Shell Plc 3rd Quarter 2023 Unaudited Results
Shell PLC has released its unaudited results for the third quarter of 2023. Income attributable to Shell plc shareholders was $7,044 million, a 125% increase from Q3 2022. Adjusted Earnings and Adjusted EBITDA decreased by 30% and 18% respectively. Cash flow from operating activities was $12.3 billion, primarily driven by Adjusted EBITDA. Net debt was $40.5 billion, and gearing remained at 17.3%. Total production available for sale decreased by 3%.
Positive
Income attributable to Shell plc shareholders increased by 125% from Q3 2022 to $7,044 million.
Adjusted Earnings and Adjusted EBITDA decreased by 30% and 18% respectively.
Cash flow from operating activities was $12.3 billion, driven by Adjusted EBITDA.
Net debt was $40.5 billion, and gearing remained at 17.3%.
Total production available for sale decreased by 3%.
11/02/2023 - 03:00 AM
SHELL PLC SUMMARY OF UNAUDITED RESULTS Quarters $ million Nine months Q3 2023 Q2 2023 Q3 2022 %¹ Reference 2023 2022 % 7,044 3,134 6,743 +125 Income/(loss) attributable to Shell plc shareholders 18,887 31,899 -41 6,224 5,073 9,454 +23 Adjusted Earnings A 20,944 30,055 -30 16,336 14,435 21,512 +13 Adjusted EBITDA A 52,204 63,689 -18 12,332 15,130 12,539 -18 Cash flow from operating activities 41,622 46,009 -10 (4,827) (3,015) (5,049) Cash flow from investing activities (12,080) (15,530) 7,505 12,116 7,490 Free cash flow G 29,542 30,479 5,649 5,130 5,426 Cash capital expenditure C 17,280 17,515 10,097 9,653 9,359 +5 Operating expenses F 29,062 28,363 +2 9,735 9,607 9,893 +1 Underlying operating expenses F 28,635 28,419 +1 12.0% 11.6% 17.3% ROACE on a Net income basis D 12.0% 17.3% 12.5% 13.4% 14.7% ROACE on an Adjusted Earnings plus Non-controlling interest (NCI) basis D 12.5% 14.7% 82,147 84,366 81,990 Total debt E 82,147 81,990 40,470 40,310 48,343 Net debt E 40,470 48,343 17.3% 17.3% 20.3% Gearing E 17.3% 20.3% 2,706 2,731 2,766 -1 Total production available for sale (thousand boe/d) 2,779 2,875 -3 1.06 0.46 0.93 +130 Basic earnings per share ($) 2.78 4.29 -35 0.93 0.75 1.30 +24 Adjusted Earnings per share ($) B 3.08 4.04 -24 0.3310 0.3310 0.2500 — Dividend per share ($) 0.9495 0.7500 +27
1.Q3 on Q2 change
Quarter Analysis1
Income attributable to Shell plc shareholders , compared with the second quarter 2023, mainly reflected higher refining margins, higher realised oil prices, higher LNG trading and optimisation results, and higher Upstream production, partly offset by lower Integrated Gas volumes.
Third quarter 2023 income attributable to Shell plc shareholders also included impairment charges, largely offset by favourable movements due to the fair value accounting of commodity derivatives. These charges and favourable movements are included in identified items amounting to a net loss of $0.1 billion in the quarter. This compares with identified items in the second quarter 2023 which amounted to a net loss of $1.6 billion and mainly related to net impairment charges and reversals of $1.7 billion .
Adjusted Earnings and Adjusted EBITDA2 were driven by the same factors as income attributable to Shell plc shareholders and adjusted for the above identified items and the cost of supplies adjustment of negative $1.0 billion .
Cash flow from operating activities for the third quarter 2023 was $12.3 billion , and primarily driven by Adjusted EBITDA, and a working capital inflow of $0.4 billion , partly offset by tax payments of $3.2 billion , and derivatives of $2.5 billion . The working capital inflow mainly reflected accounts receivable and payable movements, partly offset by inventory movements due to higher prices and higher volumes.Cash flow from investing activities for the quarter was an outflow of $4.8 billion , and included cash capital expenditure of $5.6 billion , and divestment proceeds of $0.3 billion .
Net debt and Gearing: At the end of the third quarter 2023, net debt was $40.5 billion , compared with $40.3 billion at the end of the second quarter 2023. Gearing was 17.3% at the end of the third quarter 2023 and in line with the end of the second quarter 2023.
SHELL PLC
Shareholder distributions
Total shareholder distributions in the quarter amounted to $4.9 billion comprising repurchases of shares of $2.7 billion and cash dividends paid to Shell plc shareholders of $2.2 billion . Dividends declared to Shell plc shareholders for the third quarter 2023 amount to $0.33 10 per share. Shell has now completed $3 billion of share buybacks announced in the second quarter 2023 results announcement. Today, Shell announces a share buyback programme of $3.5 billion which is expected to be completed by the fourth quarter 2023 results announcement.
Nine Months Analysis 1
Income attributable to Shell plc shareholders, compared with the first nine months 2022, reflected lower realised oil and gas prices, lower volumes, and lower refining margins, partly offset by higher Marketing margins, and higher LNG trading and optimisation results.
First nine months 2023 income attributable to Shell plc shareholders also included net impairment charges and reversals of $2.3 billion which are included in identified items amounting to a net loss of $2.2 billion . This compares with identified items in the first nine months 2022 which amounted to a net loss of $0.3 billion .
Adjusted Earnings and Adjusted EBITDA2 for the first nine months 2023 were driven by the same factors as income attributable to Shell plc shareholders and adjusted for identified items and the cost of supplies adjustment of negative $0.2 billion .$41.6 billion , and primarily driven by Adjusted EBITDA, and working capital inflow of $4.5 billion , partly offset by tax payments of $10.1 billion , and derivatives of $5.1 billion .
Cash flow from investing activities for the first nine months 2023 was an outflow of $12.1 billion and included cash capital expenditure of $17.3 billion , divestment proceeds of $2.5 billion , and net other investing cash inflows of $1.2 billion .
This Unaudited Condensed Interim Financial Report, together with supplementary financial and operational disclosure for this quarter, is available at www.shell.com/investors3.
All earnings amounts are shown post-tax, unless stated otherwise. Adjusted EBITDA is without taxation. Not incorporated by reference. THIRD QUARTER 2023 PORTFOLIO DEVELOPMENTS
Integrated Gas
In October 2023, we completed the previously announced sale of our participating interest of 35% in Indonesia’s Masela production-sharing contract to Indonesia’s PT Pertamina Hulu Energi and PETRONAS Masela Sdn. Bhd. The participating interest includes the Abadi gas project.
In October 2023, we and our partners in the Oman LNG LLC venture signed an amended shareholders’ agreement for Oman LNG LLC (Oman LNG) extending the business beyond 2024. We will remain the largest private shareholder in Oman LNG, with a 30% shareholding.
Upstream
In August 2023, we announced that gas production has started at the Timi platform in Malaysia under the SK318 production-sharing contract (Shell interest 75% ).
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PERFORMANCE BY SEGMENT
INTEGRATED GAS Quarters $ million Nine months Q3 2023 Q2 2023 Q3 2022 %¹ Reference 2023 2022 % 2,154 754 5,736 +186 Segment earnings2 5,318 16,919 -69 (375) (1,744) 3,417 Of which: Identified items A (4,625) 6,750 2,529 2,498 2,319 +1 Adjusted Earnings2 A 9,944 10,169 -2 4,871 4,827 5,393 +1 Adjusted EBITDA2 A 17,180 18,237 -6 4,009 3,628 6,664 +11 Cash flow from operating activities A 13,923 21,283 -35 1,099 1,089 956 Cash capital expenditure C 3,000 2,739 122 142 123 -14 Liquids production available for sale (thousand b/d) 134 129 +4 4,517 4,895 4,645 -8 Natural gas production available for sale (million scf/d) 4,744 4,597 +3 900 985 924 -9 Total production available for sale (thousand boe/d) 952 922 +3 6.88 7.17 7.24 -4 LNG liquefaction volumes (million tonnes) 21.23 22.90 -7 16.01 16.03 15.66 — LNG sales volumes (million tonnes) 49.01 49.16 —
Q3 on Q2 change Segment earnings, Adjusted Earnings and Adjusted EBITDA are presented on a CCS basis (see Note 2). Integrated Gas includes liquefied natural gas (LNG), conversion of natural gas into gas-to-liquids (GTL) fuels and other products. It includes natural gas and liquids exploration and extraction, and the operation of the upstream and midstream infrastructure necessary to deliver these to market. Integrated Gas also includes the marketing, trading and optimisation of LNG, including LNG as a fuel for heavy-duty vehicles.
Quarter Analysis1
Segment earnings , compared with the second quarter 2023, reflected the combined effect of higher contributions from trading and optimisation and higher realised prices from liquid products (increase of $368 million ), partly offset by lower volumes (decrease of $159 million ).
Third quarter 2023 segment earnings also included unfavourable movements of $340 million due to the fair value accounting of commodity derivatives. As part of Shell's normal business, commodity derivative hedge contracts are entered into for mitigation of economic exposures on future purchases and sales. As these commodity derivatives are measured at fair value, this creates an accounting mismatch over periods. These unfavourable movements are part of identified items and compare with the second quarter 2023 which included net impairment charges and reversals of $1,438 million and unfavourable movements of $293 million due to the fair value accounting of commodity derivatives.
Adjusted Earnings and Adjusted EBITDA2 were driven by the same factors as the segment earnings and adjusted for identified items.
Cash flow from operating activities for the quarter was primarily driven by Adjusted EBITDA, and working capital inflows of $348 million , partly offset by tax payments of $679 million , and net cash outflows related to derivatives of $454 million .
Total oil and gas production, compared with the second quarter 2023, decreased by 9% mainly due to higher planned maintenance at Prelude, in Trinidad and Tobago and production-sharing contract effects in Pearl GTL. LNG liquefaction volumes decreased by 4% mainly due to higher maintenance at Prelude.
Nine Months Analysis 1
Segment earnings, compared with the first nine months 2022, reflected lower volumes (decrease of $540 million ), and the net effect of lower realised prices and higher contributions from trading and optimisation (decrease of $172 million ), partly offset by lower operating expenses (decrease of $159 million ).
First nine months 2023 segment earnings also included unfavourable movements of $2,821 million due to the fair value accounting of commodity derivatives and net impairment charges and reversals of $1,700 million . These unfavourable movements and net impairment charges and reversals are part of identified items and compare with the first nine months 2022 which included favourable movements of $6,980 million due to the fair value accounting of commodity derivatives, and gains of $779 million from net impairment charges and reversals, partly offset by other impacts of $608 million , which mainly comprised loan write-downs, as well as charges of $387 million due to provisions for onerous contracts.
