Royal
Dutch/Shell first quarter performance and buy back program
Posted: 28 April 2004
The Royal Dutch/Shell Group of Companies reported first quarter
results for 2004 with reported net income of $4.4 billion. Reported
net income in the same period a year ago included a special credit
for the sale of the shareholding in Ruhrgas and a credit for asset
retirement obligations of some $1.3 bln in total, and as a result
year on year reported net income declines by 16 per cent. Excluding
these items in 2003, earnings in 2004 improved 9 per cent year on
year.
Mr Jeroen van der Veer, Chairman of The Committee of Managing Directors
of the Royal Dutch/Shell Group of Companies, commented on the results:
“It is good to see that we have continued to deliver satisfactory
results and cash generation despite all the issues relating to reserves.
We have increased our upstream capital investment program because
of higher cost in some of our major projects. We have also switched
investment into short-term payback projects in higher margin areas
and increased our exploration program for this year. At the same
time, current strong oil and gas prices enable us to restart the
share buy back program."
Highlights from the first three months of 2004 include:
Earnings and returns
First quarter results for 2004 reported net income of $4.4 billion.
ROACE over 12 months was 14.3%.
Strong cash generation
Cash flow from operations of over $7.8 billion, helped by a decrease
in working capital, and income from divestments of $1.7 billion
funded the investment program of $3.0 billion and resulted in a
reported gearing of 17.8%.
Share buy back
Royal Dutch and Shell Transport have decided to implement a share
buy back program in 2004 with immediate effect. The program is anticipated
to be around $2 billion for the year 2004. This amount includes
the purchase of shares for hedging of employee share options.
Capital investment
The capital investment budget for the full year is increased predominantly
in Exploration and Production. This reflects increases due to upward
cost pressure in Sakhalin and Bonga, an increase in exploration
expenditure and some short-term pay back opportunities in high margin
areas.
In Sakhalin these cost pressures are significant in dollar terms;
the extent of the necessary budget increase for Sakhalin is being
reviewed as well as potential mitigating measures.
The Bonga project is in the early stages of hook up offshore Nigeria
and start-up is expected to be delayed well into 2005. The full-year
capital investment is expected to be some $14.5 billion to $15.0
billion excluding the minority share of Sakhalin.
Portfolio actions
During the quarter the Group announced a number of completed divestments
including the sale of upstream assets in Thailand and the UK, midstream
gas assets in Germany and onshore crude pipelines in the USA and
the placement of our holding in Sinopec shares in China. Sinopec
remains a valued partner of Shell in various projects under development.
Concluding, Mr van der Veer commented: “Despite the extraordinary
challenges of this quarter our staff have concentrated on running
the business, working hard to deliver operational results and developing
the portfolio of assets and opportunities”.
For more information see www.shell.com/investor
Posted by Richard Price,
Editor Pipeline Magazine
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