Shell PLC Q4 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Lydia Rainforth - Barclays Capital - Analyst : When I think about the G&A, there's obviously been a lot of progress that you've made from 2023. So can you just talk about what philosophy you want to take going forward to help realize some of the value in the shares that you talked about? Are we thinking about now the base has been really good? So you can think about more of a radical agenda in a kind of jump delay fashion. But are you thinking that continued consistency and approach is probably still the best one for you? And then secondly, can you just talk about access to reserves in Canada? Because obviously, we've had the debooking of Groundbirch and as you think about the ramp up of LNG Canada and potentially a function of Phase 2, do you having this access organically to gas molecules in Canada, when I think about CapEx and just that area this is an organic discussion?

Question: Doug Leggate - Wolfe Research, LLC - Analyst : Wael and Sinead, I wonder if I could take two completely different topics. The first one is with the Nigerian announcement at the approval at the end of December, and obviously, Singapore is still pending. I think you have the power sales or reduction in terms of your interests currently pending. Can you give us an idea of where things stand on the disposal visibility for 2025? And my follow-up is really on the progress on the cost cutting, obviously delivered the full number, 80% of the 500,000 barrels a day. You've done a lot of things the relation reset the balance sheet. At what point would the dividend growth start to get a bit more attention over and above just the pace of the buyback? Because at least from our standpoint, that seems to be what's holding back that market recognition of value?

Question: Matt Lofting - J.P. Morgan Securities plc - Analyst : I ask two, if I could. First, just reflecting on your earlier comments, execution on the strategic sprint phase has been very effective through the last 12, 18 months. I wonder the extent to which delivering on aspects like the cost reduction objectives so early, indicates the opportunity set that you see to enhance value and margins within Shell's existing asset base is even greater than perhaps you initially anticipated. I wonder if you could just share some thoughts on that? And then secondly, integrated gas and hedging. It seemed that noncash derivative and hedging effects in IG are a key component of the lower EPS baseline versus cash generation in while that appeared to be somewhat quarter specific in nature, perhaps, could you just clarify whether there's material out of the market derivative position still on the book that could trigger a repeat of that going forward?

Question: Biraj Borkhataria - RBC Capital Markets (Canada) - Analyst : Obviously, you've made a lot of progress on the operational performance side and momentum on the cost. I just wanted to get a bit of clarity on how you're approaching sanctioning major projects. I saw the China chemical expansion FID. Could you just talk a little bit about the investment case for that project, how you're seeing the chemicals market? And I'm thinking in context of a number of the projects you may have sanctioned over recent years, a lot of them would have looked better at the time of FID than what they turned out to be in reality. So what makes you confident that this one is more robust? And then the second one was just following up on your comments on the sort of projects in the funnel. You wrote off your exploration in Namibia. Could you just give a bit more color on any future plans you have there? And maybe a bit of color on that.

Question: Josh Stone - UBS Limited - Analyst : Two questions, please. Firstly, coming on to Chemicals. You highlighted all three units are now up and running at Monaca. When I look at your results, it's not obvious that's coming through to the bottom line, and we went to an even deeper loss in the fourth quarter. So maybe if you could just bode a bit more insight there. What was the contribution from the Monaca cracker and where the offset is coming from the portfolio? When do you expect this business can return to being at a breakeven at the net income line? And then second question on the court ruling. You won your appeal on the MD case. I just think when you think about your investment priorities for the next five years, does this judgment to have any implications in your view and how you're planning to allocate capital?

Question: Alastair Syme - Citi Investment Research (Europe) - Analyst : Sinead, a quick point of clarification on the indicative CapEx guide that you're giving. I think you said the 2025 range will be low than the 2024 range. Just a clarification that we were talking a 2024 reference that relates back to CMD '23. So that would be the $20 billion to $25 billion range. I just want to check if the baseline right. And then secondly, while how do you think about LNG European Asian gas markets given all this LNG supply that's coming in the pipes, do you feel a need to do anything different to prepare the business for this change in market dynamics? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 30, 2025 / 2:30PM, SHEL.L - Q4 2024 Shell PLC Earnings Call

Question: Martijn Rats - Morgan Stanley & Co. International Plc - Analyst : I've got two, if I may. I recognize there probably not an awful question we can ask the answer is not adjust it in a couple of markets day, but I'm going to give it to go nonetheless. I was wondering about the refining portfolio and Shell, in the sense that look, it's not that long ago that there were tens and tens of refineries. We're down to sort of 5%, but out of those two, Singapore being sold, the Iran and refinery in Germany being repurposed. So we sit down to three. And now they're quite large in and of themselves, but of course, three. This is a fairly small number. And I was REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 30, 2025 / 2:30PM, SHEL.L - Q4 2024 Shell PLC Earnings Call wondering if refining still has sort of critical mass within Shell or whether we should also expect that, that much reduced portfolio of just sort of three units also at some point, become so disposal targets. I wanted to ask you about that. And then the other one, perhaps a bit more technical, but there is, of course, a reference to the additional lease obligations that will come when the Pavilion deal is completed. Can you give an indication of sort of the magnitude of what we should expect and put in our models for when that comes through in terms of the increase in the lease obligations?