Adjusted Earnings and Adjusted EBITDA2 were driven by the same factors as the segment earnings and adjusted for identified items.
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SHELL PLC
Cash flow from operating activities for the first nine months 2023 was primarily driven by Adjusted EBITDA, and working capital inflow of $2,677 million , partly offset by net cash outflows related to derivatives of $3,071 million , and tax payments of $2,843 million .
Total oil and gas production, compared with the first nine months 2022, increased by 3% mainly due to lower maintenance in Pearl GTL, Trinidad and Tobago, and ramp-up of new fields in Oman and Canada, partly offset by derecognition of Sakhalin-related volumes, and production-sharing contract effects in Pearl GTL. LNG liquefaction volumes decreased by 7% mainly due to the derecognition of Sakhalin-related volumes.
All earnings amounts are shown post-tax, unless stated otherwise. Adjusted EBITDA is without taxation. Page 4
SHELL PLC UPSTREAM Quarters $ million Nine months Q3 2023 Q2 2023 Q3 2022 %¹ Reference 2023 2022 % 1,983 1,586 5,357 +25 Segment earnings 2 6,349 14,843 -57 (238) (98) (539) Of which: Identified items A (357) 585 2,221 1,684 5,896 +32 Adjusted Earnings2 A 6,706 14,258 -53 7,412 6,447 12,539 +15 Adjusted EBITDA2 A 22,696 32,682 -31 5,336 4,519 8,343 +18 Cash flow from operating activities A 15,663 22,417 -30 2,007 2,029 1,733 Cash capital expenditure C 5,906 6,298 1,311 1,283 1,273 +2 Liquids production available for sale (thousand b/d) 1,313 1,333 -1 2,564 2,425 2,995 +6 Natural gas production available for sale (million scf/d) 2,687 3,341 -20 1,753 1,701 1,789 +3 Total production available for sale (thousand boe/d) 1,776 1,909 -7
Q3 on Q2 change Segment earnings, Adjusted Earnings and Adjusted EBITDA are presented on a CCS basis (see Note 2). The Upstream segment includes exploration and extraction of crude oil, natural gas and natural gas liquids. It also markets and transports oil and gas, and operates the infrastructure necessary to deliver them to the market.
Quarter Analysis1
Segment earnings, compared with the second quarter 2023, mainly reflected higher realised liquids prices (increase of $525 million ) and higher volumes (increase of $392 million ).$169 million and charges of $62 million related to the impact of the weakening Brazilian real on a deferred tax position. These losses are part of identified items, and compare with the second quarter 2023 which included charges of $127 million due to Brazil oil export tax and a $65 million charge relating to impairments, partly offset by gains of $92 million related to the impact of the strengthening Brazilian real on a deferred tax position.
Adjusted Earnings and Adjusted EBITDA2 were driven by the same factors as the segment earnings and adjusted for identified items.
Cash flow from operating activities for the quarter was primarily driven by Adjusted EBITDA, partly offset by tax payments of $2,090 million .
Total production, compared with the second quarter 2023, increased mainly due to higher performance in Deep Water.
Nine Months Analysis1
Segment earnings, compared with the first nine months 2022, mainly reflected lower realised oil and gas prices (decrease of $4,641 million ), lower volumes (decrease of $1,654 million ), and the comparative adverse impact of $1,037 million relating to storage and working gas transfer effects, partly offset by lower operating expenses (decrease of $673 million ).
First nine months 2023 segment earnings also included charges of $188 million from impairments, legal provisions of $169 million and deferred tax charges of $132 million due to amendments to IAS 12, partly offset by gains of $106 million due to fair value accounting of commodity derivatives. These gains and losses are part of identified items, and compare with the first nine months 2022 which included a gain of $982 million related to net impairment charges and reversals, and losses of $529 million due to the fair value accounting of commodity derivatives.
Adjusted Earnings and Adjusted EBITDA2 were driven by the same factors as the segment earnings and adjusted for identified items.
Cash flow from operating activities for the first nine months 2023 was primarily driven by Adjusted EBITDA and higher tax payments of $6,455 million , partly offset by a working capital inflow of $374 million .
Total production, compared with the first nine months 2022, decreased mainly due to the impact of divestments and field decline, partly offset by ramp-up of new fields.
All earnings amounts are shown post-tax, unless stated otherwise. Adjusted EBITDA is without taxation. Page 5
SHELL PLC MARKETING Quarters $ million Nine months Q3 2023 Q2 2023 Q3 2022 %¹ Reference 2023 2022 % 702 970 757 -28 Segment earnings² 2,809 1,758 +60 (18) 76 (63) Of which: Identified items A 320 (550) 720 894 820 -20 Adjusted Earnings² A 2,488 2,308 +8 1,519 1,604 1,505 -5 Adjusted EBITDA2 A 4,700 4,280 +10 880 1,412 2,299 -38 Cash flow from operating activities A 3,378 1,315 +157 917 670 746 Cash capital expenditure C 4,273 2,838 2,654 2,607 2,581 +2 Marketing sales volumes (thousand b/d) 2,570 2,490 +3
Q3 on Q2 change Segment earnings, Adjusted Earnings and Adjusted EBITDA are presented on a CCS basis (see Note 2). The Marketing segment comprises the Mobility, Lubricants, and Sectors & Decarbonisation businesses. The Mobility business operates Shell’s retail network including electric vehicle charging services. The Lubricants business produces, markets and sells lubricants for road transport, and machinery used in manufacturing, mining, power generation, agriculture and construction. The Sectors & Decarbonisation business sells fuels, speciality products and services including low-carbon energy solutions to a broad range of commercial customers including the aviation, marine, and agricultural sectors.
Quarter Analysis1
Segment earnings, compared with the second quarter 2023, reflected one-off tax charges (increase of $105 million ), and higher operating expenses (increase of $67 million ). Marketing margins were in line with the second quarter 2023 and included lower Mobility fuel margins due to rising feedstock costs and lower Lubricants margins, offset by higher Sectors & Decarbonisation margins.
Adjusted Earnings and Adjusted EBITDA2 were driven by the same factors as the segment earnings and adjusted for identified items.
Cash flow from operating activities for the quarter was primarily driven by Adjusted EBITDA, the timing of payments relating to emissions and biofuel programmes of $90 million , and non-cash cost-of-sales (CCS) adjustments of $70 million . These inflows were partly offset by working capital outflows of $533 million and tax payments of $224 million .
Marketing sales volumes (comprising hydrocarbon sales), compared with the second quarter 2023, increased mainly due to seasonality in Aviation.
Nine Months Analysis1
Segment earnings, compared with the first nine months 2022, reflected higher Marketing margins (increase of $1,097 million ) due to higher unit margins and volumes. These were partly offset by higher operating expenses (increase of $613 million ) including the impact of asset acquisitions and higher volumes, and higher depreciation charges (increase of $174 million ).$298 million related to indirect tax credits, and favourable movements of $51 million due to the fair value accounting of commodity derivatives. These gains are part of identified items and compare with the first nine months 2022 which included losses of $236 million from net impairments and reversals, net losses of $111 million related to the sale of assets, unfavourable movements of $88 million due to the fair value accounting of commodity derivatives, and provisions for onerous contracts of $62 million .
Adjusted Earnings and Adjusted EBITDA2 were driven by the same factors as the segment earnings and adjusted for identified items.
Cash flow from operating activities for the first nine months 2023 was primarily driven by Adjusted EBITDA, and the timing of payments relating to emissions and biofuel programmes of $279 million . These inflows were partly offset by working capital outflows of $971 million , tax payments of $464 million , and non-cash cost-of-sales (CCS) adjustments of $140 million .
Marketing sales volumes (comprising hydrocarbon sales), compared with the first nine months 2022, increased mainly due to improved demand in Aviation and Mobility asset acquisitions.
All earnings amounts are shown post-tax, unless stated otherwise. Adjusted EBITDA is without taxation. Page 6
SHELL PLC CHEMICALS AND PRODUCTS Quarters $ million Nine months Q3 2023 Q2 2023 Q3 2022 %¹ Reference 2023 2022 % 1,173 349 980 +236 Segment earnings² 3,322 4,183 -21 (207) (100) 208 Of which: Identified items A (285) 208 1,380 450 772 +207 Adjusted Earnings² A 3,607 3,975 -9 2,591 1,300 1,797 +99 Adjusted EBITDA2 A 6,940 6,988 -1 2,379 2,110 3,385 +13 Cash flow from operating activities A 6,779 9,787 -31 879 669 828 Cash capital expenditure C 2,160 3,051 1,334 1,335 1,434 — Refinery processing intake (thousand b/d) 1,360 1,391 -2 1,548 1,466 1,803 +6 Refining & Trading sales volumes (thousand b/d) 1,573 1,666 -6 2,998 2,828 2,879 +6 Chemicals sales volumes (thousand tonnes) 8,656 9,264 -7
Q3 on Q2 change Segment earnings, Adjusted Earnings and Adjusted EBITDA are presented on a CCS basis (see Note 2). The Chemicals and Products segment includes chemicals manufacturing plants with their own marketing network, and refineries which turn crude oil and other feedstocks into a range of oil products which are moved and marketed around the world for domestic, industrial and transport use. The segment also includes the pipeline business, trading and optimisation of crude oil, oil products and petrochemicals, and Oil Sands activities (the extraction of bitumen from mined oil sands and its conversion into synthetic crude oil).
Quarter Analysis1
Segment earnings, compared with the second quarter 2023, reflected higher Products margins (increase of $849 million ) mainly driven by higher refining margins due to lower global product supply and higher margins from trading and optimisation. Segment earnings also reflected higher Chemicals margins (increase of $55 million ) including higher income from joint ventures and associates. In addition, the third quarter 2023 reflected lower operating expenses (decrease of $68 million ).
Third quarter 2023 segment earnings also included losses of $79 million from net impairments and reversals, legal provisions of $74 million , and unfavourable movements of $53 million due to the fair value accounting of commodity derivatives. These losses are part of identified items, and compare with the second quarter 2023 which included losses of $76 million from net impairments and reversals.$329 million and Products had positive adjusted earnings of $1,710 million .
Cash flow from operating activities for the quarter was primarily driven by Adjusted EBITDA, and non-cash cost-of-sales (CCS) adjustments of $1,280 million . These inflows were partly offset by the timing of payments relating to emissions and biofuel programmes of $634 million , working capital outflows of $619 million , and cash outflows relating to commodity derivatives of $372 million .
