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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. With effect from January 1, 2022, the reporting segments are aligned with Shell’s Powering Progress strategy. The Renewables and Energy Solutions business is now reported separately from Integrated Gas. Shales assets in Canada are now reported as part of the Integrated Gas segment instead of the Upstream segment. The Oil Products and Chemicals segments are reorganised into two segments – Marketing, and Chemicals and Products. Prior period comparatives have been revised to conform with current year presentation. The reporting segment changes have no impact at a Group level.

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

 

2022

2021

2020

Income/(loss) attributable to Shell plc shareholders

42,309

20,101

(21,680)

Income/(loss) attributable to non-controlling interest

565

529

146

Income/(loss) for the period

42,874

20,630

(21,534)

Current cost of supplies adjustment

(1,312)

(3,148)

1,833

Of which:

 

 

 

Attributable to Shell plc shareholders

(1,196)

(3,029)

1,759

Attributable to non-controlling interest

(116)

(119)

74

CCS earnings

41,562

17,482

(19,701)

Of which:

 

 

 

Attributable to Shell plc shareholders

41,113

17,072

(19,921)

Attributable to non-controlling interest

449

410

220

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)” measure is used by management 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.

Adjusted Earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$ million

 

2022

2021

2020

 

Shell

IG

UP

Mark

C&P

R&ES

Corp

Shell

IG

UP

Mark

C&P

R&ES

Corp

Shell

IG

UP

Mark

C&P

R&ES

Corp

CCS Earnings [A]

41,562

22,212

16,222

2,133

4,515

(1,059)

(2,461)

17,482

8,060

9,603

3,535

404

(1,514)

(2,606)

(19,701)

(7,230)

(9,300)

4,081

(3,821)

(479)

(2,952)

Less: Identified items

1,259

6,075

(1,096)

(622)

(204)

(2,805)

(90)

(2,235)

(988)

1,587

68

(1,712)

(1,272)

81

(24,777)

(11,443)

(6,874)

13

(6,656)

(277)

460

Adjusted Earnings segments

 

16,137

17,319

2,754

4,719

1,745

(2,371)

 

9,048

8,015

3,468

2,115

(243)

(2,686)

 

4,213

(2,426)

4,068

2,835

(202)

(3,412)

Less: CCS earnings attributable to NCI

449

 

 

 

 

 

 

410

 

 

 

 

 

 

220

 

 

 

 

 

 

Add: Identified items attributable to NCI

15

 

 

 

 

 

 

(19)

 

 

 

 

 

 

(10)

 

 

 

 

 

 

Adjusted Earnings

39,870

 

 

 

 

 

 

19,289

 

 

 

 

 

 

4,846

 

 

 

 

 

 

[A]

See Note 8 to the “Consolidated Financial Statements”.

[B]

Non-controlling interest (NCI)

[C]

Segments above are as follows: Integrated Gas (IG); Upstream (UP); Marketing (Mark); Chemicals and Products (C&P); Renewables and Energy Solutions (R&ES); and Corporate (Corp).

Adjusted EBITDA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$ million

 

2022

2021

2020

 

Shell

IG

UP

Mark

C&P

R&ES

Corp

Shell

IG

UP

Mark

C&P

R&ES

Corp

Shell

IG

UP

Mark

C&P

R&ES

Corp

Adjusted Earnings

39,870

 

 

 

 

 

 

19,289

 

 

 

 

 

 

4,846

 

 

 

 

 

 

Add: NCI

434

 

 

 

 

 

 

429

 

 

 

 

 

 

230

 

 

 

 

 

 

Adjusted Earnings plus NCI

40,304

16,137

17,319

2,754

4,719

1,745

(2,371)

19,718

9,048

8,015

3,468

2,115

(243)

(2,686)

5,076

4,213

(2,426)

4,068

2,835

(202)

(3,412)

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

18,578

4,704

11,831

952

841

346

(96)

8,482

2,231

5,662

955

277

(55)

(588)

2,252

1,314

992

893

(398)

(14)

(535)

