve our competitive financial performance, increasing the value we obtain from the capital entrusted to us by our shareholders. In the year to come, we will reduce our capital spending, as we moderate our growth ambitions and strive to improve our free cash flow and returns.
We have also embarked on a fresh programme of asset sales refocusing our capital and technology on the areas that will deliver sustained profits and cash flow.
Better operational performance is another critical step to shareholder returns. I want to see continuous improvement in the day-to-day work of delivering our projects.
2013 was a year in which we laid firm foundations for the future, bringing projects to fruition that will underpin our ability to deliver increasing cash flow through economic cycles and competitive returns including a growing dividend. In 2014, we will strive to build on our track record of delivering new projects.
We are responding to our disappointing results for 2013 with a renewed focus on competitive financial performance and capital efficiency, while continuing to invest in new projects. These will not only be the foundation of our future competitiveness, but also help to supply the world’s growing energy needs. You will find plenty of further information on our performance and plans in this Handbook.
Ben van Beurden
Chief Executive Officer