Shell Plc Q2 FY2025 earnings call

• Cost Reduction: Achieved $800 million in structural cost reductions in H1 2025, total since 2022 $3.9 billion, targeting $5 billion to $7 billion by 2028. Majority of savings from non-portfolio reductions. Cost takeout of almost $2.5 billion, over 60% of total since 2022.
• Portfolio Progress: LNG Canada start-up with 40% working interest, strategic location for shorter Asia transit routes. Final investment decisions on Egypt and Trinidad projects. Upstream deepwater assets in Brazil (Mero-4 start-up, Gato do Mato working interest increase) and Nigeria (Bonga field interest deepened). Downstream Renewables and Energy Solutions: Chemicals divested Singapore park, Mobility divested retail networks in Indonesia and Mexico.

Integrated Gas (IG): Adjusted earnings with strong operational performance despite higher planned maintenance, weaker margins, and fewer trading opportunities. LNG Canada start-up is a key milestone, expected to contribute to LNG sales growth. Upstream: Strong performance, with deepwater assets like Brazil's Mero-4 and Nigeria's Bonga field showing top quartile operational performance. High-grade portfolio with focus on cash flow per barrel. Chemicals & Products: Chemicals faced challenges with weak margins and unplanned downtime; Products had good results but crude side had disconnect between market volatility and fundamentals. Marketing: Recorded best Q2 results in nearly a decade, with Mobility and Lubricants strong, premium fuels margin contribution.

• Cash CapEx outlook for 2025 unchanged, $3.5 billion share buyback program announced, expected to complete by Q3 2025. 4-quarter rolling shareholder distributions 46% of CFFO, in line with 40%-50% target.
• LNG sales expected to grow 4%-5%, LNG Canada to play big part. Free cash flow per share growth target of 10% CAGR by 2030.

• Geopolitical and economic uncertainty impacting trade flows, commodity prices, and margins.
• Volatility in trading optimization businesses, especially crude side due to disconnect between market volatility and fundamentals.
• Challenges in Chemicals segment with prolonged trough, excess supply, and negative free cash flow.

Q: Matt Lofting from JPMorgan asked about trading outlook in 3Q and beyond, breaking down liquids, products, and gas in IG, and about Upstream performance sustainability.

A: Wael Sawan said Upstream strong due to 'brilliant basics' focus on reliability, availability, and operation improvements. Trading segment: IG LNG seeing new norm post-Russia-Ukraine conflict, Products had good results but crude side prudent due to market disconnect.

Q: Lydia Rainforth from Barclays asked about gearing and Chemicals maintenance.

A: Wael Sawan said Chemicals facing prolonged trough, focusing on portfolio high-grading and cost reduction. Sinead Gorman said comfortable with gearing at ~19.1% as net debt increase related to inventory build and leases adding future cash value.

Q: Martijn Rats from Morgan Stanley asked about global oil demand and Chemicals excess capacity.

A: Wael Sawan said global oil product demand up ~1M bbl/day YTD, marketing strong. Chemicals excess capacity from China, watching for potential market change. Focus on non-price dependent investment thesis for free cash flow growth.

Q: Josh Stone from UBS asked about cost savings runway and acquisitions.

A: Wael Sawan said cost reduction opportunities from shop floor, supply chain, and organization simplification. Acquisitions with high bar, looking for value when seen.

Q: Michele Della Vigna from Goldman Sachs asked about buyback resilience and LNG.

A: Sinead Gorman said comfortable with buyback due to strong balance sheet. LNG earnings new norm with changed volatility, portfolio mix change.

Q: Biraj Borkhataria from RBC asked about LNG Canada ramp-up and cash flow.

A: Wael Sawan said LNG Canada ramp-up on track. Sinead Gorman said CFFO flattened by NAM JV cash return, NAM to decide dividends annually.

Q: Doug Leggate from Wolfe Research asked about LNG trading normalization and cash flow lease costs.

A: Wael Sawan said LNG trading normalized post-2022 volatility, portfolio positioning for strength. Sinead Gorman said lease costs considered in value vs risk decisions, generating future cash.

Q: Alastair Syme from Citi asked about Monaca profitability and biofuels.

A: Wael Sawan said Monaca exploring strategic partnerships, Rotterdam biofuels facility under review due to market challenges.

Q: Paul Cheng from Scotiabank asked about exploration and trading geopolitics.

A: Wael Sawan said exploration program rightsized, focusing on advantaged basins. Sinead Gorman said high-quality trading team handles geopolitical uncertainty, making prudent calls.

Q: Lucas Herrmann from BNP Paribas asked about divestments and deepwater Nigeria projects.

A: Wael Sawan said deepwater Nigeria projects under review, divestments aligning with strategy. Sinead Gorman said divestments for capital reallocation, Colonial divestment expected.

Q: Irene Himona from Bernstein asked about lubricants and mobility margins.

A: Sinead Gorman said lubricants margin up due to premium products and stable base oil pricing. Mobility margin up from premium fuels, country-specific strategies.

Q: Christopher Kuplent from Bank of America asked about marketing CapEx and buyback comfort.

A: Sinead Gorman said mobility CapEx focused on key markets, buyback comfort with 40%-50% CFFO distribution target.

Q: Ryan Todd from Piper Sandler asked about Gulf of Mexico operations and refining outlook.

A: Wael Sawan said Whale project ramp-up successful, administration change improving lease sale schedule. Refining market tight, portfolio optimized for diesel supply.

Q: Peter Low from Rothschild and Co. Redburn asked about CMP disposal and working capital.

A: Sinead Gorman said CMP disposal effects to play out, working capital decisions based on market opportunities.