Investors’ Handbook 2015-2019

Although 2019 was a tough year, Shell demonstrated its resilience by delivering credible results on several fronts.

Despite economic headwinds such as low oil and gas prices, limited global growth, and reduced chemicals and refining margins, during 2019 we continued to make good progress in building a world-class investment case.

Our cash flow from operating activities was strong compared with our industry peers, at $42.2 billion. We distributed more than $25 billion to shareholders: $15.2 billion in dividends, and $10.2 billion in share buybacks. As of February 20, 2020, we had delivered about $15 billion of our $25 billion share buyback programme, which began in 2018.

The economic headwinds did contribute to some negative factors in our financial performance. Gearing increased from 20% to 29% (equivalent to 25% on an IAS 17 accounting basis). Income was $16.4 billion, down from $23.9 billion in 2018. Earnings on a current cost of supplies (CCS) basis were $15.8 billion, down from $24.4 billion in 2018.

Overall, though, Shell’s financial foundations remained strong. We improved the resilience and quality of our portfolio by making around $5 billion of divestments. We continued to show financial discipline by limiting our cash capital expenditure to $24 billion, at the lower end of the range that we said we would spend. This highlighted one of the crucial things that has put Shell on this path to success: capital efficiency. By systematically improving capital efficiency across our portfolio, we have been able to reduce costs safely and sustainably. The average unit development cost for our Upstream and Integrated Gas projects has decreased by more than half since the end of 2014. This allows us to do more for less.

I am, however, deeply saddened that seven people died while working for Shell in 2019. This is unacceptable. Each death inflicts unimaginable grief on the bereaved family. In Shell, work colleagues mourn. Every person lost is a tragedy. When it comes to safety, we have much more to do. We have responded by introducing a new approach which we will start to deploy from 2020 onwards, alongside our continuing efforts to review and improve accident prevention procedures wherever possible.

Our core oil and gas business delivered significant projects in 2019. The first shipment of liquefied natural gas left the Prelude floating liquefied natural gas facility off the coast of Australia. Production started at our Appomattox floating production system in the Gulf of Mexico. It is expected to produce 175 thousand barrels of oil equivalent a day at its peak. We also invested for success in the future and built on Shell’s constructive approach to the greatest global challenge of our times: climate change.

Our strategy sets out three clear ambitions: to thrive in the energy transition, provide a world-class investment case, and sustain a strong societal licence to operate. In 2019, to help achieve all three ambitions, we refreshed our strategy to focus more strongly on developing our Power business.

We know the energy transition is unfolding, and we must be part of it if we are to thrive as a business. If the world is to tackle climate change, it must consume more of its energy in the form of electricity. This is a huge potential growth opportunity for Shell, one we are well positioned to seize. Shell has the brand, global presence, and retail and marketing expertise you need when buying and selling electricity and interacting with customers.

We are a worldwide supplier of natural gas, a cleaner alternative to coal for electricity generation. We are actively seeking to increase our investments in renewable power. In 2019 Shell acquired ERM Power, one of Australia’s leading commercial and industrial electricity retailers. We further enhanced our retail offering by introducing carbon-neutral driving. Motorists in the Netherlands and the UK can now offset their fuel emissions by having Shell purchase nature-based carbon credits on their behalf.

As we look forward to 2020 and beyond, we must be firm in our belief that our business strategy is sound and our financial foundations are strong.

We believe Shell’s underlying resilience will stand us in good stead for the challenges to come.

Ben van Beurden
Chief Executive Officer