Question: Ryan Todd - Piper Sandler & Co. - Analyst : Great. Maybe first question on inorganic spend. You've done a great job driving capital down -- capital spend levels lower over the last couple of years but it's also been characterized by noticeably low levels of inorganic spend. How should we think about your approach to our appetite for acquisition going forward? And maybe any thoughts or comments on how you would characterize markets across your portfolio, E&P, low carbon, et cetera? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 30, 2025 / 2:30PM, SHEL.L - Q4 2024 Shell PLC Earnings Call And then secondly, on CapEx trends, I mean as we think about the go forward, I appreciate the guide in the 2025, but going forward, if the potential for further downward pressure, is that more likely to be driven by capital avoidance similar to what we've seen from the Rotterdam Biofuels project or are there other trends in terms of cost reductions, efficiencies, et cetera, that you believe can continue to drive further downward pressure on CapEx?

Question: Christopher Kuplent - BofA Global Research (UK) - Analyst : Just two more quick ones, hopefully. I wanted to check what is currently the most tempting option for you to not cut capital. I appreciate you've done extremely well on the CapEx front, but actually deploy more capital. You've written off those wells in Namibia. Canada and AECO is causing you pain on the reserve replacement front, but wouldn't that speak in favor of an expansion of [filler] LNG? Or are you excited about Argentina? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 30, 2025 / 2:30PM, SHEL.L - Q4 2024 Shell PLC Earnings Call So I appreciate we're not going to get a list of projects now from UIL, but maybe you can give us a bit of a hint where you're currently most tempted to deploy more capital. And at the same time, perhaps a question for you, Sinead, you've put your 30% to 40% payout policy back on the slide. And I wonder whether you aren't worried that this looks a little out of date. I mean CFFO, the way you use it has been flat. Payout ratios have been above 40% for two years in a row now. How do you address investors' concerns that if CFFO for whatever reason goes down, your cash return run rate doesn't go down with it considering that you're already through the upper end of that range.

Question: Lucas Herrmann - Exane BNP Paribas (UK) - Analyst : Two, if I might. One, apologies, it's slightly philosophical. The first is straightforward per billion. Can you give us any better guidance as to when you actually expect that transaction to complete? And the second, Wael, is really to you and it's -- I'm just intrigued as to your own perception as to why it is that despite the very strong cash performance, earnings performance, you're essentially doing what you said you'd do. The shares continue to languish on I'd say, a pretty insulting multiple, but then that's my view, not necessarily yours. So -- yes, it's simply to get your perception of what it is needs to happen to drive the multiple ahead given the market increasingly seems to recognize what you are doing and the benefits are very clearly coming through in the numbers that you're presenting.

Question: Giacomo Romeo - Jefferies International Ltd. (Brokerage) - Analyst : Yes. Just two remaining questions for me. One I'd like to go back to the discussion around the Canadian gas price and LNG Canada and trying to understand that what price condition in the AECO markets will you be looking to develop your own resources. Obviously, now you said it doesn't make -- it wouldn't make sense at the moment. But I'm just trying to understand at what price level you think you'd consider start developing your own resources. And if I stay on LNG Canada, it's -- and you look at the potential for an FID on the second page, you talked about some indication from local governments. What are the key hurdles do you see in order for you to have enough visibility to take a final investment decision on this project in the coming month or so?

Question: Irene Himona - Bernstein Institutional Services LLC - Analyst : My first question on mobility earnings. Your margin per barrel last year was the highest since the pandemic, I think. But of course, the strategy is to dispose of lower margin assets. So in trying to think ahead about '25 mobility earnings, do you anticipate that disposal process can support further margin improvement? And then my second question, you said Wael, there's a lot more to do. I was just looking at your slide 13, which plots the asset availability for upstream and LNG. And [about said made], I was a bit surprised by upstream. It's below 90%, below your LNG assets and definitely below one peer who reports the metric. Do you think there's an issue to be fixed there? And if so, what is the issue?

Question: Michele Della Vigna - Goldman Sachs International - Analyst : And again, congratulations on what has been a very strong year. I would like to focus on the Renewable and Energy Solutions business, which has been loss-making for most of this year. You are making significant strategic changes there, but I was just wondering, in order for the division to turn back into profit, what do you think is needed? Is this an issue of portfolio or better integration with trading? Or is this also impacted by market conditions?