R E S U L T S
FIRST QUARTER $ million
2003 2002 %
Net Income 5,331 2,262 +136
Estimated current cost of supplies (CCS) adjustment 126 185
CCS earnings 5,205 2,077 +151
Special credits/(charges) - see note 4 1,036 84
Asset retirement obligations - see note 1 255
Adjusted CCS earnings 3,914 1,993 +96
Return on Average Capital Employed on a Net Income basis 18.3% 15.2%
Return on Average Capital Employed on a CCS earnings basis 18.0% 15.7%
To facilitate a better understanding of the underlying business
performance, the financial results are analysed on an estimated current cost of
supplies (CCS) basis adjusting for those credits or charges resulting from
transactions or events which, in the view of management, are not representative
of normal business activities of the period and which affect comparability of
earnings. It should be noted that adjusted CCS earnings is not a measure of
financial performance under generally accepted accounting principles in the
Netherlands and the USA.
Key features of the first quarter 2003
* Reported net income of $5,331 million was 136% higher than last year and
included a special credit of $1,036 million and a credit of $255 million
from the change in accounting for asset retirement obligations.
* The Group's adjusted CCS earnings (i.e. on an estimated current cost of
supplies basis excluding special items) for the quarter of $3,914 million
were 96% higher than the results last year. The earnings reflected
significantly higher hydrocarbon prices, 6% higher and record hydrocarbon
production, and substantially higher earnings in Gas and Power and Oil
Products.
* On an adjusted CCS basis, Royal Dutch earnings per share were euro 1.05
($1.13 per share), an increase compared to a year ago of 62% (98% in $ per
share), and Shell Transport earnings per share were 10.1p, an increase of
77% (see page 18).
* The sale of the Shell shareholding in Ruhrgas, a major German gas
distributor, to E.ON was closed and a net income benefit of $1.3 billion,
including related tax credits, was included in the first quarter results.
* Exploration and Production adjusted segment earnings were $2,787 million
and were up from $1,455 million a year ago. The increase mainly reflected
significantly higher hydrocarbon prices. Hydrocarbon production was the
highest in recent history and increased 6% to 4.2 million barrels of oil
equivalent a day.
* Gas & Power adjusted segment earnings were $470 million compared to $216
million reported a year ago. The higher earnings reflect higher prices for
liquefied natural gas (LNG) and improved trading earnings. Included in the
quarter is a gain of $114 million arising from utilisation of tax credits
related to the sale of the shareholding in Ruhrgas.
* Oil Products adjusted CCS segment earnings were $1,056 million compared to
$441 million achieved a year ago. Earnings in refining were substantially
higher and were complemented by higher marketing and trading income.
* Chemicals adjusted segment earnings were a loss of $15 million, down from
the first quarter 2002 earnings of $75 million. Current quarter earnings
include charges of $92 million for business restructuring and asset
impairments. Excluding these items, earnings were similar to the same
quarter a year ago.
* Capital investment for the quarter totalled $2.7 billion versus $4.6
billion a year ago, reflecting the acquisition in the first quarter of 2002
of additional interests in the downstream joint ventures in the USA.
Excluding acquisitions the comparable amount in the same period a year ago
was $2.7 billion.
* The Return on Average Capital Employed (ROACE) on a net income basis for
the twelve months to March 31, 2003 was 18.3%. ROACE on a CCS earnings
basis for the twelve months to March 31, 2003 was 18.0%. The main
difference is the CCS adjustment to net income.
* At the end of the quarter the debt ratio was 19.0%; cash, cash equivalents
and short-term securities amounted to $4.0 billion.
* Cash flow from operating activities for the quarter was $6.7 billion.
* Proceeds from divestments totalled $1.9 billion including the Ruhrgas
transaction.
Commentary
Crude oil prices increased in the first quarter with Brent prices averaging
$31.50 a barrel compared with $21.15 a barrel in 2002, while WTI prices
averaged $34.00 a barrel in 2003 compared with $21.55 a year earlier. Prices
for the second quarter will depend on general OPEC supply availabilities, OPEC
discipline in response to the return of Iraqi exports to the oil markets and
lower seasonal demand.
The first quarter of 2003 saw US natural gas prices rise significantly
relative to the fourth quarter of 2002, with the quarterly average Henry Hub
price at $6.90 per million Btu, compared to $4.27 per million Btu in the
previous quarter. The upward price movement was even stronger compared to the
first quarter 2002, when the Henry Hub price averaged $2.47 per million Btu.
