Shell second quarter 2020 update note - Seite 3

• The following price and margin outlook have been assumed for impairment testing:
  • Brent: $35/bbl (2020), $40/bbl (2021), $50/bbl (2022), $60/bbl (2023) and long-term $60 (real terms 2020)
  • Henry Hub: $1.75/MMBtu (2020), $2.5/MMBtu (2021 and 2022), 2.75/MMBtu (2023) and long-term $3.0/MMBtu (real terms 2020)
  • Average long-term refining margins revised downwards by around 30% from previous midcycle downstream assumption
• Based on these reviews, aggregate post-tax impairment charges in the range of $15 to $22 billion are expected in the second quarter. Impairment charges are reported as identified items and no cash impact is expected in the second quarter. Indicative breakdown per segment is as follows:
  • Integrated Gas $8 – $9 billion, primarily in Australia including partial impairment of QGC and Prelude
  • Upstream $4 – $6 billion, largely in Brazil and North America Shales
  • Oil Products $3 – $7 billion across the refining portfolio
• These impairments are expected to have a pre-tax impact in the range of $20 to $27 billion. No impairment charge on Goodwill is expected to be recorded in the second quarter
• Impairment calculations are being progressed: the range and timing of the recognition of impairments in the second quarter are uncertain and assessments are currently ongoing
• The revised outlook for commodity prices and refining margins could impact overall deferred tax positions, which will be reviewed after the finalisation of the operating plan later in 2020

Other

• Gearing is expected to increase by up to 3% due to the impairments. Additional impacts to reported gearing levels are expected due to pensions revaluations associated with the current interest rate environment along with other usual quarterly movements
• As per previous disclosures, CFFO price sensitivity at Shell Group level is still estimated to be $6 billion per annum for each $10 per barrel Brent price movement
  • Note that this price sensitivity is indicative, is most applicable to smaller price changes than those in the current environment and in relation to the full-year results. This excludes short-term impacts from working capital movements and cost-of-sales adjustments
• In order to enhance our disclosures and market communications, a quarterly press release will be published as of the second quarter 2020, in addition to the quarterly unaudited results. The quarterly press release will provide a summary of key messages and key performance drivers and should not be considered in isolation from, or a substitute for, financial information presented in compliance with Generally Accepted Accounting Principles (GAAP). To further simplify market communications, with effect from the second quarter, “CCS earnings attributable to shareholders excluding identified items” will be renamed to “Adjusted earnings” while the definition remains unchanged

Consensus