Chemicals manufacturing plant utilisation was 70% , in line with the second quarter 2023.
Refinery utilisation was 84% compared with 85% in the second quarter 2023.
Nine Months Analysis1
Segment earnings, compared with the first nine months 2022, reflected lower Products margins (decrease of $577 million ) mainly driven by lower refining margins partly offset by higher margins from trading and optimisation. The segment earnings also reflected higher depreciation charges (increase of $466 million ), and higher operating expenses (increase of $107 million ) with both depreciation and operating expenses including the start-up of operations at Shell Polymers Monaca in the USA. These were partly offset by higher Chemicals margins (increase of $409 million ).
First nine months 2023 segment earnings also included losses of $227 million from net impairments and reversals, legal provisions of $74 million and favourable movements of $84 million related to the fair value accounting of commodity derivatives. These gains and losses are part of identified items, and compare with the first nine months 2022 which included gains of $181 million related to the sale of assets, gains of $87 million related to the remeasurement of redundancy and restructuring costs, favourable movements of $67 million related to the fair value accounting of commodity derivatives, and losses of $142 million from net impairments and reversals.
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Adjusted Earnings and Adjusted EBITDA2 were driven by the same factors as the segment earnings and adjusted for identified items. In the first nine months 2023, Chemicals had negative adjusted earnings of $1,130 million and Products had positive adjusted earnings of $4,737 million .
Cash flow from operating activities for the first nine months 2023 was primarily driven by Adjusted EBITDA, non-cash cost-of-sales (CCS) adjustments of $401 million , cash inflows relating to commodity derivatives of $235 million , and dividends (net of profits) from joint ventures and associates of $78 million . These inflows were partly offset by working capital outflows of $744 million , the timing of payments relating to emissions and biofuel programmes of $254 million , and tax payments of $211 million .
Chemicals manufacturing plant utilisation was 70% compared with 79% in the first nine months 2022, mainly due to unplanned maintenance and economic optimisation in the first nine months 2023.
Refinery utilisation was 87% compared with 84% in the first nine months 2022, due to lower planned maintenance.
All earnings amounts are shown post-tax, unless stated otherwise. Adjusted EBITDA is without taxation. Page 8
SHELL PLC RENEWABLES AND ENERGY SOLUTIONS Quarters $ million Nine months Q3 2023 Q2 2023 Q3 2022 %¹ Reference 2023 2022 % 600 530 (4,023) +13 Segment earnings2 3,329 (5,732) +158 667 301 (4,406) Of which: Identified items A 2,778 (7,184) (67) 228 383 -129 Adjusted Earnings2 A 551 1,452 -62 79 438 530 -82 Adjusted EBITDA2 A 1,186 2,064 -43 (34) 3,192 (8,051) -101 Cash flow from operating activities A 4,249 (9,068) +147 659 556 1,086 Cash capital expenditure C 1,655 2,393 76 67 67 +14 External power sales (terawatt hours)3 211 177 +19 170 172 157 -1 Sales of pipeline gas to end-use customers (terawatt hours)4 563 603 -7
Q3 on Q2 change Segment earnings, Adjusted Earnings and Adjusted EBITDA are presented on a CCS basis (see Note 2). Physical power sales to third parties; excluding financial trades and physical trade with brokers, investors, financial institutions, trading platforms, and wholesale traders. Physical natural gas sales to third parties; excluding financial trades and physical trade with brokers, investors, financial institutions, trading platforms, and wholesale traders. Excluding sales of natural gas by other segments and LNG sales. Renewables and Energy Solutions includes activities such as renewable power generation, the marketing and trading and optimisation of power and pipeline gas, as well as carbon credits, and digitally enabled customer solutions. It also includes the production and marketing of hydrogen, development of commercial carbon capture and storage hubs, investment in nature-based projects that avoid or reduce carbon emissions, and Shell Ventures, which invests in companies that work to accelerate the energy and mobility transformation.
Quarter Analysis 1
Segment earnings , compared with the second quarter 2023, reflected lower margins (decrease of $170 million ) mainly due to seasonal impacts primarily in Europe and from trading and optimisation, and higher operating expenses (increase of $88 million ). segment earnings also included favourable movements of $506 million due to the fair value accounting of commodity derivatives, a gain of $312 million mainly related to a previously novated gas supply contract (see Note 8), partly offset by losses of $76 million on the sale of assets, and $75 million of net impairment charges and reversals. As part of Shell's normal business, commodity derivative hedge contracts are entered into for mitigation of economic exposures on future purchases, sales and inventory. As these commodity derivatives are measured at fair value, this creates an accounting mismatch over periods. These favourable movements and losses are part of identified items and compare with the second quarter 2023 which included favourable movements of $310 million due to the fair value accounting of commodity derivatives.
Adjusted Earnings and Adjusted EBITDA2 were driven by the same factors as the segment earnings and adjusted for identified items. Most Renewables and Energy Solutions activities were loss-making in the third quarter 2023, partly offset by positive adjusted earnings from trading and optimisation.Cash flow from operating activities for the quarter was primarily driven by cash outflows related to derivatives of $1,407 million , and tax payments of $258 million , partly offset by working capital inflows of $1,188 million .
Nine Months Analysis 1
Segment earnings, compared with the first nine months 2022, reflected lower margins (decrease of $420 million ) mainly from trading and optimisation for gas and power partly offset by Energy Marketing, and higher operating expenses (increase of $291 million ).
Nine months 2023 segment earnings also included favourable movements of $2,632 million due to the fair value accounting of commodity derivatives. These favourable movements are part of identified items and compare with the first nine months 2022 which included unfavourable movements of $7,192 million due to the fair value accounting of commodity derivatives.
Adjusted Earnings and Adjusted EBITDA2 were driven by the same factors as the segment earnings and adjusted for identified items. Most Renewables and Energy Solutions activities were loss-making for the first nine months 2023, partly offset by positive adjusted earnings from trading and optimisation.$4,693 million , and Adjusted EBITDA, partly offset by net cash outflows related to derivatives of $1,719 million .
1.All earnings amounts are shown post-tax, unless stated otherwise.
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2.Adjusted EBITDA is without taxation.Additional Growth Measures
Quarters Nine months Q3 2023 Q2 2023 Q3 2022 %¹ 2023 2022 % Renewable power generation capacity (gigawatt): 2.5 2.5 2.2 — – In operation2 2.5 2.2 +13 4.9 4.6 3.0 +6 – Under construction and/or committed for sale3 4.9 3.0 +62
Q3 on Q2 change Shell's equity share of renewable generation capacity post commercial operation date. It excludes Shell's equity share of associates where information cannot be obtained. Shell's equity share of renewable generation capacity under construction and/or committed for sale under long-term offtake agreements (PPA). It excludes Shell's equity share of associates where information cannot be obtained. CORPORATE Quarters $ million Nine months Q3 2023 Q2 2023 Q3 2022 Reference 2023 2022 (460) (701) (543) Segment earnings1 (2,225) (1,807) 22 (48) 28 Of which: Identified items A (50) (62) (482) (654) (571) Adjusted Earnings1 A (2,175) (1,745) (136) (180) (251) Adjusted EBITDA1 A (499) (562) (238) 269 (100) Cash flow from operating activities A (2,372) 276
1.Segment earnings, Adjusted Earnings and Adjusted EBITDA are presented on a CCS basis (see Note 2).
Quarter Analysis1
Segment earnings, compared with the second quarter 2023, reflected favourable movements in net interest expense and currency exchange rate effects.
Adjusted EBITDA2 was mainly driven by favourable currency exchange rate effects.
Nine Months Analysis1
Segment earnings, compared with the first nine months 2022, were primarily driven by unfavourable movements in tax credits, partly offset by favourable currency exchange rate effects.
Adjusted EBITDA2 was mainly driven by favourable currency exchange rate effects.
All earnings amounts are shown post-tax, unless stated otherwise. Adjusted EBITDA is without taxation. OUTLOOK FOR THE FOURTH QUARTER 2023 $23 - $25 billion .
Integrated Gas production is expected to be approximately 870 - 930 thousand boe/d. LNG liquefaction volumes are expected to be approximately 6.7 - 7.3 million tonnes. Outlook reflects ongoing maintenance at Prelude and lower expected liquefaction volumes from Egypt.
Upstream production is expected to be approximately 1,750 - 1,950 thousand boe/d. Production outlook reflects the closure of the Groningen gas field.
Refinery utilisation is expected to be approximately 75% - 83% , due to planned maintenance activities in North America. Chemicals manufacturing plant utilisation is expected to be approximately 62% - 70% .
Corporate Adjusted Earnings are expected to be a net expense of approximately $550 - $750 million in the fourth quarter 2023 and a net expense of approximately $2,750 - $2,950 million for the full year 2023. This excludes the impact of currency exchange rate and fair value accounting effects.
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FORTHCOMING EVENTS
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SHELL PLC
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME Quarters $ million Nine months Q3 2023 Q2 2023 Q3 2022 2023 2022 76,350 74,578 95,749 Revenue1 237,888 280,011 747 629 2,512 Share of profit/(loss) of joint ventures and associates 2,957 4,240 913 813 498 Interest and other income/(expenses)2 2,207 755 78,011 76,020 98,759 Total revenue and other income/(expenses) 243,052 285,006 49,144 51,492 70,684 Purchases 158,138 192,999 6,384 6,041 5,910 Production and manufacturing expenses 18,433 18,298 3,447 3,314 3,229 Selling, distribution and administrative expenses 9,811 9,392 267 297 220 Research and development 817 672 436 444 424 Exploration 1,283 1,063 5,911 7,872 6,124 Depreciation, depletion and amortisation2 20,069 12,071 1,131 1,211 734 Interest expense 3,507 2,140 66,720 70,671 87,324 Total expenditure 212,058 236,635 11,291 5,348 11,435 Income/(loss) before taxation 30,993 48,371 4,115 2,195 4,587 Taxation charge/(credit) 11,891 15,966 7,176 3,154 6,848 Income/(loss) for the period¹ 19,102 32,405 132 20 104 Income/(loss) attributable to non-controlling interest 215 505 7,044 3,134 6,743 Income/(loss) attributable to Shell plc shareholders 18,887 31,899 1.06 0.46 0.93 Basic earnings per share ($)3 2.78 4.29 1.05 0.46 0.92 Diluted earnings per share ($)3 2.75 4.25