Refining margins in the first quarter this year were considerably higher
than a year ago due to tightening of the global product supply/demand balance.
Product availabilities were cut by US refinery turnarounds and Venezuelan
supply disruptions. Demand was bolstered by a cold northern hemisphere winter,
oil substitution for gas due to high US natural gas prices and an extended
shutdown of Japanese nuclear power plants. In the first quarter of 2003,
industry refining margins averaged $3.90, $2.05, $6.40 and $6.85 a barrel in
Rotterdam, Singapore, US Gulf Coast and US West Coast respectively, compared to
$0.05, $0.30, $2.65 and $4.75 a barrel in 2002. The high first quarter margins
are not seen as sustainable but some support in the Atlantic Basin in the
second quarter may come from seasonal refinery maintenance in Europe and low
product stocks. Margin outlook for the remainder of 2003 is uncertain and much
will depend on the pace of global economic recovery and OPEC output policy in
response to the expected return of Iraqi crude exports to the market. Singapore
margins are expected to return to a lower level for the rest of the year given
the substantial refinery over capacity in the region.
Chemicals trading conditions remained difficult as a result of volatility
in feedstock prices and the global economic environment. Industry cracker
margins improved in Europe and declined in the USA, from a year ago. In Europe,
naphtha feedstock increases were more than offset by final product prices. In
the USA, high gas feedstock prices relative to crude prices favoured chemical
crackers using liquid feedstocks. The outlook for chemicals is mixed due to
uncertainty and volatility in feedstock costs and the economy.
In Exploration and Production, a significant discovery, Bonga North West,
was made during the quarter in Nigeria, and successful appraisal took place at
Tahiti in the Gulf of Mexico. In Canada, at the Athabasca Oil Sands Project
(Shell Canada share 60%) commissioning and testing of the synthetic crude units
was completed at the Scotford Upgrader and first production of synthetic crude
oil from purchased bitumen feedstock was achieved in the quarter. Bitumen
production at the Muskeg River Mine resumed on April 4 and shipment of diluted
bitumen into the Corridor Pipeline system commenced. Fully integrated operation
was achieved on April 19 when the Scotford Upgrader started processing bitumen
from the Muskeg River Mine. During the quarter the intention to divest assets
in the USA and the UK was announced. In the USA selected assets in the Gulf of
Mexico shelf and onshore assets in the State of Michigan were put up for sale
and in the UK North Sea selected assets in producing fields, undeveloped
discoveries and exploration blocks.
The Group's 14.75% indirectly held interest in Ruhrgas, a major German gas
distributor, was sold to E.ON for some $1.7 billion (euro 1.5 billion) and the
benefits were included in the first quarter.
In Gas & Power the first of two liquefaction trains of the Malaysia Tiga
LNG joint venture (Shell interest 15%) came on stream. The total capacity of
the Tiga plant will reach some 6.8 million tonnes per annum (mtpa) later this
year. Following the expiry of the 20-year joint venture agreement, Shell sold
its 15% interest in the Malaysia Satu LNG joint venture. In Nigeria, LNG
volumes from the third liquefaction train (on stream in the fourth quarter of
2002) continued to build up with plateau contract volumes expected to be
reached by end 2003.
Two InterGen (Shell share 68%) power plants in Australia and Turkey with a
combined capacity of 1.2 Gigawatt (GW) came on stream in the quarter,
increasing InterGen's operational capacity to 6.4 GW (100% basis).
In Oil Products the sale and purchase agreements for the acquisition of 70
retail sites in Hungary, 33 sites in the Czech Republic and 7 motorway sites in
France from Total were announced. In exchange, Total will purchase 133 retail
sites in Germany. The deal in Germany will on completion, finalise the
divestment of some five per cent of retail volumes, required by the German
Cartel Office, following the formation of Shell and DEA Oil in 2002.
The intended sale of retail and refinery assets in Sweden was announced and
Shell in the USA announced the proposed sale of the majority of the company's
onshore crude pipeline systems.
In the USA, Shell entered into an agreement in April to sell its 50%
ownership interest in the Excel Paralubes venture to Flint Hills Resources.
Completion of the sale is subject to approval by the Federal Trade Commission.
In Chemicals, provisions were taken for restructuring and asset impairment
in CRI International (Group interest 100%). The restructured business will
focus on high-performance catalysts and related technologies.
In Renewables the divestment of the Forestry business in Chile and Uruguay
was completed during the quarter.
Shares totalling $0.3 billion were purchased during the quarter to underpin
employee share option schemes.
