Q2 2023 Shell PLC Earnings Call Pre-recorded
Cash and eight and I will be presenting our second quarter results for 2023.
During capital markets day, we reiterated our commitment to our powering progress strategy, including net zero emissions by 2050.
We also outlined our plans over the coming years to deliver more value with less emissions.
I'm pleased with the progress we are making on our journey.
In the first half of this year, we delivered our second highest adjusted earnings in a decade better than in the same period in 2014, when the average Brent oil price from $110 per barrel compared with $80 per barrel this year.
And we continue to help our customers cut their carbon emissions, while reducing emissions from our own operations for instance in the first half of this year, we removed 0.4 million tonnes of greenhouse gas emissions through abatement projects.
This removal is equivalent to taking more than 160000 cars off of Europe's roads for a year.
Wael Sawan: In downstream, our improved Shell V-Power formulation, which can clean up to 100% of deposits on vital engine parts, delivered strong volume and margin growth. However, despite the strong operational performance, our financial results were impacted by lower commodity prices, planned maintenance, and the skew of our LNG portfolio towards the Northern Hemisphere winter. Our Q4 business and financial delivery has been strong, enabling us to responsibly invest in our businesses, reduce debt, all while enhancing shareholder distributions. At our Capital Markets Day, we announced a 15% step up in the dividend and a plan to buy back a minimum of $5 billion of shares in H2 2023, subject to board approval. We continue to believe our shares represent significant value.
Wael Sawan: In downstream, our improved Shell V-Power formulation, which can clean up to 100% of deposits on vital engine parts, delivered strong volume and margin growth. However, despite the strong operational performance, our financial results were impacted by lower commodity prices, planned maintenance, and the skew of our LNG portfolio towards the Northern Hemisphere winter. Our Q4 business and financial delivery has been strong, enabling us to responsibly invest in our businesses, reduce debt, all while enhancing shareholder distributions. At our Capital Markets Day, we announced a 15% step up in the dividend and a plan to buy back a minimum of $5 billion of shares in H2 2023, subject to board approval. We continue to believe our shares represent significant value.
Performance discipline, and simplification continued to be our guiding principles and in the second quarter. We demonstrated strong operational performance across our portfolio take friends are floating LNG facility in Australia, which delivered its highest quarterly production since startup in 2018.
In renewables and energy solutions are cross wind JV produced its first green electricity in June .
This is an exciting ongoing project that when completed is expected to produce around 3% of the Netherlands total demand for electricity.
In the Gulf of Mexico, our turnaround operations at Appomattox, Vito and Olympus, we're safely completed ahead of schedule and below budget.
In downstream, our improved shell V power formulation, which can clean up to 100% of deposits on vital engine parts delivered strong volume and margin growth.
Wael Sawan: Today, in addition to delivering on the dividend increase, we are commencing a buyback program of $3 billion for the next three months. With that, let me hand over to Sinead to tell us more about our financial results in the quarter.
Wael Sawan: Today, in addition to delivering on the dividend increase, we are commencing a buyback program of $3 billion for the next three months. With that, let me hand over to Sinead to tell us more about our financial results in the quarter.
However, despite the strong operational performance our financial results were impacted by lower commodity prices planned maintenance and the skew of our LNG port for you towards the northern Hemisphere winter.
Sinead Gorman: Thank you, Wael. We delivered resilient financial results in Q2. Our adjusted earnings were $5.1 billion, and we delivered $15.1 billion of cash flow from operations, including a working capital inflow of $4.8 billion. The working capital inflow was mainly due to lower prices, inflows from initial margin, and a reduction in accounts receivable. In Integrated Gas and Upstream, we saw lower prices, fewer trading and optimization opportunities due to seasonality and lower production due to planned maintenance, which included higher value barrels in the Gulf of Mexico. As Wael mentioned, and as we outlined during Capital Markets Day, our LNG portfolio is geared towards the Northern Hemisphere winter, making Q1 and Q4 typically stronger than Q2 and Q3.
Sinead Gorman: Thank you, Wael. We delivered resilient financial results in Q2. Our adjusted earnings were $5.1 billion, and we delivered $15.1 billion of cash flow from operations, including a working capital inflow of $4.8 billion. The working capital inflow was mainly due to lower prices, inflows from initial margin, and a reduction in accounts receivable. In Integrated Gas and Upstream, we saw lower prices, fewer trading and optimization opportunities due to seasonality and lower production due to planned maintenance, which included higher value barrels in the Gulf of Mexico. As Wael mentioned, and as we outlined during Capital Markets Day, our LNG portfolio is geared towards the Northern Hemisphere winter, making Q1 and Q4 typically stronger than Q2 and Q3.
Our fourth quarter business and financial delivery has been strong enabling us to responsibly invest in our businesses reduce debt all while enhancing shareholder distributions at.
At our capital markets day, we announced a 15% step up in the dividend and our plan to buy back a minimum of $5 billion of shares in the second half of 2023 subject to board approval.
We continue to believe our shares represent significant value and so today. In addition to delivering on the dividend increase we are commencing a buyback program of $3 billion for the next three months with that let me hand over to shade tell us more about our financial results in the quarter. Thank you al.
