Q4 2021 Shell PLC Earnings Call (Q&A)

Speaker 1: I could just ask about CapEx guidance this year, and specifically chemicals and products and the marketing divisions. Both of them look around $5 billion.

Capex guidance, this year, and specifically chemicals and products and the marketing divisions, both of them look around $5 billion.

Speaker 1: obviously depreciations less than half of that number in both. So I did wanted to get a sense of some of the bigger projects or investments or buckets that are in those two businesses this year. It feels pretty high levels of spend and I just want to understand is it biofuels capacity? Is it EV be tortured? When how are you sick? NO.

Obviously depreciations less than half of that number in both so I just wanted to get a sense of some of the bigger projects or investments or buckets that are in those two businesses. This year it feels pretty high levels of spend and I just want to understand is it biofuels capacity is EV Chargers is.

Speaker 1: Is it stations? Obviously there's some M&A potential in there. So if you could just talk about that, please it'd be fantastic. Thank you.

Is it stations, obviously theres some M&A potential in there. So if you could just talk about that please would be fantastic. Thank you.

Speaker 2: Yeah, great. Thank you very much, Phil Oswald. Yeah, indeed, 5000 companies and of course many more coming. Many companies, of course, have been very clear in their minds that they need to get to net zero and are ready to make that pledge. But not necessarily always quite knowing how they will get

Yes, great.

Thank you very much.

Yes, Indeed, 5000 companies and of course, many more coming many companies of course had been very clear in their mind that they need to get to net zero.

And are ready to make that flex, but not necessarily all those quite knowing how to look at.

Speaker 2: What we have been doing as far as I've said before, we reorganized the company and we are now looking into the market on a segment by segment basis, sector by sector basis. At these 5,000 companies

What we have been doing asphalt as I've said before so we reorganized the company and we are now looking into the market on a segment by segment basis sector by sector basis.

5000 companies and more of course are spread over a number of sectors.

Speaker 2: I spread over a number of sectors. So the discussions will be different. If you are talking to an airline, you will have different type of discussions. The way you're talking to a taxi fleet company, or the way you're talking to a tech company. And sometimes, of course, there are quite conventional discussions already. Well, you know, I buy lubricants from you, but I also want to do other things. Okay, you help me. And quite often, of course, it's then a matter of bringing the might of Shell to that customer and say, well, let me listen to your challenges. And let me find out what solution would work.

Discussions will be different if you're talking to an airline you will have different type of discussions I know you're talking to a taxi fleet company. Although you are talking to a tech company and sometimes of course, they are quite conventional discussions already well by lubricants from you, but I also wanted to do a lot of things can you help me.

Right of course, it's been a matter of bringing the might of shell to that customer and say well, let me listen to your challenges and let me find out what solution would work for you.

Speaker 2: Sometimes these discussions, of course, run higher up in the company and all the way up to, of course, in the EVP for that business or the director for that business. And in some cases, I get personally involved talking to the CEO of these companies as well. If you want to do some strategic deal with Amazon, quite often it does require me to also get involved.

Sometimes these discussions of course run higher up in the company and all the way up to of course in <unk>.

EVP for that business or the director for that business and in some cases I get personally involved talking to the CEO of these companies as well.

You want to do some strategic deal, but Amazon quite often it does require me to also get involved.

Speaker 2: And but the discussions are quite often in the discovery. And rather than us telling this solution that we have for you, it is more trying to find out what is the challenge that you need to overcome. And more often than not, we find that we have a formidable range of solutions to bring.

And but the discussion Scott quite often in the discovery and rather than us telling this a solution that we have for you. It is more trying to find out what is the challenge that you need to overcome and more often than not we find that we have a a formidable range of solutions to bring.

Speaker 2: quite often of course then meaning that we also have to take some bold actions by building the supply chain to that customer or seeing the new opportunities like in hydrogen for instance, talking to trucking companies about how hydrogen can help them out.

Quite often of course, then meaning that.

We also have to take some bold actions by building the supply chain to that customer or seeing the new opportunities like in hydrogen for instance, talking to trucking companies about how hydrogen can help them out.

Speaker 2: is great, but it does mean that we still have to deliver on delivering the supply chain of course.

Is great, but it does mean that you still have to deliver on delivering the supply chain of course, so it is a little bit variable it depends a little bit on what type of company and what type of sector, but it is a different type of dynamic the dynamic that we ahead of course, where our first one after 30 years, which was all about.

Speaker 2: So it is a little bit variable. It depends a little bit on what type of company and what type of sector. But it is a different type of dime.

Speaker 2: that the dynamic that we had of course, for our first hundred and thirty years, which was all about we can make these products, how do we sell them? It's just the other way around, and that's what we call customer back.

We can make these products how do we sell them.

Just the other way around and Thats, what we call customer back.

Jessica.

So thank you for the question relating to Capex and our guidance for the year just to make sure everyone's aware we've indicated that.

Speaker 3: So thank you also for the question relating to CAPEX and our guidance for the year just to make sure everyone's where we've indicated that.

Speaker 3: CapEx for 2022, we're looking at $23 to $27 billion. We expect to be on the low end of that.

Our capex for 2022, we're looking at a $23 billion to $27 billion, we expect to be on the low end of that so that's a somewhat of a step up in I think a modest step up from what we are what.

Speaker 3: So that's somewhat of a step up, but I think a modest step up from what we

Speaker 3: what we spent in 2021, around $20 billion. So the first thing to highlight in this is that.

What we spent in 2021 around 20 $20 billion. So the first thing.

To highlight this is that we want to grow our business and then spoke a bit about some of the areas, where we're looking to grow the business, but we wanted to do it in a measured way and we want to maintain the capital discipline that we've established in the company over the last couple of years.

Speaker 3: We want to grow our business and then spoke a bit about some of the areas where we're looking to grow the business, but we want to do it in a measured way. We want to maintain the capital discipline that we've established in the company over the last couple of years.

Speaker 3: We also get a lot more for every dollar we spend, and we certainly want to have that continue going forward as well. In terms of where that money will go and why the stuff that you're seeing in our chemicals and products business,

We also get a lot more for every dollar we spend and we certainly want to have that continue going forward as well in terms of where that that money will go and why the step up that you're seeing and our chemicals and products business.

Speaker 3: as well as our marketing business, as well do you touch on, I think, all of the main points that I would like to raise.

As well as our marketing business I was wondering you touched on I think all of the main points that I would like to raise.

Speaker 3: So in our marketing business, our mobility business, you'll see a step up in relation to our EV business. There's a lot of...

In our marketing business, our mobility business, you'll see a step up in relation to our EV business Theres a lot of great things happening in that business as we expand our charge points around the world. We've made a lot of progress in China. We've made a lot of progress here here in the U K and you know very feeling very good about that business and looking to continue to expand.

Speaker 3: great things happening in that business as we expand our charge points around the world.

Speaker 3: We've made a lot of progress in China. We've made a lot of progress here in the U.K. And we're feeling very good about that business and looking to continue to expand that business to meet our ambitious targets for the middle of the decade. You also mentioned biofuels. That does show up in our marketing spend as well. We've sanctioned two plants, two HEPA plants.

And that business to meet our ambitious targets for the middle of the decade. You've also mentioned Biofuels that does show up in our marketing spend as well we sanctioned two plants to have the plants. So that we can provide our own sources of biofuels those investments will start kicking in in the next in the next couple of years and as you mentioned as well we are building out our sites.

Speaker 3: so that we can provide our own sources of biofuels. Those investments will start kicking in in the next couple of years. And as you mentioned as well, we are building out our sites in places like China, India, and other markets.

Since like China, India and other markets.

Speaker 3: So, across that spectrum of our marketing business, that's what's contributing to that slightly higher amount of CAPEX being allocated. In our chemicals and products business, the main contributor to that is our finishing up the Pennsylvania Chemicals Project.

So across that spectrum of our marketing business, that's what's contributing to that slightly.

Higher amount of capex being being allocated in our chemicals and products.

Business the main contributor to that is our.

Finishing up the Pennsylvania chemicals project, this year, which should hopefully be up and running by the end of the year and Thats really the primary primarily large piece of capex that you'll see in that part of our business. The rest is mostly around run and maintain we're also doing some energy transition spend in that and that money as long as we try and.

Speaker 3: this year, which should hopefully be up and running by by the end of the year. And that's really the primary, primarily large piece of CAPEX that you'll see in that part of our business. The rest is mostly around run and maintain. We're also doing some energy transition spending that and that money, as well as we try and improve our own scope one and scope two emissions.

Improve our own scope, one and scope two emissions and our chemicals and refining portfolio specifically.

Speaker 2: in our chemicals and refining portfolios specifically. Okay, thanks, Jessica. Thanks, Oswald. Cecilia, who's next?

Okay. Thanks, Jessica Thanks, Oswald Cecilia who is next.

Lithia reinforced from Barclays. Please go ahead.

Speaker 4: Thanks and good afternoon. I have two questions if I could as well. The first one, Ben, on your start of year message you talked about going faster, being bolder, being more daring. Can you help me understand what that actually means in practice and is that different to where you were thinking a year ago?

And that's been a key questions if I could just on the first.

Then on your philosophy, a message he talks about getting faster being bold are being moved adding can you help me understand what that actually means in practice is that different to where you were thinking a year ago.

Speaker 4: And then the second one, just to come back to this idea of energy as a service and the 5,000 companies, is the idea that that helps you build market share, or is it a case of actually, if you're reducing emissions by, let's say, a million tons, that the margin for you would be $10 a ton, so almost trying to think about it as a carbon management business?

And then the second one just to come back to this idea of energy as a service and then 5000 companies is the idea that that helps you build market share or is it a case of actually if you're reducing emissions by let's say 8 million tons that the margin fee would be turned all of a sudden say almost trying to think about it as a carbon management business. Thanks.

Speaker 2: questions, Lydia, and thanks for reading my notes. I always read yours as well, of course. Bolder and faster, I said it in my end-of-year message and, of course, also very much meant for the staff in Shell.

Great questions and thanks for reading My notes I always breeds yours is about of course.

Bolder and faster I said it in my end of your MSA turnover scores also very much meant for the staff and shell.

Speaker 2: Why did I say that? Well, you know, we have tremendous opportunities in this.

Why did I say that well it.

Have they have tremendous opportunities in this energy transition.

Speaker 2: But that do require perhaps a slightly different mindset. I talked earlier on about, you know, discussing the back and we'll talk about it in a moment.

But that do require perhaps a slightly different mindset I talked earlier on about discuss them a backend will talk about in a moment as well.

Speaker 2: But it also means that people have to think different about what is the opportunity and what risk and how do I take that risk and tell it.

But it also means that people have to think differently about what is the opportunity and what risk and how do I take that risk intelligently.

Speaker 2: And let me just give you two examples. So, take for instance, hydrogen. If we want to build a new

Let me just give you. Two example, so take for instance, hydrogen if we wanted to build a new hydrogen plant.

Speaker 2: You can't take the conventional approach of just saying let's do some analysis about market developments in this area and how can we build this up and what will happen etc. The market isn't there.

You can't take the conventional approach of just saying, let's do some analysis about market development in this area and how can we build this up and what will happen et cetera. The market isn't that so it doesn't mean that we then can adopt a bill within that will come after stuart's no not entirely but maybe a little bit.

Speaker 2: So does it mean that we then can adopt a build it and level come attitudes. No not entirely but maybe a little bit. Maybe we have to understand can we shape that market as it comes into being. What risks can we take as this market is building up. What do we do with the hydrogen before all these customers start showing up with the hydrogen trucks if that is what we are aiming for.

