Royal Dutch Shell plc: 2nd Quarter and Half Year 2016 Unaudited Results

Jul 28, 2016, 06:47 ET from Royal Dutch Shell plc

THE HAGUE, Netherlands, July 28, 2016 /PRNewswire/ --


   

    SUMMARY OF UNAUDITED RESULTS

                Quarters                      $ million                Half year
    Q2 2016  Q1 2016 Q2 2015   %[1]                                  2016    2015       %
                                      Income attributable to
       1,175     484   3,986      -71 shareholders                  1,659   8,416      -80
                                      Current cost of supplies
                                      (CCS) adjustment for
       (936)     330   (625)          Downstream[2]                  (606)   (294)
                                      CCS earnings attributable
         239     814   3,361      -93 to shareholders[3]            1,053   8,122      -87
       (806)   (739)   (399)          Identified items[2],[4]      (1,545)    624
                                      CCS earnings attributable
                                      to shareholders excluding
       1,045   1,553   3,760      -72 identified items              2,598   7,498      -65
                                      Of which:
         868     994   1,403          Integrated Gas                1,862   2,894
     (1,325) (1,437)   (469)          Upstream                     (2,762)   (664)
       1,816   2,010   2,961          Downstream                    3,826   5,607
                                      Corporate and
       (314)    (14)   (135)          Non-controlling interest       (328)   (339)
                                      Cash flow from operating
       2,292     661   6,050      -62 activities                    2,953  13,156      -78
                                      Basic CCS earnings per
        0.03    0.11    0.53      -94 share ($)                      0.14    1.29      -89
                                      Basic CCS earnings per ADS
        0.06    0.22    1.06          ($)                            0.28    2.58
                                      Basic CCS earnings per
                                      share excl. identified
        0.13    0.22    0.60      -78 items[4] ($)                   0.34    1.19      -71
                                      Basic CCS earnings per ADS
                                      excl. identified items[4]
        0.26    0.44    1.20          ($)                            0.68    2.38
        0.47    0.47    0.47        - Dividend per share ($)         0.94    0.94        -
        0.94    0.94    0.94        - Dividend per ADS ($)           1.88    1.88        -

    1. Q2 on Q2 change

    2. Attributable to shareholders

    3. CCS earnings are defined in Note [3] and CCS earnings attributable to
    shareholders in Definition [A].

    4. See page 5 and Definition [C]. Comparative information has been restated.

  • Following the acquisition on February 15, 2016, BG Group plc ("BG") has been consolidated within Royal Dutch Shell's results.
  • Royal Dutch Shell's second quarter 2016 CCS earnings attributable to shareholders were $0.2 billion compared with $3.4 billion for the same quarter a year ago.
  • Second quarter 2016 CCS earnings attributable to shareholders excluding identified items were $1.0 billion compared with $3.8 billion for the second quarter 2015, a decrease of 72%.
  • Compared with the second quarter 2015, CCS earnings attributable to shareholders excluding identified items were impacted by the decline in oil, gas and LNG prices, the depreciation step-up resulting from the BG acquisition, weaker refining industry conditions, and increased taxation. Earnings benefited from increased production volumes from BG assets.
  • Second quarter 2016 basic CCS earnings per share excluding identified items decreased by 78% versus the second quarter 2015.
  • Cash flow from operating activities for the second quarter 2016 was $2.3 billion, which included negative working capital movements of $2.5 billion.
  • Total dividends distributed to shareholders in the quarter were $3.7 billion, of which $1.2 billion were settled by issuing 50.5 million A shares under the Scrip Dividend Programme.
  • Gearing at the end of the second quarter 2016 was 28.1% versus 12.7% at the end of the second quarter 2015. This increase mainly reflects the impact of the acquisition of BG.
  • A second quarter 2016 dividend has been announced of $0.47 per ordinary share and $0.94 per American Depositary Share ("ADS").

Royal Dutch Shell Chief Executive Officer Ben van Beurden commented:


"Downstream and Integrated Gas businesses contributed strongly to the results, alongside Shell's self-help programme. However, lower oil prices continue to be a significant challenge across the business, particularly in the Upstream.

We are managing the company through the down-cycle by reducing costs, by delivering on lower and more predictable investment levels, executing our asset sales plans and starting up profitable new projects. At the same time, integration of Shell and BG is making strong progress, and our operating performance continues to further improve.

We are making significant and lasting changes to Shell's working practices and cost structure. Shell is firmly on track to deliver a $40 billion underlying operating cost run rate at the end of 2016.

Looking through the cycle, our investment plans and portfolio actions are focused firmly on reshaping Shell into a world-class investment case through stronger, sustained and growing free cash flow per share."


   

    SUMMARY OF CCS EARNINGS EXCLUDING IDENTIFIED ITEMS

                Quarters                      $ million                  Half year
     Q2 2016 Q1 2016 Q2 2015   %[1]                                   2016    2015      %
                                       CCS earnings attributable
         239     814   3,361      -93  to shareholders               1,053   8,122      -87
                                       Of which:
         982     905   1,335      -26  Integrated Gas                1,887   2,474      -24
      (1,974) (1,350)   (561)    -252  Upstream                     (3,324)    839     -496
       1,717   1,700   2,746      -37  Downstream                    3,417   5,260      -35
       1,490   1,294   2,243      -34    Oil Products                2,784   4,357      -36
         227     406     503      -55    Chemicals                     633     903      -30
                                       Corporate and
        (486)   (441)   (159)    -206  Non-controlling interest       (927)   (451)    -106
        (806)   (739)   (399)          Identified items[2]          (1,545)    624
                                       Of which:
         114     (89)    (68)          Integrated Gas                   25    (420)
        (649)     87     (92)          Upstream                       (562)  1,503
         (99)   (310)   (215)          Downstream                     (409)   (347)
         (78)   (339)   (155)            Oil Products                 (417)   (278)
         (21)     29     (60)            Chemicals                      8      (69)
                                       Corporate and
        (172)   (427)    (24)          Non-controlling interest       (599)   (112)
                                       CCS earnings attributable
                                       to shareholders excluding
       1,045   1,553   3,760      -72  identified items              2,598   7,498      -65
                                       Of which:
         868     994   1,403      -38  Integrated Gas                1,862   2,894      -36
      (1,325) (1,437)   (469)    -183  Upstream                     (2,762)   (664)    -316
       1,816   2,010   2,961      -39  Downstream                    3,826   5,607      -32
       1,568   1,633   2,398      -35    Oil Products                3,201   4,635      -31
         248     377     563      -56    Chemicals                     625     972      -36
                                       Corporate and
        (314)    (14)   (135)    -133  Non-controlling interest       (328)   (339)      +3
    1. Q2 on Q2 change

    2. See page 5. Comparative information has been restated.

SECOND QUARTER 2016 PORTFOLIO DEVELOPMENTS 

Integrated Gas 

During the quarter, Mahanagar Gas Limited (MGL), a joint venture between BG Asia Pacific Holdings (a Shell subsidiary) and GAIL (India) Limited, completed an initial public offering (IPO) for 25% of the equity for a total of around $154 million (Shell share $77 million). The IPO was an obligation under the original approval/ licensing permits granted by the Government of India's Foreign Investment Promotion Board in 1994. Immediately prior to the IPO, the Government of Maharashtra increased its interest to 10% as a result of the conversion of the Compulsory Convertible Debentures resulting in a dilution for each of Shell and GAIL to 45%. After completion of both transactions, Shell and GAIL each hold a 32.5% interest in MGL (previously 49.75% each), with a 10% interest held by the Government of Maharashtra (previously 0.5%) and 25% held by public shareholders (previously 0%).

During the quarter, the Māui joint venture (Shell interest 83.75%) completed the sale of the Māui onshore natural gas pipeline in New Zealand, to infrastructure funds managed by First State Investments for a consideration of $0.2 billion.

In July, the LNG Canada joint venture announced that the joint venture participants - Shell, PetroChina, Mitsubishi Corporation and Kogas - decided to delay final investment decision on the LNG Canada project (Shell interest 50%) that was planned for the end of 2016.

Also in July, Shell decided to delay final investment decision on the Lake Charles LNG project (Shell capacity interest 100%) that was planned for 2016, in the United States. The Lake Charles LNG project is proposed to convert the existing Lake Charles LNG regasification facility owned by Energy Transfer to a liquefaction facility.

Upstream 

Shell had continued success in its exploration programme with 2 discoveries in Oman and the United States. This included a notable oil discovery in the United States with the Shell-operated Fort Sumter well (Shell interest 100%) in the Gulf of Mexico. The initial estimated recoverable resources for the Fort Sumter well are more than 125 million barrels of oil equivalent.

In July, the non-operated ML South development (Shell interest 35%) in Brunei reached first production. The expected peak production from this development is around 35 thousand barrels of oil equivalent per day ("boe/d").

Also in July, the non-operated Lula Central production system was started up with the interconnection of the first production well to FPSO Cidade de Saquarema (Shell interest 25%), the eighth FPSO in the Santos Basin pre-salt offshore Brazil. FPSO Cidade de Saquarema has a processing capacity of 150 thousand barrels of oil and compressing capacity of up to 212 million standard cubic feet of gas per day.

Downstream 

During the quarter, Shell announced a final investment decision to build a major petrochemical complex, comprising an ethylene cracker with polyethylene derivatives unit in Pennsylvania, USA. Main construction will start approximately 18 months from the decision date in order to manage capital spending, with commercial production expected to begin early in the next decade.

Shell announced that it has completed the sale of Dansk Fuels in Denmark for a consideration of $0.3 billion. Dansk Fuels comprises retail, commercial fuels, commercial fleet and aviation businesses, and products trading and supply activities associated with those businesses.  

In the United States, Shell Midstream Partners, L.P. acquired additional interests in Zydeco Pipeline Company, Colonial Pipeline Company, and Bengal Pipeline Company for $700 million from Shell Pipeline Company. The acquisition increased Shell Midstream Partners' ownership interest in Zydeco from 62.5% to 92.5%, in Colonial from 3% to 6%, and in Bengal from 49% to 50%.

Shell also completed the sale of an additional 3.59% interest in Shell Midstream Partners, L.P. to public investors via the issuance of an additional 12,075,000 LP units for net proceeds of $398 million.