Earnings by industry segment
Exploration and Production
FIRST QUARTER $ million
2003 2002 %
Segment earnings 3,042 1,570 +94
Special credits/(charges) - 115
Asset retirement obligations (see note 1) 255
Adjusted segment earnings 2,787 1,455 +92
Crude oil production (thousand b/d) 2,407 2,199 +9
Natural gas production available for sale (million scf/d) 10,636 10,456 +2
Adjusted first quarter earnings of $2,787 million were 92% higher than a
year ago mainly due to significantly higher hydrocarbon prices and the benefit
of a 6% increase in hydrocarbon production. Gas realisations overall were 61%
higher than the same period last year; the largest increase was in the USA,
where realisations increased by 191%; outside of the USA the increase was 28%.
Oil realisations were up 53%. Depreciation, including the effects of the
acquisition of Enterprise and the additional interest in the Draugen field in
Norway, was some $550 million higher than a year ago. This quarter's earnings
include a net tax benefit of some $30 million largely resulting from the
realisation of a tax credit of some $100 million partly offset by a tax
provision.
The 6% improvement in total hydrocarbon production comprised a 9% increase
in oil production and a 2% increase in gas production.
Oil production reflected the acquisition last year of Enterprise, an
additional interest in the Draugen field, higher OPEC production quotas in
Nigeria and Abu Dhabi and new fields in Nigeria and the USA. These increases
were partly offset by normal field declines, mainly in the USA and Australia,
the strike in Venezuela and changes to entitlements under production sharing
contracts.
Gas production was the highest in recent history and benefited from higher
demand in the Netherlands, the acquisition last year of Enterprise and new
fields in the USA. These increases were partly offset by normal field declines
in the USA, divestments in New Zealand and changes to entitlements under
production sharing contracts.
Capital investment in the first quarter of $1.7 billion was 3% lower than
the corresponding period last year and included exploration expense of $0.2
billion.
Segment earnings for the quarter included a credit of $255 million
resulting from the change in accounting for asset retirement obligations.
Gas & Power
FIRST QUARTER $ million
2003 2002 %
Segment earnings 1,506 254 +493
Special credits/(charges) 1,036 38
Adjusted segment earnings 470 216 +118
Equity LNG sales volume (million tonnes) 2.33 2.44 -5
Adjusted earnings for the first quarter were $470 million compared to $216
million a year ago. Liquefied natural gas (LNG) prices were some 15% above
those realised in the first quarter last year. While LNG volumes were 5% lower
at 2.33 million tonnes reflecting the loss of volumes following the sale of the
Group's 15% interest in the Malaysia Satu LNG joint venture, higher throughput
at the other four LNG processing plants partly offset this reduction. Trading
earnings in the USA were higher, as was the contribution from power reflecting
additional capacity and improved operations. Included in the quarter is a gain
of $114 million arising from utilisation of tax credits related to the sale of
the shareholding in Ruhrgas.
The segment earnings of $1,506 million included a special credit of $1,036
million from the sale of the Shell shareholding in Ruhrgas.
Oil Products
FIRST QUARTER $ million
2003 2002 %
Segment earnings 1,195 585 +104
CCS adjustment 139 224
Segment CCS earnings 1,056 361 +193
Special credits/(charges) - (80)
Adjusted segment CCS earnings 1,056 441 +139
Refinery intake (thousand b/d) 4,166 4,187 -1
Oil product sales (thousand b/d) 7,340 7,226 +2
First quarter earnings on an adjusted CCS basis of $1,056 million were 139%
higher than a year ago. Earnings in refining were substantially higher and were
complemented by higher marketing and trading income.
The results for the first quarter of 2003 include Pennzoil-Quaker State
(PQS) in the USA, acquired effective October 1, 2002.
Outside the USA, adjusted CCS earnings increased to $929 million compared
to $439 million a year ago. Refining earnings rose sharply reflecting the
strong industry refining margins in both Rotterdam and Singapore partly offset
by the impact of a strengthening Euro on operating costs. Overall refinery
utilisation was 2% lower than a year earlier whilst refinery intake rose 1%.
Marketing earnings were broadly unchanged. Gross fuels margins were squeezed in
the first two months of the quarter by supply cost pressures but benefited in
March as these pressures eased. Total inland sales volumes fell by 4%,
principally in Europe and Latin America. Trading earnings were higher with
improved business opportunities from higher market differentials and shipping
earnings benefited from an increase in freight rates.