1. See Note 2 “Segment information”.
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SHELL PLC CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Quarters $ million Nine months Q3 2023 Q2 2023 Q3 2022 2023 2022 7,176 3,154 6,848 Income/(loss) for the period 19,102 32,405 Other comprehensive income/(loss) net of tax: Items that may be reclassified to income in later periods: (1,460) (267) (3,456) – Currency translation differences (1,174) (5,841) 1 (7) (25) – Debt instruments remeasurements 13 (90) 141 100 (57) – Cash flow hedging gains/(losses) 61 112 — 8 183 – Net investment hedging gains/(losses) (44) 444 (39) (53) 11 – Deferred cost of hedging (94) 233 (72) (10) 30 – Share of other comprehensive income/(loss) of joint ventures and associates (118) 198 (1,429) (229) (3,315) Total (1,357) (4,945) Items that are not reclassified to income in later periods: 180 (24) 126 – Retirement benefits remeasurements 125 7,556 (38) 16 (21) – Equity instruments remeasurements (15) (454) 17 (24) 12 – Share of other comprehensive income/(loss) of joint ventures and associates (15) (26) 159 (32) 117 Total 95 7,076 (1,270) (261) (3,198) Other comprehensive income/(loss) for the period (1,262) 2,131 5,906 2,893 3,649 Comprehensive income/(loss) for the period 17,840 34,536 149 (15) (38) Comprehensive income/(loss) attributable to non-controlling interest 217 507 5,757 2,908 3,687 Comprehensive income/(loss) attributable to Shell plc shareholders 17,622 34,029
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SHELL PLC CONDENSED CONSOLIDATED BALANCE SHEET $ million September 30, 2023 December 31, 2022 Assets Non-current assets Goodwill1 17,345 16,039 Other intangible assets 8,288 9,662 Property, plant and equipment 197,043 198,642 Joint ventures and associates 24,477 23,864 Investments in securities 3,329 3,362 Deferred tax1 5,537 7,815 Retirement benefits 9,654 10,200 Trade and other receivables 6,049 6,920 Derivative financial instruments² 524 582 272,247 277,086 Current assets Inventories 30,230 31,894 Trade and other receivables 52,077 66,510 Derivative financial instruments² 14,724 24,437 Cash and cash equivalents 43,031 40,246 140,062 163,087 Assets classified as held for sale1 1,189 2,851 141,251 165,938 Total assets 413,498 443,024 Liabilities Non-current liabilities Debt 72,028 74,794 Trade and other payables 3,920 3,432 Derivative financial instruments² 3,257 3,563 Deferred tax1 15,891 16,186 Retirement benefits 6,837 7,296 Decommissioning and other provisions 23,492 23,845 125,423 129,116 Current liabilities Debt 10,119 9,001 Trade and other payables 67,188 79,357 Derivative financial instruments² 9,444 23,779 Income taxes payable 4,372 4,869 Decommissioning and other provisions 3,223 2,910 94,345 119,916 Liabilities directly associated with assets classified as held for sale1 786 1,395 95,131 121,311 Total liabilities 220,555 250,427 Equity attributable to Shell plc shareholders 191,199 190,472 Non-controlling interest1 1,745 2,125 Total equity 192,943 192,597 Total liabilities and equity 413,498 443,024
See Note 8 “Other notes to the unaudited Condensed Consolidated Interim Financial Statements”. See Note 7 “Derivative financial instruments and debt excluding lease liabilities”. Page 14
SHELL PLC CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Equity attributable to Shell plc shareholders $ million Share capital 1 Shares held in trust Other reserves² Retained earnings Total Non-controlling interest Total equity At January 1, 2023 584 (726) 21,132 169,482 190,472 2,125 192,597 Comprehensive income/(loss) for the period — — (1,263) 18,886 17,622 217 17,840 Transfer from other comprehensive income — — (111) 111 — — — Dividends³ — — — (6,193) (6,193) (636) (6,829) Repurchases of shares4 (30) — 30 (11,058) (11,058) — (11,058) Share-based compensation — 466 (18) (100) 349 — 349 Other changes — — — 8 8 37 45 At September 30, 2023 555 (261) 19,769 171,136 191,199 1,745 192,943 At January 1, 2022 641 (610) 18,909 153,026 171,966 3,360 175,326 Comprehensive income/(loss) for the period — — 2,130 31,899 34,029 507 34,536 Transfer from other comprehensive income — — 13 (13) — — — Dividends3 — — — (5,497) (5,497) (164) (5,662) Repurchases of shares4 (43) — 43 (14,523) (14,523) — (14,523) Share-based compensation — 444 18 133 594 — 594 Other changes — — — (46) (46) 11 (35) At September 30, 2022 598 (167) 21,113 164,978 186,523 3,715 190,237
See Note 5 “Share capital”. See Note 6 “Other reserves”. The amount charged to retained earnings is based on prevailing exchange rates on payment date. Includes shares committed to repurchase under an irrevocable contract and repurchases subject to settlement at the end of the quarter. Page 15
SHELL PLC CONSOLIDATED STATEMENT OF CASH FLOWS Quarters $ million Nine months Q3 2023 Q2 2023 Q3 2022 2023 2022 11,291 5,348 11,435 Income before taxation for the period 30,993 48,371 Adjustment for: 513 612 389 – Interest expense (net) 1,789 1,539 5,911 7,872 6,124 – Depreciation, depletion and amortisation1 20,069 12,071 186 204 218 – Exploration well write-offs 626 486 74 (53) (93) – Net (gains)/losses on sale and revaluation of non-current assets and businesses (24) (621) (747) (629) (2,512) – Share of (profit)/loss of joint ventures and associates (2,957) (4,240) 749 884 814 – Dividends received from joint ventures and associates 2,529 2,985 (3,151) 1,171 484 – (Increase)/decrease in inventories 2,237 (11,263) (1,126) 8,289 (98) – (Increase)/decrease in current receivables 13,105 (14,168) 4,711 (4,619) (4,544) – Increase/(decrease) in current payables (10,841) 9,606 (2,807) (907) 3,334 – Derivative financial instruments (6,050) 5,050 1 14 (87) – Retirement benefits 31 282 70 (236) (744) – Decommissioning and other provisions (250) (183) (150) 954 1,258 – Other1 474 4,841 (3,191) (3,773) (3,438) Tax paid (10,108) (8,748) 12,332 15,130 12,539 Cash flow from operating activities 41,622 46,009 (5,259) (4,614) (5,268) Capital expenditure (16,033) (16,182) (350) (436) (95) Investments in joint ventures and associates (1,093) (1,114) (40) (80) (63) Investments in equity securities (154) (218) 184 362 39 Proceeds from sale of property, plant and equipment and businesses 2,024 1,379 68 100 203 Proceeds from joint ventures and associates from sale, capital reduction and repayment of long-term loans 425 392 7 18 36 Proceeds from sale of equity securities 28 52 586 522 253 Interest received 1,555 505 701 1,908 496 Other investing cash inflows1 3,308 1,542 (724) (794) (650) Other investing cash outflows (2,141) (1,886) (4,827) (3,015) (5,049) Cash flow from investing activities (12,080) (15,530) 88 (186) (206) Net increase/(decrease) in debt with maturity period within three months (185) 566 Other debt: 187 362 103 – New borrowings 964 239 (3,368) (1,774) (1,171) – Repayments (6,596) (6,243) (1,049) (1,158) (747) Interest paid (3,076) (2,494) (26) (152) (843) Derivative financial instruments 22 (2,155) 6 2 4 Change in non-controlling interest (22) 9 Cash dividends paid to: (2,179) (1,983) (1,818) – Shell plc shareholders (6,192) (5,620) (51) (575) (54) – Non-controlling interest (636) (164) (2,725) (3,624) (4,950) Repurchases of shares (10,640) (13,963) (30) 86 (25) Shares held in trust: net sales/(purchases) and dividends received (176) (50) (9,147) (9,003) (9,707) Cash flow from financing activities (26,535) (29,876) (421) (93) (774) Effects of exchange rate changes on cash and cash equivalents (222) (1,596) (2,063) 3,020 (2,992) Increase/(decrease) in cash and cash equivalents 2,785 (993) 45,094 42,074 38,970 Cash and cash equivalents at beginning of period 40,246 36,970 43,031 45,094 35,978 Cash and cash equivalents at end of period 43,031 35,978
1.See Note 8 “Other notes to the unaudited Condensed Consolidated Interim Financial Statements”.
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SHELL PLC
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. Basis of preparation
These unaudited Condensed Consolidated Interim Financial Statements (“Interim Statements”) of Shell plc (“the Company”) and its subsidiaries (collectively referred to as “Shell”) have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting as issued by the International Accounting Standards Board ("IASB") and adopted by the UK, and on the basis of the same accounting principles as those used in the Company's Annual Report and Accounts (pages 237 to 307) for the year ended December 31, 2022 as filed with the Registrar of Companies for England and Wales and the Autoriteit Financiële Markten (the Netherlands) and Form 20-F (pages 216 to 287) for the year ended December 31, 2022 as filed with the US Securities and Exchange Commission, and should be read in conjunction with these filings.
The financial information presented in the unaudited Condensed Consolidated Interim Financial 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, 2022 were published in Shell's Annual Report and Accounts, a copy of which was delivered to the Registrar of Companies for England and Wales, and in Shell's Form 20-F. The auditor's report on those accounts was unqualified, did not include a reference to any matters to which the auditor 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.
On consolidation, assets and liabilities of non-dollar entities are translated to dollars at period-end rates of exchange, while their statements of income, other comprehensive income and cash flows are translated at average rates. Until the end of 2022 this translation was performed at quarterly average rates. As from January 1, 2023 this translation is performed at monthly average rates. This change had no significant impact on Shell's financial reporting.
New standards adopted in 2023
IFRS 17 Insurance contracts (IFRS 17) as issued in 2017, with amendments published in 2020 and 2021, was adopted as from January 1, 2023. The adoption of IFRS 17 had no significant effect on Shell's financial reporting.
Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12 Income taxes (IAS 12)), published in May 2021, was adopted as from January 1, 2023. The adoption of these amendments had no significant effect on Shell's financial reporting.
International Tax Reform — Pillar Two Model Rules (Amendments to IAS 12) as issued on May 23, 2023, was adopted as from that date. The amendments to IAS 12 introduce a temporary mandatory relief from accounting for deferred tax that arises from legislation implementing OECD Pillar Two. On June 20, 2023, the United Kingdom substantively enacted Pillar Two. As required by the amendments to IAS 12, Shell has applied the exception to recognising and disclosing information about deferred tax assets and liabilities related to Pillar Two income taxes.
Future long-term commodity price assumptions and management’s view on the future development of refining margins represent a significant estimate. Future long-term commodity price assumptions were subject to change in the second quarter 2023. These assumptions continue to apply for impairment testing purposes in the third quarter 2023.
The discount rate applied in assessing value in use represents a significant estimate. The discount rate applied was subject to change in the second quarter 2023.