KEY FEATURES OF THE SECOND QUARTER 2016 

  • Second quarter 2016 CCS earnings attributable to shareholders were $239 million, 93% lower than for the same quarter a year ago.
  • Second quarter 2016 CCS earnings attributable to shareholders excluding identified items were $1,045 million compared with $3,760 million for the second quarter 2015, a decrease of 72%.
  • Basic CCS earnings per share for the second quarter 2016 decreased by 94% versus the same quarter a year ago.
  • Basic CCS earnings per share excluding identified items for the second quarter 2016 decreased by 78% versus the same quarter a year ago.
  • Cash flow from operating activities for the second quarter 2016 was $2.3 billion, which included negative working capital movements of $2.5 billion, compared with $6.1 billion for the same quarter last year.
  • Capital investment (see Definition [C]) for the second quarter 2016 was $6.3 billion. Half year 2016 capital investment was $65.3 billion, which included $52.9 billion related to the acquisition of BG. Organic capital investment for the full year 2016 is expected to be $29 billion, compared with combined capital investment of $47 billion in 2014.
  • Divestments (see Definition [D]) for the second quarter 2016 were $1.0 billion.
  • Operating expenses (see Definition [G]) for the second quarter 2016 increased by $1.7 billion versus the same quarter a year ago, and included $1.4 billion related to redundancy and restructuring charges and $0.4 billion related to a provision for onerous contracts. Compared with the second quarter 2015, operating expenses excluding identified items decreased by $0.9 billion before the increase of $1.0 billion due to the consolidation of BG. Operating expenses are trending towards an underlying run rate of $40 billion by the end of 2016.
  • Total dividends distributed to shareholders in the second quarter 2016 were $3.7 billion, of which $1.2 billion were settled by issuing 50.5 million A shares under the Scrip Dividend Programme.
  • Return on average capital employed on a reported income basis (see Definition [E]) was a negative -1.4% at the end of the second quarter 2016 compared with 6.3% at the end of the second quarter 2015. Return on average capital employed on a CCS basis excluding identified items was 2.5% at the end of the second quarter 2016 compared with 7.6% at the end of the second quarter 2015.
  • Gearing (see Definition [F]) was 28.1% at the end of the second quarter 2016 versus 12.7% at the end of the second quarter 2015. This increase mainly reflects the impact of the BG acquisition including 1.6% related to the recognition of associated finance leases in the first quarter of 2016.
  • Global liquids realisations were 29% lower and global natural gas realisations were 28% lower than for the same quarter a year ago.
  • Oil and gas production for the second quarter 2016 was 3,508 thousand boe/d, an increase of 28% compared with the second quarter 2015. The impact of BG on the second quarter 2016 production was an increase of 768 thousand boe/d. Excluding the impact of divestments, curtailment and underground storage utilisation at NAM in the Netherlands, a Malaysia PSC expiry, PSC price effects, the Woodside accounting change (see page 12), and security impacts in Nigeria, second quarter 2016 production increased by 30% compared with the same period last year, or 2% excluding BG.
  • LNG liquefaction volumes of 7.57 million tonnes for the second quarter 2016, of which BG contributed 2.42 million tonnes, were 39% higher than for the same quarter a year ago.
  • LNG sales volumes of 14.25 million tonnes for the second quarter 2016 were 52% higher than for the same quarter a year ago, mainly reflecting Shell's enlarged portfolio after the acquisition of BG.
  • Oil products sales volumes for the second quarter 2016 were 1% higher than for the second quarter 2015.
  • Chemicals sales volumes for the second quarter 2016 decreased by 2% compared with the same quarter a year ago.
  • Supplementary financial and operational disclosure for this quarter is available at http://www.shell.com/investor.

SUMMARY OF IDENTIFIED ITEMS 

With effect from 2016, identified items include the impact of exchange rate movements on certain deferred tax balances, as set out in Definition [B]. The comparative information in this Report has been restated following this change.

CCS earnings attributable to shareholders for the second quarter 2016 reflected the following items, which in aggregate amounted to a net charge of $806 million (compared with a net charge of $399 million for the second quarter 2015), as summarised below:

  • Integrated Gas earnings included a net gain of $114 million, primarily reflecting the impact of some $580 million following a change in accounting classification for Woodside (see page 12), from an associate to an investment in securities. As a consequence, SEC proved reserves of 103 million boe at December 31, 2015, have been de-booked and production decreases by 25 thousand boe/d. Earnings were also impacted by divestment gains of some $200 million. This was partly offset by redundancy and restructuring charges of some $250 million, a charge of some $220 million related to the impact of the weakening Australian dollar on a deferred tax position, and a net charge on fair value accounting of certain commodity derivatives and gas contracts of some $190 million. Integrated Gas earnings for the second quarter 2015 included a net charge of $68 million.
  • Upstream earnings included a net charge of $649 million, primarily reflecting redundancy and restructuring charges of some $570 million, other items including a provision for onerous contracts of some $240 million, impairments of some $140 million and a net charge on fair value accounting of certain commodity derivatives and gas contracts of some $80 million. These charges were partly offset by a gain of some $360 million related to the impact of the strengthening Brazilian real on a deferred tax position. Upstream earnings for the second quarter 2015 included a net charge of $92 million.
  • Downstream earnings included a net charge of $99 million, primarily reflecting redundancy and restructuring charges of some $250 million and impairment charges of some $50 million, partly offset by other tax-related credits of some $150 million. Downstream earnings for the second quarter 2015 included a net charge of $215 million.
  • Corporate results and Non-controlling interest included a net charge of $172 million, mainly reflecting the impact of the strengthening Brazilian real on deferred tax positions related to financing of the Upstream business. Earnings for the second quarter 2015 included a net charge of $24 million.

Identified items for the first quarter 2016 and 2015 can be found on page 27.


EARNINGS BY SEGMENT 


   
    INTEGRATED GAS

                Quarters                       $ million                  Half year
     Q2 2016 Q1 2016 Q2 2015   %[1]                                  2016    2015        %
                                      Integrated Gas earnings
         868     994   1,403   -38    excluding identified items    1,862   2,894      -36
         982     905   1,335   -26    Integrated Gas earnings       1,887   2,474      -24
                                      Integrated Gas cash flow
       2,730   2,657   1,444   +89    from operating activities     5,387   3,978      +35
                                      Integrated Gas capital
                                      investment excluding BG
       1,153   1,051   1,313   -12    acquisition impact            2,204   2,614      -16
                                      Integrated Gas BG-related
           -  21,773       -          capital investment           21,773       -
                                      Liquids production
                                      available for sale
         219     224     199   +10    (thousand b/d)                  222     200      +11
                                      Natural gas production
                                      available for sale (million
       3,831   3,532   2,350   +63    scf/d)                        3,682   2,398      +54
                                      Total production available
         880     833     604   +46    for sale (thousand boe/d)       856     613      +40
                                      LNG liquefaction volumes
        7.57    7.04    5.46   +39    (million tonnes)              14.61   11.63      +26
                                      LNG sales volumes (million
       14.25   12.29    9.40   +52    tonnes)                       26.54   19.21      +38
    1. Q2 on Q2 change

Second quarter Integrated Gas earnings excluding identified items were $868 million compared with $1,403 million a year ago. Identified items were a net gain of $114 million, compared with a net charge of $68 million for the second quarter 2015 (see page 5).

Compared with the second quarter 2015, earnings excluding identified items were impacted by the decline in oil and LNG prices, and increased depreciation including a step-up resulting from the BG acquisition. The consolidation of BG resulted in higher operating expenses. This was partly offset by higher LNG and liquids production volumes, related to the contribution of BG assets.

Second quarter 2016 production was 880 thousand boe/d compared with 604 thousand boe/d a year ago. Liquids production increased by 10% and natural gas production increased by 63% compared with the second quarter 2015.

LNG liquefaction volumes of 7.57 million tonnes increased by 39% compared with the same quarter a year ago, mainly reflecting the impact of the acquisition of BG, including an increase associated with Queensland Curtis LNG in Australia and Atlantic LNG in Trinidad and Tobago.

LNG sales volumes of 14.25 million tonnes increased by 52% compared with the same quarter a year ago, mainly reflecting Shell's enlarged portfolio after the acquisition of BG.

Half year Integrated Gas earnings excluding identified items were $1,862 million compared with $2,894 million for the first half year 2015. Identified items were a net gain of $25 million, compared with a net charge of $420 million for the first half year 2015 (see page 5).

Compared with the first half year 2015, Integrated Gas earnings excluding identified items were impacted by the decline in oil and LNG prices and the Malaysia LNG Dua JVA expiry. The consolidation of BG resulted in higher operating expenses and a step-up in depreciation. This was partly offset by increased production volumes mainly as a result of the contribution of BG assets and higher uptime at Pearl GTL in Qatar, and lower well write-offs.

Half year 2016 production was 856 thousand boe/d compared with 613 thousand boe/d for the same period a year ago. Liquids production increased by 11% and natural gas production increased by 54% compared with the first half year 2015.

LNG liquefaction volumes of 14.61 million tonnes were 26% higher than for the first half year 2015, mainly reflecting the impact of the acquisition of BG, including an increase associated with Queensland Curtis LNG in Australia, partly offset by lower feedgas availability and the expiry of the Malaysia LNG Dua JVA.

LNG sales volumes of 26.54 million tonnes increased by 38% compared with the first half year 2015, mainly reflecting Shell's enlarged portfolio after the acquisition of BG.


   

    UPSTREAM

                Quarters                      $ million                  Half year
    Q2 2016  Q1 2016 Q2 2015    %[1]                                2016    2015      %
                                      Upstream earnings
     (1,325)  (1,437)   (469)  -183   excluding identified items  (2,762)   (664)     -316
     (1,974)  (1,350)   (561)  -252   Upstream earnings           (3,324)     839     -496
                                      Upstream cash flow from
       (297)     448     648  -146    operating activities            151   2,243      -93
                                      Upstream capital
                                      investment excluding BG
      3,700    3,907   4,603   -20    acquisition impact            7,607   9,245      -18
                                      Upstream BG-related
          -   31,131       -          capital investment           31,131       -
                                      Liquids production
                                      available for sale
      1,526    1,557   1,233   +24   (thousand b/d)                 1,541   1,287      +20
                                      Natural gas production
                                      available for sale
      6,395    7,373   5,184   +23   (million scf/d)                6,884   6,075      +13
                                      Total production available
      2,628    2,828   2,127   +24    for sale (thousand boe/d)     2,728   2,335      +17
    1. Q2 on Q2 change

Second quarter Upstream earnings excluding identified items were a loss of $1,325 million compared with a loss of $469 million a year ago. Identified items were a net charge of $649 million compared with a net charge of $92 million for the second quarter 2015 (see page 5).