Maybe we have to understand can be shaped up market as it comes into being what risks can be take as this market is building up what do we do with the hydrogen before these customers start showing up with a hydrogen trucks. If that is what we are aiming for that particular facility. So you need to have a slightly different mindset, you talked about customers getting to <unk>.

Speaker 2: So you need to have a slightly different mindset. We talked about customers getting to net zero. Sometimes these discussions we have with customers about what do you need? What can we do for you? But also bring things out where we just say, well, yes, I think we can do that. We don't have that ready or handy for you, but we're happy to commit.

Net zero, sometimes these discussions discussions we have with customers about what do you need what can we do for you, but also bring things out, but I would just say well, yes, I think we can do that we don't have that ready or handy for you, but we're happy to commit to it.

Speaker 2: And that doesn't mean that we basically go short on everything. We can't do that either. But you can take intelligent risks and say, OK, fine, we're ready to commit that. Let's work with a customer. How are we going to build that supply chain for that particular opportunity or customer need? And as I said, sometimes that requires a different sort of way of dealing with the challenges, the opportunities, the risks.

And that doesn't mean that we basically go short on everything he can do that either but you can't take intelligent risks and say, okay. Fine we're ready to commit that let's work with customer how are we going to build that supply chain for that particular opportunity or customer need and as I said, sometimes that requires a different sort of.

Way of dealing with the challenges and opportunities the risks than we are used to of course and shall we say somewhat old world that we basically had more conventional planning tools.

Speaker 2: than we are used to, of course, in, shall we say, a somewhat old world where we basically had more conventional planning.

Speaker 2: Now, on your second question, which is very much related to it.

On your second question, which is very much related to it Lydia.

Speaker 2: Yeah, if we if we provide energy as a service or if we do customer back indeed it does mean that we develop new types of customers as well. Does it mean that our share can grow? Maybe in some cases, yes, absolutely. But I predominantly still look at that as basically high grading the quality of our portfolio of customers and products.

Yeah, if we.

If we provide energy as a service or if you do customer back.

Indeed, it does mean that we develop new types of customers as well it doesn't mean that our shack and grow maybe in some cases, yes, absolutely, but predominantly still look at that as basically high grading the quality of our portfolio of customers and products.

Speaker 2: In years to come, we will find that we have to put real carbon constraints on the product.

In years to come we will find that we have to put real carbon constraints.

On the product portfolios that you've put out there and we have to find good ways and we are finding good ways. Therefore to reform the demands that we're serving from a higher carbon demand to a lower carbon demand while at the same time actually upgrading the cash flows as well that is what the energy challenge is all about.

Speaker 2: And we have to find good ways, and we are finding good ways, therefore, to reform the demands that we are serving from a higher carbon demand to a lower carbon demand, while at the same time actually upgrading the cash flows as well. That is what the energy challenge is all about for us.

Speaker 2: And therefore, making sure that people look at these opportunities, upgrade opportunities, is as important, if not more important, than simply growing market share. But probably a little bit of both will happen. Because before the market will completely transition to a low carbon market, it will just be adding low carbon demand onto the existing demand as well. So it's a little bit of both. But for me, the high grading, Lydia, is the more important objective to pursue. Thank you very much.

For us and therefore, making sure that people look at these opportunities upgrade opportunities is as important if not more important than simply growing market share, but it probably a little bit of both will happen because before the market will complete the transition to a low carbon markets. It will just be adding low carbon demand.

Onto the existing demand as well so it's a little bit of both but for me to high grading Lydia is the more important objective to pursue.

Thank you very much and see you kind of have the next question. Please.

Speaker 5: The next question is from Martin Rotz from Morgan Stanley . Please go ahead.

The next question is from Martin Rats from Morgan Stanley . Please go ahead.

Speaker 6: Yeah and thanks for taking my question. The first one I wanted to ask is, well it's much more practical, so we've seen huge rises of course in JKM LNG prices and I know that historically your LNG portfolio is largely built around oil indexed contracts with S-curves that we don't really know, but nevertheless there is still a significant chunk that is on the spot basis and we've seen a strong beat of course in integrated gas.

Yeah. Thanks for taking my question.

The first one I wanted to ask as well it's much more practical.

So we've seen huge rises of course in jae Kim LNG prices.

I know that historically your LNG portfolio is largely built around oil indexed.

Contracts with S curves that we don't really know.

Nevertheless, there is still a significant chunk that is on the spot basis, and we've seen a strong beat of course in integrated gas.

Speaker 6: the rise in JQM is so large that it's sort of not around any error anymore. So I was hoping you could provide perhaps some commentary about like how, if this is sustained and.

The rise in Jae Kim is so large that it's sort of not.

So rounding error anymore. So I was hoping you could provide perhaps some commentary about like if this is sustained.

Speaker 6: forward curves does suggest that. How is this going to feed through into earnings over the next couple of quarters? I'd be most interested in that. And then secondly, I simply wanted to ask your assessment of how you see the recovery in oil and gas demand ongoing as in.

The forward curve still suggest that.

How is this going to feed through into into earnings over the next couple of quarters I'd be most interested in that and then secondly.

I simply wanted to ask your assessment of how you see the recovery in oil and gas demand ongoing as in.

Speaker 6: You often sit on more real-time data than many of us. What is your assessment of?

You often settle more realtime data than many of us.

What is your assessment of how demand is coming back as well as coming back, whereas it's accelerating whereas its stalling I was hoping you could say a few things from a macro perspective, yes.

Speaker 6: how demand is coming back, is not coming back, where is it accelerating, where is it stalling? I was hoping you could say a few things from a macro perspective.

Speaker 2: Yeah, thanks, Martijn. Let me start with the second question. Jessica will take the first.

Yes, Thanks My time.

Let me start with your second question Jessica will take the first one.

Speaker 2: I think recovery of foreign gas demand of course is very much in evidence if you just look at how far

I think recovery of foreign guests amount of course is very much in evidence. If you just look at how fast.

Speaker 2: particularly the east, of course, has recovered. It's, uh, it is.

Particularly the east of course is recovered.

It is you can say it's booming.

Speaker 2: can say it's booming. It's a 12 percent rise in gas demand in China. Tremendous pull there for also for LNG. And of course many of these things have to do with just the tail end of the pandemic.

A 12% rise in gas demand in China.

A tremendous pool Gulf. We're also for LNG and of course, many of these things have to do with just the tail end of the pandemic.

Speaker 2: But then, of course, also the drive for decarbonisation, which I think we will see more and more of. And a very important part of decarbonisation is conversion of coal-fired power to gas-fired power. But also, of course, industry, residential heating, et cetera, many of the demand drivers is not just...

But then of course also the drive for Decarbonization Rich I think we will see more and more of and a very important part of decarbonization is conversion of coal fired power to gas fired power, but also of course industry residential heating et cetera, many of the.

The demand drivers is not just LNG or gas for power generation two thirds is actually non power generation and therefore general.

Speaker 2: LNG or gas for power generation. Two thirds is actually non-power generation and therefore general economic activity is also driving.

E Commerce economic.

Activity is also driving a significant part of it.

Speaker 2: I think the factor that stays behind a little bit, I would say is more in the liquid side, so it is...

I think the same so that stays.

Behind a little bit I would say, it's more on the liquid side. So it's it is.

It is still aviation.

I think many of the other liquid sectors road transport shipping.

And we see actually quite quite a few constraints and if you look at the overall liquids demand of course, you'll see my time that it is that is largely sort of restore two to where it was from before the pandemic.

Speaker 2: I think the big point, of course, is not so much the demand recovery, it is actually how supply is lagging.

The Big point of course is not so much the demand the demand recovery. It is actually how supply is lagging because in the meantime of course the industry has.

Speaker 2: Because in the meantime, of course, the industry has, with capital discipline, but also to preserve financial resilience, been quite parsimonious.

With capital discipline, but also to preserve financial resilience.

Been quite parsimonious with investments.

Speaker 2: And as a result of it, we actually see a significant struggle for supply to keep up with demand. And I think that is going to be with us for some time to come. Jessica?

And as a result of it.

<unk> actually see a significant struggle for supply to keep up with demand.

I think that is going to be with us for some time to come.

Jessica.

Great.

My time in terms of the.

Speaker 3: the LNG industry today and what we should be expecting going into the first quarter.

The LNG industry today, and what we should be expecting going into the first quarter.

Indeed I am.

Speaker 3: An absolute standout quarter for our LNG business in the fourth quarter.

Standout quarter for our LNG business in the fourth quarter.

Speaker 3: Really great to see what that business, the portfolio, and the capabilities of our trading and optimization team can deliver in these circumstances.

Really great to see what that business the portfolio and the capabilities of our our trading and optimization team can deliver in these circumstances. It is relatively unprecedented both in terms of the absolute level of prices have achieved but importantly also the duration in which these high levels of prices have been maintained.

Speaker 3: It is relatively unprecedented, both in terms of the absolute level that prices have achieved, but importantly also the duration in which these high levels

Speaker 3: of prices have been maintained in the industry. So that's really unprecedented.

And in the industry, so that's really unprecedented.

Speaker 3: There's reason to believe that some of those dynamics could continue for the reasons that Ben had just mentioned. There are genuine supply issues that are being felt across the energy system. And that does put pressure on gas prices. We're certainly seeing that in Europe and in LNG specifically. And that could continue for some time in terms of into the first and second quarter.

There's reason to believe that some of those dynamics could continue for some for the reasons that Penn had just mentioned there are genuine supply issues that are being felt across the energy system and that does put pressure on gas prices. We're certainly seeing that in Europe and in LNG, specifically and that could continue for some time in terms of into the first and second quarter.

Speaker 3: In terms of shelves specifically, we managed extremely well during the fourth quarter. Some of the supply issues that we had in the third quarter continued to the fourth quarter, but the team worked hard in terms of managing some of those risks. I think learned a bit from the third quarter and that learning from the third quarter and the innate power of our portfolio. And as I said, the capabilities really came through.

In terms of shelf, specifically, we managed extremely well during during the fourth quarter. Some of the supply issues that we had in the third quarter continued through the fourth quarter, but the team worked hard in terms of managing some of those those risks.

Learned a bit from the third quarter and that.

Learning from the third quarter MD&A power of our portfolio and as I said the capabilities really came through.

Speaker 3: going from almost 2 billion of earnings to 4 billion of earnings over that quarter.

Going from almost almost 2 billion of earnings to 4 billion of earnings over that quarter.

Speaker 3: Was was realized in two parts of the business. Part of that came through the asset side of the business and the other piece from the trading optimization side of our business. So it's not just an.

Was.

It was realized in two parts of the business part of that came through the asset side of the business and the other piece from the trading the optimization side.

Side of our business. So it's not just an entirely trading story that youre seeing in those earnings. It's also the positive effect of the macro environment on our assets as well and so that that should continue the trading and the optimization piece is a bit harder to predict it is very dependent on the circumstances in the market and the timing of cargoes et cetera.

Speaker 3: an entirely trading story that you're seeing in those earnings. It's also the positive effect of the macro environment on our assets as well. And so that should continue. The trading and the optimization piece is a bit harder to predict. It's very.

Speaker 3: dependent on the circumstances in the market and the timing of cargo, et cetera. Again, the team did a stellar job in the fourth quarter of really optimizing that. I'm optimistic that that can continue through the first quarter, but we still do have some supply challenges that we're continuing to manage. I think most of those will be behind us by the end of Q2.