Add: Depreciation, depletion and amortisation excluding impairments

22,393

5,544

11,889

1,573

3,004

365

18

23,071

5,389

12,574

1,575

3,235

281

17

24,981

5,851

13,805

1,455

3,604

244

22

Add: Exploration well write-offs

881

142

738

 

 

 

639

15

624

 

 

 

815

452

363

 

 

 

Add: Interest expense excluding identified items

3,181

84

345

45

22

2

2,683

3,607

71

331

26

44

3,135

4,089

78

368

43

15

3

3,582

Less: Interest income

1,046

43

22

24

(2)

959

511

37

3

36

4

431

679

56

4

25

5

589

Adjusted EBITDA (CCS basis)

84,289

26,569

42,100

5,324

8,561

2,459

(725)

55,004

16,754

27,170

6,021

5,635

(21)

(554)

36,533

11,908

13,045

6,455

6,032

25

(933)

[A]

Non-controlling interest (NCI)

[B]

Segments above are as follows: Integrated Gas (IG); Upstream (UP); Marketing (Mark); Chemicals and Products (C&P); Renewables and Energy Solutions (R&ES); and Corporate (Corp).

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

 

2022

2021

2020

Identified items included in Income/(loss) before taxation

 

 

 

Divestment gains/(losses)

657

5,996

316

Impairment reversals/(impairments)

2,260

(3,884)

(28,061)

Redundancy and restructuring

44

(227)

(883)

Provisions for onerous contracts

(508)

(340)

(1,392)

Fair value accounting of commodity derivatives and certain gas contracts

3,244

(3,249)

(1,151)

Other

(1,519) [A]

(621)

(706)

Total identified items included in Income/(loss) before taxation

4,178

(2,326)

(31,877)

Total identified items included in Taxation charge/(credit)

(2,919) [B]

91

7,100

Identified items included in Income/(loss) for the period

1,259

(2,235)

(24,777)

Divestment gains/(losses)

418

4,632

4

Impairment reversals/(impairments)

725

(2,993)

(21,267)

Redundancy and restructuring

43

(140)

(644)

Provisions for onerous contracts

(487)

(299)

(1,120)

Fair value accounting of commodity derivatives and certain gas contracts

3,421

(2,764)

(1,034)

Impact of exchange rate movements on tax balances

(57)

(128)

(240)

Other

(2,804) [C]

(543)

(475)

Impact on CCS earnings

1,259

(2,235)

(24,777)

Of which:

 

 

 

Integrated Gas

6,075

(988)

(11,443)

Upstream

(1,096)

1,587

(6,874)

Marketing

(622)

68

13

Chemicals and Products

(204)

(1,712)

(6,656)

Renewables and Energy Solutions

(2,805)

(1,272)

(277)

Corporate

(90)

81

460

Identified items attributable to Non-controlling interest

15

(19)

(10)

Identified items attributable to Shell plc shareholders

1,243

(2,216)

(24,767)

[A]

Includes $(940) million related to the EU solidarity contribution.

[B]

Includes $(528) million related to the EU solidarity contribution and $(802) million related to the UK Energy Profits Levy.

[C]

Includes $(2,270) million related to the EU solidarity contribution and to the UK Energy Profits Levy.

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

 

2022

2021

2020

 

Shell

IG

UP

Mark

C&P

R&ES

Corp

Shell

IG

UP

Mark

C&P

R&ES

Corp

Shell

IG

UP

Mark

C&P

R&ES

Corp

Capital expenditure [A]

22,600

3,432

8,020

4,527

3,835

2,609

175

19,000

3,306

6,277

2,122

5,091

2,069

135

16,585

3,491

6,714

1,684

4,163

363

169

Investments in joint ventures and associates [A]

1,973

833

123

304

2

703

9

479

196

(109)

149

80

154

10

1,024

68

379

84

34

458

Investments in equity securities [A]

260

1

157

103

218

 

3

4

136

75

218

7

6

6

1

107

92

Cash capital expenditure

24,833

4,265

8,143

4,831

3,838

3,469

287

19,698

3,502

6,168

2,273

5,175

2,359

221

17,827

3,566

7,099

1,774

4,198

928

262

[A]

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

[B]

Segments above are as follows: Integrated Gas (IG); Upstream (UP); Marketing (Mark); Chemicals and Products (C&P); Renewables and Energy Solutions (R&ES); and Corporate (Corp).