Compared with the second quarter 2015, earnings excluding identified items were impacted by the decline in oil and gas prices and depreciation step-up resulting from the BG acquisition. This was partly offset by increased production volumes, mainly from BG assets and improved operational performance. Operating expenses and exploration expenses were lower, as steps taken by the company to reduce these costs more than offset the increases due to the consolidation of BG.  

Second quarter 2016 production was 2,628 thousand boe/d compared with 2,127 thousand boe/d a year ago. Liquids production increased by 24% and natural gas production increased by 23% compared with the second quarter 2015, driven by the impact of BG.

New field start-ups and the continuing ramp-up of existing fields, in particular the Corrib gas field in Ireland, and Erha North ph2 in Nigeria, contributed some 53 thousand boe/d to production compared with the second quarter 2015.

Half year Upstream earnings excluding identified items were a loss of $2,762 million compared with a loss of $664 million for the same period a year ago. Identified items were a net charge of $562 million compared with a net gain of $1,503 million for the first half year 2015 (see page 5).

Compared with the first half year 2015, earnings excluding identified items were impacted by the decline in oil and gas prices, and increased depreciation mainly related to a step-up resulting from the BG acquisition. This was partly offset by increased production volumes mainly from BG assets. Exploration expense and operating expenses were lower, as steps taken by the company to reduce these costs more than offset the increases due to the consolidation of BG.

Half year 2016 production was 2,728 thousand boe/d compared with 2,335 thousand boe/d for the same period last year. Liquids production increased by 20% and natural gas production increased by 13% compared with the first half year 2015.

New field start-ups and the continuing ramp-up of existing fields, in particular Erha North ph2 in Nigeria, the Corrib gas field in Ireland, and North American shales, contributed some 58 thousand boe/d to production compared with the first half year 2015.


   

    DOWNSTREAM

                Quarters                       $ million                Half year
    Q2 2016  Q1 2016  Q2 2015  %[1]                                2016    2015      %
                                      Downstream earnings
                                      excluding identified
      1,816    2,010    2,961  -39    items[2]                    3,826   5,607    -32
                                      Of which:
      1,568    1,633    2,398  -35      Oil Products              3,201   4,635    -31
        248      377      563  -56      Chemicals                   625     972    -36
      1,717    1,700    2,746  -37    Downstream earnings[2]      3,417   5,260    -35
                                      Downstream cash flow from
        571   (1,434)   3,816  -85    operating activities         (863)  5,370   -116
                                      Downstream capital
      1,389    1,092    1,085  +28    investment                  2,481   1,934    +28
                                      Refinery processing intake
      2,648    2,645    2,944  -10   (thousand b/d)               2,646   2,908     -9
                                      Oil products sales volumes
      6,595    6,225    6,531   +1   (thousand b/d)               6,410   6,423      -
                                      Chemicals sales volumes
      4,248    4,050    4,326   -2   (thousand tonnes)            8,298   8,518     -3

    1. Q2 on Q2 change

    2. Earnings are presented on a CCS basis

Second quarter Downstream earnings excluding identified items were $1,816 million compared with $2,961 million for the second quarter 2015. Identified items were a net charge of $99 million, compared with a net charge of $215 million for the second quarter 2015 (see page 5).

Compared with the second quarter 2015, Downstream earnings excluding identified items were mainly impacted by weaker refining industry conditions, increased taxation, and lower Chemicals margins. Downstream earnings benefited from lower costs, including the impact of favourable exchange rate effects and divestments.

Oil Products 

  • Refining & Trading earnings excluding identified items were $459 million in the second quarter 2016 compared with $1,313 million for the same period last year. Second quarter 2016 earnings were impacted by lower realised refining margins, reflecting the weaker global refining industry conditions due to oversupply and high inventory levels, and weaker operating performance, and increased taxation.

    Refinery intake volumes were 10% lower compared with the same quarter last year. Excluding portfolio impacts, refinery intake volumes were 9% lower compared with the same period a year ago. Refinery availability decreased to 89% compared with 95% in the second quarter 2015, mainly as a result of increased maintenance.
  • Marketing earnings excluding identified items were $1,109 million in the second quarter 2016 compared with $1,085 million for the same period a year ago. Second quarter 2016 earnings benefited from lower costs and stronger underlying unit margins, offsetting the impact of adverse exchange rate effects and divestments.

Oil products sales volumes increased by 1% compared with the same period a year ago, reflecting higher trading volumes partly offset by lower marketing volumes.

Chemicals 

  • Chemicals earnings excluding identified items were $248 million in the second quarter 2016 compared with $563 million for the same period last year. Second quarter 2016 earnings were mainly impacted by weaker base chemicals industry conditions in the United States and the impact of unit shutdowns at the Bukom chemical site in Singapore, partly offset by recovery at the Moerdijk chemical site in the Netherlands.

    Chemicals sales volumes decreased by 2% compared with the same quarter last year, mainly as a result of weaker intermediates demand and reduced availability driven by unit shutdowns at Bukom, partly offset by recovery at Moerdijk. Chemicals manufacturing plant availability decreased to 85% from 86% in the second quarter 2015, mainly reflecting unit shutdowns at Bukom, partly offset by recovery at Moerdijk.

Half year Downstream earnings excluding identified items were $3,826 million compared with $5,607 million for the same period a year ago. Identified items were a net charge of $409 million, compared with a net charge of $347 million for the first half year 2015 (see page 5).

Compared with the first half year 2015, Downstream earnings excluding identified items were mainly impacted by weaker refining industry conditions, increased taxation, and lower Chemicals margins. Downstream earnings benefited from lower costs, including the impact of favourable exchange rate effects and divestments.

Oil Products 

  • Refining & Trading earnings excluding identified items were $1,121 million in the first half year 2016 compared with $2,575 million for the same period last year. Half year 2016 earnings were impacted by lower realised refining margins, reflecting the weaker global refining industry conditions due to oversupply and high inventory levels, and weaker operating performance.

    Refinery intake volumes were 9% lower compared with the first half year 2015. Excluding portfolio impacts, refinery intake volumes were 7% lower compared with the same period a year ago. Refinery availability decreased to 89% compared with 95% for the first half year 2015, mainly as a result of increased maintenance.
  • Marketing earnings excluding identified items were $2,080 million in the first half year 2016 compared with $2,060 million for the same period a year ago. Half year 2016 earnings benefited from stronger underlying unit margins and lower costs, offsetting the impact of adverse exchange rate effects and divestments. Earnings were impacted by increased taxation.

Oil products sales volumes were in line with the first half year 2015.

Chemicals 

  • Chemicals earnings excluding identified items were $625 million in the first half year 2016 compared with $972 million for the same period last year. Half year 2016 earnings were primarily impacted by weaker base chemicals industry conditions in the US and the impact of unit shutdowns at the Bukom chemical site in Singapore, partly offset by recovery at the Moerdijk chemical site in the Netherlands.

    Half year Chemicals sales volumes decreased by 3% compared with the same period last year, mainly as a result of weaker intermediates demand and reduced availability driven by unit shutdowns at Bukom, partly offset by recovery at Moerdijk. Chemicals manufacturing plant availability increased to 86% from 85% in the first half year 2015, mainly reflecting recovery at Moerdijk, partly offset by unit shutdowns at Bukom.

   

    CORPORATE AND NON-CONTROLLING INTEREST

           Quarters                          $ million                       Half year
    Q2 2016  Q1 2016 Q2 2015                                               2016     2015
                              Corporate and Non-controlling interest
       (314)    (14)    (135) earnings excl. identified items              (328)    (339)

                              Of which:
       (234)     69      (41)   Corporate                                  (165)    (124)
        (80)    (83)     (94)   Non-controlling interest                   (163)    (215)

                              Corporate and Non-controlling interest
       (486)   (441)    (159) earnings                                     (927)    (451)


Second quarter Corporate results and Non-controlling interest excluding identified items were a loss of $314 million, compared with a loss of $135 million for the same period last year. Identified items for the second quarter 2016 were a net charge of $172 million, and earnings for the second quarter 2015 included a net charge of $24 million (see page 5).

Compared with the second quarter 2015, Corporate results excluding identified items mainly reflected higher net interest expense and adverse exchange rate effects, partly offset by higher tax credits.

Half year Corporate results and Non-controlling interest excluding identified items were a loss of $328 million, compared with a loss of $339 million for the same period last year. Identified items for the first half year 2016 were a net charge of $599 million, and earnings for the first half year 2015 included a net charge of $112 million (see page 5).

Compared with the first half year 2015, Corporate results excluding identified items mainly reflected favourable exchange rate effects, offset by higher net interest expense and costs, and lower tax credits.

OUTLOOK FOR THE THIRD QUARTER 2016 

Compared with the third quarter 2015, Integrated Gas earnings are expected to be negatively impacted by a reduction of some 15 thousand boe/d associated with the impact of maintenance.

Compared with the third quarter 2015, Upstream earnings are expected to be negatively impacted by a reduction of some 35 thousand boe/d associated with sabotage incidents and repairs in Nigeria. Earnings could be further impacted if the security conditions continue to deteriorate.

Refinery availability is expected to marginally increase in the third quarter 2016 as a result of lower planned maintenance compared with the same period a year ago. Chemicals manufacturing plant availability is expected to increase in the third quarter 2016 driven by the planned restart of the Bukom chemical site in Singapore compared with the third quarter 2015, which was heavily impacted by unit shutdowns at the Moerdijk chemical site in the Netherlands.

As a result of divestments in Denmark, Norway and France, Oil products sales volumes are expected to decrease by some 200 thousand barrels per day compared with the third quarter 2015.

Compared with the third quarter 2015, the BG purchase price allocation is expected to increase depreciation by up to $0.3 billion.

Following the completion of the BG acquisition, the sensitivities to earnings have been updated:

  • Integrated Gas - around $2 billion per annum for every $10 per barrel movement in Brent
  • Upstream - around $3 billion per annum for every $10 per barrel movement in Brent

FORTHCOMING EVENTS 

Third quarter 2016 results and third quarter 2016 dividend are scheduled to be announced on November 1, 2016. Shell will host a North America Investor Day on November 8, 2016 in New York City.

UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 


   

    CONSOLIDATED STATEMENT OF INCOME

                Quarters                   $ million                  Half year
     Q2 2016  Q1 2016  Q2 2015                                        2016    2015
      58,415   48,554   72,402  Revenue[1]                         106,969 138,108
                                Share of profit of joint ventures
         946      789    1,136  and associates                       1,735   2,541
         910     389      412   Interest and other income            1,299   2,147
      60,271   49,732   73,950  Total revenue and other income     110,003 142,796
      40,362   33,286   52,441  Purchases                           73,648  99,866
                                Production and manufacturing
       8,076    6,765    6,506  expenses                            14,841  13,161
                                Selling, distribution and
       3,227    3,106    3,076  administrative expenses              6,333   5,970
         243      243      252  Research and development               486     505
         535      457      964  Exploration                            992   1,764
                                Depreciation, depletion and
       6,097    6,147    4,673  amortisation                        12,244   9,277
         770      370      466  Interest expense                     1,140     842
      59,310   50,374   68,378  Total expenditure                  109,684 131,385
         961     (642)   5,572  Income/(loss) before taxation          319  11,411
        (319)  (1,097)   1,458  Taxation charge/(credit)            (1,416)  2,760
       1,280      455    4,114  Income/(loss) for the period[1]      1,735   8,651
                                Income/(loss) attributable to
         105      (29)     128  non-controlling interest                76     235
                                Income/(loss) attributable to
                                Royal Dutch Shell plc
       1,175      484    3,986  shareholders                         1,659   8,416
        0.15     0.07     0.63  Basic earnings per share[2]           0.22    1.34
        0.15     0.07     0.62  Diluted earnings per share[2]         0.22    1.32

    1. See Note 3 "Segment information"

    2. See Note 4 "Earnings per share"



   

    CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

          Quarters                   $ million                         Half year                
    Q2 2016 Q1 2016  Q2 2015                                           2016    2015
      1,280     455    4,114   Income/(loss) for the period           1,735   8,651
                               Other comprehensive income
                               net of tax:
                               Items that may be
                               reclassified to income in
                               later periods:
                               - Currency translation                      
       (434)   2,319   1,668     differences                          1,885  (2,531)
                               - Unrealised gains/(losses)
      (128)    (12)     (129)    on securities                         (140)   (264)
                               - Cash flow hedging
      (538)     324      133     gains/(losses)                        (214)    124
                               - Net investment hedging
      (863)     136        -     gains/(losses)[1]                     (727)      -
                               - Share of other
                                 comprehensive income/(loss)
                                 of joint ventures and
       (77)       8      (25)    associates                             (69)    (18)
    (2,040)   2,775    1,647   Total                                    735  (2,689)
                               Items that are not
                               reclassified to income in
                               later periods:
                               - Retirement benefits
    (2,795) (1,634)    5,496     remeasurements                      (4,429)  4,180
                               Other comprehensive
    (4,835)   1,141    7,143   income/(loss) for the period          (3,694)  1,491
                               Comprehensive income/(loss)
    (3,555)   1,596   11,257   for the period                        (1,959) 10,142
                               Comprehensive income/(loss)
                               attributable to
         96       4      161   non-controlling interest                 100     224
                               Comprehensive income/(loss)
                               attributable to Royal Dutch
    (3,651)   1,592   11,096 Shell plc shareholders                  (2,059)  9,918

    1. See Note [1] "Basis of preparation"

    CONDENSED CONSOLIDATED BALANCE SHEET
                                                              $ million
                                            
                                             Jun 30,         Mar 31,               Dec 31,
                                            2016[1]          2016[1]                 2015
    Assets
    Non-current assets
    Intangible assets                       21,093           21,327                 6,283                                           
    Property, plant and equipment          242,907          245,133               182,838
    Joint ventures and associates[2]        33,850           35,654                30,150
    Investments in securities[2]             5,709            3,474                 3,416
    Deferred tax                            15,812           15,311                11,033
    Retirement benefits                      1,645            3,108                 4,362
    Trade and other receivables[3]          11,030           11,047                 8,717

                                           332,046          335,054               246,799
    Current assets
    Inventories                             20,626           17,396                15,822
    Trade and other receivables[3],[4]      49,547           47,872                45,784
    Cash and cash equivalents               15,222           11,019                31,752

                                            85,395           76,287                93,358
                                          
    Total assets                           417,441          411,341               340,157
    Liabilities
    Non-current liabilities
    Debt[5]                                 79,466           73,005                52,849
    Trade and other payables[3]              4,393            3,917                 4,528
    Deferred tax                            15,904           16,677                 8,976
    Retirement benefits                     15,882           13,516                12,587
    Decommissioning and other
    provisions                              31,825           32,710                26,148
                                           
                                           147,470          139,825               105,088

    Current liabilities
    Debt                                    10,863            7,868                 5,530
    Trade and other payables[3],[4]         52,669           51,069                52,770
    Taxes payable                            8,291           10,387                 8,233
    Retirement benefits                        392              401                   350
    Decommissioning and other
    provisions                               5,250            3,777                 4,065
                                            77,465           73,502                70,948                                          
    Total liabilities                      224,935          213,327               176,036
    Equity attributable to Royal Dutch     
    Shell plc shareholders                 190,670          196,521               162,876
    Non-controlling interest                 1,836            1,493                 1,245
                                          
    Total equity                           192,506          198,014               164,121
                                           
    Total liabilities and equity           417,441          411,341               340,157

    1. See Note 2 "Acquisition of BG Group plc"

    2. During the second quarter 2016, management concluded that a change in
    Shell's level of involvement over Woodside's financial and operating policy
    decisions resulted in no longer having significant influence. Its
    classification was therefore changed from an associate (carrying amount:
    $2,144 million) to an investment in securities (carrying amount at fair
    value: $2,442 million). The consequential revaluation and related release
    of cumulative currency translation differences were reported in interest
    and other income in the Consolidated Statement of Income.

    3. See Note 7 "Derivative contracts"

    4. The amounts at March 31, 2016 have been reduced by $4,963 million in
    order to appropriately reflect certain contracts on a net basis which were
    previously presented gross.

    5. During the second quarter 2016, debt of $9,246 million was issued under
    the US shelf registration and EMTN programme.



   

    CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

                               Equity attributable to Royal Dutch
                                     Shell plc shareholders
                                                                          
                     Share   Shares  Other                       Non-
                    capital held in reserves Retained         controlling    Total
       $ million      [1]    trust    [2]    earnings   Total  interest     equity

    At January 1,                                                         
    2016                546   (584) (17,186)  180,100  162,876   1,245     164,121
    Comprehensive
    income/(loss)                                                         
    for the period        -      -   (3,718)    1,659   (2,059)    100      (1,959)                                                                          
    Dividends paid        -      -        -    (7,411)  (7,411)    (69)     (7,480)
    Scrip dividends       9      -       (9)    2,717    2,717       -       2,717
    Shares issued
    for the
    acquisition of
    BG Group plc[3]     120      -   33,930         -   34,050       -      34,050
    Repurchases of
    shares                -      -        -         -        -       -           -
    Share-based
    compensation[4]       -   (168)     266       133      231       -         231
    Capital
    contributions
    from, and other
    changes
    in, non-controlling
    interest              -      -        -       266      266     560         826

    At June 30,                                                           
    2016                675   (752)  13,283   177,464  190,670   1,836     192,506

    At January 1,                                                         
    2015                540 (1,190) (14,365)  186,981  171,966     820     172,786
    Comprehensive
    income/(loss)
    for the period        -      -    1,502     8,416    9,918     224      10,142                                                                          
    Dividends paid        -      -        -    (5,957)  (5,957)    (45)     (6,002)
    Scrip dividends       2      -       (2)      731      731       -         731
    Repurchases of
    shares               (1)     -        1         1        1       -           1
    Share-based
    compensation          -    634        -        39      673       -         673
    Capital
    contributions
    from, and other
    changes in,
    non-controlling
    interest              -      -        -       (98)     (98)    222         124

    At June 30,                                                           
    2015                541   (556) (13,285)  190,087  176,787   1,221     178,008

    1. See Note 5 "Share capital"

    2. See Note 6 "Other reserves"

    3. See Note 2 "Acquisition of BG Group plc"

    4. Includes a reclassification of $534 million between Shares held in trust
    and Other reserves, with no impact on total equity, in order to appropriately
    reflect the carrying amount of Shares held in trust at cost.


   

    CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

                        Quarters                      $ million               Half year
          Q2 2016    Q1 2016       Q2 2015                                  2016      2015
                                                Cash flow from operating
                                                activities                                              
                                                Income/(loss) for
            1,280        455         4,114      the period                 1,735     8,651
                                                Adjustment for:
              119        753         1,753      - Current tax                872     4,700
                                                - Interest expense
              671        272           395        (net)                      943       698
                                                - Depreciation,
                                                  depletion and
            6,097      6,147         4,673        amortisation            12,244     9,277
                                                - Net (gains)/losses
                                                  on sale of
                                                  non-current assets
             (535)      (175)         (247)       and businesses[1]         (710)   (1,859)
                                                - Decrease/(increase)
           (2,474)    (3,909)       (1,588)       in working capital      (6,383)   (1,960)
                                                - Share of
                                                  (profit)/loss of
                                                  joint ventures and
             (946)      (789)       (1,136)       associates              (1,735)   (2,541)
                                                - Dividends received
                                                  from joint ventures
              964        688         1,071        and associates           1,652     2,148
                                                - Deferred tax,
                                                  retirement benefits,
                                                  decommissioning
             (533)    (1,755)          (90)       and other provisions    (2,288)   (1,593)
             (346)      (292)          255      - Other                     (638)      349

                                                Net cash from operating
            4,297      1,395         9,200      activities (pre-tax)       5,692    17,870
           (2,005)      (734)       (3,150)     Tax paid                  (2,739)   (4,714)

                                                Net cash from operating
            2,292        661         6,050      activities                 2,953    13,156