Again, the team did a stellar job in the fourth quarter of really optimizing that I'm optimistic that that can continue through the first quarter, but we still do have some supply challenges that we're continuing to manage I think most of those will be behind us by the end of Q2.

Speaker 3: So I think there's favorable conditions for the first quarter, certainly from our asset perspective.

So I think there is favorable conditions for the first quarter certainly for from our asset perspective.

Speaker 3: The trading side, again, I think we proved our strength in Q4, and I hope the team can achieve.

On the trading side again, I think we proved our strength in Q4 and I hope the team can can achieve perhaps not quite the same level, but.

Speaker 3: Perhaps not quite the same levels, but almost the same levels in the first quarter. I think the conditions are there. I will point out though, there's two things that are playing out in the first quarter. We have maintenance and parole in the first quarter, so please keep that in mind. And of course, prayleud, we're bringing that back online after having a power interruption issue in the last quarter.

Almost the same levels in the first quarter I think the conditions are there I will point out though there's two things that are that are playing out in the first quarter, we have maintenance and pearl in the first quarter. So please keep that in mind and of course prelude we're.

Bringing that back online after having a power interruption issue in the last quarter.

Speaker 2: Okay, thanks, Martijn. And bear in mind also, of course, that in February , we will do our annual LNG update while we'll be hosting it together with Steve. So please reserve some questions for them as well.

Okay. Thanks.

Bear in mind also of course that in February we will do.

Annual LNG update wild well be hosting a together with Steve. So were please proceed up some questions for them as well.

Cecilia Who's next.

Speaker 5: Faraj Bukhataria from RBC, your line is open.

Barrage book Cataria from RBC Your line is open.

Speaker 7: Hi, thanks for taking my questions. The first one's on the buyback. On an underlying basis, excluding the Permian proceeds, it looks like you're at the top end of the 20% to 30% payout on cash flow, using the last four quarters as a reference point, I suppose.

Alright, thanks for taking my questions.

One is on the on the buyback on a underlying basis, excluding the Permian proceeds.

The top end of the 20% 30%.

Hey on cash flow.

Using the last full quarters as referenced I suppose if the macro holds the cash flow numbers move up but can you comment on your thinking on.

On how you're deciding where you fit in that 20%, 30% range, presumably that will keep moving lower for the balance sheet is not a constraint, but I'm just trying to understand how you as a management team and our board thinks.

how you as a management team and a board are thinking about it.

Thinking about it.

And then the second question is actually on your balance sheet, you're sitting on $36 billion of cash and I think you've prepaid some debt in the fourth quarter, which resulted in some penalties, but I suppose in the grand scheme of things still made sense. But just conceptually, sitting on that much cash in this environment seems a little bit odd. So I'm just trying to understand your thinking there and whether we should expect any early repayments for 2022.

And then the second question is actually on the on your balance sheet, you're sitting on $36 billion of cash and I think you've we prepaid some debt in the fourth quarter, which resulted.

It resulted in some penalties penalties, but I.

I suppose in the Grand scheme of things still makes sense, but just conceptually.

Conceptually sitting on that much cash.

In this environment it seems a little bit odd so I'm just trying to understand your thinking there and whether we should expect any early repayments for 2022.

Yes, thanks, Biraj. I'll bite off the top end, and then most of it will be answered by Jessica. I think you worked out a percentage correctly. It's when we said that it's higher up in the range. It's somewhere between 10th, 29th and 30th. So well done there. And of course, you have to bear in mind, this particular financial framework was set out when there was a different outlook that we were facing.

Yes, thanks barrage.

A bite off the top and then most of it will be answered by Jessica I think you worked out the percentage correctly. It's finished it's higher up into a range of somewhere between 10, and 29% 30, so well done there.

And of course, you have to bear in mind. This particular financial framework was set out when there was a different outlook.

Facing so let's let's first of all deliver that the first half of the year, we've been very clear about what we want to do.

So let's first of all, deliver that first half of the year. We've been very clear about what we want to do. Also bear in mind, of course, at this stage, buying back four billion, the quarter is probably sort of the maximum run rate that we can do. Unless we ask for permission to also buy off-market.

Also bear in mind of course at this stage.

Buying back 4 billion the quarter was broadly sort of the maximum run rate that we can if we can do unless we ask for permission to also buy off market.

which is something that we are indeed considering. And then let's indeed take a look on how things play out, whether the upper limit is still the right way to think about it. We have said we will pay out on a historical basis. We don't pay our prospective cash, we pay out cash that we have earned. And I think therefore it's appropriate for you to just wait a little bit until we are at the cost of QQ2 and we come back.

Which is something that we are indeed considering.

And then you take a look on how things play out.

That upper limit is still the right way to think about it and we have said we will pay out on a historical basis. So we don't pay our prospective cash we pay out cash that we have earned and I think therefore, it's appropriate for you to just wait a little bit until we are at the cusp of Q2, and we come back to you.

What's going to happen next but Jessica quite a few more questions announce it so why don't you take that.

But Jessica, quite a few more questions and answers. So why don't you take that? Thanks, thanks, Ben. And thanks for our eye.

Thanks Ben.

Thanks Raj.

Indeed, so 2021 was an exceptional year for us in terms of cash generation.

So 2021 was.

And an exceptional year for us in terms of cash generation and.

$55 billion of CFFO excluding working capital.

$55 billion of CFO , excluding working capital $40 billion of free cash flow of $27 billion of organic free cash flow. These are obviously material amounts being generated by the company reflection of the strength of our portfolio the strength of our operational excellence and our performance really coming through particularly in IGN upstream in the last quarter.

40 billion of free cashflow, 27 billion of organic free cashflow. These are obviously material amounts being generated by the company, reflection of the strength of our portfolio, the strength of our operational excellence, our performance really coming through, particularly in IG and upstream in the in the last quarter.

That has put us in a very different place than where we were just a year ago. We've paid down our debt by some $23 billion. I can honestly say we didn't anticipate that.

And that has put us in a very different place than where we were just a year ago, we've paid down our debt by some $23 billion I can honestly say, we didnt anticipate that we were still in the forties in terms of Brent prices as we were leaving 22020 and so we're in a very very different place than we expected a very strong place financially and so that.

still in the 40s in terms of Brent prices as we were leaving 2020. And so we're in a very, very different place than we expected, a very strong place financially. And so that does.

We've said a different context in terms of how these decisions are being made, whether it be the level of share buybacks, our tap ex levels and the balance sheet levels. I think the balance sheet right now is very strong. We're comfortable with where it is. So it is less less of a priority. The strength is always a priority, but in terms of needing to allocate just proportionately to balance sheet, I think we can step a bit back from that. And it's more a question of how we want to

Does.

I just had a different context in terms of how these decisions are being made whether it be the level of share buybacks, our capex levels and the balance sheet levels I think the balance sheet right. Now is very strong we're comfortable with where we're at is so it is a less less of a priority. The strength is always a priority, but in terms of needing to allocate disproportionately to balance sheet. I think we can step a bit back from there.

And it's more a question of how we want to.

prudently, appropriately, in a measured way, grow CapEx, and that's why we're at the lower end of the range of 23 to 27. And then the share buyback, which Ben just spoke about, you know, considerable cash being generated, and that's what's really driving the $8.5 billion share buybacks that we've outlined for the first half.

Prudently appropriately in a measured way grow Capex and that's why we're at the lower end lower end of the range of 23 to 27, and then the share buyback, which then just just spoke about.

Considerable cash being generated and that's what's really driving the $8 5 billion dollar share buybacks that we've outlined.

Outlined for the first half.

The level of cash that we have on the balance sheet is a reflection of where we were a year ago and being well prepared to manage any volatility and any risk and ensure the financial resiliency of the company. Again, we weren't anticipating Brent reaching 90 this year and that's what the balance sheet reflects and the cash levels reflect. We did do some early redemption of debt that caused an interest expense.

Okay.

The level of cash that we have on the balance sheet is a reflection of where we were a year ago and being well prepared to manage any volatility in any risk and ensure the financial resiliency of the company again.

Again, we werent anticipating Brent reaching 90 this year and that's with the balance sheet reflects the cash levels reflect we did do some odd.

An early redemption of debt that causes an interest expense that shows up in corporate this quarter, which some of you may have seen it wasn't positive MPV transaction for US we will continue to look at opportunities to optimize the balance sheet optimize our cash levels and if we see similar opportunities and we may remain in fact.

that shows up in corporate this quarter, which some of you may have seen, it was a positive NPV transaction for us. We will continue to look at opportunities to optimize the balance sheet, optimize our cash levels, and if we see similar opportunities, and we may in fact do that, but we'll do that. We'll let you know when that happens rather than kind of indicating that prospectively. But I think hopefully I've given you a sense of some of the considerations that we're making across the spectrum of capital allocation. Thanks Jessica. Thanks, Mirage.

Do that but we'll do that we'll let you know when that when that happens rather than kind.

Kind of indicating that prospectively.

But I think hopefully I've given you a sense of some of the considerations that we're making across the spectrum of capital allocation.

Jessica Thanks barrage Cecilia who is next.

A'ren, a hermona from society general, please go ahead.

Hey, Ryan her Manav from Society Generale. Please go ahead.

Thank you very much and congratulations on these excellent results. My first question relates to what Jessica just talked about.

Thank you very much and congratulations on these excellent results.

My first question relates to what Jessica just talked about.

The capital allocation priority number two, which is not that supportive of graduating. You mentioned that Jessica, that it's not that much of a priority. That's always thinking ahead and in these price environment, you will continue to generate a very substantial free cash flow. We are

The capital allocation priority number two which is supportive of credit rating you mentioned that just because it is not that much of a priority.

Obviously thinking ahead in this price environment, you will continue to generate very substantial free cash flow.

Hum.

We are however.

towards the high end of the cycle, even if the cycle lasts a little bit longer. How should we think about that was my question. How much lower would you want, queering, for example, to be at the top end of the cycle, given that you've managed to reduce it so far last year? My second question was on your approach to, as a disposal.

Towards the high end of the cycle, even if the cycle lasts a little bit longer.

How should we think about that towards my question, how much lower would you want queuing for example to be at the top.

El pen to the cycle.

Given that you've managed to reduce it so far last year. My second question was on your approach to asset disposals.

In this extraordinary price environment, it's quite likely that price views will begin to diverge. Others might see more value in some of your assets than you judge them to be worth to you. So would you contemplate some...

I mean, this extraordinary price environment.

Quite likely that trying to views will begin to diverge others might see.

More broadly some of your assets then you judge them to be worth to you. So would you contemplate some.

other additional sizable asset disposal driven by value creation should someone offer you a good price.

The additional sizable asset disposals driven.

The value creation should someone over your good price.

Thanks, Irina. Let me take the second one. And Jessica, if you talk about net debt and the position in the cycle, which is an interesting perspective as well. Of course, we always look at asset disposals, Irina. We have to take a view on how do we keep our portfolio fresh.

Thanks, Irina let me take the second one and Jessica if you talk about.

Net debt.

And the positioning of the cycle, which is an interesting.

The perspective as well.

Of course, we always look at asset disposals are whenever you have to take a view on how do we keep our portfolio fresh which.

Which are the assets where we believe they are better off in the hands of others? And where do we believe we want to put our new investment dollars? Is that in continuing to harvest the value left in an asset? Or are we better off building a new asset which has longer running rates?

Which are the assets, where we believe they are better off in the hands of others and why do we believe he wanted to put new investment dollars is that in continuing to harvest the value left in an asset or are we better off building, a new assets, which has long a running room.