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

 

2022

2021

2020

 

Shell

IG

UP

Mark

C&P

R&ES

Corp

Shell

IG

UP

Mark

C&P

R&ES

Corp

Shell

IG

UP

Mark

C&P

R&ES

Corp

Production and manufacturing expenses

25,518

4,907

9,676

810

7,583

2,520

22

23,822

4,194

9,797

950

6,815

2,098

(32)

24,001

4,957

10,195

779

6,952

1,091

27

Selling, distribution and administrative expenses

12,883

218

233

7,351

3,592

972

517

11,328

231

186

6,384

3,375

596

556

9,881

60

(31)

5,380

3,391

606

475

Research and development

1,075

112

456

222

187

98

815

101

339

167

157

51

907

84

486

147

171

19

Total

39,477

5,238

10,364

8,384

11,361

3,590

540

35,964

4,526

10,324

7,501

10,347

2,745

524

34,789

5,100

10,650

6,305

10,514

1,716

505

Identified items

(21)

(354)

438

(103)

7

(7)

(1)

(655)

(230)

(238)

(135)

(48)

(8)

4

(2,287)

(782)

(756)

(144)

(597)

(5)

(3)

Underlying operating expenses

39,456

4,884

10,802

8,281

11,368

3,583

539

35,309

4,295

10,086

7,366

10,298

2,737

527

32,502

4,318

9,894

6,161

9,916

1,711

501

[A]

Segments above are as follows: Integrated Gas (IG); Upstream (UP); Marketing (Mark); Chemicals and Products (C&P); Renewables and Energy Solutions (R&ES); and Corporate (Corp).

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

 

2022

2021

2020

Income for the period

42,874

20,630

(21,534)

Interest expense after tax

2,290

2,741

2,822

Income before interest expense

45,164

23,371

(18,712)

Capital employed – opening

264,413

266,551

286,887

Capital employed – closing

276,392

264,413

266,551

Capital employed – average

270,402

265,482

276,719

ROACE

16.7%

8.8%

(6.8)%

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).

Calculation of net debt and gearing

 

 

 

$ million

 

2022

2021

2020

Current debt

9,001

8,218

16,899

Non-current debt

74,794

80,868

91,115

Total debt

83,795

89,086

108,014

Add: Debt-related derivative financial instruments: net liability / (asset)

3,071

424

(1,979)

Add: Collateral on debt-related : net liability / (asset)

(1,783)

16

1,181

Less: Cash and cash equivalents

(40,246)

(36,970)

(31,830)

Net Debt

44,837

52,556

75,386

Add: Total equity

192,597

175,326

158,537

Total capital

237,434

227,882

233,923

Gearing

18.9%

23.1%

32.2%

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

 

2022

2021

2020

Cash flow from operating activities

68,414

45,104

34,105

Cash flow from investing activities

(22,448)

(4,761)

(13,278)

Free cash flow

45,965

40,343

20,828

Less: Cash inflows related to divestments [A]

2,059

15,113

4,010

Add: Tax paid on divestments

17

188

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

4,205

1,658

817

Organic free cash flow

48,128

27,076

17,634

[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

 

2022

2021

2020

Cash dividends paid to Shell plc shareholders

(7,405)

(6,253)

(7,424)

Repurchases of shares

(18,437)

(2,889)

(1,702)

Shareholder distribution

(25,842)

(9,142)

(9,126)

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

 

2022

2021

2020

Proceeds from sale of property, plant and equipment and businesses

1,431

14,233

2,489

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

511

584

1,240

Proceeds from sale of equity securities

117

296

281

Divestment proceeds

2,059

15,113

4,010

Of which:

 

 

 

Integrated Gas

241

3,931

486

Upstream

558

10,147

1,903

Marketing

266

42

56

Chemicals and Products

776

903

1,338

Renewables and Energy Solutions

191

47

22

Corporate

26

44

205

CCS
carbon capture and storage
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CCS earnings
earnings on a current cost of supplies basis
View complete glossary
GAAP
generally accepted accounting principles
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