                                               Cash flow from investing
                                               activities                                              
           (5,796)    (5,324)       (6,205)    Capital expenditure       (11,120)  (12,420)
                                               Acquisition of BG Group
                                               plc, net of cash and
                                               cash equivalents
                -    (11,421)            -     acquired[2]               (11,421)        -
                                               Investments in joint
             (216)      (332)         (208)    ventures and associates      (548)     (617)
                                               Proceeds from sale of
                                               property, plant and
                                               equipment and
              516         46           206     businesses                    562     2,409
                                               Proceeds from sale of
                                               joint ventures and
               23         16           165     associates                     39       169
               93        136            59     Interest received             229       115
              (70)       (37)          (80)    Other                        (107)     (159)

                                               Net cash used in
           (5,450)   (16,916)       (6,063)    investing activities      (22,366)  (10,503)
                                               Cash flow from
                                               financing activities
                                               Net increase/(decrease)
                                               in debt with maturity
                                               period
            1,870        873         1,072     within three months         2,743       817
                                               Other debt:
            9,472        264        10,045     - New borrowings            9,736    10,797
             (972)    (1,969)       (2,188)    - Repayments               (2,941)   (2,818)
             (725)      (534)         (317)    Interest paid              (1,259)     (726)
                                               Change in
                                               non-controlling
              397        422           424     interest                      819       419
                                               Cash dividends paid to:
                                               - Royal Dutch Shell plc
           (2,436)    (2,258)       (2,294)      shareholders             (4,694)   (5,226)
                                               - Non-controlling
              (34)       (35)          (27)      interest                    (69)      (45)
                -          -             -     Repurchases of shares           -      (409)
                                               Shares held in trust:
                                               net sales/(purchases)
                6         (4)           (5)    and dividends received          2       (45)

                                               Net cash from/(used in)
            7,578     (3,241)        6,710     financing activities        4,337     2,764

                                               Currency translation
                                               differences relating to
                                               cash and
             (217)    (1,237)          417     cash equivalents           (1,454)      (43)

                                               Increase/(decrease) in
                                               cash and cash
            4,203    (20,733)        7,114     equivalents               (16,530)    5,374

                                               Cash and cash
                                               equivalents at
           11,019     31,752        19,867     beginning of period        31,752    21,607

                                               Cash and cash
                                               equivalents at end of
           15,222     11,019        26,981      period                    15,222    26,981

    1. Includes the increase to fair value in the carrying amount of Woodside
    in the second quarter 2016 (see page 12).

    2. See Note 2 "Acquisition of BG Group plc"


NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 

  1. Basis of preparation


These unaudited Condensed Consolidated Interim Financial Statements ("Interim Statements") of Royal Dutch Shell plc ("the Company") and its subsidiaries (collectively referred to as "Shell") have been prepared in accordance with IAS 34 Interim Financial Reporting as issued by the International Accounting Standards Board and as adopted by the European Union, and on the basis of the same accounting principles as, and should be read in conjunction with, the Annual Report and Form 20-F for the year ended December 31, 2015 (pages 120 to 125) as filed with the U.S. Securities and Exchange Commission. In addition to those accounting policies, following the acquisition of BG Group plc, Shell accounts for net investment hedges where the effective portion of gains and losses arising on hedging instruments that are used to hedge net investments in foreign operations are recognised in other comprehensive income until the related investment is disposed of.

The Directors consider it appropriate to continue to adopt the going concern basis of accounting in preparing these Interim Statements.

The financial information presented in the Interim Statements does not constitute statutory accounts within the meaning of section 434(3) of the Companies Act 2006 ("the Act"). Statutory accounts for the year ended December 31, 2015 were published in Shell's Annual Report and a copy was delivered to the Registrar of Companies in England and Wales. The auditors' report on those accounts was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report and did not contain a statement under sections 498(2) or 498(3) of the Act.

  2. Acquisition of BG Group plc


On February 15, 2016, the Company acquired all the voting rights in BG by means of a Scheme of Arrangement under Part 26 of the Act for a purchase consideration of $54,034 million. This included cash of $19,036 million and the fair value ($34,050 million) of 218.7 million A shares and 1,305.1 million B shares issued in exchange for all BG shares. The fair value of the shares issued was calculated using the market price of the Company's A and B shares of 1,545.0 and 1,538.5 pence respectively on the London Stock Exchange at its opening of business on February 15, 2016.

BG's activities mainly comprise exploration, development, production, liquefaction and marketing of hydrocarbons, the development and use of LNG import facilities, and the purchase, shipping and sale of LNG and regasified natural gas. The acquisition is expected to accelerate Shell's growth strategy in global LNG and deep water. It is expected to add material proved oil and gas reserves and production volumes, and provides Shell with enhanced positions in competitive new oil and gas projects, particularly in Australia LNG and Brazil deep water.

Goodwill of $9,024 million was recognised on the acquisition, being the excess of the purchase consideration over the fair value of net assets acquired as set out below. The net asset value, in line with accounting standards, is determined by reference to oil and gas prices, as reflected in the prevailing market view on the day of completion. Oil and gas prices are based on the forward price curve for the first two years, and subsequent years based on the market consensus price view.

The fair values of the net assets, and therefore the resultant goodwill, are provisional.


   

    FAIR VALUE OF NET ASSETS ACQUIRED (PROVISIONAL)
                                                                               $ million
    Assets
    Non-current assets
    Intangible assets                                                              6,178
    Property, plant and equipment                                                 58,444
    Joint ventures and associates                                                  4,702
    Deferred tax                                                                   2,432
    Other                                                                          2,181
                                                                                  73,937
    Current assets
    Inventories                                                                      417
    Trade and other receivables                                                    4,202
    Cash and cash equivalents                                                      6,803
                                                                                  11,422
    Total assets                                                                  85,359
    Liabilities
    Non-current liabilities
    Debt                                                                          18,949
    Deferred tax                                                                   8,393
    Decommissioning and other provisions                                           6,401
    Other                                                                            665
                                                                                  34,408
    Current liabilities
    Debt                                                                           1,345
    Trade and other payables                                                       3,926
    Other                                                                            670
                                                                                   5,941
    Total liabilities                                                             40,349
    Total                                                                         45,010

Acquisition costs of $391 million were recognised in the Consolidated Statement of Income in production and manufacturing and selling, distribution and administrative expenses ($47 million in 2015 and $344 million in the first quarter 2016).

The acquired activities of BG are now significantly integrated with those of other Shell entities and therefore it is impracticable to identify separately either the amounts of revenue and income since the date of acquisition that BG has contributed to the Consolidated Statement of Comprehensive Income, or the revenue and income of Shell for the half year 2016 as though the acquisition date of BG had been as at January 1, 2016.

  3. Segment information


Segmental reporting has been changed with effect from 2016, in line with a change in the way Shell's businesses are managed. Shell now reports its business through the segments Integrated Gas (previously part of Upstream), Upstream, Downstream and Corporate. Comparative information has been reclassified.

Integrated Gas is engaged in the liquefaction and transportation of gas, and the conversion of natural gas to liquids to provide fuels and other products, as well as projects with an integrated activity from producing to commercialising gas. Upstream combines the operating segments Upstream, which is engaged in the exploration for and extraction of crude oil, natural gas and natural gas liquids, the transportation of oil and wind energy, and Oil Sands, which is engaged in the extraction of bitumen from oil sands that is converted into synthetic crude oil. These operating segments have similar economic characteristics because their earnings are significantly dependent on crude oil and natural gas prices and production volumes, and because their projects generally require significant investment, are complex and generate revenues for many years.


   

    INFORMATION BY SEGMENT
            Quarters                      $ million                     Half year
    Q2 2016  Q1 2016 Q2 2015                                          2016    2015
                              Third-party revenue
       5,373   5,679    4,807  Integrated Gas                       11,052  10,756
       1,711   1,922    1,489  Upstream                              3,633   3,306
      51,315  40,929   66,082  Downstream                           92,244 123,998
          16      24       24  Corporate                                40      48
      58,415  48,554   72,402 Total third-party revenue            106,969 138,108
                              Inter-segment revenue
         896     743    1,167  Integrated Gas[1]                     1,639   2,144
       6,049   5,037    7,507  Upstream[1]                          11,086  14,301
       1,993   1,455      271  Downstream                            3,448     633
           -       -        -  Corporate                                 -       -
                              CCS earnings
         982     905    1,335  Integrated Gas                        1,887   2,474
      (1,974) (1,350)    (561) Upstream                             (3,324)    839
       1,717   1,700    2,746  Downstream                            3,417   5,260
        (423)   (456)     (68) Corporate                              (879)   (239)
         302     799    3,452 Total CCS earnings[2]                  1,101   8,334

    1. Inter-segment revenue for the first quarter 2016 has been amended for
    Integrated Gas and Upstream to include revenue previously accounted for as
    intra-segment revenue.

    2. See pages 5 and 27 for a summary of significant items, including redundancy
    and restructuring charges, impacting segment earnings.

    RECONCILIATION OF CCS EARNINGS TO INCOME FOR THE PERIOD
                Quarters                $ million                      Half year
    Q2 2016  Q1 2016 Q2 2015                                          2016    2015
         302     799    3,452  Total CCS earnings                    1,101   8,334
                               Current cost of supplies
                               adjustment:
       1,158    (398)     765   Purchases                              760     413
        (323)    120     (219)  Taxation                              (203)   (117)
                                Share of profit/(loss) of joint
         143     (66)     116  ventures and associates                  77      21
       1,280     455    4,114  Income/(loss) for the period          1,735   8,651


4. Earnings per share


   

    EARNINGS PER SHARE
            Quarters                                                   Half year
     Q2 2016  Q1 2016 Q2 2015                                       2016      2015
                                Income attributable to Royal
                                Dutch Shell plc shareholders ($
       1,175     484    3,986   million)                           1,659     8,416
                                Weighted average number of shares
                                as the basis for:
                                Basic earnings per share
     8,000.0 7,173.4  6,304.6  (million)                         7,586.7   6,298.4
                                Diluted earnings per share
     8,053.3 7,230.4  6,383.9  (million)                         7,641.8   6,380.5


5. Share Capital


   

    ISSUED AND FULLY PAID
                                                                   Sterling
                            Ordinary shares of EUR0.07 each     deferred shares
      Number of shares            A                  B           of GBP1 each
    At January 1, 2016       3,990,921,569      2,440,410,614          50,000
    Scrip dividends            116,249,778                  -               -
    Shares issued for
    the acquisition of
    BG Group plc[1]            218,728,308      1,305,076,117               -
    Repurchases of
    shares                               -                  -               -
    At June 30, 2016         4,325,899,655      3,745,486,731          50,000

    At January 1, 2015       3,907,302,393      2,440,410,614          50,000
    Scrip dividends             23,430,143                  -               -
    Repurchases of
    shares                     (12,717,512)                 -               -
    At June 30, 2015         3,918,015,024      2,440,410,614          50,000

    1. See Note 2 "Acquisition of BG Group plc"

    NOMINAL VALUE
                                    Ordinary shares of EUR0.07 each
         $ million                         A                  B           Total
    At January 1, 2016                   340                206             546
    Scrip dividends                        9                  -               9
    Shares issued for
    the acquisition of
    BG Group plc[1]                       17                103             120
    Repurchases of
    shares                                 -                  -               -
    At June 30, 2016                     366                309             675

    At January 1, 2015                   334                206             540
    Scrip dividends                        2                  -               2
    Repurchases of
    shares                                (1)                 -              (1)
    At June 30, 2015                     335                206             541

    1. See Note 2 "Acquisition of BG Group plc"


The total nominal value of sterling deferred shares is less than $1 million.