We always look at it throughout the cycle, we permanently manage a funnel of.

We always look at that throughout the cycle, we permanently manage a funnel of of 10 $20 billion of divestment prospects, which we can activate pull forward pushback, depending a little bit on where we are in the market.

of 10-20 billion dollars of divestment prospects, which we can activate pool-forward pushback, depending a little bit on where we are in the market and the cycle. So yes, you can expect us to continue to work on divestments. Not quite at a $15 billion level, I would say, every year, but across the cycle, work with an average of four billion per year is not a problem.

And the cycle. So yes, you can expect us to continue.

Continue to wear to work on divestments, that's quieted, a $15 billion level I would say.

Every year, but across the cycle work with an average of a $4 billion per year is not a bad place to start.

But indeed, with a very strong macro, it does make sense to think harder. Is this the moment to harvest some of the late life assets that are probably better off in the hands of others? Jessica? Great. Irena, thank you for the question.

But indeed, the day with a very strong macro.

It's it does make sense to think harder is just a moment to harvest some of the late life assets that are probably better off in the hands of others.

Jessica great.

And thank you for the question.

Hi in terms of balance sheet strength and can view the ultimate destination as I mentioned, we're really pleased in terms of the improvement that we've seen on our net debt over 2021 down from 23 billion as I just mentioned.

kind of the ultimate destination. As I mentioned, we're really pleased in terms of the improvement that we've seen on our net debt over 2021, down some 23 billion, as I just mentioned. And so we're much further ahead on that journey than I expected us to be a mere 12 months ago. So we're comfortable with that now.

And so we're much further ahead on that journey than I expected us to be a mere 12 months ago. So we're comfortable with that now a bit more strengthening is not a bad thing. It certainly gives us financial resiliency and flexibility if nothing else than last 12 to 24 months, we've seen how quickly the macro can change from one direction.

A bit more strengthening is not a bad thing. It certainly gives us financial resiliency and flexibility. If nothing else, in the last 12 to 24 months, we've seen how quickly the macro can change from one direction to the other. So I would, well, you know, it all feels quite buoyant right now.

To the other so well it all feels quite buoyant right now.

612 18 months.

From today, we could be in a different position. And of course, that's what we always need to keep in mind with respect to our balance sheet and kind of not get too far ahead of ourselves. So I think we'll look at it quarter by quarter before really making any kind of material adjustments to our capital allocation framework. I think we're in a good place. As I mentioned,

From today, we could be in a different position and of course, that's what we always need to keep in mind with respect to our balance sheet and kind of not get too far ahead of ourselves. So I think we'll look at it quarter by quarter before before really making any kind of material adjustments to our capital allocation framework I think we're in a good place as I mentioned.

The current macro and the current performance of the company will give us you know I think a lot of optionality if you will with respect to shareholder distributions. That's a great place for us to be.

The current macro and the current performance of the company will give us.

A lot of Optionality, if you will with respect to shareholder distributions. That's a great place for us to be on the capital side. It does give us more room to grow capex, but we're we're clear we want to maintain our capital discipline, we want to grow in a measured way we want to prove out business models, while also being bold and ambitious but trying to get that balance right and.

On the capital side, it does give us more room to grow CapEx, but we're clear we want to maintain our capital discipline, we want to grow in a measured way, we want to prove out business models while also being bold and ambitious, but trying to get that balance right. And so, not getting too caught up in the moment when things are really, really high, and similarly not getting too caught up in the moment when things dip down as well. I mean, that's our job. Our job is to work through these.

Not not getting too caught up in the moment when it's.

When things are really really high and suddenly not getting too caught up at the moment when things when things stepped down as well I mean, that's our job our job is to work through these these cycles and I think we're in a great great position right now in terms of managing volatility and importantly, being able to fund the energy transition and help transform the company.

these cycles and I think we're in a great position right now in terms of managing volatility and importantly being able to fund the energy transition and help transform the company.

Thanks Jessica, thanks Irina and Cecilia who will be next.

Thanks, Jessica Thanks, Irina and Cecilia who will be next.

Our next question is from Michaela Dullavenia from Goldman Sachs. Please go ahead.

Our next question is from Makena vignette from.

Goldman Sachs. Please go ahead.

Ben and Jessica, thank you and congratulations. I had two questions. The first one is about the EU green taxonomy. It will start to be applied this year in terms of taxonomy, eligible revenues and investment. I was wondering if you could give us perhaps an early indication of where you think you're likely to score in terms of percentage. They are given how important this is going to be for the ESG strategies of so many European investors.

Ben and Jessica Thank you and congratulations I had two questions.

The first one is about the EU green taxonomy it will stop.

To be applied to D C or in terms of taxonomy eligible revenues in investment I was wondering if you could give us perhaps an early indication of where you think you're likely to score in terms of percentage there given how important this is going to be for the ESG strategies of so many European investors.

And secondly, cost inflation is the theme of the moment. It's emerging across many industries.

Secondly cost inflation is the theme of the moment, it's emerging across many industries. It seems like so far in oil and gas the only area of really material inflation is U S onshore, but I was wondering if perhaps there are other areas that are concerning you at the moment and if we look at your Capex incurred.

It seems like so far in oil and gas, the only area of really material inflation is U.S. onshore. But I was wondering if perhaps there are other areas that are concerning you at the moment. And if we look at your capex increase, which, you know, your guidance is about 15-20% in 2022, how much of that is activity versus price increases? Thank you.

<unk>, which you know your guidance is about.

15, 20% in 2022, how much of that is at TVT versus price increases. Thank you.

Thanks, Mike.

Michaela. I'll take the second one and Jessica will talk about the EU green taxonomy. Yeah we see some price inflation as well. Of course most of the price inflation that is being talked about today is of course in cost of living and clearly driven also by energy prices. If you look into our supply chain though it's a slightly different.

I'll take the second one and Jessica will talk.

Talk about the U.

Greentech ceremony.

Yeah, we see some price inflation as well of course, most of the price inflation.

It's being talked about today is of course in cost of living.

And can be driven also by energy prices. If you look into our supply chain is a slightly different story.

I think probably where we see most of the supply chain cost inflation is actually in the renewable space. So wind turbines significantly up, but also battery cost. We see the raw materials there also being significantly affected by inflation that supply chain. That's something that we are watching very carefully, because of course, quite often you bid on project.

I think probably where we see most of the supply chain cost inflation is actually in the renewable space, So wind turbines significantly up but.

So battery cost you see raw.

Raw materials there.

Also being significantly affected by by inflation that supply chain, that's something that we're watching very carefully because of course quite often you bid on projects.

where you have to take a view on how costs then subsequently will develop.

But you have to take a view on how costs. Then subsequently will develop as well.

And that's probably the most significant part. In other parts of the supply chain, depending a little bit where you look in terms of steel or construction costs, other materials.

That's probably the most significant part in other parts of the supply chain, depending a little bit where you look in terms of steel or construction cost.

All the materials.

Yes, there are inflation percentages, but most of them, if I analyze it a little bit further, it is actually more base year effects. So in other words, we come off a year where we had a lot of cost deflation because of lowering activity, and now you see a little bit of a recovery. So yeah, you may be looking at an 8% rise in cost, but that's off a 7% drop in cost last year. That's most of what we see in the more conventional supply chain.

Yes, there is there are inflation percentages, but most of them if I annualize it a little bit further it is actually more base year effect. So in other words, we come off a year, where we had a lot of cost deflation because of lowering activity and now you see a little bit of a recovery. So yes, you may be looking at an 8% rise in costs, but that's off a.

7% drop in cost last year, that's most of what we see in a more conventional supply chains.

And if I then look at overall, our unit operating costs, we are quite still confident that we can continue to drive costs further down from where we are today. So we don't see that inflationary aspect in the supply chain coming through into our cost of operation.

And if I then look at overall.

Unit operating costs, they are quite still confidence that we can continue to drive costs further down.

From where we are today, so we don't see that inflationary aspect into supply chain coming through into our cost of operations on the project side.

The step up that we are talking about which is a modest step up of course is predominantly activity. So we want to allocate more capital to certain parts of our portfolio that is not cost inflation that is simply because we want to do more and also there we are quite confident that with all the changes that we are pursuing in PMT we can.

<unk> continued to drive down costs. Further we don't think they are back at where we need to be or where we were two decades ago. So also the more running room to come.

need to be or where we were two decades ago. So also there more running room.

on the first question. Yes, so on the EU taxonomy. First of all, I...

On the first question, yes, so on the EU taxonomy first of all I.

As you're likely aware, Michaela, and I know you know the subject well, I've read some of the reports you've written on the EU taxonomy, which I think were quite good, by the way. And I'm going to turn it over to you, Michaela, to talk a little bit more about that.

As youre likely aware Mccann and <unk>.

I know you know the subject well I've read some of the reports you've written on the EU taxonomy testing for quite good by the way.

As a PLC, we're not actually subject to the requirements of the taxonomy, but nonetheless.

As a plc, we're not actually subject to the requirements of the taxonomy, but nonetheless, we have.

We have had a team in place working to prepare disclosures according to the taxonomy.

I've had a team in place working to prepare disclosures according to the taxonomy.

Once again, as you're likely aware, there's a lot of important details that haven't been sorted out, both in terms of the scope of what's in the taxonomy, but also how to actually practically apply some of the concepts.

Once again as you're likely aware, there's a lot of important details that havent been sorted out both in terms of the scope of what's in the taxonomy, but also how to actually practically apply some of the concepts. Nonetheless, we're working through all of that and I would expect there'll be.

Then, unless we're working through all of that and I would expect we'll be providing disclosures on that over the course of 2022 and bringing some of that into our annual report as well. So we're fully committed in terms of making sure we understand the intent of it as well as being able to represent our business in that context. It's another...

We'll be providing disclosures on that over the course of 2022 and bringing a.

Some of that into our annual report as well. So we're fully committed in terms of making sure we understand the intent of it as well as being able to represent our business and in that context.

Other important.

way of describing or understanding how the world needs to move to a green future. It's an important piece of it, but there's a lot of details that need to be sorted. And importantly, we'll have to see how the market responds to it. And if the market thinks this is a good way of considering whether a company is on the right path or not.

Way of describing or understanding how the world needs to move to a green future. It's an important piece of it but there's a lot of details that need to be sorted and importantly, we will have to see how the market responds to it and if the market thinks this is a good way of off considering whether a company is on the right path or not part of the challenge that we have is that.

Part of the challenge that we have is that there's a lot of very worthy efforts out there that are trying to determine whether companies are on the right or wrong side of the greenhouse gas reduction agenda. Of course, we think we're very much on the right side of that and are trying to drive it with our absolute emission targets for scope one and two and our intensity targets where we believe we've taken the full scope into consideration. And we'll continue to report across that breadth.

Theres a lot of very worthy efforts out there that are trying to determine whether companies are on the right or wrong side of the greenhouse gas reduction agenda of course, we think we're very much on the right side of that and they're trying to drive it with our.

Absolute emission targets for scope, one and two in our intensity targets, where we believe we've taken the full scope into consideration.

And we'll continue to report across that breadth.

But as society, we'll have to figure out what's the best way for really assessing a company and a company's performance and taxonomy, I expect will be one of the important considerations in that area.

And but as you know as society will have to figure out what's the best way for really assessing our company and the company's performance and taxonomy I expect will be one of the important considerations in that are in that area.