2. Segment information
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. Sales between segments are based on prices generally equivalent to commercially available prices.
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SHELL PLC INFORMATION BY SEGMENT Quarters $ million Nine months Q3 2023 Q2 2023 Q3 2022 2023 2022 Third-party revenue 8,338 7,938 14,471 Integrated Gas 27,208 40,948 1,617 1,533 1,623 Upstream 5,212 5,407 29,577 26,573 31,965 Marketing 82,430 92,222 27,779 28,656 37,649 Chemicals and Products 88,490 110,862 9,032 9,866 10,031 Renewables and Energy Solutions 34,517 30,534 7 12 10 Corporate 31 38 76,350 74,578 95,749 Total third-party revenue 1 237,888 280,011 Inter-segment revenue 2,472 2,940 5,666 Integrated Gas 8,946 13,374 10,277 8,859 13,164 Upstream 30,282 39,056 154 123 169 Marketing 439 423 569 508 696 Chemicals and Products 1,642 2,081 894 771 1,992 Renewables and Energy Solutions 3,140 4,756 — — — Corporate — — CCS earnings 2,154 754 5,736 Integrated Gas 5,318 16,919 1,983 1,586 5,357 Upstream 6,349 14,843 702 970 757 Marketing 2,809 1,758 1,173 349 980 Chemicals and Products 3,322 4,183 600 530 (4,023) Renewables and Energy Solutions 3,329 (5,732) (460) (701) (543) Corporate (2,225) (1,807) 6,152 3,488 8,264 Total CCS earnings 2 18,901 30,163
Includes revenue from sources other than from contracts with customers, which mainly comprises the impact of fair value accounting of commodity derivatives. Third quarter 2023 included income of $3,530 million (second quarter 2023: $4,247 million income; third quarter 2022: $440 million losses). This amount includes both the reversal of prior gains of $2,583 million (second quarter 2023: $27 million gains; third quarter 2022: $4,233 million losses) related to sales contracts and prior losses of $965 million (second quarter 2023: $88 million losses; third quarter 2022: $4,114 million gains) related to purchase contracts that were previously recognised and where physical settlement took place in the third quarter 2023. See Note 3 "Reconciliation of income for the period to CCS Earnings, Operating expenses, Total Debt, and Cash capital expenditure". Page 18
SHELL PLC
3. Reconciliation of income for the period to CCS Earnings, Operating expenses, Total Debt, and Cash capital expenditure
RECONCILIATION OF INCOME FOR THE PERIOD TO CCS EARNINGS Quarters $ million Nine months Q3 2023 Q2 2023 Q3 2022 2023 2022 7,044 3,134 6,743 Income/(loss) attributable to Shell plc shareholders 18,887 31,899 132 20 104 Income/(loss) attributable to non-controlling interest 215 505 7,176 3,154 6,848 Income/(loss) for the period 19,102 32,405 Current cost of supplies adjustment: (1,304) 383 1,800 Purchases (275) (2,923) 327 (96) (433) Taxation 60 745 (47) 47 51 Share of profit/(loss) of joint ventures and associates 14 (63) (1,024) 334 1,417 Current cost of supplies adjustment (201) (2,242) Of which: (969) 326 1,354 Attributable to Shell plc shareholders (162) (2,099) (55) 8 62 Attributable to non-controlling interest (39) (143) 6,152 3,488 8,264 CCS earnings 18,901 30,163 Of which: 6,075 3,460 8,098 CCS earnings attributable to Shell plc shareholders 18,725 29,800 77 27 167 CCS earnings attributable to non-controlling interest 176 363 RECONCILIATION OF OPERATING EXPENSES Quarters $ million Nine months Q3 2023 Q2 2023 Q3 2022 2023 2022 6,384 6,041 5,910 Production and manufacturing expenses 18,433 18,298 3,447 3,314 3,229 Selling, distribution and administrative expenses 9,811 9,392 267 297 220 Research and development 817 672 10,097 9,653 9,359 Operating expenses 29,062 28,363
RECONCILIATION OF TOTAL DEBT Quarters $ million Nine months Q3 2023 Q2 2023 Q3 2022 2023 2022 September 30, 2023 June 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 10,119 12,114 8,046 Current debt 10,119 8,046 72,028 72,252 73,944 Non-current debt 72,028 73,944 82,147 84,366 81,990 Total debt 82,147 81,990
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SHELL PLC RECONCILIATION OF CASH CAPITAL EXPENDITURE Quarters $ million Nine months Q3 2023 Q2 2023 Q3 2022 2023 2022 5,259 4,614 5,268 Capital expenditure 16,033 16,182 350 436 95 Investments in joint ventures and associates 1,093 1,114 40 80 63 Investments in equity securities 154 218 5,649 5,130 5,426 Cash capital expenditure 17,280 17,515 Of which: 1,099 1,089 956 Integrated Gas 3,000 2,739 2,007 2,029 1,733 Upstream 5,906 6,298 917 670 746 Marketing 4,273 2,838 879 669 828 Chemicals and Products 2,160 3,051 659 556 1,086 Renewables and Energy Solutions 1,655 2,393 87 117 78 Corporate 285 196
4. Earnings per share
EARNINGS PER SHARE Quarters Nine months Q3 2023 Q2 2023 Q3 2022 2023 2022 7,044 3,134 6,743 Income/(loss) attributable to Shell plc shareholders ($ million) 18,887 31,899 Weighted average number of shares used as the basis for determining: 6,668.1 6,793.4 7,276.7 Basic earnings per share (million) 6,792.5 7,443.1 6,736.7 6,854.2 7,341.3 Diluted earnings per share (million) 6,856.7 7,505.9
5. Share capital
ISSUED AND FULLY PAID ORDINARY SHARES OF €0.07 EACH 1 Number of shares Nominal value ($ million) A B Ordinary shares A B Ordinary shares Total At January 1, 2023 7,003,503,393 584 584 Repurchases of shares (357,368,014) (30) (30) At September 30, 2023 6,646,135,379 555 555 At January 1, 2022 4,101,239,499 3,582,892,954 345 296 641 Repurchases of shares before assimilation — (34,106,548) — (3) (3) Assimilation of ordinary A and B shares into ordinary shares on January 29, 2022 (4,101,239,499) (3,548,786,406) 7,650,025,905 (345) (293) 638 — Repurchases of B shares on January 27 and 28, 2022, cancelled as ordinary shares on February 2 and 3, 2022 (507,742) — — Repurchases of shares after assimilation (481,555,025) (40) (40) At September 30, 2022 7,167,963,138 598 598
1.Share capital at December 31, 2022, also included 50,000 issued and fully paid sterling deferred shares of £1 each, which were redeemed on March 27, 2023. Upon redemption, the sterling deferred shares were treated as cancelled and the Company's issued share capital was reduced by the nominal value of the shares redeemed in accordance with section 688 of the UK Companies Act 2006.
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SHELL PLC
At Shell plc’s Annual General Meeting on May 23, 2023, the Board was authorised to allot ordinary shares in Shell plc, and to grant rights to subscribe for, or to convert, any security into ordinary shares in Shell plc, up to an aggregate nominal amount of approximately €161 million (representing approximately 2,307 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 22, 2024, or the end of the Annual General Meeting to be held in 2024, unless previously renewed, revoked or varied by Shell plc in a general meeting.
6. Other reserves
OTHER RESERVES $ million Merger reserve Share premium reserve Capital redemption reserve Share plan reserve Accumulated other comprehensive income Total At January 1, 2023 37,298 154 196 1,140 (17,656) 21,132 Other comprehensive income/(loss) attributable to Shell plc shareholders — — — — (1,263) (1,263) Transfer from other comprehensive income — — — — (111) (111) Repurchases of shares — — 30 — — 30 Share-based compensation — — — (18) — (18) At September 30, 2023 37,298 154 227 1,121 (19,029) 19,769 At January 1, 2022 37,298 154 139 964 (19,646) 18,909 Other comprehensive income/(loss) attributable to Shell plc shareholders — — — — 2,130 2,130 Transfer from other comprehensive income — — — — 13 13 Repurchases of shares — — 43 — — 43 Share-based compensation — — — 18 — 18 At September 30, 2022 37,298 154 183 981 (17,502) 21,113
The merger reserve and share premium reserve were established as a consequence of Shell plc (formerly 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 merger reserve increased in 2016 following the issuance of shares for the acquisition of BG Group plc. The capital redemption reserve was established in connection with repurchases of shares of Shell plc. The share plan reserve is in respect of equity-settled share-based compensation plans.
7. Derivative financial instruments and debt excluding lease liabilities
As disclosed in the Consolidated Financial Statements for the year ended December 31, 2022, presented in the Annual Report and Accounts 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 September 30, 2023, are consistent with those used in the year ended December 31, 2022, though the carrying amounts of derivative financial instruments measured using predominantly unobservable inputs have changed since that date. The movement of the derivative financial instruments between December 31, 2022 and September 30, 2023 is a decrease of $9,713 million for the current assets and a decrease of $14,335 million for the current liabilities.
The table below provides the comparison of the fair value with the carrying amount of debt excluding lease liabilities, disclosed in accordance with IFRS 7 Financial Instruments: Disclosures.
DEBT EXCLUDING LEASE LIABILITIES $ million September 30, 2023 December 31, 2022 Carrying amount 54,293 56,152 Fair value¹ 49,264 51,959
1. Mainly determined from the prices quoted for these securities.
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8. Other notes to the unaudited Condensed Consolidated Interim Financial Statements
Consolidated Statement of Income
Interest and other income
Quarters $ million Nine months Q3 2023 Q2 2023 Q3 2022 2023 2022 913 813 498 Interest and other income/(expenses) 2,207 755 Of which: 618 599 346 Interest income 1,718 601 7 29 2 Dividend income (from investments in equity securities) 36 202 (75) 65 93 Net gains/(losses) on sales and revaluation of non-current assets and businesses 35 621 168 7 (12) Net foreign exchange gains/(losses) on financing activities (60) 170 195 113 69 Other 478 (838)
Purchases
Quarters $ million Nine months Q3 2023 Q2 2023 Q3 2022 2023 2022 49,144 51,492 70,684 Purchases 158,138 192,999
Purchases in the third quarter 2023 include a credit of $408 million pre-tax ($312 million post-tax) mainly related to set-off of claims in the third quarter 2023 leading to derecognition of a net payable position in respect of a previously novated gas supply contract (see Note 6 to the Consolidated Financial Statements for the year ended December 31, 2022).