At Royal Dutch Shell plc's Annual General Meeting on May 24, 2016, the Board was authorised to allot ordinary shares in Royal Dutch Shell plc, and to grant rights to subscribe for or to convert any security into ordinary shares in Royal Dutch Shell plc, up to an aggregate nominal amount of €185 million (representing 2,643 million ordinary shares of €0.07 each), and to list such shares or rights on any stock exchange. This authority expires at the earlier of the close of business on August 24, 2017, and the end of the Annual General Meeting to be held in 2017, unless previously renewed, revoked or varied by Royal Dutch Shell plc in a general meeting.

  6. Other reserves


   

    OTHER RESERVES
                                                                      Accumulated
                                      Share     Capital                 other
                             Merger   premium  redemption Share plan comprehensive
          $ million         reserve   reserve   reserve    reserve      income       Total
    At January 1, 2016        3,398       154         84      1,658     (22,480)   (17,186)
    Other comprehensive
    income/(loss)
    attributable to Royal
    Dutch Shell plc
    shareholders                  -          -          -          -     (3,718)    (3,718)
    Scrip dividends              (9)         -          -          -          -         (9)
    Shares issued for the
    acquisition of BG
    Group plc[1]             33,930          -          -          -           -    33,930
    Repurchases of shares         -          -          -          -           -         -
    Share-based
    compensation                  -          -          -       (268)        534       266
    At June 30, 2016         37,319        154         84      1,390     (25,664)   13,283
    At January 1, 2015        3,405        154         83      1,723     (19,730)  (14,365)
    Other comprehensive
    income/(loss)
    attributable to Royal
    Dutch Shell plc
    shareholders                  -          -          -          -       1,502      1,502
    Scrip dividends              (2)         -          -          -           -         (2)
    Repurchases of shares         -          -          1          -           -          1
    Share-based
    compensation                  -          -          -       (421)          -       (421)
    At June 30, 2015          3,403        154         84      1,302     (18,228)   (13,285)

    1. See Note [2] "Acquisition of BG Group plc"

The merger reserve and share premium reserve were established as a consequence of Royal Dutch Shell plc becoming the single parent company of Royal Dutch Petroleum Company and The "Shell" Transport and Trading Company, p.l.c., now The Shell Transport and Trading Company Limited, in 2005. The increase in the merger reserve in the first half year 2016 in respect of the shares issued for the acquisition of BG represents the difference between the fair value and the nominal value of the shares. The capital redemption reserve was established in connection with repurchases of shares of Royal Dutch Shell plc. The share plan reserve is in respect of equity-settled share-based compensation plans.

7. Derivative contracts

The table below provides the carrying amounts of derivatives contracts held, disclosed in accordance with
IFRS 13 Fair Value Measurement.


   

    DERIVATIVE CONTRACTS
              $ million              Jun 30, 2016    Mar 31, 2016   Dec 31, 2015
    Included within:
    Trade and other receivables -
    non-current                             1,143           1,250            744
    Trade and other receivables -
    current[1]                              9,188          12,297         13,114

    Trade and other payables -
    non-current                             1,742           1,369          1,687
    Trade and other payables -
    current[1]                              9,493          11,026         10,757

    1. The amounts at March 31, 2016 have been reduced by $4,963 million in order to
    appropriately reflect certain contracts on a net basis which were previously
    presented gross.

As disclosed in the Consolidated Financial Statements for the year ended December 31, 2015, presented in the Annual Report and Form 20-F for that year, Shell is exposed to the risks of changes in fair value of its financial assets and liabilities. The fair values of the financial assets and liabilities are defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Methods and assumptions used to estimate the fair values at June 30, 2016 are consistent with those used in the year ended December 31, 2015, and the carrying amounts of derivative contracts measured using predominantly unobservable inputs have not changed materially since that date.

The fair value of debt excluding finance lease liabilities at June 30, 2016 was $83,367 million (March 31, 2016: $71,903 million; December 31, 2015: $53,480 million). Fair value is determined from the prices quoted for those securities.

DEFINITIONS

  1. Earnings on a current cost of supplies basis attributable to shareholders

Segment earnings are presented on a current cost of supplies basis (CCS earnings), which is the earnings measure used by the Chief Executive Officer for the purposes of making decisions about allocating resources and assessing performance. On this basis, the purchase price of volumes sold during the period is based on the current cost of supplies during the same period after making allowance for the tax effect. CCS earnings therefore exclude the effect of changes in the oil price on inventory carrying amounts. The current cost of supplies adjustment does not impact net cash from operating activities in the Condensed Consolidated Statement of Cash Flows. The reconciliation of CCS earning to net income is as follows.


   

                Quarters                  $ million                         Half year
       Q2     Q1          Q2
     2016   2016        2015                                            2016          2015
                               Earnings on a current cost of
      302    799       3,452   supplies basis (CCS earnings)           1,101         8,334
                               Attributable to non-controlling
      (63)    15         (91)  interest                                  (48)         (212)
                               Earnings on a current cost of
                               supplies basis attributable to
                               Royal Dutch Shell plc
      239    814       3,361   shareholders                            1,053         8,122
                               Current cost of supplies
      978   (344)        662   adjustment                                634           317
      (42)    14         (37)  Non-controlling interest                  (28)          (23)
                               Income attributable to Royal
    1,175    484       3,986   Dutch Shell plc shareholders            1,659         8,416
      105    (29)        128   Non-controlling interest                   76           235
    1,280    455       4,114   Income for the period                   1,735         8,651

 

B. Identified items

Identified items are shown to provide additional insight into segment earnings and income attributable to shareholders. They include the full impact on Shell's CCS earnings of the following items: Divestment gains and losses, impairments, fair value accounting of commodity derivatives and certain gas contracts (see below), and redundancy and restructuring. Further items may be identified in addition to the above.

Impacts of accounting for derivatives

In the ordinary course of business Shell enters into contracts to supply or purchase oil and gas products as well as power and environmental products. Derivative contracts are entered into for mitigation of resulting economic exposures (generally price exposure) and these derivative contracts are carried at period-end market price (fair value), with movements in fair value recognised in income for the period. Supply and purchase contracts entered into for operational purposes are, by contrast, recognised when the transaction occurs (see also below); furthermore, inventory is carried at historical cost or net realisable value, whichever is lower.

As a consequence, accounting mismatches occur because: (a) the supply or purchase transaction is recognised in a different period; or (b) the inventory is measured on a different basis.

In addition, certain UK gas contracts held by Upstream are, due to pricing or delivery conditions, deemed to contain embedded derivatives or written options and are also required to be carried at fair value even though they are entered into for operational purposes.

The accounting impacts of the aforementioned are reported as identified items in this Report.

Impacts of exchange rate movements on deferred tax balances

With effect from 2016, identified items include the impact on deferred tax balances of exchange rate movements arising on:

The conversion to dollars of the local currency tax base of non-monetary assets and liabilities, as well as losses. This primarily impacts the Integrated Gas and Upstream segments.

The conversion of dollar-denominated inter-segment loans to local currency. This primarily impacts the Corporate segment.

The comparative information presented in this Report has been restated for this definition change. The following table sets out the impact of the definition change on the identified items for the year 2015.


   

    RESTATED IDENTIFIED ITEMS BY SEGMENT

            $ million                                   Quarters                                                                           
                                   Q1 2015      Q2 2015      Q3 2015        Q4 2015
    Identified items as
    previously reported
      Integrated Gas                    15        (117)        (878)           (347)
      Upstream                       1,849        (146)      (7,340)           (479)
      Downstream                      (132)       (215)        (136)            978
      Corporate and
      Non-controlling interest        (217)          4          464            (137)
    Impact of definition
    change
      Integrated Gas                  (367)         50         (469)            227
      Upstream                        (254)         53         (292)             30
      Downstream                         -           -            -               -
      Corporate and
      Non-controlling interest         129         (28)         155              (4)
    Identified items as
    restated
      Integrated Gas                  (352)        (67)      (1,347)           (120)
      Upstream                       1,595         (93)      (7,632)           (449)
      Downstream                      (132)       (215)        (136)            978
      Corporate and
      Non-controlling interest         (88)        (24)         619            (141)

C. Capital investment

Capital investment is a measure used to make decisions about allocating resources and assessing performance. It is defined as the sum of capital expenditure, acquisition of BG, exploration expense (excluding well write-offs), new investments in joint ventures and associates, new finance leases and other adjustments. The reconciliation of Capital expenditure to Capital investment is as follows.