Thank you very much, Jessica. And maybe another point to bring to bring in here, which I think is is quite important in determining whether a company is Paris compliant or not. Quite often the focus on just capital spend is is just incomplete. It's just inappropriate. It is actually not just a capital spend. It's also the operating cost, because much of our green agenda is much more OPEC denominated than it is CAPEX denominated.

Thank you very much Jessica and maybe another point to bring to bring in here, which I think is quite important in determining what our company is better compliance and it's quite often the focus on just capital spend is is just incomplete. Its just inappropriate. It is actually not just the capital spend it's also the operating costs.

Because much of our green agenda is much more opec's denominated capex denominated and if you add it all up Opex and Capex, we spent about $55 billion a year more than a third of that we actually spend on the green agenda and I think that's an important point to bear in mind as well.

And if you add it all up, OPEX and CAPEX, we spend about $55 billion a year. More than a third of that we actually spend on the green agenda. And I think that's an important point to bear in mind.

But anyway, thanks for the question and more to come on this one. So Cecilia can.

But anyway, thanks for the question and.

More to come on this one so as I sit here can we have the next one please.

Our next question is from Roger Reach from Wells Fargo. Please go ahead.

Our next question is from Roger read from Wells Fargo. Please go ahead.

Yes, and I guess good afternoon, good morning on our side of the pond.

Yes.

Good afternoon, good morning on our side of the pond.

I'd like to keep.

hit on two things. One, a question on execution, just within the existing operations, obviously, you know, we've had things like prelude that have had hiccups. I was just curious, though, as you look across your overall portfolio, and with the, I don't know if I call it above normal, but you know, relatively heavy level of maintenance coming in Q1.

You hit on two things one a question on execution just within the existing operations, obviously, we've had things like prelude.

So I was just curious, though as you look across your overall portfolio and with the.

Don't know if I call it above normal.

Ultimately heavy level of maintenance coming in Q1, how that should be considered and then the second part is to follow up on one of your comments from earlier about real carbon constrained I was just curious what does that really mean to you is it.

how that should be considered. And then the second part is to follow up on one of your comments from earlier about a real carbon constraint. I was just curious.

Global price of carbon is it's piecing together all the regional markets is it.

A tax, a credit, I just, you know, kind of what your thoughts are and what would be the best credit choke.

Attach a credit I'm, just kind of what your thoughts are on what would be the best approach overall.

Yeah, okay, thanks, Roger, and good morning to you. Let me take the second question. Jessica, if you want to take the first one, including the one on Prel, you.

Yep, Okay. Thanks, Roger and good morning to you.

Let me take the second question, Jessica if you want to take the first one including the one on prelude.

I think Roger, I think when I talk about real carbon constraints, it is making sure that we as a business

I think Roger.

Roger I think when I talk about real carbon constrained it is making sure that we as a business can grow our cash flows while at the same time, reducing our carbon footprint.

can grow our cash flows while at the same time reducing our carbon

And sometimes indeed we will be helped by you know a carbon price that may exist in a market where our customers are indeed being encouraged to take low carbon energy products and therefore we can supply them to them and therefore we can decarbonize while still growing our business with them. But in some other areas that may not work.

And sometimes indeed, we will be helped by you know a carbon price that may exist in a market, where our customers R&D being encouraged to take low carbon energy products and therefore, we can supply them to them.

Therefore, we can decarbonize, while still growing our business with them, but in some other areas that may not work like that so take for instance, the example of aviation in my mind, putting a price on a ticket or even putting apprise on jet fuel is just not going to decarbonize. The aviation sector what needs to happen. There is that we will have to have.

So take, for instance, the example of aviation. In my mind, putting a price on a ticket or even putting a price on jet fuel is just not going to decarbonize the aviation sector. What needs to happen there is that we will have to have regional and ideally global mandates on the amount of biojet that needs to be blended into the jet fuel.

Regional and ideally global mandates on the amount of bio jet that needs to be blended into the jet fuel pool, So what I would love to do.

So what I would love to do when this process gets on the way, and of course, we are building our biojet plants and some jurisdictions are indeed now introducing blending mandates, but only small mandates, 5% of biojet by 2030, which is just not enough.

This process gets underway and of course, we are building our buyer jet plants in.

In some jurisdictions R&D now introducing blending mandates, but only.

Small mandates 5% of Biogen by 2030, which is just not enough if you've considered within the bigger scheme of things, but what I would love to do is to give our aviation business with us to grow that business, but with a lower carbon footprint. So you figure out together with your customers. How we are going to bring competitive biofuels to mark.

if you consider it in the bigger scheme of things. But what I would love to do is to give our aviation business the task to grow their business, but with a lower carbon footprint. So you figure out together with your customers, how we are going to bring competitive biofuels to market in a way that they want to buy, need to buy, work together with regulators, making it happen, et cetera.

In a way that they want to buy and need to buy work to kind of regulators, making it happen et cetera et cetera.

A similar story I could tell, for instance, for the heavy-duty trucking sector, where I would love to have a trucking business figuring out how can I grow my business without just selling more diesel. So can we somehow find ways and means to sell bio LNG, hydrogen, biofuels in general, and how do I work together with my customers, and maybe with regulators, depending on which jurisdiction we are working in, to grow that.

The similar store equity for instance for the heavy duty trucking sector, but I would love to have our trucking business figuring out how can I grow my business without just selling more diesel so can be somehow find ways and means to sell bio LNG.

Hydrogen.

Biofuels in general and how do I work together with my customers and maybe with regulators, depending on which jurisdiction. We are working to grow that business. So at this point in time. It is a shift from well if the opportunity is that we may actually take advantage from it.

So at this point in time, it is a shift from, well, if the opportunity is there, we may actually take advantage from it to how do I make sure that this opportunity will come? I'm the one shaping it, and I'm actually the one building the customer loyalty and the solution space and the infrastructure very early on in the journey so that we have a look in of future profitability.

How do I make sure that this opportunity will come under one shaping it and im actually the one building customer loyalty and the solution space and the infrastructure very early on in the journey. So that we have looking or future profitability that is what our strategy is all about when it comes to pursuing that zero and we have this strategy.

That is what our strategy is all about when it comes to pursuing net zero and we have this strategy on a sector by sector basis because it will be different again sector by sector.

On a sector by sector basis, because it will be different again sector by sector.

I hope it helps a little bit Roger, but I'm sure we will be coming back to this in future calls as well. Jessica, operational. Hi, good morning Roger.

I hope it helps a little bit Roger but I am sure we will be coming back to this in future calls as well Jessica operational.

Good morning, Roger.

In terms of operational performance, operational excellence is a priority for all of our businesses across Shell and you would find for every business, every asset, there is an ambition to move to top core tile performance to the extent that they're not already there. So that is a clear focus for our business. It's one of the main drivers of value. And you saw that commitment to operational excellence in our numbers in the fourth quarter, particularly in our upstream business.

In terms of operational performance operational excellence is a priority for all of our businesses across shell and you would find for.

Every business every asset there is a an ambition to move to top quartile performance to the extent that they are not already there. So that is a clear focus for our business. It's one of the main drivers of value and you saw that commitment to operational excellence in our numbers in the fourth quarter, particularly in our upstream business.

What you see is earnings and cash generation that are much higher than they were, say, just a few years ago in a comparable price environment. And there's a portfolio piece to that, our value over volume strategy coming into the four that's contributing to that outcome. But importantly, it's been a focus across all of our assets to really get the most out of out of the performance.

What you see is earnings and cash generation.

That are much higher than they were say just a few years ago, and a comparable price environment and theres a portfolio piece to that our value over volume.

<unk> strategy coming coming into the fore that's contributing to that outcome, but importantly, its been a focus across all of our assets to really get the most out of our out of the.

<unk> and <unk>.

The recovery from Ida in the Gulf of Mexico, which I mentioned in the video, I think is an excellent example of the capability of Shell to deal with extraordinary kind of unplanned events and bring those assets.

The recovery from Ida in the Gulf of Mexico, which I mentioned and in the video I think is an excellent example of the capability of shell to deal with extraordinary kind of unplanned events and bring those assets back online safely.

back online safely, on time, and under the expected cost of recovery.

On time and under the expected cost of recovery. Similarly in IAG very strong performance across the <unk>.

Similarly in IG, very strong performance across the portfolio. The challenges we've had in IG have largely been around gas supply, which is different than kind of an operational performance issue, and it's been primarily from third parties. So it's not really Shell per se. We own it. We've got to fix the problem. But it's not a kind of operational excellence issue for us.

Ross the portfolio. The challenges we've had in Iga have largely been around gas supply, which is which is different than kind of an operational performance issue and it's been primarily from third parties. So it's not really shell per say, we own it and we've got to fix the problem, but it's not a kind of operational excellence issue for us.

in IG specifically. Now there's a couple other pieces to that in terms of performance. It's not all perfect. And so Prelude, we had an event in the fourth quarter and an electric event that was very kind of.

And specifically, there's a couple of other pieces to that in terms of performance, it's not all perfect and.

And so pray live we had a we had an event in the fourth quarter and an electric event that was very kind of specific it was not kind of a process issue or kind of a wider operational issue is kind of equipment failure that will take us some time to work through and get that back online and get that back online safely safety is always the first.

specific it was not kind of a process issue or kind of a wider operational issue is kind of equipment failure That will take us some time to work through and get that back online and get that back online safely Safety is always the first priority in terms of responding to occurrences like this

Priority in terms of responding to occur.

Occurrences like this but I'd say on the whole those types of issues across our portfolio have been declining over over the last few years. If you think about the first quarter of 2021 and some of the maintenance that you referred to whats happening. There is we have in Pearl a scheduled turnaround it was completely a plant that's norm.

But I'd say on the whole, those types of issues across our portfolio have been declining over the last few years. If you think about the first quarter of 2021 and some of the maintenance that you referred to, what's happening there is we have in PERL a scheduled turnaround. It was completely planned. That's normal for that asset. So there's nothing extraordinary there. I've mentioned Prelude and getting that up and running.

<unk> for that asset. So there is nothing nothing extraordinary there I've mentioned prelude and getting that up and running and then we have in our refining business Norco, which was impacted by hurricane Ida that's been a bit harder for us to bring back on back online and then Scott Ford We had a turnaround also that affected us in the fourth quarter.

And then we have in our refining business, Norco, which was impacted by Hurricane Ida, that's been a bit harder for us to bring back online. And then Scott Ferd, we had a turnaround also that affected us in the fourth quarter. So I think on balance, there's a couple of soft spots, but on balance, I think very strong performance in the fourth quarter. And in the first quarter, for the most part, it's about planned activity, which is a kind of normal what you would expect with the scale and scope of the company.

So I think on balance I you know there is a couple of soft spots, but on balance I think very strong performance in the fourth quarter and in the first quarter for the most part it's about planned activity, which is a kind of normal what you would expect with the scale and scope of our company excellent. Thank you very much Jessica Roger Thank you very much Cecilia who is next.

Roger, thank you very much. And Cecilia, who's next?

Our next question is Christian Malik from JPMorgan. Please go ahead.

Our next question is Chris <unk> from Jpmorgan. Please go ahead.

Thank you, Christian Malik. So hi Ben and Jessica, I hope you and your families are well and moved to London's been smooth. So the first question relates to slide 18.

Thank you Christian.

So hi, Ben and Jessica.

And your families are well and moved to London has been smooth.

So two questions. The first question relates to slide 18.

Maybe this sounds cynical, but if I had no idea about the company and simply looked at this slide in isolation and measured capital allocation versus...