Depreciation, depletion and amortisation
Quarters $ million Nine months Q3 2023 Q2 2023 Q3 2022 2023 2022 5,911 7,872 6,124 Depreciation, depletion and amortisation 20,069 12,071 Of which: 5,716 5,708 5,665 Depreciation 17,120 16,662 359 2,490 466 Impairments 3,438 1,525 (163) (326) (8) Impairment reversals (489) (6,117)
Impairments recognised in the third quarter 2023 of $359 million pre-tax ($299 million post-tax) mainly relate to various assets in Renewables and Energy Solutions and Chemicals and Products. Impairments recognised in the second quarter 2023 of $2,490 million pre-tax ($1,910 million post-tax) were mainly triggered by a change in the discount rate applied and mainly relate to an asset in Integrated Gas located in North America and various smaller impairments across segments. Impairments of $466 million pre-tax ($368 million post-tax) in the third quarter 2022 mainly relate to the classification of an Upstream asset as held for sale.Condensed Consolidated Balance Sheet
Goodwill
$ million September 30, 2023 December 31, 2022 Goodwill 17,345 16,039
Goodwill as at September 30, 2023, includes $1,464 million goodwill recognised in the first quarter 2023, related to the acquisition of Nature Energy Biogas A/S. The accounting is provisional and is expected to be completed in the fourth quarter 2023.
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Deferred tax
$ million September 30, 2023 December 31, 2022 Non-current assets Deferred tax 5,537 7,815 Non-current liabilities Deferred tax 15,891 16,186 Net deferred liability (10,353) (8,371)
The presentation in the balance sheet takes into consideration the offsetting of deferred tax assets and deferred tax liabilities within the same tax jurisdiction, where this is permitted. The overall deferred tax position in a particular tax jurisdiction determines if a deferred tax balance related to that jurisdiction is presented within deferred tax assets or deferred tax liabilities.
Shell's net deferred tax position was a liability of $10,353 million at September 30, 2023 (December 31, 2022: $8,371 million ). The net increase in the net deferred tax liability is mainly driven by a reduction of the deferred tax asset due to the utilisation of deferred tax.
Assets classified as held for sale
$ million September 30, 2023 December 31, 2022 Assets classified as held for sale 1,189 2,851 Liabilities directly associated with assets classified as held for sale 786 1,395
Assets classified as held for sale and associated liabilities at September 30, 2023, principally relate to various Renewables and Energy Solutions projects and an Integrated Gas project held for sale. The major classes of assets and liabilities classified as held for sale at September 30, 2023, are Trade and other receivables ($594 million ; December 31, 2022: $95 million ), Property plant and equipment ($372 million ; December 31, 2022: $2,526 million ) and Trade and other payables ($776 million ; December 31, 2022: $278 million ).
$ million September 30, 2023 December 31, 2022 Non-controlling interest 1,745 2,125
The change in non-controlling interest is mainly driven by dividend payments to non-controlling shareholders during the second quarter 2023.
Consolidated Statement of Cash Flows
Cash flow from operating activities - Other
Quarters $ million Nine months Q3 2023 Q2 2023 Q3 2022 2023 2022 (150) 954 1,258 Other 474 4,841
Cash flow from operating activities - Other for the third quarter 2023 includes $630 million of net outflows (second quarter 2023: $764 million net inflows; third quarter 2022: $625 million net inflows) due to the timing of payments relating to emissions and biofuel programmes in Europe and North America and $336 million (second quarter 2023: $29 million ; third quarter 2022: $478 million ) in relation to reversal of currency exchange losses on Cash and cash equivalents.
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Other investing cash inflows
Quarters $ million Nine months Q3 2023 Q2 2023 Q3 2022 2023 2022 701 1,908 496 Other investing cash inflows 3,308 1,542
Other investing cash inflows in the second quarter 2023 mainly relate to repayments of short-term debt securities and short-term loans.
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ALTERNATIVE PERFORMANCE (NON-GAAP) MEASURES
A.Adjusted Earnings and Adjusted earnings before interest, taxes, depreciation and amortisation (“Adjusted EBITDA”)
The “Adjusted Earnings” measure aims to facilitate a comparative understanding of Shell’s financial performance from period to period by removing the effects of oil price changes on inventory carrying amounts and removing the effects of identified items. These items are in some cases driven by external factors and may, either individually or collectively, hinder the comparative understanding of Shell’s financial results from period to period. This measure excludes earnings attributable to non-controlling interest.
We define “Adjusted EBITDA” as “Income/(loss) for the period” adjusted for current cost of supplies; identified items; tax charge/(credit); depreciation, amortisation and depletion; exploration well write-offs and net interest expense. All items include the non-controlling interest component. Management uses this measure to evaluate Shell's performance in the period and over time.
ADJUSTED EARNINGS Quarters $ million Nine months Q3 2023 Q2 2023 Q3 2022 2023 2022 7,044 3,134 6,743 Income/(loss) attributable to Shell plc shareholders 18,887 31,899 (969) 326 1,354 Add: Current cost of supplies adjustment attributable to Shell plc shareholders1 (162) (2,099) Of which: (56) 49 (11) Marketing 112 (515) (913) 277 1,365 Chemicals and Products (273) (1,584) 6,075 3,460 8,098 CCS earnings attributable to Shell plc shareholders 1 18,725 29,800 Of which: 2,154 754 5,736 Integrated Gas 5,318 16,919 1,983 1,586 5,357 Upstream 6,349 14,843 702 970 757 Marketing 2,809 1,758 1,173 349 980 Chemicals and Products 3,322 4,183 600 530 (4,023) Renewables and Energy Solutions 3,329 (5,732) (460) (701) (543) Corporate (2,225) (1,807) 77 27 167 Less: Non-controlling interest 176 363 (149) (1,613) (1,356) Less: Identified items attributable to Shell plc shareholders (2,219) (255) Of which: (375) (1,744) 3,417 Integrated Gas (4,625) 6,750 (238) (98) (539) Upstream (357) 585 (18) 76 (63) Marketing 320 (550) (207) (100) 208 Chemicals and Products (285) 208 667 301 (4,406) Renewables and Energy Solutions 2,778 (7,184) 22 (48) 28 Corporate (50) (62) — — 2 Less: Non-controlling interest — 2 6,224 5,073 9,454 Adjusted Earnings 20,944 30,055 Of which: 2,529 2,498 2,319 Integrated Gas 9,944 10,169 2,221 1,684 5,896 Upstream 6,706 14,258 720 894 820 Marketing 2,488 2,308 1,380 450 772 Chemicals and Products 3,607 3,975 (67) 228 383 Renewables and Energy Solutions 551 1,452 (482) (654) (571) Corporate (2,175) (1,745) 77 27 165 Less: Non-controlling interest 176 361
1. See Note 2 “Segment information”.
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SHELL PLC ADJUSTED EBITDA Quarters $ million Nine months Q3 2023 Q2 2023 Q3 2022 2023 2022 6,224 5,073 9,454 Adjusted Earnings 20,944 30,055 77 27 165 Add: Non-controlling interest 176 361 3,621 2,813 5,621 Add: Taxation charge/(credit) excluding tax impact of identified items 11,553 14,587 Of which: 845 831 1,549 Integrated Gas 2,771 3,764 2,155 1,688 3,414 Upstream 6,707 8,910 288 243 285 Marketing 797 791 232 (48) 318 Chemicals and Products 565 861 65 101 49 Renewables and Energy Solutions 334 349 37 (2) 6 Corporate 379 (88) 5,716 5,708 5,665 Add: Depreciation, depletion and amortisation excluding impairments 17,120 16,662 Of which: 1,413 1,447 1,440 Integrated Gas 4,300 4,130 2,771 2,778 3,014 Upstream 8,358 8,945 495 454 393 Marketing 1,383 1,157 951 914 716 Chemicals and Products 2,763 2,156 82 110 97 Renewables and Energy Solutions 303 261 4 4 5 Corporate 13 13 186 203 218 Add: Exploration well write-offs 625 486 Of which: 35 23 81 Integrated Gas 59 133 151 180 137 Upstream 566 353 1,130 1,210 734 Add: Interest expense excluding identified items 3,504 2,139 Of which: 51 29 20 Integrated Gas 110 56 119 120 85 Upstream 372 235 23 12 7 Marketing 40 25 41 (5) (1) Chemicals and Products 39 12 1 1 (2) Renewables and Energy Solutions 3 — 895 1,053 625 Corporate 2,941 1,811 618 599 346 Less: Interest income 1,718 601 Of which: 1 1 16 Integrated Gas 2 16 5 3 7 Upstream 13 16 8 — — Marketing 8 — 13 11 8 Chemicals and Products 33 16 1 2 (3) Renewables and Energy Solutions 5 (3) 590 582 318 Corporate 1,657 556 16,336 14,435 21,512 Adjusted EBITDA 52,204 63,689 Of which: 4,871 4,827 5,393 Integrated Gas 17,180 18,237 7,412 6,447 12,539 Upstream 22,696 32,682 1,519 1,604 1,505 Marketing 4,700 4,280 2,591 1,300 1,797 Chemicals and Products 6,940 6,988 79 438 530 Renewables and Energy Solutions 1,186 2,064 (136) (180) (251) Corporate (499) (562) (1,351) 430 1,850 Less: Current cost of supplies adjustment before taxation (261) (2,986)
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SHELL PLC Of which: (70) 54 (28) Marketing 140 (691) (1,280) 376 1,878 Chemicals and Products (401) (2,295) (13) 327 (1,687) Joint ventures and associates (dividends received less profit) (167) (2,800) Of which: (40) 119 (236) Integrated Gas 32 (610) 43 28 (1,543) Upstream (443) (2,843) (15) 26 5 Marketing 91 125 (23) 112 128 Chemicals and Products 78 518 21 41 (43) Renewables and Energy Solutions 72 8 — — 1 Corporate 2 2 (2,549) (777) 1,135 Derivative financial instruments (5,112) 2,676 Of which: (454) (201) 3,591 Integrated Gas (3,071) 7,053 (20) 9 47 Upstream — (35) 7 (15) (67) Marketing (28) (49) (372) (206) 410 Chemicals and Products 235 (243) (1,407) (170) (2,695) Renewables and Energy Solutions (1,719) (3,676) (304) (193) (151) Corporate (528) (375) (3,191) (3,773) (3,438) Tax paid (10,108) (8,748) Of which: (679) (1,279) (845) Integrated Gas (2,843) (2,112) (2,090) (2,346) (2,372) Upstream (6,455) (6,060) (224) (169) (112) Marketing (464) (333) 52 (113) (44) Chemicals and Products (211) (71) (258) (86) (11) Renewables and Energy Solutions (350) (50) 8 220 (54) Corporate 214 (121) (35) 507 1,025 Other 42 4,031 Of which: (38) (46) (67) Integrated Gas (52) 195 (87) (391) 15 Upstream (510) 282 55 103 30 Marketing 190 (95) (531) 714 551 Chemicals and Products 80 2,616 342 11 (138) Renewables and Energy Solutions 367 (158) 223 116 635 Corporate (34) 1,191 433 4,840 (4,157) (Increase)/decrease in working capital 4,502 (15,825) Of which: 348 208 (1,174) Integrated Gas 2,677 (1,479) 78 772 (343) Upstream 374 (1,610) (533) (83) 910 Marketing (971) (3,304) (619) 679 2,421 Chemicals and Products (744) (2,316) 1,188 2,958 (5,694) Renewables and Energy Solutions 4,693 (7,256) (30) 306 (279) Corporate (1,528) 141 12,332 15,130 12,539 Cash flow from operating activities 41,622 46,009 Of which: 4,009 3,628 6,664 Integrated Gas 13,923 21,283 5,336 4,519 8,343 Upstream 15,663 22,417 880 1,412 2,299 Marketing 3,378 1,315 2,379 2,110 3,385 Chemicals and Products 6,779 9,787 (34) 3,192 (8,051) Renewables and Energy Solutions 4,249 (9,068) (238) 269 (100) Corporate (2,372) 276
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Identified items
Identified items comprise: divestment gains and losses, impairments, redundancy and restructuring, provisions for onerous contracts, fair value accounting of commodity derivatives and certain gas contracts and the impact of exchange rate movements on certain deferred tax balances, and other items. Identified items in the table below are presented on a net basis.