In the USA, adjusted earnings were $127 million compared to $2 million a
year ago. Earnings benefited from higher retail and lubricant earnings, the
latter reflecting the inclusion of income from PQS. Gasoline margins were
higher than a year earlier, improving over the course of the quarter, while
operating expenses were lower. Refining income increased although the benefit
of stronger industry refining margins on both the US West and Gulf Coasts was
offset by a major planned shutdown programme timed to accommodate capital
investments to meet clean fuels regulations. Overall utilisation was 3% lower,
with refinery intake down by 4%. Trading earnings were higher but
transportation earnings fell. Earnings for the quarter were negatively impacted
by some $50 million for provisions related to environmental remediation,
litigation and a prior year tax assessment.
Chemicals
FIRST QUARTER $ million
2003 2002
Segment earnings (15) 75
Special credits/(charges) - -
Adjusted segment earnings (15) 75
Adjusted earnings for the first quarter were a loss of $15 million compared
with a profit of $75 million last year. Excluding business restructuring and
asset impairment charges of $92 million in the USA, earnings were comparable to
the same period a year ago. Shell cracker margins improved from a year ago in
both the USA and Europe. In the USA, the economics of cracking liquid
feedstocks were favourable relative to the more commonly used ethane
feedstocks. However global total product unit margins were unchanged from a
year ago despite weak conditions in the USA. Global earnings were impacted by
higher volumes and costs, principally related to additional capacity, improved
overall capacity utilisation and improved earnings from the polyolefins joint
venture Basell and the additives joint venture Infineum.
Other industry segments
FIRST QUARTER $ million
2003 2002
Segment earnings (40) (41)
Special credits/(charges) - -
Adjusted segment earnings (40) (41)
Adjusted earnings for the first quarter were a loss of $40 million, similar
to a year ago. The losses in 2003 reflect lower earnings in Shell Consumer due
to low retail gas margins in the USA and difficult trading conditions in Solar.
Corporate
FIRST QUARTER $ million
2003 2002
Segment net costs (268) (174)
Special credits/(charges) - -
Adjusted segment net costs (268) (174)
First quarter net costs were $268 million, higher than a year ago mainly
due to higher net borrowing resulting in increased interest cost partly offset
by increased tax credits.
Note
The results shown for the first quarter are unaudited.
Quarterly results are expected to be announced on July 24 for the second
quarter and October 23 for the third quarter of 2003. The 2003 interim
dividends are expected to be announced on July 24.
This publication contains forward-looking statements that are subject to
risk factors associated with the oil, gas, power, chemicals and renewables
businesses. It is believed that the expectations reflected in these statements
are reasonable, but may be affected by a variety of variables which could cause
actual results or trends to differ materially, including, but not limited to:
price fluctuations, actual demand, currency fluctuations, drilling and
production results, reserve estimates, loss of market, industry competition,
environmental risks, physical risks, legislative, fiscal and regulatory
developments, economic and financial market conditions in various countries and
regions, political risks, project delay or advancement, approvals and cost
estimates.
May 2, 2003
Statement of income
$ million
Q1 Q4 Q1
2003 2002 2002 % *
Sales proceeds ** 69,374 60,577 47,882 +45
Sales taxes, excise duties and similar levies 15,559 15,734 12,694
______ ______ ______
Net proceeds 53,815 44,843 35,188 +53
Cost of sales ** 43,479 36,874 29,074
______ ______ ______
Gross profit 10,336 7,969 6,114 +69
Selling, distribution and administrative expenses 3,023 3,611 2,434
Exploration 248 351 175
Research and development 132 135 86