Maybe some cynical, but if I had no idea about the company and simply looks at this slide isolation.

They just can't location because cash generation I was wondering why you won't increase your upstream capex should generate more cash, especially gives me represents 50% of total share.

cash regeneration. I wonder why you aren't increasing your upstream capital. It's going to generate more cash, especially given it represents 50% of the total sales of the phone. I mean, surely you'd want to take advantage of prices being backwardated. Your reserves ratios are improving. And I thought I thought, say, in the context of generalist concerns that renewable energy simply can't make money.

Surely you would want to take advantage of prices being backward dated reserves ratios are improving.

I would say in the context of generalists that renewable energy simply call it make money.

over the long term, given how much money or capital is going into it.

Over the long term given how much money is caps, how much money or capital is going into it.

So that's the first question. The second question pertains to the 20-30% range and absolute quantum of cash return in 2025 and beyond as Shell pivots the business through transition. So while your current yield is fantastic and congratulations on delivering.

That's the first question. The second question pertains to the 20 to 30 range.

Absolute quantum of cash return in 2025 and beyond as a shelter or at the business through transition.

While current yield is fantastic and congratulations on delivering.

I'd like to ask how sustainable is it if you plan to move to effectively sort of a lower returns business? And it might be kind of unfair to put it, but I get a lot of sort of questions from global PMs asking, how do you think you can compete with the U.S. majors on cash return over the medium term who are very long oil and gas and by definition can generate premium cash flow?

So to ask how sustainable is it if you plan to move to effectively sort of low returns business.

And it might be kind of I'm trying to put it but I got a little okay.

Again, a lot of some questions from global Pms, asking how would you compete with the U S. Majors on cash return as the medium, Tim who all very long oil and gas and by definition can generate premium casually. Thank you.

Thanks very much Christian. I'm afraid I have to disagree with you in a few points, namely that you can't make money and renewables. If you define it very narrowly to renewable assets.

Yeah, Thanks, very much Christian.

I'm afraid I have to disagree with you on a few points, namely that you can't make money in renewables. If you define it very narrowly to renewable assets.

It's maybe one story. But of course we don't necessarily invest in renewable assets to be supplying the commodity or the merchant market in a particular country or region. We want to build an integrated business which I said works from the customer back. And many a time of course the opportunities are there for the entire value.

One story, but of course, we don't necessarily invest in renewable assets to be supplying the commodity or the merchant market in a particular country or region, we want to build an integrated business, which are set works from the customer back.

And many a time of course the opportunities are there for the entire value chain building a hydrogen business there'll be high return is not necessarily the return I can make on the electrolyze. It is the entire return that we will be able to make and serving the trucking business in Europe for instance, which is made up of many more.

building a hydrogen business that will be high return. It's not necessarily the return I can make on the electrolyzer. It is the entire return that we will be able to make in serving the trucking business in Europe , for instance, which is made up of many more component parts than just to make it as.

Important parts than just a naked assets.

The other thing you have to bear in mind, of course, is that, yes, you may look at individual projects and we may have a differentiated return requirement for certain projects over others. So, for instance, yes, higher for upstream, maybe lower for some of the marketing and also energy transition projects.

The other thing you have to bear in mind of course is that yes, you may look at individual projects and we may have a differentiated return requirements.

For certain projects over others itself wrenches, yes, higher for upstream maybe lower force already at the marketing at all so.

Energy transition project, that's simply is because for every successful project that we execute and upstream there are also significant cost recoverable.

But that simply is because for every successful project that we execute in upstream, there are also significant costs that are not recoverable. So in other words, we have to deal with dry holes. We have to deal with the fact that projects sometimes can disappoint because of the subsurface being disappointing. And many a time, of course, the investment decision that you take.

In other words, we have to deal with the dry holes, we have to deal with the fact that.

Project, sometimes can disappoint because of the subsurface being disappointing and many a time of course the investment decision that you take it in upstream project you make after a significant amount of cash has already been sunk in it. So therefore, you have to look at full cycle economics here and what we are sharing with you is the economics forward look.

In an upstream project, you make after a significant amount of cash has already been sunk in it. So therefore you have to look at full cycle economics here. And what we are sharing with you is the economics forward looking at the sanction.

At the sanction decision. So therefore I do believe certainly that if you take a risk adjusted approach that the way we have competition going on for capital. It is actually a level playing field and it is not just investing in assets. It is investing and building businesses now.

So therefore, I do believe, certainly that if you take a risk of justice approach, that the way we have competition going on for capital, it is actually a level playing field. And it is not just investing in assets, it is investing in building...

Now, you have to be right in today's environment, many of the short cycle projects that we are doing and time backs, et cetera, have a much better prospect. And that is also where indeed we are allocating capital to. But in the long run, we also have to build a business.

No you're absolutely right in today's environment. Many of the short cycle projects that we are doing in tie backs et cetera have a much better prospects and that is also indeed, we are allocating capital to but in the long run. We also have to build a business that is fit for the future. So that the company is fit for the future and that is also a focus we need.

fit for the future. So the company is fit for the future. And that is also a focus we need to have. We cannot have that focus on a cyclical basis. They would just say, well, you know, today it looks good tomorrow not anymore. And therefore, look through the cycle, look across the entire value chain, look at life cycle costs and look at a risk adjusted basis. And then indeed you come to the right conclusions.

Have we cannot have that focus on a cyclical basis I would just say well today. It looks good tomorrow not anymore, and therefore look through the cycle look across the entire value chain look at our lifecycle cost and look at on a risk adjusted basis, and then indeed, you come to the right conclusions.

Thank you Christian and Cecilia who is next.

Our next question is Lucas Hermann from Exxon, please relax.

Our next question is Lucas Herrmann from Exxon. Please go ahead.

Yeah, thanks very much. And Jessica, thanks for the opportunity. A couple, if I might, can I push you a little bit on Pearl, just in terms of, you know, the time of the timing of the or the duration of the maintenance program? And I presume that the vast majority of

Yes, thanks, very much and then Jessica thanks for the opportunity a couple if I might can I push you a little bit on Po just in terms of the time of the Tommy and Lilly or the duration of the maintenance program and I presume that the vast majority of the.

The guidance you've given for reduction in volumes in integrated gases associated with pearl. So in short, is this going to be down for a quarter?

The guidance, you've given a reduction in volumes in integrated gas is associated with Po. So in short, it's going to be down per quarter.

And is this the, you're operating on one train this year and you'll operate on, you know, or you'll look to undertake maintenance on the second next?

And is this your operating on one train this year and your operational you'll look to them just like my comments on the second next.

Just to give me an idea, because obviously it's a very large cash flow asset. And secondly, can I just ask how much, I mean, going back to the capex observation that the Christian made. And actually, I probably go the other way, Ben, in that...

Give me an idea because obviously, it's a very large cash flow asset.

And secondly can I just ask how much.

Going back to the Capex observation, the Christian actually I'd, probably go the other way.

It strikes me that your Capex last year in your upstream 6 billion, you're guiding towards 8 billion. This year.

strike me that you know, capex last year in your upstream six billion, you're guiding towards eight billion this year.

Permian has fallen out, which must have been a considerable few hundred millions. So it's more around, you know, where is the incremental spend actually going? What are you driving it towards? Is it predominantly short cycle? Some more explanation if possible. That's it, thank you.

This call them out which must.

Must've been a considerable few hundred millions so it's more around where is the incremental spend actually going what you're what you're driving it towards is it predominantly short cycle. Some more explanation if possible.

Thank you.

Yeah, thanks very much Lucas. I leave Jessica to talk a little bit about the pill details because I do not have them off the top of my head. For a moment I was thinking you might ask, why don't you defer it when the prices are right? Of course, these are unbelievably complex logistics operations that you have to put together for such a large turnaround event. So you cannot quickly move it around. You plan it and then let's see, yeah, that's the end.

Yes, thanks, very much Lucas I leave Jessica to talk a little bit about the bill details because I do not have them off the top of my head for a moment I was thinking you might ask why don't you defer it when the prices are right of course. These are unbelievably complex logistics operations that you have to put together for such a large turnaround event.

So you cannot quickly move it around your planets and then let's see that's the end of it.

But we'll get back to you with a bit more detail. Hopefully, Jessica has that to hand as well. I think, yeah, so we've been very clear. We will invest roughly $8 billion in upstream. And indeed, you're also right, that then doesn't include any more the Permian. But we have plenty of good opportunities to invest.

But.

We'll get back to you with a bit more detail hopefully Jessica two to hand, as well I think yeah. So we've been very clear, we will we will invest roughly $8 billion.

In upstream.

And indeed, you're also right that.

That then doesn't include any motor Permian, but we have plenty of good opportunities to invest in.

Now, where will we go? Mostly in the core assets. Again, we have said 80% of our spend is in the core assets and that is no different for 2020.

Now where will we go mostly in the core assets.

Again, we have set 80% of our spend is and isn't a core asset centers no different for ROE for 2020.

Sorry 2022.

And therefore, yeah, expect more to go into into deep water, but we have quite a few good opportunities that we are executing on and maybe a few more to come. It will also be in hopefully an acquisition of of new activities that we can continue to invest in.

Therefore, I expect more to go into.

Into deepwater, but we have quite a few good opportunities that we're executing on and maybe a few more to come it would also be in hopefully in acquisition of <unk>.

Of new activities that we can continue to invest in so.

So it is a short cycle, well to the extent that you call deep water short cycle, perhaps it is.

So it is a short cycle, but to the extent that you called deepwater short cycle, perhaps it is.

but I again I have no hesitation to say that

But I.

Again, I have no hesitation to say that by getting out of the Permian still allocating $8 billion to upstream we will simply high grade Spence two dose areas, where we believe we have most of the running room.

by getting out of the firm, and still allocating $8 billion to upstream. We will simply, high-greatest spend to those areas where we believe we have most of the running room. Jessica, on pull.

Jessica on pill.

Sure so odd.

Touching on some of the statements I made earlier, for the outlook for the first quarter in 2022.

Touching on some of the statements I made earlier for the outlook for the first quarter in 2022 for integrated gas the volumes are being impacted by both prelude and Pearl and those are the main drivers pearl should be through mostly through the first quarter.

for integrated gas, the volumes are being impacted by both Prelude and Pearl. Those are the main drivers. Pearl should be through mostly through the first quarter. I'm not expecting kind of more material impacts beyond the first quarter from a Pearl perspective or in the portfolio perspective. I mean, those ongoing maintenance that happens.

I'm not expecting kind of more more material impacts beyond the first quarter from from a perl perspective or in the portfolio perspective, I mean, those ongoing maintenance that happens.

throughout our asset base, but in terms of PERL, I'm not expecting that to be significant for the whole year, and of course, we've got the quarterly update note that we'll provide as we go into the first quarter, and we'll provide any more insight, should there be any further updates at that point in time. But for integrated gas, it's really those two assets. Of course, PERL is not LNG-related. You, I'm sure, know that already, but just to make sure that everyone on the calls has that in mind, it's the GTL asset and the PRELUDE asset, which does affect LNG volumes. Thanks, Lucas.

Throughout throughout our asset base.

In terms of Pearl I'm, not expecting that to be significant for the whole year and of course, we've got the quarterly update note that we will provide as we go into the first quarter and will provide any more insight should there be any further updates.

At that point in time, but for integrated gas, it's really those those two assets and of course pearls not LNG related.

I am sure.

No that already but just to make sure that everyone on the calls has that in mind, it's the detail assets and the prelude asset.