 


   

                Quarters                      $ million                  Half year
    Q2 2016  Q1 2016 Q2 2015                                            2016    2015
                               Capital investment:
       1,153  22,824   1,313     Integrated Gas                        23,977   2,614
       3,700  35,038   4,603     Upstream                              38,738   9,245
       1,389   1,092   1,085     Downstream                             2,481   1,934
          42      21      49     Corporate                                 63      99
       6,284  58,975   7,050   Total                                   65,259  13,892
                                 Capital investment related to the
           - (52,904)      -     acquisition of BG Group plc          (52,904)      -
                                 Investments in joint ventures and
        (216)   (332)    (208)   associates                              (548)   (617)
                                 Exploration expense, excluding
        (336)   (224)   (643)    exploration wells written off           (560) (1,145)
           9    (414)    (18)    Finance leases                          (405)    (24)
          55     223      24     Other                                    278     314
       5,796   5,324   6,205   Capital expenditure                     11,120  12,420

  D. Divestments

"Divestments" is a measure used to monitor the progress of Shell's divestment programme. This measure comprises proceeds from sale of property, plant and equipment and businesses, joint ventures and associates, and other Integrated Gas, Upstream and Downstream investments, adjusted onto an accruals basis, and proceeds from sale of interests in an entity while retaining control (for example, proceeds from sale of interest in Shell Midstream Partners, L.P.).

 


   

                Quarters                      $ million                  Half year
     Q2 2016  Q1 2016 Q2 2015                                          2016    2015
                               Proceeds from sale of property,
         516      46     206   plant and equipment and businesses       562   2,409
                               Proceeds from sale of joint
          23      16     165   ventures and associates                   39     169
                               Other (in Cash flow from investing
         (70)    (37)    (80)  activities)                             (107)   (159)
                               Proceeds from sale of interests in
         398     421     298   Shell Midstream Partners, L.P.           819     298
         135      39      93   Other[1]                                 174     129
       1,002     485     682   Total                                  1,487   2,846

    1. Mainly changes in non-current receivables included within Other (in
    Cash flow from investing activities), which are not considered to be
    divestments.


 E. Return on average capital employed

Return on average capital employed (ROACE) measures the efficiency of Shell's utilisation of the capital that it employs and is a common measure of business performance. In this calculation, ROACE is defined as the sum of income for the current and previous three quarters, adjusted for after-tax interest expense, as a percentage of the average capital employed for the same period. Capital employed consists of total equity, current debt and non-current debt.


   

                   $ million                        Jun 30, 2016     Jun 30, 2015
    Income for current and previous three
    quarters                                            (4,716)          13,494
    Interest expense after tax                           1,139            1,033
    Income before interest expense                      (3,576)          14,527
    Capital employed - opening                         230,949          230,235
    Capital employed - closing                         282,835          230,949
    Capital employed - average                         256,892          230,592
    ROACE                                                -1.4%             6.3%

Return on average capital employed on a CCS basis excluding identified items is defined as the sum of CCS earnings attributable to shareholders excluding identified items for the current and previous three quarters, as a percentage of the average capital employed for the same period.

 


   

                   $ million                      Jun 30, 2016     Jun 30, 2015
    CCS earnings excluding identified items
    for current and previous three quarters              6,546           17,474
    Capital employed - opening                         230,949          230,235
    Capital employed - closing                         282,835          230,949
    Capital employed - average                         256,892          230,592
    ROACE on a CCS basis excluding
    identified items                                      2.5%             7.6%

F. Gearing

Gearing, calculated as net debt (total debt less cash and cash equivalents) as a percentage of total capital (net debt plus total equity), is a key measure of Shell's capital structure.

        $ million            Jun 30,   Mar 31,    Dec 31,   Jun 30,
                               2016      2016       2015      2015
Current debt                 10,863     7,868      5,530     7,366
Non-current debt             79,466    73,005     52,849    45,575
Less: Cash and cash
equivalents                 (15,222)  (11,019)   (31,752)  (26,981)
Net debt                     75,107    69,854     26,624    25,960
Add: Total equity           192,506   198,014    164,121   178,008
Total capital               267,613   267,868    190,748   203,968
Gearing                        28.1%     26.1%      14.0%     12.7%

G. Operating expenses

Operating expenses comprise production and manufacturing expenses; selling, distribution and administrative expenses; and research and development expenses.

 

PRINCIPAL RISKS AND UNCERTAINTIES 

The principal risks and uncertainties affecting Shell are described in the Risk Factors section of the Annual Report and Form 20-F for the year ended December 31, 2015 (pages 8 to 12) and are summarised below. There are no material changes in those Risk Factors for the remaining 6 months of the financial year.

  • We are exposed to fluctuating prices of crude oil, natural gas, oil products and chemicals.
  • Our ability to deliver competitive returns and pursue commercial opportunities depends in part on the robustness and, ultimately, the accuracy of our price assumptions.
  • Our ability to achieve strategic objectives depends on how we react to competitive forces.
  • The acquisition of BG Group plc exposes us to integration risks and other challenges.
  • Following the acquisition of BG, we seek to execute divestments in the pursuit of our strategy. We may not be able to successfully divest these assets in line with our strategy.
  • Our future hydrocarbon production depends on the delivery of large and complex projects, as well as on our ability to replace proved oil and gas reserves.
  • The estimation of proved oil and gas reserves involves subjective judgements based on available information and the application of complex rules, so subsequent downward adjustments are possible.
  • We operate in more than 70 countries that have differing degrees of political, legal and fiscal stability. This exposes us to a wide range of political developments that could result in changes to contractual terms, laws and regulations. For example, the outcome of the United Kingdom's (UK) recent referendum to leave the European Union (EU) could have a material effect on us depending on the impact of future changes in UK and EU laws and regulations. In addition, we and our joint arrangements and associates face the risk of litigation worldwide.
  • Our operations expose us to social instability, civil unrest, terrorism, piracy, acts of war and risks of pandemic diseases that could have a material adverse effect on our business.
  • A further erosion of the business and operating environment in Nigeria could have a material adverse effect on us.
  • Rising climate change concerns have led and could lead to additional legal and/or regulatory measures which could result in project delays or cancellations, a decrease in demand for fossil fuels and additional compliance obligations, and therefore could adversely impact our costs and/or revenue.
  • The nature of our operations exposes us, and the communities in which we work, to a wide range of health, safety, security and environment risks.
  • The operation of the Groningen asset in the Netherlands continues to expose communities to earth tremor risks.
  • Our future performance depends on the successful development and deployment of new technologies and new products.
  • We are exposed to treasury and trading risks, including liquidity risk, interest rate risk, foreign exchange risk, commodity price risk and credit risk. We are affected by the global macroeconomic environment as well as financial and commodity market conditions.
  • We have substantial pension commitments, whose funding is subject to capital market risks.
  • We mainly self-insure our risk exposure. We could incur significant losses from different types of risks that are not covered by insurance from third-party insurers.
  • An erosion of our business reputation could have a material adverse effect on our brand, our ability to secure new resources and our licence to operate.
  • Many of our major projects and operations are conducted in joint arrangements or associates. This could reduce our degree of control, as well as our ability to identify and manage risks.
  • We rely heavily on information technology systems for our operations.
  • Violations of antitrust and competition laws carry fines and expose us and/or our employees to criminal sanctions and civil suits.
  • Violations of anti-bribery and corruption laws and anti-money laundering laws carry fines and expose us and/or our employees to criminal sanctions and civil suits.
  • Violations of data protection laws carry fines and expose us and/or our employees to criminal sanctions and civil suits.
  • Violations of trade controls, including sanctions, carry fines and expose us and our employees to criminal sanctions and civil suits.
  • The Company's Articles of Association determine the jurisdiction for shareholder disputes. This could limit shareholder remedies.

FIRST QUARTER 2016 PORTFOLIO DEVELOPMENTS 

During the quarter, Shell completed the acquisition of BG for a purchase consideration of $54,034 million. This includes cash of $19,036 million, and the fair value ($34,050 million) of 1,523.8 million shares issued in exchange for all BG shares. Following completion of the acquisition on February 15, 2016, BG was consolidated within Shell's results. For practical purposes, this includes February and March 2016, as the impact for the first half of February is deemed immaterial.

The consolidation of BG resulted in an increase to first quarter 2016 cash flow from operating activities of $0.8 billion and an increase to CCS earnings attributable to shareholders excluding identified items of $0.2 billion.

Goodwill of $9,024 million was recognised on the acquisition, being the excess of the purchase consideration over the fair value of net assets acquired (see Note 2).

Shell completed the United Kingdom office footprint review announced during the final stages of the BG combination. The outcomes of the review are subject to appropriate engagement with employees and employee representatives. The review recommended a consolidation of all Shell's London and South East based operations into Central London with the intention to close the Thames Valley Park office in Reading by the end of 2016. The review also recommended that all Aberdeen-based onshore operations move to the Shell Aberdeen Tullos office, with BG's offices at Albyn Place closing by 2016 and the closure of Shell's Brabazon House office in Manchester by the end of 2017.  

Integrated Gas

During the quarter, first LNG production was achieved at the non-operated Gorgon project (Shell interest 25%) on Barrow Island, offshore Australia. Subsequent to first LNG cargo delivery, LNG production was temporarily halted due to mechanical issues with the propane refrigerant compressor on Train 1.

In Australia, the Browse Joint Venture participants (Shell interest 27%) decided not to progress with the development concept being studied for the resource as it did not meet commercial requirements for a positive final investment decision ("FID"), considering the current economic and market environment.

In Indonesia, INPEX as operator of the Abadi field (Shell interest 35%) received a notification from the Indonesian government authorities instructing to re-propose a plan of development based on onshore LNG for the Abadi LNG project. Shell and INPEX remain committed to work together with the Government of Indonesia to ensure that the Abadi project moves forward to optimally develop the Abadi gas reserves in a manner that benefits all.

Upstream

In Brazil, Shell announced the start of oil production from the third phase of the deep-water Parque das Conchas BC-10 development (Shell interest 50%) in the Campos basin.

Also in Brazil, the seventh non-operated FPSO, Cidade de Maricá, (Shell interest 25%) reached first oil in the BM-S-11 block of the Santos Basin, offshore Brazil. The FPSO has a production capacity of 150 thousand barrels per day.

Shell announced that it has decided to exit the joint development of the Bab sour gas reservoirs (Shell interest 40%) with ADNOC in the emirate of Abu Dhabi, United Arab Emirates, and to stop further joint work on the project. This reflects the economic climate prevailing in the energy industry.

In the United Kingdom, Shell has agreed to sell its 7.59% interest in the Maclure oil and gas field in the North Sea for a purchase consideration of some $24 million. Completion is subject to necessary approvals.  

Shell had continued success in its exploration programme with 10 discoveries and appraisals in Brunei, Egypt, Malaysia, Nigeria, Oman, and the United States. This included a notable oil discovery in the United States with the non-operated Kepler North well (Shell interest 50%) in the Gulf of Mexico, and a notable gas discovery with the non-operated Jerun-1 well (Shell interest 30%) in Malaysia.