______ ______ ______
Operating profit of Group companies 6,933 3,872 3,419 +103
Share of operating profit of associated companies 1,196 500 681
______ ______ ______
Operating profit 8,129 4,372 4,100 +98
Interest and other income 1,469 186 184
Interest expense 374 421 241
Currency exchange gains/(losses) (17) 77 (30)
______ ______ ______
Income before taxation 9,207 4,214 4,013 +129
Taxation 3,787 1,817 1,744
______ ______ ______
Income after taxation 5,420 2,397 2,269 +139
Minority interests 89 83 7
______ ______ ______
NET INCOME 5,331 2,314 2,262 +136
______ ______ ______
* Q1 on Q1 change
** Certain amounts for 2002 have been reclassified (see note 1)
Earnings by industry segment
$ million
Q1 Q4 Q1
2003 2002 2002 % *
Exploration and Production:
World outside USA 2,307 1,466 1,206 +91
USA 735 503 364 +102
______ ______ ______
3,042 1,969 1,570 +94
______ ______ ______
Gas and Power:
World outside USA 1,472 262 256 +475
USA 34 (66) (2) -
______ ______ ______
1,506 196 254 +493
______ ______ ______
Oil Products:
World outside USA 929 509 382 +143
USA 127 (161) (21) -
______ ______ ______
1,056 348 361 +193
______ ______ ______
Chemicals:
World outside USA 196 204 95 +106
USA (211) (76) (20)
______ ______ ______
(15) 128 75 -
______ ______ ______
Other industry segments (40) (22) (41)
______ ______ ______
TOTAL OPERATING SEGMENTS 5,549 2,619 2,219 +150
______ ______ ______
Corporate:
Interest income/(expense) (259) (285) (115)
Currency exchange gains/(losses) (10) 83 (7)
Other - including taxation 1 (13) (52)
______ ______ ______
(268) (215) (174)
______ ______ ______
Minority interests (76) (78) 32
______ ______ ______
CCS EARNINGS 5,205 2,326 2,077 +151
______ ______ ______
CCS adjustment 126 (12) 185
______ ______ ______
NET INCOME 5,331 2,314 2,262 +136
______ ______ ______
* Q1 on Q1 change
Summarised statement of assets and liabilities
$ million
Mar 31 Dec 31 Mar 31
2003 2002 2002
Fixed assets:
Tangible fixed assets 79,986 79,390 60,050
Intangible fixed assets 4,659 4,696 1,216
Investments 21,055 20,760 19,951
______ ______ ______
105,700 104,846 81,217
______ ______ ______
Other long-term assets 7,307 7,299 7,980
Current assets:
Inventories 11,007 10,298 8,582
Accounts receivable 31,111 28,687 21,052
Short-term securities 1 5 1
Cash and cash equivalents 3,991 1,556 4,221
______ ______ ______
46,110 40,546 33,856
______ ______ ______
Current liabilities:
Short-term debt 9,567 12,874 4,397
Accounts payable and accrued liabilities 32,808 32,078 21,401
Taxes payable 7,669 5,010 6,203
Dividends payable to Parent Companies 5,235 5,153 5,715
______ ______ ______
55,279 55,115 37,716
______ ______ ______
Net current assets/(liabilities) (9,169) (14,569) (3,860)
______ ______ ______
Total assets less current liabilities 103,838 97,576 85,337
______ ______ ______
Long-term liabilities:
Long-term debt 6,799 6,817 2,197
Other 5,838 6,118 5,605
______ ______ ______
12,637 12,935 7,802
______ ______ ______
Provisions:
Deferred taxation 12,684 12,471 8,210
Other 8,809 8,544 5,812
______ ______ ______
21,493 21,015 14,022
______ ______ ______
Minority interests 3,686 3,562 5,156
______ ______ ______
NET ASSETS 66,022 60,064 58,357
______ ______ ______
Summarised statement of cash flows (Note 7)
$ million
Q1 Q4 Q1
2003 2002 2002
CASH FLOW PROVIDED BY OPERATING ACTIVITIES:
Net income 5,331 2,314 2,262
Depreciation, depletion and amortisation 2,498 2,440 1,750
(Profit)/loss on sale of assets (1,301) (38) (162)
Decrease/(increase) in net working capital 256 (467) (768)
Associated companies:
Dividends more/(less) than net income (226) 230 (46)
Deferred taxation and other provisions 242 247 13
Other (112) (328) 162
______ ______ ______
Cash flow provided by operating activities 6,688 4,398 3,211
______ ______ ______
CASH FLOW USED IN INVESTING ACTIVITIES:
Capital expenditure (2,173) (5,676) (4,081)
Proceeds from sale of assets 268 263 235
Net investments in associated companies (321) (299) (265)