LNG volumes.

Thanks, Lucas and Cecilia who is next.

Our next question is from Christopher Cooplin from Bank of America. Please go ahead.

Our next question is from Christopher Copeland from Bank of America. Please go ahead.

Thank you very much good afternoon, everyone.

Thank you very much. Good afternoon everyone. Can I just continue along Lucas's lines please Ben and actually make the point that it seems your 1-2% per annum production decline outlook

Can I just continue along Lucas as lines. Please then.

Make the point that it seems your 1% to 2% per annum production decline outlook is.

Indeed still here after taking out a considerable chunk from from the Permian. So I Wonder how you would address that particular point that youre spending more but yet your overall volume outlook appears PURA.

overall volume outlook appears poorer. And a question, again, on Capex but elsewhere. Jessica, you talked earlier about Penkem obviously swallowing up a significant chunk of your chemicals allocation for this year. What are your thoughts beyond 22 for chemicals? I remember a few years ago you were talking about sustaining capital in chemicals to be significantly below $2 billion. So I wonder whether you can comment on that. And if I may, even if it's just a short yes, any excess cash flow from higher oil and gas prices in particular, who knows what's to come. Ben, I assume you continue to have a preference for using more buybacks, even though you are already at the maximum. Or are you indeed suggesting that dividends could go up faster as well? Thank you. Yeah, thanks, Chris. Let me take the last one quickly then. That is a short yes. And as I said earlier on, I realized maybe I need to.

And a question again on Capex, but elsewhere.

Jessica you talked earlier about pen Cam, obviously swallowing up a significant chunk of your chemicals allocation for this year.

What are your thoughts beyond 'twenty two for chemicals I remember a few years ago, you were talking about.

Sustaining capital.

In chemicals to be significantly below $2 billion. So I wonder whether you can comment on that and if I may even if it's just a short yes.

Any excess cash flow from higher oil and gas prices in particular, who knows what's to come.

I assume you continue to have a preference for using more buybacks, even though you are already at the maximum or are you indeed, suggesting that dividends could go up faster as well. Thank you.

Yeah. Thanks, Chris Let me take the last one quickly then it is a short yes.

Yeah, thanks, Chris. Let me take the last one quickly then. That is a short, yes.

And I said earlier on I realized maybe I need to deepen that comment a little bit more. So we can do more buybacks of course now that we are unifying or have unified the two lines of shares.

And as I said earlier on I realized maybe I need to deepen that go into a little bit more. So we can do more buybacks of course no debt we.

Unifying all have unified the two lines of shares so we roughly double.

but it's but okay so that gives us about four billion

But it's but okay. So that gives us about $4 billion.

a quarter. I think it would be good if we would have more freedom so we are looking at bringing a resolution forward for our AGM to see whether we can also buy back on the euronext for instance which will give us almost a doubling of that number.

A quarter.

It would be good if we would have more freedom. So we are looking at bringing a resolution forward for AGM to see but if you can also buyback on the Euronext for instance, which will give us almost a doubling of that number again.

And therefore we can do a whole lot more, particularly if it needs to be concentrated, for instance, in one or two.

Therefore, we can do a whole lot more particularly if it needs to be concentrated for instance.

And one or two quarters.

So, yes, if the opportunities are there, I still believe that our shares are undervalue, and therefore it does make sense to return in the form of buybacks.

So yes, if the opportunities are there I still believe that our shares.

Undervalued and therefore, it does make sense to return in the form of buybacks.

that may of course change over time but not at this point in time. I think on your comment, it doesn't quite work like that now that we have the 8 billion, but minus the Permian, I want to do somehow changes. I think by and large, what we mean to signal here, there will be gentle decline in the volumes in our upstream business. As this business indeed is

That may of course change over time, but not at this point in time.

Think on your on your comments it doesn't quite work like that now that we have the $8 billion, but minus the Permian I want her to somehow changes I think by and large what we mean to signal here that will be a gentle decline in the volumes in our upstream business as this business indeed is it.

is is being over a very long period of time harvested well into the next decade by the way. But at the same time also as we drive this business with a value over volume approach. And again I think we started talking about value over volume about nine years ago. And it's still very much alive. You see the effects of it. So today we are producing a materially better result in our upstream business.

As being over very long periods of time harvested well into the next decade by the way, but at the same time also as we drive this business with a value over volume approach.

Again, I think we started talking about value over volume.

Nine years ago, and it's still very much alive and you see the effects of it. So today, we are producing a materially better results in our upstream business.

at comparable price levels that we saw, for instance, in 2018, with significantly lower volumes. So indeed, it is a continuous high grading of the business, making sure that this is also a business that continues to deliver the free cash flow that we are going to need to, of course, fund shareholder returns, but also to fund the rest of the strategy.

At comparable price levels that we saw for instance in 2018 with significantly lower volumes. So indeed, it is a continuous high grading of the business, making sure that this is also a business that continues to deliver the free cash flow that we are going to need to of course funds shareholder return.

But also to fund the rest of the strategy. So yeah. The one to two per cent to sell that even though we have taken of course, a bit of a step down in the Permian divestments.

So yeah, the 1 to 2% is still there, even though we have taken, of course, a bit of a step down with the Permian divestment.

Jessica.

Good. And I would say the 1% to 2% is from a lower base. So it's picking up from the Permian volumes coming out. So it's not entirely apples and apples to the prior 1% to 2%, which was at a higher number. So just to, so that's clear for people. On the CAPEX side and what's driving the CAPEX levels in our chemicals and products businesses.

Good Ah, Yeah, and I would say the 1% to 2% is from a from a lower base. So it's picking up from the Permian volumes coming out so its not entirely apples and apples to the prior 1%, 2%, which was at a higher number. So just to so that is clear for people on the on the Capex side and what what's driving the <unk>.

Opex levels, and our chemicals and products.

Businesses.

As you mentioned, it is the Penn Chem, finishing that up in 2022.

As you mentioned it is the Penn Kim finishing that up in 2022.

There's other important investments for making. We're investing in plastics to chemicals. That's also driving some of the CapEx. We're continuing to look at growth opportunities. And there's other energy transition spend that we're doing because we're looking to drive overall carbon profile of the company to a very different place. And we think ultimately that's gonna become a competitive advantage for us as well.

Theres other important investments, we're making we're investing in our plastics to chemicals. That's also driving some of this some of the Capex, we're continuing to look at growth opportunities and there's other energy transition spend that we're doing because we're looking to.

Drive overall carbon profile of the company to a very different place and we think ultimately that is going to become a competitive advantage for us as well on the refining side, which is in those numbers as well, we're continuing to repurpose those assets as well is part of that is supporting the cafe and the creation of Biofuels.

on the refining side, which is in those numbers as well, we're continuing to repurpose those assets as well. Part of that is supporting the CAFA and the creation of biofuels.

But across kind of the spectrum also our hydrogen agenda which is getting played out in places like Rhineland. Those are also coming into these numbers so for refining it's about repurposing for the future for the energy parts of the future and for chemicals. It's the pen cam, it's plastics to chemicals and other energy transition spent on top of the normal maintenance that you would expect in the portfolio.

But across the spectrum and also our hydrogen agenda, which is getting played out in places like Rhineland. Those are also coming into these numbers. So for refining its about repurposing for the future for the energy parks of the future and for chemicals, it's the pen Kim its plastics to chemicals and other energy transition spend on top of the normal maintenance that you would expect in the portfolio.

Yeah.

Okay, thanks very much Jessica and Christian. Thank you. Thanks very much. Can we have the next question, please?

Okay. Thanks, very much Jessica and Christian. Thank you. Thanks very much can we have the next question. Please Sir Cecilia.

The next question comes from out of Tristan from City. Please go ahead.

The next question comes from Alastair Syme from Citi. Please go ahead.

Hi, thank you for the opportunity. A couple of questions. In 2020, my understanding was you under token major restructuring that was labeled about repositioning the company for the energy transition. And there are press reports out there that suggest that some of your high level management that was put in place then, sort of barely a year later seems to depart the organization.

Hi, Thanks for the opportunity a couple of questions in 2020.

My understanding is you undertook a major restructuring that was labeled about repositioning the company for the energy transition.

There are press reports out there that suggest that some of your high level management.

Was put in place then sort of barely a year later it seems to us the part of the organization.

So I just wanted to understand what's going on and whether maybe you're struggling to maintain holding on to talent in what's a pretty hot market area.

So I just wanted to understand what's going on and whether maybe you're struggling to maintain.

Holding on to talent and what is a pretty hot market area.

And then, Ben, I just wanted to pick up on your earlier comment about, you know, life cycle costs and maybe talk about that in the context of ScotWind. You know, my understanding is there's not going to be an electron on that until 2030. You know, paybacks may be another 15 years after that.

And then Dan I, just wanted to pick up on your earlier comment about.

Lifecycle costs, and maybe talk about that in the context of Scotland.

My understanding is there's not going to be an electron on that until 2030.

Paybacks, maybe another 15 years after that.

How can you give him that? How do you think you can give him that? Is confidence on livestock or costs? You're not going to be a dollar in the money until maybe the mid-2040s. Thank you.

So how can you give investors how do you think you can give investors confidence on lost soccer costs, when you're not going to be a dollar in the money until maybe mid 2014.

Thank you.

Yeah, thanks very much, Talastar. And indeed, we will have to learn the concepts of life, sacrifice, also in different types of business.

Thanks, very much <unk> and indeed, we will have to learn the concepts of lifecycle cost also of different types of businesses, but I can tell you already the amount of exploration, we will do in the wind speeds in Scotland is going to be relatively minor and it's got to be of course significantly less expensive as well so yes.

But I can tell you already the amount of exploration we will do in the wind speed since Scotland is going to be relatively minor and it's going to be of course

Significantly less expensive as well. So yes, these some of these projects is building a funnel That will be able to last us for many years and decades so that we have a backlog of projects to work on and of course A trick will be to have a funnel that relatively low maintenance

So all of these projects is building a funnel that we'll be able to last us for many years and decades. So that we have a backlog of projects to go to work on and of course, the trick will be to have a funnel, but relatively low maintenance costs. So that we can take these projects off then we are ready to wear to pursue them all when we need them without necessarily.

so that we can take these projects off when we are ready to pursue them or when we need them without necessarily incurring a lot of cost, unlike, of course, many of the upstream projects where quite often between taking the license and taking the FIDA is a decade. And that's not a cheap decade. We spend a lot of money in that decade.

Lee incurring a lot of course, unlike of course, many of the upstream projects that quite often between taking the license and taking the idea is a decade and thats. Another cheap decades, we spent a lot of money in a decade doing seismic doing exploration and appraisal quite often doing two or three designs et cetera.

seismic, doing exploration, doing appraisal, quite often doing two or three designs, etc. And by the time you are ready to take your investment decision, of course, you have spent a significant amount of sunk cost, which is the reason why we have a higher hurdle for projects that are being sanctioned at that point in time. That will be different for projects like Scotswind.

And by the time you are ready to take your investment decision of course, you have spend a significant amount of sunk cost which is the reason why we have a higher hurdle for projects that are being sanctioned at that point in time that will be different for projects like Scotsman.

By the way, we are very pleased that we have been able to win that five gigawatt wind farm for our floating technology.

By the way we are.

Very pleased that we have been able to win that five gigawatt wind farm for a for a floating technology.

Yeah on the talent.

Indeed, we did do a significant reorganization reshape. We think we've taken out well over $2 billion of cost structurally, a significant amount of staff as well.

