Shell strives to give investors a clear and concise view of our operations around the world. This Investors’ Handbook includes financial data showing how Shell has performed over the last five years and outlines our plans for the future.
After my first year as Chief Executive Officer, I am pleased to see that we are delivering on our three key priorities of improved financial performance, enhanced capital efficiency and continued strong project delivery.
Shell’s earnings on a current cost of supplies basis improved in 2014 compared with 2013, largely thanks to our prudent investment strategy and delivery of major new projects around the world. We achieved these better results despite the fall in oil prices during the second half of 2014, through improved operational performance, prudent spending and sales of assets that are not central to our strategy. But there is still work to be done. I want to see more competitive performance across Shell in 2015 and beyond.
We continued our focus on safety, but sadly five people working for Shell in 2014 lost their lives. There was also an explosion at our Moerdijk chemical plant in the Netherlands, but thankfully it caused no serious injuries.
For 2014, our earnings on a current cost of supplies basis attributable to shareholders were $19 billion, which included impairments of $5 billion and gains on divestments of $2 billion, compared with $17 billion in 2013, which included impairments of $4 billion. Net cash flow from operating activities rose to $45 billion from $40 billion in 2013. We reduced our capital investment from $46 billion in 2013 to $37 billion.
Underlining our ongoing commitment to shareholder returns, we distributed $12 billion to shareholders in dividends, including those taken as shares under our Scrip Dividend Programme, and spent $3 billion on share repurchases in 2014. This compares with $11 billion of dividends and $5 billion of share repurchases in 2013. Our Upstream earnings rose from 2013 to 2014, reflecting improved operational performance and the start of production from new deep-water projects. These included Gumusut-Kakap in Malaysia, the Bonga North West development off the coast of Nigeria and Cardamom and Mars B in the Gulf of Mexico. However, production from new projects was more than offset by the expiry of a licence in Abu Dhabi and the impact of asset sales. Our oil and gas production averaged 3.1 million boe/d in 2014, 4% less than in 2013.
The integration of the Repsol liquefied natural gas (LNG) businesses acquired in January helped boost our LNG sales to 24 million tonnes, up 22% on 2013.
It was a good year for our exploration drive, with 10 notable discoveries. The resources we uncovered – including in the USA, Gabon and Malaysia – could be important sources of gas and oil for decades to come.
We continued to streamline our Downstream operations, selling most of our businesses in Australia and Italy, for example. While there is some growth potential in businesses such as Chemicals, Lubricants and in China, we continue to look for opportunities to reduce our costs and optimise our Downstream portfolio.
Divestments, together with the initial public offering in Shell Midstream Partners, L.P., generated $15 billion in proceeds in 2014, meeting our target for 2014-15 well ahead of schedule. We plan to continue to divest assets in 2015.
We expect organic capital investment to be lower in 2015 than 2014 levels of around $35 billion. But we want to preserve our growth to ensure we continue to generate cash flow and dividends for our shareholders. That is why we are still planning to invest in economically-sound projects this year in key growth areas, such as deep water and LNG.
On April 8, 2015, we announced the recommended combination with BG Group plc. We expect the combination to be accretive to earnings per share from 2017 and to cash flow from operations per share from 2016. It will accelerate our growth strategy in deep water and global LNG. We also believe the transaction will be a springboard for a faster rate of portfolio change, particularly in exploration and other long-term plays. We will be concentrating on fewer themes, and at a larger scale, to drive profitability and balance risk, and unlock more value from the combined portfolios. Information related to the transaction, which remains subject to a number of regulatory approvals and other conditions, can be found at www.shell.com.
In the short term, the world economy is going through a period of relatively slow growth. There is no change in the long-term outlook for energy demand, however, as the global population rises and living standards improve. At the same time, the need to tackle climate change requires effective policies that help meet the world’s energy needs while significantly reducing carbon dioxide (CO2) emissions.
We will continue our strategy of strengthening our position as a leader in the oil and gas industry while supplying energy in a responsible way. By stepping up our drive to improve our financial performance and continuing to invest in good projects and opportunities, we are working hard to add more value for our shareholders.
During a testing time for the energy industry, this may mean making tough choices for stand-alone Shell and tough choices for the combined Shell and BG portfolio options after all regulatory approvals have been obtained and completion has occurred. But it will help Shell deliver where it matters – the bottom line.
Ben van Beurden
Chief Executive Officer