Proceeds from sale and other movements in investments 1,675 51 (81)
______ ______ ______
Cash flow used in investing activities (551) (5,661) (4,192)
______ ______ ______
CASH FLOW PROVIDED BY/(USED IN) FINANCING ACTIVITIES:
Net increase/(decrease) in long-term debt (409) 1,301 (1,920)
Net increase/(decrease) in short-term debt (2,971) (2,803) 633
Change in minority interests 12 6 386
Dividends paid to:
Parent Companies - - (296)
Minority interests (43) (54) (73)
______ ______ ______
Cash flow provided by/(used in) financing activities (3,411) (1,550) (1,270)
______ ______ ______
Parent Companies' shares: net sales/(purchases) and
dividends received (315) 11 (185)
Currency translation differences relating to cash and
cash equivalents 24 40 (13)
______ ______ ______
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 2,435 (2,762) (2,449)
______ ______ ______
Operational data
Q1 Q4 Q1
2003 2002 2002 % *
CRUDE OIL PRODUCTION thousand b/d
Europe 741 738 552
Other Eastern Hemisphere 1,112 1,117 1,120
USA 460 446 417
Other Western Hemisphere 94 98 110
______ ______ ______
2,407 2,399 2,199 +9
______ ______ ______
NATURAL GAS PRODUCTION AVAILABLE FOR SALE million scf/d **
Europe 5,228 4,727 4,572
Other Eastern Hemisphere 3,128 3,249 3,625
USA 1,633 1,703 1,567
Other Western Hemisphere 647 660 692
______ ______ ______
10,636 10,339 10,456 +2
______ ______ ______
million scm/d ***
Europe 148 134 129
Other Eastern Hemisphere 89 92 103
USA 46 48 44
Other Western Hemisphere 18 19 20
______ ______ ______
301 293 296 +2
______ ______ ______
LIQUEFIED NATURAL GAS (LNG) million tonnes
Equity LNG sales volume 2.33 2.55 2.44 -5
Realised Oil Prices $/bbl
WOUSA 29.49 25.57 19.50
USA 29.01 24.49 17.74
Global 29.43 25.40 19.21
Realised Gas Prices $/thousand scf
WOUSA 2.69 2.40 2.10
USA 6.87 4.13 2.36
Global 3.44 2.73 2.14
* Q1 on Q1 change
** scf/d = standard cubic feet per day
*** scm/d = standard cubic metres per day
Operational data (continued)
Q1 Q4 Q1
2003 2002 2002 % *
thousand b/d
REFINERY PROCESSING INTAKE
Europe 1,816 1,809 1,801
Other Eastern Hemisphere 964 987 942
USA 1,038 1,033 1,084
Other Western Hemisphere 348 353 360
______ ______ ______
4,166 4,182 4,187 -1
______ ______ ______
OIL SALES
Gasolines 2,677 2,787 2,693
Kerosines 809 803 722
Gas/Diesel oils 2,261 2,271 2,254
Fuel oil 865 817 773
Other products 728 824 784
______ ______ ______
Total oil products** 7,340 7,502 7,226 +2
Crude oil 5,007 4,964 4,811
______ ______ ______
Total oil sales 12,347 12,466 12,037 +3
______ ______ ______
**comprising
Europe 2,059 2,118 2,191
Other Eastern Hemisphere 1,272 1,307 1,256
USA 2,215 2,143 2,108
Other Western Hemisphere 714 787 759
Export sales 1,080 1,147 912
CHEMICAL SALES - NET PROCEEDS *** $ million
Europe 1,519 1,166 810
Other Eastern Hemisphere 757 652 384
USA 1,462 1,241 1,038
Other Western Hemisphere 183 147 84
______ ______ ______
3,921 3,206 2,316 +69
______ ______ ______
* Q1 on Q1 change
*** Excluding proceeds from chemical trading activities
Capital investment
$ million
Q1 Q4 Q1
2003 2002 2002
Capital expenditure:
Exploration and Production:
World outside USA 1,187 1,799 1,248
USA 297 463 341
______ ______ ______
1,484 2,262 1,589
______ ______ ______
Gas and Power:
World outside USA 212 179 65
USA 1 3 1
______ ______ ______
213 182 66
______ ______ ______
Oil Products:
Refining:
World outside USA 66 213 46
USA 127 179 1,290
______ ______ ______
193 392 1,336
______ ______ ______
Marketing:
World outside USA 115 520 206
USA 39 1,952 599
______ ______ ______
154 2,472 805
______ ______ ______
Chemicals:
World outside USA 24 78 56
USA 66 127 66
______ ______ ______
90 205 122
______ ______ ______
Other segments 41 163 163
______ ______ ______
TOTAL CAPITAL EXPENDITURE 2,175 5,676 4,081
______ ______ ______
Exploration expense:
World outside USA 139 208 95
USA 84 69 73
______ ______ ______
223 277 168
______ ______ ______
New equity investments in associated companies:
World outside USA 119 258 38
USA 24 75 184
______ ______ ______
143 333 222