IDENTIFIED ITEMS Quarters $ million Nine months Q3 2023 Q2 2023 Q3 2022 2023 2022 Identified items included in Income/(loss) before taxation (75) 65 92 Divestment gains/(losses) 35 636 (196) (2,164) (458) Impairment reversals/(impairments) (2,952) 3,038 (20) (24) (26) Redundancy and restructuring (54) 22 — — 29 Provisions for onerous contracts (24) (508) 258 130 (2,199) Fair value accounting of commodity derivatives and certain gas contracts 939 (2,374) 50 1 (142) 608 Other 116 (432) 17 (2,136) (1,955) Total identified items included in Income/(loss) before taxation (1,941) 381 167 (523) (601) Less: total identified items included in Taxation charge/(credit) 278 634 Identified items included in Income/(loss) for the period (68) 50 99 Divestment gains/(losses) 50 465 (167) (1,661) (363) Impairment reversals/(impairments) (2,284) 1,384 (14) (17) (29) Redundancy and restructuring (35) 25 — — 17 Provisions for onerous contracts (18) (487) 121 46 (998) Fair value accounting of commodity derivatives and certain gas contracts 52 (761) (51) 45 (81) Impact of exchange rate movements on tax balances 8 (131) 29 (77) 1 Other 7 (749) (149) (1,613) (1,354) Impact on CCS earnings (2,219) (253) Of which: (375) (1,744) 3,417 Integrated Gas (4,625) 6,750 (238) (98) (539) Upstream (357) 585 (18) 76 (63) Marketing 320 (550) (207) (100) 208 Chemicals and Products (285) 208 667 301 (4,406) Renewables and Energy Solutions 2,778 (7,184) 22 (48) 28 Corporate (50) (62) — — 2 Impact on CCS earnings attributable to non-controlling interest — 2 (149) (1,613) (1,356) Impact on CCS earnings attributable to Shell plc shareholders (2,219) (255)
1.Mainly consists of a credit in relation to a previously novated gas supply contract (see Note 8) partly offset by the recognition of a legal provision.
Provisions for onerous contracts: Provisions for onerous contracts that relate to businesses that Shell has exited or to redundant assets or assets that cannot be used.
Fair value accounting of commodity derivatives and certain gas contracts: 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. Shell also enters into contracts for tolling, pipeline and storage capacity. Derivative contracts are entered into for mitigation of resulting economic exposures (generally price exposure) and these derivative contracts are carried at period-end market
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price (fair value), with movements in fair value recognised in income for the period. Supply and purchase contracts entered into for operational purposes, as well as contracts for tolling, pipeline and storage capacity, are, by contrast, recognised when the transaction occurs; 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 contracts 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 are reported as identified items.
Impacts of exchange rate movements on tax balances represent the impact on tax balances of exchange rate movements arising on (a) the conversion to dollars of the local currency tax base of non-monetary assets and liabilities, as well as losses (this primarily impacts the Upstream and Integrated Gas segments) and (b) the conversion of dollar-denominated inter-segment loans to local currency, leading to taxable exchange rate gains or losses (this primarily impacts the Corporate segment).
Other identified items represent other credits or charges that based on Shell management's assessment hinder the comparative understanding of Shell's financial results from period to period.
B. Adjusted Earnings per share
Adjusted Earnings per share is calculated as Adjusted Earnings (see Reference A), divided by the weighted average number of shares used as the basis for basic earnings per share (see Note 4).
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C. Cash capital expenditure
Cash capital expenditure represents cash spent on maintaining and developing assets as well as on investments in the period. Management regularly monitors this measure as a key lever to delivering sustainable cash flows. Cash capital expenditure is the sum of the following lines from the Consolidated Statement of Cash flows: Capital expenditure, Investments in joint ventures and associates and Investments in equity securities.
Quarters $ million Nine months Q3 2023 Q2 2023 Q3 2022 2023 2022 5,259 4,614 5,268 Capital expenditure 16,033 16,182 Of which: 958 803 918 Integrated Gas 2,458 2,614 2,013 1,936 1,743 Upstream 5,701 6,069 893 656 733 Marketing 4,225 2,702 803 663 828 Chemicals and Products 2,077 3,049 523 483 993 Renewables and Energy Solutions 1,382 1,654 68 72 54 Corporate 190 94 350 436 95 Investments in joint ventures and associates 1,093 1,114 Of which: 141 286 38 Integrated Gas 543 124 (6) 93 (10) Upstream 205 229 24 14 13 Marketing 47 136 76 3 — Chemicals and Products 82 2 114 46 48 Renewables and Energy Solutions 205 616 1 (6) 6 Corporate 11 7 40 80 63 Investments in equity securities 154 218 Of which: — — — Integrated Gas — — — — — Upstream — — — — — Marketing — — — 2 — Chemicals and Products 2 1 21 27 45 Renewables and Energy Solutions 68 122 19 51 18 Corporate 84 96 5,649 5,130 5,426 Cash capital expenditure 17,280 17,515 Of which: 1,099 1,089 956 Integrated Gas 3,000 2,739 2,007 2,029 1,733 Upstream 5,906 6,298 917 670 746 Marketing 4,273 2,838 879 669 828 Chemicals and Products 2,160 3,051 659 556 1,086 Renewables and Energy Solutions 1,655 2,393 87 117 78 Corporate 285 196
D. Return on average capital employed
Return on average capital employed ("ROACE") measures the efficiency of Shell’s utilisation of the capital that it employs. Shell uses two ROACE measures: ROACE on a Net income basis and ROACE on an Adjusted Earnings plus Non-controlling interest (NCI) basis, both adjusted for after-tax interest expense.
Both measures refer to Capital employed which consists of total equity, current debt and non-current debt.
ROACE on a Net income basis
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SHELL PLC $ million Quarters Q3 2023 Q2 2023 Q3 2022 Income - current and previous three quarters 29,571 29,242 44,009 Interest expense after tax - current and previous three quarters 3,204 2,941 2,273 Income before interest expense - current and previous three quarters 32,775 32,183 46,282 Capital employed – opening 272,227 278,039 262,074 Capital employed – closing 275,090 276,460 272,227 Capital employed – average 273,659 277,250 267,150 ROACE on a Net income basis 12.0% 11.6% 17.3%
ROACE on an Adjusted Earnings plus Non-controlling interest (NCI) basis
In this calculation, the sum of Adjusted Earnings (see Reference A) plus non-controlling interest (NCI) excluding identified items for the current and previous three quarters, adjusted for after-tax interest expense, is expressed as a percentage of the average capital employed for the same period.
$ million Quarters Q3 2023 Q2 2023 Q3 2022 Adjusted Earnings - current and previous three quarters (Reference A) 30,758 33,988 36,446 Add: Income/(loss) attributable to NCI - current and previous three quarters 275 247 649 Add: Current cost of supplies adjustment attributable to NCI - current and previous three quarters (12) 105 (180) Less: Identified items attributable to NCI (Reference A) - current and previous three quarters 13 15 (9) Adjusted Earnings plus NCI excluding identified items - current and previous three quarters 31,008 34,325 36,924 Add: Interest expense after tax - current and previous three quarters 3,204 2,941 2,273 Adjusted Earnings plus NCI excluding identified items before interest expense - current and previous three quarters 34,211 37,265 39,197 Capital employed - average 273,659 277,250 267,150 ROACE on an Adjusted Earnings plus NCI basis 12.5% 13.4% 14.7%
E. Gearing and Net debt
Gearing is a measure of Shell’s capital structure and is defined as net debt as a percentage of total capital. Net debt is defined as the sum of current and non-current debt, less cash and cash equivalents, adjusted for the fair value of derivative financial instruments used to hedge foreign exchange and interest rate risks relating to debt, and associated collateral balances. Management considers this adjustment useful because it reduces the volatility of net debt caused by fluctuations in foreign exchange and interest rates, and eliminates the potential impact of related collateral payments or receipts. Debt-related derivative financial instruments are a subset of the derivative financial instrument assets and liabilities presented on the balance sheet. Collateral balances are reported under “Trade and other receivables” or “Trade and other payables” as appropriate.
$ million Quarters September 30, 2023 June 30, 2023 September 30, 2022 Current debt 10,119 12,114 8,046 Non-current debt 72,028 72,252 73,944 Total debt 82,147 84,366 81,990 Of which lease liabilities 27,854 27,587 26,560 Add: Debt-related derivative financial instruments: net liability/(asset) 3,116 2,773 4,470 Add: Collateral on debt-related derivatives: net liability/(asset) (1,762) (1,736) (2,139) Less: Cash and cash equivalents (43,031) (45,094) (35,978) Net debt 40,470 40,310 48,343 Add: Total equity 192,943 192,094 190,237 Total capital 233,414 232,404 238,581 Gearing 17.3 % 17.3 % 20.3 %
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F. Operating expenses and Underlying operating expenses
Operating expenses is a measure of Shell’s cost management performance, comprising the following items from the Consolidated Statement of Income: production and manufacturing expenses; selling, distribution and administrative expenses; and research and development expenses.