We delivered a resilient financial results in the second quarter, our adjusted earnings were $5 $1 billion, and we delivered $15 $1 billion of cash flow from operations, including working capital inflow of $4 $8 billion.
Sinead Gorman: In our downstream and RES businesses, marketing achieved one of its highest mobility unit margins in recent years, largely due to a combination of the driving season in the US and an improving macro environment. In chemicals and products, the products business was impacted by fewer trading and optimization opportunities than in Q1, while chemicals margins remain below historical averages despite a slight improvement quarter-on-quarter. Moving on to our financial framework. Today, we are lowering our 2023 cash CapEx outlook to $23 to 26 billion as we continue to demonstrate discipline in our capital spend. We have brought down our net debt to around $40 billion, which is almost half of what it was in 2019.
Sinead Gorman: In our downstream and RES businesses, marketing achieved one of its highest mobility unit margins in recent years, largely due to a combination of the driving season in the US and an improving macro environment. In chemicals and products, the products business was impacted by fewer trading and optimization opportunities than in Q1, while chemicals margins remain below historical averages despite a slight improvement quarter-on-quarter. Moving on to our financial framework. Today, we are lowering our 2023 cash CapEx outlook to $23 to 26 billion as we continue to demonstrate discipline in our capital spend. We have brought down our net debt to around $40 billion, which is almost half of what it was in 2019.
The working capital inflow was mainly due to lower prices in place from initial margin and a reduction in accounts receivable.
And integrated gas and upstream we saw lower prices fewer trading and optimization opportunities G seasonality and lower production due to planned maintenance, which included higher value barrels in the Gulf of Mexico.
As wild mentioned and actually I.
Lyne drink capital markets day, our LNG portfolio is geared towards the northern hemisphere winter, making Q1, and Q4 typically stronger than Q2 and Q3.
Sinead Gorman: Finally, we are delivering on the 15% dividend increase that we announced at Capital Markets Day, while also today announcing a $3 billion buyback program for the next three months. As we continue to believe our shares represent significant value, we will commence a program of at least $2.5 billion at the Q3 results subject to board approval. Together, this means we are meeting our target shareholder distributions of 30% to 40% of our CFFO through the cycle. With that, I'll hand back over to Wael.
Sinead Gorman: Finally, we are delivering on the 15% dividend increase that we announced at Capital Markets Day, while also today announcing a $3 billion buyback program for the next three months. As we continue to believe our shares represent significant value, we will commence a program of at least $2.5 billion at the Q3 results subject to board approval. Together, this means we are meeting our target shareholder distributions of 30% to 40% of our CFFO through the cycle. With that, I'll hand back over to Wael.
And our downstream and <unk> businesses marketing achieved one of its highest mobility unit margins in recent years.
Largely due to a combination of the driving season in the U S and an improving macro environment.
In chemicals and products the products business was impacted by fewer trading and optimization opportunities than in the first quarter, whilst chemicals margins remained below historical averages despite a slight improvement quarter on quarter.
Moving onto our financial framework.
Today, we are lowering our 2023 cash capex outlook to $23 billion to $26 billion as we continue to demonstrate discipline in our capital spend.
Wael Sawan: Thank you, Sinead. Looking ahead to Q3, the macro outlook continues to be uncertain with mixed demand signals in China, healthy inventory levels in Europe and Asia, but with general tightness in the supply of oil and gas in the medium term. In our own operations, we will undertake considerable planned maintenance activities, including the Prelude and Trinidad and Tobago IG assets in the coming months. We will continue to deliver more value with less emissions, not through words, but through actions, remaining committed to our guiding principles of performance, discipline, and simplification, and aiming to be the investment case through the energy transition. Thank you.
Wael Sawan: Thank you, Sinead. Looking ahead to Q3, the macro outlook continues to be uncertain with mixed demand signals in China, healthy inventory levels in Europe and Asia, but with general tightness in the supply of oil and gas in the medium term. In our own operations, we will undertake considerable planned maintenance activities, including the Prelude and Trinidad and Tobago IG assets in the coming months. We will continue to deliver more value with less emissions, not through words, but through actions, remaining committed to our guiding principles of performance, discipline, and simplification, and aiming to be the investment case through the energy transition. Thank you.
We have brought down our net debt to around $40 billion, which is almost half of what it was in 2019 and finally, we are delivering on the 15% dividend increase that we announced at capital markets day, whilst also today announcing a $3 billion buyback program for the next three months.
As we continue to believe our shares represent significant value, we will commence a program of at least $2 $5 billion at the Q3 results subject to board approval.
Together. This means we are meeting our targets shareholder distributions of 13% to 40% of our CFO through the cycle and with that I'll hand back over to while thank you should aid looking ahead to Q3, the macro outlook continues to be uncertain with mixed demand signals in China healthy inventory levels in Europe , and Asia with with general.
Tightness in the supply of oil and gas in the medium term.
And then our own operations, we will undertake considerable planned maintenance activities, including the prelude and Trinidad and Tobago I G assets in the coming months, we will continue to deliver more value with less emissions not through words, but through actions remaining committed to our guiding principles of performance discipline and simplification.
And aiming to be the investment case through the energy transition.
Thank you.
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