______ ______ ______
New loans to associated companies 196 66 160
______ ______ ______
TOTAL CAPITAL INVESTMENT* 2,737 6,352 4,631
______ ______ ______
*comprising
Exploration and Production 1,707 2,553 1,759
Gas and Power 289 336 83
Oil Products 355 2,930 2,332
Chemicals 149 304 134
Other segments 41 163 163
New loans to associated companies 196 66 160
______ ______ ______
2,737 6,352 4,631
______ ______ ______
Special items (Note 4)
$ million
Q1 Q4 Q1
credits/(charges) 2003 2002 2002
Exploration and Production:
World outside USA
Asset disposals/impairment - (135) 14
USA
Asset disposals/impairment - - 101
______ ______ ______
- (135) 115
______ ______ ______
Gas and Power:
World outside USA
Asset disposals/impairment 1,036 (4) -
USA
Asset disposals/impairment - (105) 38
______ ______ ______
1,036 (109) 38
______ ______ ______
Oil Products:
World outside USA
Restructuring and redundancy - (44) (31)
Asset disposals/impairment - (19) (26)
USA
Restructuring and redundancy - (13) -
Asset disposals/impairment - (53) -
Other - (10) (23)
______ ______ ______
- (139) (80)
______ ______ ______
Chemicals:
World outside USA
Asset disposals/impairment - (23) -
USA
Asset disposals/impairment - (17) -
Other - (12) -
______ ______ ______
- (52) -
______ ______ ______
Other industry segments:
Asset disposals/impairment - (21) -
______ ______ ______
- (21) -
______ ______ ______
Minority interests:
Asset disposals/impairment - - 11
______ ______ ______
- - 11
______ ______ ______
______ ______ ______
SPECIAL ITEMS 1,036 (456) 84
______ ______ ______
Adjusted CCS earnings by industry segment
$ million
Q1 Q4 Q1
2003 2002 2002 % *
Exploration and Production:
World outside USA 2,307 1,601 1,192 +94
USA 735 503 263 +179
Asset retirement obligations (255)
______ ______ ______
2,787 2,104 1,455 +92
______ ______ ______
Gas and Power:
World outside USA 436 266 256 +70
USA 34 39 (40) -
______ ______ ______
470 305 216 +118
______ ______ ______
Oil Products:
World outside USA 929 572 439 +112
USA 127 (85) 2 -
______ ______ ______
1,056 487 441 +139
______ ______ ______
Chemicals:
World outside USA 196 227 95 +106
USA (211) (47) (20)
______ ______ ______
(15) 180 75 -
______ ______ ______
Other industry segments (40) (1) (41)
______ ______ ______
TOTAL OPERATING SEGMENTS 4,258 3,075 2,146 +98
______ ______ ______
Corporate:
Interest income/(expense) (259) (285) (115)
Currency exchange gains/(losses) (10) 83 (7)
Other - including taxation 1 (13) (52)
______ ______ ______
(268) (215) (174)
______ ______ ______
Minority interests (76) (78) 21
______ ______ ______
ADJUSTED CCS EARNINGS 3,914 2,782 1,993 +96
______ ______ ______
* Q1 on Q1 change
Proforma earnings per share (Note 8)
Q1 Q4 Q1
2003 2002 2002
ROYAL DUTCH
Net income per share (euro ) 1.43 0.67 0.74
Net income per share ($) 1.54 0.67 0.65
CCS earnings per share ($) 1.50 0.67 0.59
Adjusted CCS earnings per share (euro ) 1.05 0.80 0.65
Adjusted CCS earnings per share ($) 1.13 0.80 0.57
SHELL TRANSPORT
Net income per share (pence) 13.8 6.1 6.5
Net income per ADR ($) 1.32 0.57 0.56
CCS earnings per ADR ($) 1.29 0.58 0.51
Adjusted CCS earnings per share (pence) 10.1 7.3 5.7
Adjusted CCS earnings per ADR ($) 0.97 0.69 0.49
Notes
NOTE 1. Accounting policies
US accounting standard FAS 143 is effective for the Group from the first
quarter, 2003 and requires that an entity recognises the discounted ultimate
liability for an asset retirement obligation in the period in which it is
incurred together with an offsetting asset. The cumulative effect of the change
has been included within net income for the first quarter, 2003.
In addition, in the first quarter, 2003, the Group completed the
implementation of US accounting guidance EITF Issue No. 02-03, which includes
the requirement that gains and losses on certain derivative instruments be
shown net in the Statement of Income. Certain prior period amounts have been
reclassified, resulting in a reduction in sales proceeds and a corresponding
reduction in cost of sales.