Indeed, we did do a significant REO.

Reorganization reshape.

We've taken out a well over $2 billion of cost structurally a significant amount of stuff as well. Unfortunately.

And indeed, we have also repositioned the structure of the company. Now, I think you're referring probably to our power business.

And indeed, we have also repositioned the structure of the company now I think you're referring probably to our power business.

and particularly to the partial of Elizabeth Brendan. The Brendan. Let me be very clear, so I recruited the

Particularly to the departure of Elizabeth Brendan Brennan.

Very clear so I recruited Elizabeth.

when she came in as the head of strategy for power. And I was very impressed with the work that she did. And therefore I appointed her as the executive vice president for our rest business when that position came up. I think Elizabeth has done a very good job. She has taken that strategy turned it into much more of a reality.

When she came in as the head of strategy for power and I was very impressed with the work that she did and therefore I appointed her as the executive Vice President for our risk business when their position came up.

Elizabeth has done a very good job she has taken that strategy doing it into much more of a reality.

But indeed at some point in time, another opportunity and a change in her priorities and life came along back in the United States. So, you know, we depart on very good terms and very grateful for the contribution that she has made. And now we move into the next phase.

But indeed at some point in time another opportunity in a in a change in her priorities in life came along back into United States. So you know.

We depart on very good terms I'm very grateful for their contribution.

She.

<unk> has made and now we move into the next phase.

what you will have seen is that we have replaced it actually two executive vice

You will see.

Is that we have replaced of its actually two executive Vice presidents. So we have a very strong person that we recruited from erste at.

So we have a very strong person that we recruited from Irstedt, Thomas Borschtom, who will be looking at the generation part of that business.

This voice storm, who will be looking at the generation part of that business.

as an EVP and then Steve Hill who you will be familiar with also from our guest marketing business who actually also did the power trading he now takes care of the marketing side both on the guest and power side so we have a very strong dual headed approach for the entire value chain here building on the legacy that Elizabeth will leave behind and

As an EVP and then Steve Hill, who you will be familiar with also from our gas marketing business, who actually also the power trading. He now takes care of the marketing side, both on the gas and power side. So we have a very strong.

Jugal had its approach for the entire value chain here building on the legacy that elisabethville they'll leave behind.

And there is nothing more to it.

Now, can I have the next question please to see?

Now can I have the next question. Please Cecilia.

We will now take our final question today from Jason Caveman from...

We will now take our final question today from.

<unk>.

Jason <unk> from Cowen. Please go ahead.

Good afternoon, thanks for squeezing me in. I just wanted to ask first another one on the financial framework. And if I'm reading between the lines, it does sound like you're reassessing that a bit. Now that you may be a bit more confident in the market outlook. Are you specifically looking at what you're gonna do on cash returns as a percentage of? Uh...

Good afternoon, and thanks for squeezing me in.

Just wanted to ask first another one on the financial framework and if I'm reading between the lines. It does sound like you're reassessing that a bit now that the.

You may be a bit more confident in the market outlook.

Are you specifically looking at what Youre going to do on.

Cash returns as a percentage of cat.

Sorry, hey, yeah, can you here? Can you hear me? Can you hear you, but you cut out of there. Would you mind going one's over the question again, Jason Apologies for that?

Alright, Hey, yes, Ken Kenny here can you hear me.

But you've cut out of there, but would you mind going ones over the question again, Jason apologies for that.

Oh yeah, sorry, yeah, no, sorry for that. Um, yeah, I just wanted to ask

Oh, Yeah, sorry, yeah, no sorry for that.

I just wanted to ask on.

on the financial framework and specifically the cash return to it does sound like you're reassessing that now that you're a bit more confident in the market outlook. Is that a fair assessment of your comments today and when do you think you'll have a decision on if there will be a change on the cash return metrics based on cash flow from up.

On the financial framework and specifically.

The cash returns it does sound like you are reassessing that now that you're a bit more confident in the market outlook.

Is that a fair assessment of your comments today.

And when do you think you'll have a decision.

There will be a change.

The cash return metrics based on cash flow from ops and my second question is on something that wasn't discussed.

And my second question is on something that wasn't discussed. There's

There is.

Obviously a proposal out there for Shelta breaking to different parts and Shel has Said you know, we see a lot of value in the integration of the business Have you studied that at more in depth since that proposal came out and and what's the response been from shareholders To that proposal. Thanks

Obviously, a proposal out there for shelter break into different parts and shell has.

So we see a lot of value in the integration of the business.

Have you studied that add more in depth since that proposal came out and what's the response been from shareholders.

To that proposal.

Yeah, thanks very much, Jason. And by all means, we're not squeezing you in. We're happy to take your questions. Let me take the second one on third point. And Jessica will talk about a little bit more about what we meant by the comments on the financial framework. Well, let me first of all say congratulations to third point and then love for an excellent moment in which they stepped into the stock. And as a result, that they no doubt are enjoying at the moment. That was a very smart move.

Yeah, Thanks, very much Jason and by all means we're not squeezing you and we're happy to take your questions.

We take the second one or third point and Jessica will talk about.

A little bit more about what we meant by the comments on the financial framework, but let me first of all say.

Congratulations to third point, and then low for an excellent moment in which they stepped into the stock.

As a result of that they had no doubt are enjoying at the moment that was a very smart move.

Of course, we were significantly undervalued company and by the way, I still believe that the share price has more running room ahead of it, of course.

Of course, we we were significantly undervalued company and by the way I still believe that the share price has more running room ahead of it of course.

Now we have been talking to the third point. We have listened to the ideas, which by the way are ideas for us also to build on. And by the way we do this all the time, but I'll share hold.

We have been talking to the third point we have.

Listen to but the ideas, which by the way our ideas for US also to build on and by the way. We do this all the time, but all but all shareholders.

what's ideas do you have? Where can we improve? And many a time, of course, individual shareholders, they'll see some of the moves that we make, or some of the changes that we made, or some of the closures that we did, or some of the other activities that we've done, that we'll see back, that actually, that was exactly what I were proposing. And there is that for no difference in terms of how we deal with third point.

Are these do you have.

Where can we improve and many a time of course individual shareholders will see some of the moves that you make some of the changes that we made or some of the disclosures that we did with some of the other activities that we've done that we'll see back that actually that was exactly what they were proposing and there is therefore no difference in terms of how we deal with third.

So, I do believe we have to look at why is it that there is still a gap from what I believe is the full valuation of a company versus what is the current enterprise value. We have to then weigh that also against, you know, what would be the pros and cons.

<unk>.

So I do believe we have to look at why is it that there is still a gap from what I believe is the full valuation of a company who is just what is the current enterprise value. We have to then wait at all so against what would be the pros and cons.

So yes indeed I'll be studying ideas like this. Yes, but then again, we more or less do this all the time. We continuously reflect on what we hear back and we incorporate some of these ideas on new insights in our strategy going forward.

So, yes, indeed I'll be studying ideas like this yes, but then again, we more or less to this all the time, we continuously reflect on what we hear back and we incorporate some of these ideas or new insights in our strategy going forward.

So, that's all I can say about it at this point in time. On your second question, have we heard from many other investors...

So that's all I can say about it at this point in time on your <unk> or your second question have we heard from many other investors.

the encouragements to break up. No, not really. But again, it doesn't mean that we shouldn't be looking at how more and how better can we make sure that our total value is best reflected in what you see in our shares.

The the encouragement to but to break up.

No not really at AR, but again it doesn't mean that we shouldnt be looking at how more and how better and to make sure that our total value is best reflected in what you see in our shares.

Jessica.

Jason, thank you for the question on the financial framework. What we're trying to, what are the points I wanted to get across today was that the current framework that we're operating within was conceived in a very different macro environment and we've...

Jason. Thank you for the question on the financial framework, what we're trying to what one of the points I wanted to get across today was that the current framework that we're operating within was conceived in very different macro environment and we've.

We've generated far more cash in 2021 than we certainly had planned for, and we'd strengthened the balance. She did a pay as much faster than expected because of the macro environment and because of the performance of the company. Uh...

We've generated far more cash in 2021 than we certainly had planned for and we strengthened the balance sheet at a pace much faster than expected.

Of the macro environment and because of the performance of the company.

The 20 to 30 percent, there's a bit of a balance we need to strike, which is on the one hand, we want to provide a clear, consistent framework that shareholders understand, that the market understands, and can help.

The 20% to 30% if there was a bit of a balance we need to strike, which is on one hand, we want to provide a clear consistent frameworks that shareholders understand that the market understands and they can help.

frame the way we're thinking about capital allocation on the one hand, but on the other hand, we obviously need to respond to the market that that we're in and we're in a very favorable market and the distribution profile that we've

Frame the way, we're thinking about capital allocation on the one hand, but on the other hand, we obviously need to respond to the market that we're in and we're in a very favorable market and the distribution profile that we've we've announced today in terms of the first half of 2022 reflects that very positive macro environment as well as the positive.

We've announced today in terms of the first half of 2022 reflects that very positive macro environment as well as the positive performance of the company.

Performance of the company, what I would say is that.

What I would say is that obviously we do reflect on the reality of today. There's nothing kind of new to announce. I think when there is something to announce, we'll do it. But the 20 to 30 percent, if anything is should be considered a floor, that's the minimum we would do. There certainly wouldn't be anything that would stop us.

Obviously, we do reflect on the reality of today, there's nothing kind of new to announce I think when there is something to announce we'll we'll do it but the 20% to 30%.

If anything it should be considered a floor. That's the minimum we would do there certainly wouldn't be anything that would stop us going over 30%, but that is a decision for for the board and.

going over 30% but that is a decision for the board. And if the market continues to be as it is today, I think there is reason for us to consider different allocation but I think we need to do that with a little bit more experience and the actual reality playing through and not get ahead of ourselves. And we'll certainly let you know in the market now as soon as we are thinking shifts in any way.

If the market continues to be as it is today I think there is reason for us to consider.

Different allocation, but I think we need to do that with a little bit more experience and.

The actual reality, playing through and not get ahead of ourselves.

We'll certainly let you know in the market know as soon as we are thinking shifts in any in it anyway.

Okay, well, that feels like a good moment to indeed wrap it up. And thank you very much for all your questions for joining today. I realized we didn't get to all of you there in the queue, but our team has taken down your names and we'll call you back. But nevertheless, I hope that the questions that we get to have given you insights into how we are delivering our strategy when our financial performance has been in 2021. And of course, how we look at 2022 and what they outlook for it.

Okay.

It feels like a good moment to indeed wrap it up and thank you very much therefore for all your questions and for joining today I realize we didn't get to all of you there into Q, but.

Our IR team is taken down your names and we'll call you back, but nevertheless, I hope that's the questions that we get to have giving you insights into how we are delivering our strategy with our financial performance has been in 2021 and of course, how we look at 2022 and what the outlook for the year really is as I already mentioned.

As I already mentioned earlier on, we also have the annual energy outlook and the shall insights event for integrated gas. We'll have that later in the month. That will be hosted by, well, so on and Steve Phil and they will be looking forward to seeing you there again. And that's it for now. So I wish you a very pleasant of the week and hope you and your families stay safe and stay well. Thank you very much.

On your own but you also have the annual LNG outlook and Michelle insights event for integrated gas, we will have that later in the month.

Will be hosted by well Salon and Steve Bill and they will be looking forward to seeing you there again and that's it for now so I wish you a very pleasant end of the week and hope you and your families stay safe and stay well. Thank you very much.

[laughter].

The.

Yeah.

[music].