Jeroen van der Veer, Shell chief executive commented: First quarter 2009 performance was affected by the weaker global economy, with a challenging Upstream and Downstream business environment. As we announced previously, our dividend for first quarter 2009 will be $0.42 per share, an increase of 5%. We continue to make significant investments in the company for future profitability. Industry conditions remain challenging, and our focus is on capital discipline and costs. We are taking a prudent approach to this downturn, focused on sustaining a strong position in the energy landscape. Shell people, operational excellence, good investments and technology are our cornerstones for the future.
First quarter exploration & production segment earnings were $1,697 million compared to $5,143 million a year ago. Earnings included a net gain of $345 million related to identify items, compared to a net charge of $66 million in the first quarter 2008.
Earnings compared to the first quarter 2008 reflected the impact of lower oil and gas prices on revenues, lower oil production volumes, higher exploration expenses, mainly related to on going amortization of leasehold license costs, and non-cash pension charges, which were partly offset by lower royalty expenses.
Global liquids realizations were 54% lower than in the first quarter 2008. Global gas realizations were 15% lower than a year ago. Outside the USA, gas realizations decreased by 2% whereas in the USA gas realizations decreased by 50%.
First quarter 2009 production (excluding oil sands bitumen production) was 3,321 thousand barrels of oil equivalent per day (boe/d) compared to 3,438 thousand boe/d a year ago. Crude oil production was down 7% and natural gas production was in line with the first quarter 2008.
Underlying production, compared to the first quarter 2008, increased by some 200 thousand boe/d from new fields start-ups and the continuing ramp-up of fields started up in recent years, more than offsetting field declines.
First Quarter Portfolio Developments:
In Russia, the Sakhalin II project (Shell share 27.5%) delivered first gas production from the Lunskoye A platform and also commenced LNG exports. The Sakhalin II project is expected to deliver 395 thousand boe/d of peak production (100% basis) after full ramp-up.
In the USA, the final investment decision (FID) was taken on the Caesar Tonga project (Shell share 22.4%), with estimated peak production of 40 thousand boe/d (100% basis).
Also in the USA, Shell was the apparent highest bidder on 39 of 54 blocks in Lease Sale 208 in the Gulf of Mexico.
In Guyana, Shell acquired a 25% interest in the Stabroek exploration license covering an area of some 47 thousand square kilometer.
In Abu Dhabi, Shell signed an agreement with Abu Dhabi National Oil Company (ADNOC) to extend the GASCO joint venture for a further twenty years. GASCO’s operations are mainly focused on gas processing and natural gas liquid (NGL) extraction.
First quarter Gas & Power segment earnings were $514 million compared to $948 million a year ago.
Earnings included a charge of $15 million related to identify items, compared to a charge of $11 million in the first quarter 2008.
Earnings compared to the first quarter 2008 mainly reflected lower LNG earnings, reduced gas-to-liquids product prices, lower natural gas and power trading contributions and non-cash pension charges.
LNG earnings were lower than in the same quarter last year reflecting lower LNG sales volumes and the impact of lower oil prices on LNG revenues. In addition, lower dividends were received from an LNG joint venture due to payment timing differences.
These were partly offset by higher income from LNG cargo diversion opportunities and the benefit of recent sales contract renegotiations.
LNG sales volumes of 3.06 million tonnes were 13% lower than in the same quarter a year ago.
Compared to the first quarter 2008, volumes increased following the start-up of Train 5 at the North West Shelf project and the start-up of the Sakhalin II LNG production. This growth was more than offset by lower volumes from Nigeria LNG due to natural gas supply disruptions. Excluding the impacts from the security situation in Nigeria, LNG sales volumes were broadly similar compared to the same quarter last year.
Natural gas and power marketing and trading earnings were lower than in the same quarter a year ago, reflecting increased contributions from Europe, which were more than offset by reduced earnings in North America.
First Quarter Portfolio Developments
In Russia, following the start-up of LNG production, the first LNG cargo was lifted from the Sakhalin II project (Shell share 27.5%), which will have an LNG capacity of 9.6 million tonnes per annum (100% basis) after full ramp-up.
First quarter oil sands segment results were a loss of $42 million compared to earnings of $249 million in the same quarter last year. Earnings compared to the first quarter 2008 reflected the impact of lower oil prices on revenues, higher operating costs, higher royalty expenses and non-cash pension charges, which were partly offset by higher underlying production volumes.
Bitumen production compared to the same quarter last year decreased by 11%. Bitumen production, excluding the one-off effect of the royalty revision in the first quarter 2008, resulted in an increase of the underlying production of 4%. Upgrader availability was 96% compared to 94% in the same quarter last year.
First quarter oil products segment earnings were $1,396 million compared to $2,367 million for the same period last year.
First quarter oil products CCS segment earnings were $1,092 million compared to $1,194 million in the first quarter 2008. Earnings included a charge of $136 million related to identified items.
CCS earnings compared to the first quarter 2008 reflected increased marketing earnings, lower refining earnings and non-cash pension charges.
Marketing earnings compared to the same period a year ago reflected lower oil products marketing sales volumes, as a consequence of a worldwide decline in demand, and lower retail and lubricants earnings, which were more than offset by higher trading and B2B contributions. Oil products (marketing and trading) sales volumes decreased by 12% compared to the same quarter last year mainly as a result of reduced global demand. Marketing sales volumes were 6% lower than in the first quarter 2008. Excluding the impact of divestments, marketing sales volumes decreased by 3%.
Refining earnings compared to the first quarter 2008 reflected lower realized refining margins and lower refinery intake volumes, which were partly offset by lower operating costs.
Industry refining margins compared to the same quarter a year ago were higher in the Asia Pacific region and the US West Coast and lower in Europe and the US Gulf Coast.
Refining intake volumes decreased by 15% compared to the same quarter last year. Excluding the impact of divestments, intake volumes decreased by 7% mainly as a result of weaker market conditions. Refinery availability was in line with the first quarter of 2008 at 92%.
First quarter corporate segment earnings were $133 million compared to $146 million for the same period last year. Earnings included a gain of $162 million related to an identified item. Currency exchange losses in the first quarter 2009 were $46 million compared to losses of $62 million in the first quarter 2008.
Earnings, when compared to the first quarter 2008, reflected lower interest income and higher shareholder and other costs, which were partly offset by increased tax credits and reduced currency exchange rate losses.
First quarter corporate segment earnings were $133 million compared to $146 million for the same period last year. Earnings included a gain of $162 million related to an identified item.
