SHELL PROJECTS $4.5 BN PRE-TAX PROFIT IN 2018

“We expect to achieve and exceed the $3.5 billion synergies prospectus commitment earlier than expected, in 2017, when synergies should be $4 billion. Our other deal-related financial commitments to shareholders in the form of asset sales, debt reduction, and dividends, followed by share buy-backs, are unchanged”, he said.

Setting his remarks in the context of a volatile industry backdrop, van Beurden said he sees important opportunities for Shell from the substantial and lasting changes underway in the energy sector.

“We expect to see robust demand for oil and gas for decades to come, in a global energy system in a long-term transition to lower carbon fuels. As well as low oil prices today, we are seeing higher levels of price volatility, due to geopolitical change, the speed of information flows, and the pace of innovation in our sector.

“By capping our capital spending in the period to 2020, investing in compelling projects, driving down costs and selling non-core positions, we can reshape Shell into a more focused and more resilient company, with better returns and growing free cash flow per share.

“All of this is underpinned by an unrelenting focus on safe and environmentally-responsible operational performance, high quality and commercial project execution and prudent financial management of the company.”
Turning to the recent acquisition of BG, van Beurden said: “The BG deal is an opportunity to accelerate the re-shaping of Shell. Integration is gathering pace, and today we expect to deliver more synergies, and at a faster rate.”

On future opportunities: shales and new energies, he said the businesses are expected to become significant growth priorities for Shell beyond 2020 as it establishes a clear pathways to profitability.

“They are themes with material value and upside potential to deliver returns for Shell shareholders.Investment here remains relatively low, focused on current positions and identifying potential opportunities. Free cash flow will likely be negative, and returns low, for some time. Capital employed here is constrained until attractive opportunities are developed”, he said.

According to him, in shales, Shell’s restructured portfolio is focused on North America and Argentina, with substantial long-term growth potential. But in new energies, he said there is potential for Shell to achieve material scale and profitability. “As the energy transition unfolds, we intend to establish a portfolio to build on our established strengths in low-carbon biofuels, hydrogen and smart customer solutions; as well as in solar and wind. Many of these activities complement the company’s natural gas strategy today.

“Overall, Shell’s focus is on re-shaping the company. We will retain the most competitive and resilient positions, through targeted investment, and substantial asset sales. This is a value-driven, not time-driven, divestment programme; and an integral element of Shell’s portfolio improvement plan”, he said.