In all other respects the Group's accounting policies are essentially
unchanged from those set out in Note 2 to the Financial Statements of the Royal
Dutch/Shell Group of Companies in the 2002 Annual Reports and Accounts on pages
58 to 60.
NOTE 2. "Non-Generally Accepted Accounting Principles (GAAP)" financial
measures
The United States Securities and Exchange Commission (SEC) recently issued
final rules entitled "Conditions for Use of non-GAAP Financial Measures",
including Regulation G on disclosures, implementing certain requirements of the
Sarbanes-Oxley Act.
Presentation of non-GAAP financial measures, including Special items, will
be under continued review by the Group in the light of the developing guidance
on the application of the SEC Regulation G.
NOTE 3. Earnings on an estimated current cost of supplies (CCS) basis
On this basis, cost of sales of the volumes sold in the period is based on
the cost of supplies of the same period (instead of using the first-in
first-out (FIFO) method of inventory accounting used by most Group companies)
and allowance is made for the estimated tax effect. These earnings are more
comparable with those of companies using the last-in first-out (LIFO) inventory
basis after excluding any inventory drawdown effects. The adjustment from net
income on to an estimated current cost of supplies basis has no related balance
sheet entry.
NOTE 4. Special items
Special items are those significant credits or charges resulting from
transactions or events which, in the view of management, are not representative
of normal business activities of the period and which affect comparability of
earnings. With effect from the first quarter, 2003, certain items which would
have been treated as special items under previous practice have not been so
treated, in line with SEC Regulation G, on the grounds that items of a similar
nature have occurred, or could occur, within a two-year period.
NOTE 5. Return on average capital employed (ROACE)
The Group's preferred measure of return on capital is on a CCS basis. The
nearest equivalent GAAP measure is the "net income" basis.
ROACE on a net income basis is the sum of the current and previous three
quarters' net income plus interest expense, less tax and minority interest
(both calculated at the average rate for the Group), as a percentage of the
average of the Group share of closing capital employed and the opening capital
employed a year earlier.
In the calculation of ROACE on a CCS earnings basis, the sum of the current
and previous three quarters' net income is replaced by the sum of the current
and previous three quarters' CCS earnings, and total interest expense is
replaced by Group companies' interest expense only. The tax rate and the
minority interest components are derived from calculations at the published
segment level.
NOTE 6. Earnings by industry segment
Operating segment results exclude interest and other income of a
non-operational nature, interest expense, non-trading currency exchange effects
and tax on these items, which are included in the results of the Corporate
segment, and minority interests.
NOTE 7. Statement of cash flows
This statement reflects cash flows of Group companies as measured in their
own currencies, which are translated into US dollars at average rates of
exchange for the periods and therefore excludes currency translation
differences except for those arising on cash and cash equivalents.
NOTE 8. Proforma earnings per share
Group net income is shared between Royal Dutch and Shell Transport in the
proportion of 60:40 (as described in the Royal Dutch and Shell Transport 2002
Annual Reports and Accounts in Note 1 on page 58). For the purposes of these
proforma calculations, Group CCS earnings and adjusted CCS earnings are also
shared in the proportion 60:40.
For Royal Dutch and Shell Transport, earnings per share in euro and
sterling respectively are translated from underlying US dollars at average
rates for the period.
In the first quarter 2001, Royal Dutch and Shell Transport each commenced a
share buyback programme under authorisation granted at shareholders' meetings
in May 2000. All Shell Transport shares bought as part of this programme are
cancelled immediately. Royal Dutch shares bought as part of this programme can
only be cancelled in arrears after such a resolution has been passed at the
General Meeting of Royal Dutch shareholders. The last such resolution was on
April 23, 2003 for shares bought under this programme since the previous
General Meeting. For the purpose of earnings per share calculations all shares
bought under the share buyback programme are deemed to have been cancelled upon
the day of purchase.
Earnings per share calculations are based on the following weighted average
number of shares:
Q1 Q4 Q1
2003 2002 2002
Royal Dutch shares of euro 0.56 (millions) 2,083.5 2,083.7 2,100.6
Shell Transport shares of 25p (millions) 9,667.5 9,668.3 9,744.4
Shares at the end of the following periods are:
Q1 Q4 Q1
2003 2002 2002
Royal Dutch shares of euro 0.56 (millions) 2,083.5 2,083.5 2,099.9
Shell Transport shares of 25p (millions) 9,667.5 9,667.5 9,741.2
One American Depository Receipt (ADR) or New York Share is equal to six 25p
Shell Transport shares.
All amounts shown throughout this report are unaudited.
END