Upstream divestments totalled some $38 million for the first quarter 2016 and reflected, among others, the first tranche of the sale proceeds of the Anasuria development in the North Sea.

Downstream

During the quarter, Shell announced a conditional agreement for the sale of its 51% shareholding in the Shell Refining Company in Malaysia for $66 million. The transaction is expected to complete in 2016, subject to regulatory approval.

In the United States, Shell announced that it has signed a non-binding Letter of Intent to divide the assets of Motiva Enterprises LLC. The Motiva joint venture was formed in 1998 and has operated as a 50/50 refining and marketing joint venture between Saudi Arabian Oil Company and Shell since 2002. In the proposed division of assets, Shell will assume sole ownership of the Norco, Louisiana refinery (where Shell operates a chemicals plant), the Convent, Louisiana refinery, nine distribution terminals, and Shell branded markets in Florida, Louisiana, and the Northeastern region. Saudi Refining Inc. will retain the Motiva name, assume sole ownership of the Port Arthur refinery in Texas, retain 26 distribution terminals, and have an exclusive licence to use the Shell brand for gasoline and diesel sales in Texas, and in the majority of the Mississippi Valley, the Southeast and Mid-Atlantic markets.

Also in the United States, Shell completed the sale of an additional 4.66% interest in Shell Midstream Partners, L.P. to public investors via the issuance of an additional 13,400,000 LP units for net proceeds of $421 million.

Shell announced FID on a project to expand China National Offshore Oil Corporation ("CNOOC") and Shell Petrochemical Company's ("CSPC") existing 50/50 joint venture in Huizhou, Guangdong Province, China. Subject to regulatory approvals, Shell and CNOOC have agreed that CSPC will take over CNOOC's ongoing project to build additional chemical facilities next to CSPC's petrochemical complex. The project includes the ongoing construction of a new ethylene cracker and ethylene derivatives units, which will increase ethylene capacity by more than 1 million tonnes per year, about double the current capacity. It will also include a styrene monomer and propylene oxide plant.

In May, Shell announced that it completed the sale of Dansk Fuels in Denmark for a consideration of $0.3 billion. Dansk Fuels comprises retail, commercial fuels, commercial fleet and aviation businesses, and products trading and supply activities associated with those businesses.  

FIRST QUARTER SUMMARY OF IDENTIFIED ITEMS 

With effect from 2016, identified items include the impact of exchange rate movements on certain deferred tax balances, as set out in Definition A. The comparative information in this Report has been restated following this change.

CCS earnings attributable to shareholders for the first quarter 2016 reflected the following items, which in aggregate amounted to a net charge of $739 million (compared with a net gain of $1,023 million for the first quarter 2015), as summarised below:

  • Integrated Gas earnings included a net charge of $89 million, primarily reflecting a gain of some $400 million related to the impact of the strengthening Australian dollar on a deferred tax position, offset by a net charge on fair value accounting of certain commodity derivatives and gas contracts of some $170 million, asset impairments of some $130 million, and other items including a litigation provision. Integrated Gas earnings for the first quarter 2015 included a net charge of $352 million.
  • Upstream earnings included a net gain of $87 million, primarily reflecting a gain of some $360 million related to the impact of the strengthening Brazilian real on a deferred tax position, partly offset by asset impairments of some $300 million. Upstream earnings for the first quarter 2015 included a net gain of $1,595 million.
  • Downstream earnings included a net charge of $310 million, primarily reflecting the net impact of fair value accounting of commodity derivatives of some $240 million and impairments of some $190 million, partly offset by gains on divestments of some $130 million. Downstream earnings for the first quarter 2015 included a net charge of $132 million.
  • Corporate results and Non-controlling interest included a net charge of $427 million, mainly reflecting a charge of $266 million related to the payment of stamp duty in the United Kingdom for the acquisition of BG, and a charge of some $190 million related to the impact of the strengthening Brazilian real on deferred tax positions related to financing of the Upstream business, partly offset by $100 million for the non-controlling interest share of an impairment of a Downstream asset. Earnings for the first quarter 2015 included a net charge of $88 million.

RESPONSIBILITY STATEMENT  

It is confirmed that to the best of our knowledge: (a) the Condensed Consolidated Interim Financial Statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union; (b) the interim management report includes a fair review of the information required by Disclosure Guidance and Transparency Rule (DTR) 4.2.7R (indication of important events during the first six months of the financial year, and their impact on the Condensed Consolidated Interim Financial Statements, and description of principal risks and uncertainties for the remaining six months of the financial year); and (c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties transactions and changes thereto).

The Directors of Royal Dutch Shell plc are shown on pages 62-64 in the Annual Report and Form 20-F for the year ended December 31, 2015.



   
    On behalf of the Board

    Ben van Beurden                Simon Henry
    Chief Executive Officer        Chief Financial Officer
    July 28, 2016                  July 28, 2016

 

INDEPENDENT REVIEW REPORT TO ROYAL DUTCH SHELL PLC 

Introduction 

We have been engaged by Royal Dutch Shell plc to review the Condensed Consolidated Interim Financial Statements in the half-yearly financial report for the six months ended June 30, 2016, which comprise the Consolidated Statement of Income, the Consolidated Statement of Comprehensive Income, the Condensed Consolidated Balance Sheet, the Consolidated Statement of Changes in Equity, the Condensed Consolidated Statement of Cash Flows and Notes 1 to 7. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to Royal Dutch Shell plc in accordance with guidance contained in the International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than Royal Dutch Shell plc, for our work, for this report, or for the conclusions we have formed.

Directors' responsibilities 

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

The annual Consolidated Financial Statements of Royal Dutch Shell plc and its subsidiaries are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB) and as adopted by the European Union (EU). The condensed set of financial statements included in the half-yearly financial report has been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting, as issued by the IASB and as adopted by the EU.

Our responsibility 

Our responsibility is to express to Royal Dutch Shell plc a conclusion on the Condensed Consolidated Interim Financial Statements in the half-yearly financial report based on our review.

Scope of review 

We conducted our review in accordance with International Standard on Review Engagements 2410 (UK and Ireland), "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion 

Based on our review, nothing has come to our attention that causes us to believe that the Condensed Consolidated Interim Financial Statements in the half-yearly financial report for the six months ended June 30, 2016 are not prepared, in all material respects, in accordance with International Accounting Standard 34 as issued by the IASB and as adopted by the EU and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Ernst & Young LLP

London

July 28, 2016

The maintenance and integrity of the Royal Dutch Shell plc website (http://www.shell.com) are the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the Condensed Consolidated Interim Financial Statements since they were initially presented on the website.

Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

CAUTIONARY STATEMENT  

All amounts shown throughout this announcement are unaudited. All peak production figures in Portfolio Developments are quoted at 100% expected production.

The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate legal entities. In this announcement "Shell", "Shell group" and "Royal Dutch Shell" are sometimes used for convenience where references are made to Royal Dutch Shell plc and its subsidiaries in general. Likewise, the words "we", "us" and "our" are also used to refer to subsidiaries in general or to those who work for them. These expressions are also used where no useful purpose is served by identifying the particular company or companies. "Subsidiaries", "Shell subsidiaries" and "Shell companies" as used in this announcement refer to companies over which Royal Dutch Shell plc either directly or indirectly has control. Entities and unincorporated arrangements over which Shell has joint control are generally referred to as "joint ventures" and "joint operations" respectively. Entities over which Shell has significant influence but neither control nor joint control are referred to as "associates". The term "Shell interest" is used for convenience to indicate the direct and/or indirect ownership interest held by Shell in a venture, partnership or company, after exclusion of all third-party interest.

This announcement contains forward-looking statements concerning the financial condition, results of operations and businesses of Royal Dutch Shell. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management's current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of Royal Dutch Shell to market risks and statements expressing management's expectations, beliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of terms and phrases such as "anticipate", "believe", "could", "estimate", "expect", "goals", "intend", "may", "objectives", "outlook", "plan", "probably", "project", "risks", "schedule", "seek", "should", "target", "will" and similar terms and phrases. There are a number of factors that could affect the future operations of Royal Dutch Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this announcement, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for Shell's products; (c) currency fluctuations; (d) drilling and production results; (e) reserves estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and regulatory developments including regulatory measures addressing climate change; (k) economic and financial market conditions in various countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; and (m) changes in trading conditions. There can be no assurance that future dividend payments will match or exceed previous dividend payments. All forward-looking statements contained in this announcement are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Additional risk factors that may affect future results are contained in Royal Dutch Shell's Form 20-F for the year ended December 31, 2015 (available at http://www.shell.com/investor and http://www.sec.gov). These risk factors also expressly qualify all forward-looking statements contained in this announcement and should be considered by the reader. Each forward-looking statement speaks only as of the date of this announcement, July 28, 2016. Neither Royal Dutch Shell plc nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this announcement.

This Report contains references to Shell's website. These references are for the readers' convenience only. Shell is not incorporating by reference any information posted on http://www.shell.com

We may have used certain terms, such as resources, in this announcement that the United States Securities and Exchange Commission (SEC) strictly prohibits us from including in our filings with the SEC. U.S. investors are urged to consider closely the disclosure in our Form 20-F, File No 1-32575, available on the SEC website http://www.sec.gov. You can also obtain this form from the SEC by calling 1-800-SEC-0330.

This announcement contains inside information.

July 28, 2016

The information in this Report reflects the unaudited consolidated financial position and results of Royal Dutch Shell plc. The information in this Report also represents Royal Dutch Shell plc's half-yearly financial report for the purposes of the Disclosure Guidance and Transparency Rules of the UK Financial Conduct Authority. As such: (1) the interim management report can be found on pages 2 to 10 and 21 to 27; (2) the condensed set of financial statements on pages 11 to 20; and (3) the directors' responsibility statement on page 28 and the auditors' independent review on page 29. Company No. 4366849, Registered Office: Shell Centre, London, SE1 7NA, England, UK.

Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Contacts:
- Michiel Brandjes, Company Secretary
- Investor Relations: International +31(0)-70-377-4540; North America +1-832-337-2034
- Media: International +44(0)207-934-5550; USA +1-713-241-4544


SOURCE Royal Dutch Shell plc