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Non-GAAP measures reconciliations

These non-GAAP measures, also known as alternative performance measures, are financial measures other than those defined in International Financial Reporting Standards, which Shell considers provide useful information.

Earnings on a current cost of supplies basis

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

Reconciliation of income for the period to CCS earnings

 

 

 

$ million

 

2021

2020

2019

Income/(loss) attributable to Shell plc shareholders

20,101

(21,680)

15,842

Income/(loss) attributable to non-controlling interest

529

146

590

Income/(loss) for the period

20,630

(21,534)

16,432

Current cost of supplies adjustment

(3,148)

1,833

(605)

Of which:

 

 

 

Attributable to Shell plc shareholders

(3,029)

1,759

(572)

Attributable to non-controlling interest

(119)

74

(33)

CCS earnings

17,482

(19,701)

15,827

Of which:

 

 

 

Attributable to Shell plc shareholders

17,072

(19,921)

15,270

Attributable to non-controlling interest

410

220

557

Adjusted earnings and adjusted earnings before interest, taxes, depreciation and amortisation (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.

The “Adjusted EBITDA (CCS basis)” and “Adjusted EBITDA (FIFO basis)” measures are introduced with effect from January 1, 2021. Management uses both measures to evaluate Shell’s performance in the period and over time. We define “Adjusted EBITDA (CCS basis)” 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. We define “Adjusted EBITDA (FIFO basis)” as “Income/(loss) for the period adjusted for 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.

Adjusted Earnings

 

 

 

$ million

 

2021

2020

2019

Income/(loss) attributable to Shell PLC shareholders

20,101

(21,680)

15,842

Add: Current cost of supplies adjustment attributable to Shell plc shareholders

(3,029)

1,759

(572)

Less: Identified items attributable to Shell plc shareholders

(2,216)

(24,767)

(1,192)

Adjusted Earnings

19,289

4,846

16,462

Of which:

 

 

 

Integrated Gas

8,757

4,383

8,955

Upstream

7,950

(2,852)

4,452

Oil Products

3,944

5,995

6,231

Chemicals

1,753

962

741

Corporate

(2,686)

(3,412)

(3,383)

less: Non-controlling interest

(429)

(230)

(535)

Adjusted EBITDA

 

 

 

$ million

 

2021

2020

2019

Adjusted Earnings

19,289

4,846

16,462

Add: Non-controlling interest

429

230

535

Add: Taxation charge/(credit) excluding tax impact of identified items

8,482

2,252

9,533

Add: Depreciation, depletion and amortisation excluding impairments

23,071

24,981

25,108

Add: Exploration well write-offs

639

815

1,218

Add: Interest expense excluding identified items

3,607

4,088

4,687

Less: Interest income

510

679

899

Adjusted EBITDA (CCS basis)

55,004

36,533

56,644

Of which:

 

 

 

Integrated Gas

16,421

11,668

16,719

Upstream

27,358

13,247

27,034

Oil Products

8,821

10,421

11,779

Chemicals

2,959

2,131

1,891

Corporate

(554)

(933)

(780)

Less: Current cost of supplies adjustment

(3,148)

1,833

(605)

Add: Current cost of supplies adjustment to taxation charge/(credit)

808

(585)

194

Adjusted EBITDA (FIFO basis)

58,960

34,114

57,443

Of which:

 

 

 

Integrated Gas

16,421

11,668

16,719

Upstream

27,358

13,247

27,034

Oil Products

12,267

8,288

12,674

Chemicals

3,470

1,847

1,796

Corporate

(554)

(933)

(780)

Identified Items

The objective of identified items is to remove material impacts on net income/loss arising from transactions which are generally uncontrollable and unusual (infrequent or non-recurring) in nature or giving rise to a mismatch of accounting and economic results, or certain transactions that are generally excluded from underlying results in the industry.

 

 

 

$ million

 

2021

2020

2019

Identified items before tax

 

 

 

Of which:

 

 

 

Divestment gains/(losses)

5,996

316

2,611

Impairments

(3,884)

(28,061)

(4,155)

Redundancy and restructuring

(227)

(883)

(132)

Provisions for onerous contracts

(340)

(1,392)

Fair value accounting of commodity derivatives and certain gas contracts

(3,249)

(1,151)

602

Other

(621)

(706)

(770)

Total identified items before tax

(2,326)

(31,877)

(1,844)

Tax impact

91

7,100

674

Identified items after tax

(2,235)

(24,777)

(1,170)

Of which:

 

 

 

Divestment gains/(losses)

4,632

4

2,170

Impairments

(2,993)

(21,267)

(3,162)

Redundancy and restructuring

(140)

(644)

(89)

Provisions for onerous contracts

(299)

(1,120)

Fair value accounting of commodity derivatives and certain gas contracts

(2,764)

(1,034)

650

Impact of exchange rate movements on tax balances

(128)

(240)

(69)

Other

(543)

(475)

(670)

Impact on CCS earnings

(2,235)

(24,777)

(1,170)

Of which:

 

 

 

Integrated Gas

(2,417)

(10,661)

(326)

Upstream

1,745

(7,933)

(598)

Oil Products

(1,280)

(6,489)

(93)

Chemicals

(364)

(154)

(263)

Corporate

81

460

109

Identified items attributable to Shell plc shareholders

(2,216)

(24,767)

(1,192)

Identified items attributable to Non-controlling interest

(19)

(10)

22

Cash capital expenditure

Cash capital expenditure monitors investing activities on a cash basis, excluding items such as lease additions which do not necessarily result in cash outflows in the period. The measure comprises the following lines from the Consolidated Statement of Cash flows: Capital expenditure, Investments in joint ventures and associates and Investments in equity securities.