Underlying operating expenses is a measure aimed at facilitating a comparative understanding of performance from period to period by removing the effects of identified items, which, either individually or collectively, can cause volatility, in some cases driven by external factors.
Quarters $ million Nine months Q3 2023 Q2 2023 Q3 2022 2023 2022 6,384 6,041 5,910 Production and manufacturing expenses 18,433 18,298 Of which: 1,125 1,082 1,157 Integrated Gas 3,341 3,697 2,266 2,095 2,078 Upstream 6,591 6,940 213 195 152 Marketing 643 641 2,021 2,069 1,908 Chemicals and Products 5,965 5,406 760 598 680 Renewables and Energy Solutions 1,878 1,643 (1) 3 (64) Corporate 14 (27) 3,447 3,314 3,229 Selling, distribution and administrative expenses 9,811 9,392 Of which: 52 45 41 Integrated Gas 123 169 5 58 25 Upstream 120 157 2,123 2,051 1,867 Marketing 5,970 5,306 828 787 884 Chemicals and Products 2,436 2,657 286 257 226 Renewables and Energy Solutions 787 671 152 116 186 Corporate 375 432 267 297 220 Research and development 817 672 Of which: 30 26 30 Integrated Gas 84 76 135 122 74 Upstream 365 288 59 68 47 Marketing 183 134 47 52 53 Chemicals and Products 139 120 (4) 29 17 Renewables and Energy Solutions 45 55 — — — Corporate — — 10,097 9,653 9,359 Operating expenses 29,062 28,363 Of which identified items: (19) (23) (26) Redundancy and restructuring (charges)/reversal (51) 23 (343) (23) 561 (Provisions)/reversal (376) 177 — — — Other — (143) (362) (45) 535 Total identified items (426) 57 9,735 9,607 9,893 Underlying operating expenses 28,635 28,419
G. Free cash flow and Organic free cash flow
Free cash flow is used to evaluate cash available for financing activities, including dividend payments and debt servicing, after investment in maintaining and growing the business. It is defined as the sum of “Cash flow from operating activities” and “Cash flow from investing activities”.
Cash flows from acquisition and divestment activities are removed from Free cash flow to arrive at the Organic free cash flow, a measure used by management to evaluate the generation of free cash flow without these activities.
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SHELL PLC Quarters $ million Nine months Q3 2023 Q2 2023 Q3 2022 2023 2022 12,332 15,130 12,539 Cash flow from operating activities 41,622 46,009 (4,827) (3,015) (5,049) Cash flow from investing activities (12,080) (15,530) 7,505 12,116 7,490 Free cash flow 29,542 30,479 259 480 278 Less: Divestment proceeds (Reference I) 2,477 1,824 (3) 2 — Add: Tax paid on divestments (reported under "Other investing cash outflows") — — 3 166 661 Add: Cash outflows related to inorganic capital expenditure1 2,316 3,234 7,246 11,804 7,872 Organic free cash flow 2 29,381 31,890
Cash outflows related to inorganic capital expenditure includes portfolio actions which expand Shell's activities through acquisitions and restructuring activities as reported in capital expenditure lines in the Consolidated Statement of Cash Flows. Free cash flow less divestment proceeds, adding back outflows related to inorganic expenditure. H. Cash flow from operating activities and cash flow from operating activities excluding working capital movements
Working capital movements are defined as the sum of the following items in the Consolidated Statement of Cash Flows: (i) (increase)/decrease in inventories, (ii) (increase)/decrease in current receivables, and (iii) increase/(decrease) in current payables.
Cash flow from operating activities excluding working capital movements is a measure used by Shell to analyse its operating cash generation over time excluding the timing effects of changes in inventories and operating receivables and payables from period to period.
Quarters $ million Nine months Q3 2023 Q2 2023 Q3 2022 2023 2022 12,332 15,130 12,539 Cash flow from operating activities 41,622 46,009 Of which: 4,009 3,628 6,664 Integrated Gas 13,923 21,283 5,336 4,519 8,343 Upstream 15,663 22,417 880 1,412 2,299 Marketing 3,378 1,315 2,379 2,110 3,385 Chemicals and Products 6,779 9,787 (34) 3,192 (8,051) Renewables and Energy Solutions 4,249 (9,068) (238) 269 (100) Corporate (2,372) 276 (3,151) 1,171 484 (Increase)/decrease in inventories 2,237 (11,263) (1,126) 8,289 (98) (Increase)/decrease in current receivables 13,105 (14,168) 4,711 (4,619) (4,544) Increase/(decrease) in current payables (10,841) 9,606 433 4,840 (4,157) (Increase)/decrease in working capital 4,502 (15,825) 11,899 10,290 16,696 Cash flow from operating activities excluding working capital movements 37,120 61,834
I. Divestment proceeds
Divestment proceeds represent cash received from divestment activities in the period. Management regularly monitors this measure as a key lever to deliver sustainable cash flow.
Quarters $ million Nine months Q3 2023 Q2 2023 Q3 2022 2023 2022 184 362 39 Proceeds from sale of property, plant and equipment and businesses 2,024 1,379 68 100 203 Proceeds from joint ventures and associates from sale, capital reduction and repayment of long-term loans 425 392 7 18 36 Proceeds from sale of equity securities 28 52 259 480 278 Divestment proceeds 2,477 1,824
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CAUTIONARY STATEMENT
All amounts shown throughout this Unaudited Condensed Interim Financial Report are unaudited. All peak production figures in Portfolio Developments are quoted at 100% expected production. The numbers presented throughout this Unaudited Condensed Interim Financial Report may not sum precisely to the totals provided and percentages may not precisely reflect the absolute figures, due to rounding.
The companies in which Shell plc directly and indirectly owns investments are separate legal entities. In this Unaudited Condensed Interim Financial Report, “Shell”, “Shell Group” and “Group” are sometimes used for convenience where references are made to Shell plc and its subsidiaries in general. Likewise, the words “we”, “us” and “our” are also used to refer to Shell plc and its subsidiaries in general or to those who work for them. These terms are also used where no useful purpose is served by identifying the particular entity or entities. “Subsidiaries”, “Shell subsidiaries” and “Shell companies” as used in this Unaudited Condensed Interim Financial Report refer to entities over which 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. “Joint ventures” and “joint operations” are collectively referred to as “joint arrangements”. 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 an entity or unincorporated joint arrangement, after exclusion of all third-party interest.
Forward-Looking Statements
This Unaudited Condensed Interim Financial Report contains forward-looking statements (within the meaning of the U.S. Private Securities Litigation Reform Act of 1995) concerning the financial condition, results of operations and businesses of 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 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 “aim”, “ambition”, “anticipate”, “believe”, “could”, “estimate”, “expect”, “goals”, “intend”, “may”, “milestones”, “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 Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this Unaudited Condensed Interim Financial Report, 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, judicial, 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; (m) risks associated with the impact of pandemics, such as the COVID-19 (coronavirus) outbreak; and (n) changes in trading conditions. No assurance is provided that future dividend payments will match or exceed previous dividend payments. All forward-looking statements contained in this Unaudited Condensed Interim Financial Report 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 Shell plc’s Form 20-F for the year ended December 31, 2022 (available at www.shell.com/investor and www.sec.gov). These risk factors also expressly qualify all forward-looking statements contained in this Unaudited Condensed Interim Financial Report and should be considered by the reader. Each forward-looking statement speaks only as of the date of this Unaudited Condensed Interim Financial Report, November 2, 2023. Neither 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 Unaudited Condensed Interim Financial Report.
Shell’s Net Carbon Intensity
Also, in this Unaudited Condensed Interim Financial Report we may refer to Shell’s “Net Carbon Intensity”, which includes Shell’s carbon emissions from the production of our energy products, our suppliers’ carbon emissions in supplying energy for that production and our customers’ carbon emissions associated with their use of the energy products we sell. Shell only controls its own emissions. The use of the term Shell’s “Net Carbon Intensity” is for convenience only and not intended to suggest these emissions are those of Shell plc or its subsidiaries.
Shell’s net-Zero Emissions Target
Shell’s operating plan, outlook and budgets are forecasted for a ten-year period and are updated every year. They reflect the current economic environment and what we can reasonably expect to see over the next ten years. Accordingly, they reflect our Scope 1, Scope 2 and Net Carbon Intensity (NCI) targets over the next ten years. However, Shell’s operating plans cannot reflect our 2050 net-zero emissions target and 2035 NCI target, as these targets are currently outside our planning period. In the future, as society moves towards net-zero emissions, we expect Shell’s operating plans to reflect this movement. However, if society is not net zero in 2050, as of today, there would be significant risk that Shell may not meet this target.
Forward-Looking Non-GAAP measures
This Unaudited Condensed Interim Financial Report may contain certain forward-looking non-GAAP measures such as cash capital expenditure and divestments. We are unable to provide a reconciliation of these forward-looking Non-GAAP measures to the most comparable GAAP financial measures because certain information needed to reconcile those Non-GAAP measures to the most comparable GAAP financial measures is dependent on future events some of which are outside the control of Shell, such as oil and gas prices, interest rates and exchange rates. Moreover, estimating such GAAP measures with the required precision necessary to provide a meaningful reconciliation is extremely difficult and could not be accomplished without unreasonable effort. Non-GAAP measures in respect of future periods which cannot be reconciled to the most comparable GAAP financial measure are calculated in a manner which is consistent with the accounting policies applied in Shell plc’s consolidated financial statements.
The contents of websites referred to in this Unaudited Condensed Interim Financial Report do not form part of this Unaudited Condensed Interim Financial Report.
We may have used certain terms, such as resources, in this Unaudited Condensed Interim Financial Report that the United States Securities and Exchange Commission (SEC) strictly prohibits us from including in our filings with the SEC. Investors are urged to consider closely the disclosure in our Form 20-F, File No 1-32575, available on the SEC website www.sec.gov.
This Unaudited Condensed Interim Financial Report contains inside information.
November 2, 2023
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SHELL PLC The information in this Unaudited Condensed Interim Financial Report reflects the unaudited consolidated financial position and results of Shell plc. Company No. 4366849, Registered Office: Shell Centre, London, SE1 7NA, England, UK.
Contacts:
- Caroline J.M. Omloo, Company Secretary
- Media: International +44 (0) 207 934 5550; USA +1 832 337 4355
LEI number of Shell plc: 21380068P1DRHMJ8KU70
Classification: Inside Information
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What was the income attributable to Shell plc shareholders in Q3 2023?
What was the percentage change in Adjusted Earnings from Q3 2022 to Q3 2023?
What was the cash flow from operating activities in Q3 2023?
What was the net debt at the end of Q3 2023?
What was the percentage change in total production available for sale from Q3 2022 to Q3 2023?