The reconciliation of “Capital expenditure” to “Cash capital expenditure” is as follows.

Cash capital expenditure

 

 

 

$ million

 

2021

2020

2019

Capital expenditure [A]

19,000

16,585

22,971

Investments in joint ventures and associates [A]

479

1,024

743

Investments in equity securities [A]

218

218

205

Cash capital expenditure

19,698

17,827

23,919

Of which:

 

 

 

Integrated Gas

5,767

4,301

4,299

Upstream

6,269

7,296

10,205

Oil Products

3,868

3,328

4,907

Chemicals

3,573

2,640

4,090

Corporate

221

262

418

[A]

Included within Cash flow from investing activities in the “Consolidated Statement of Cash Flows”.

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.

Operating expenses and underlying operating expenses

 

 

 

$ million

 

2021

2020

2019

Production and manufacturing expenses

23,822

24,001

26,438

Selling, distribution and administrative expenses

11,328

9,881

10,493

Research and development

815

907

962

Total

35,964

34,789

37,893

Of which

 

 

 

Integrated Gas

7,126

6,555

6,667

Upstream

10,604

10,983

11,582

Oil Products

14,376

13,511

15,730

Chemicals

3,335

3,235

3,430

Corporate

524

505

486

Identified Items, of which:

 

 

 

Redundancy and restructuring (charges)/reversal

(226)

(872)

(123)

(Provisions)/reversal

(254)

(1,415)

(639)

Other

(175)

(131)

Underlying operating expenses

35,309

32,502

37,000

Of which:

 

 

 

Integrated Gas

6,892

5,769

6,534

Upstream

10,362

10,227

11,284

Oil Products

14,272

12,970

15,590

Chemicals

3,256

3,035

3,104

Corporate

527

501

488

Return on average capital employed

Return on average capital employed (ROACE) measures the efficiency of our utilisation of the capital that we employ. In this calculation, ROACE is defined as income for the period, adjusted for after-tax interest expense, as a percentage of the average capital employed for the period. Capital employed consists of total equity, current debt and non-current debt.

Calculation of return on average capital employed

 

 

 

$ million

 

2021

2020

2019

Income for the period

20,630

(21,534)

16,432

Interest expense after tax

2,741

2,822

3,024

Income before interest expense

23,371

(18,712)

19,456

Capital employed – opening

266,551

286,887

295,398

Capital employed – closing

264,413

266,551

286,887

Capital employed – average

265,482

276,719

291,142

ROACE

8.8%

(6.8)%

6.7%

Net debt and gearing

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 risk relating to debt, and associated collateral balances.

Gearing is a measure of Shell’s capital structure and is defined as net debt (total debt less cash and cash equivalents) as a percentage of total capital (net debt plus total equity).

Also refer to Note 15 to the Consolidated Financial Statements.

Free cash flow and organic free cash flow

Free cash flow is used to evaluate cash available for financing activities, including shareholder distributions and debt servicing, after investment in maintaining and growing our business.

Organic free cash flow is defined as Free cash flow excluding the cash flows from acquisition and divestment activities. It is a measure used by management to evaluate generation of cash flow without these activities.

Free cash flow and Organic free cash flow

 

 

 

$ million

 

2021

2020

2019

Cash flow from operating activities

45,104

34,105

42,178

Cash flow from investing activities

(4,761)

(13,278)

(15,779)

Free cash flow

40,343

20,828

26,399

Less: Cash inflows related to divestments [A]

15,113

4,010

7,871

Add: Tax paid on divestments

188

187

Add: Cash outflows related to inorganic capital expenditure [B]

1,658

817

1,400

Organic free cash flow

27,076

17,634

20,116

[A]

Cash inflows related to divestments includes Proceeds from sale of property, plant and equipment and businesses, Proceeds from joint ventures and associates from sale, capital reduction and repayment of long-term loans, and Proceeds from sale of equity securities as reported in the “Consolidated Statement of Cash Flows”.

[B]

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”.

Shareholder distribution

Shareholder distribution is used to evaluate the level of cash distribution to shareholders. It is defined as the sum of Cash dividends paid to Shell plc shareholders and Repurchases of shares, both of which are reported in the Consolidated Statement of Cash Flows.

Calculation of shareholder distribution

 

 

 

$ million

 

2021

2020

2019

Cash dividends paid to Shell plc shareholders

(6,253)

(7,424)

(15,198)

Repurchases of shares

(2,889)

(1,702)

(10,188)

Shareholder distribution

(9,142)

(9,126)

(25,386)

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.

Calculation of Divestment proceeds

 

 

 

$ million

 

2021

2020

2019

Proceeds from sale of property, plant and equipment and businesses

14,233

2,489

4,803

Proceeds from joint ventures and associates from sale, capital reduction and repayment of long-term loans [A]

584

1,240

2,599

Proceeds from sale of equity securities

296

281

469

Divestment proceeds

15,113

4,010

7,871

Of which:

 

 

 

Integrated Gas

3,195

503

723

Upstream

10,930

1,909

5,384

Oil Products

935

1,368

1,517

Chemicals

10

26

22

Corporate

44

205

225

[A]

includes $322 million (2020: $313 million) of long-term loan repayments received from joint ventures and associates.

CCS
carbon capture and storage
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CCS earnings
earnings on a current cost of supplies basis
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GAAP
generally accepted accounting principles
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ROACE
return on average capital employed
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