Shell Exploration & Production
More Upstream, Profitable DownstreamThe 2005 EP Roadmap to realising the strategy
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Where we are now:
Active in 30+ counties around the world~ 12 bln boe proved reserves3,772 thousand b/d equity production ------ 3,684
thousand b/dEarnings $9 billion ------------------------------- $5.7 blillionCapital investment of $9.9 billion ------------- $5.1 billionTotal operating cost of $ 7.2 billionDebt adjusted cashflow of $ 16.4 billion
The World’s 3rd largest IOC
2005 half year update
2004 full year figures
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The Shell Strategy
More Upstream, Profitable Downstream
Shaping the portfolio to match the strategy
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6
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2004 Capital Investment $14.9 bln$ bln (100%) Half Year Update: on track for
$15 bln
EP GP OP CH
Shell’s 2004 Capital Investment demonstrates the commitment to EP’s contribution to delivering the strategy.
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Realising the Strategy in EP . . .
Project Delivery, Operational Excellence, Competitive Costs
Portfolio Action
Exploration & New Positions
Where we want to be
Portfolio today• Robust cash generation
• Leader in Gas
• Lower proved reserves life
• Existing Oil
• New Material Oil
• More Integrated Gas
• More Unconventional Oil
Hig
her
Up
sid
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. . . requires setting Priorities today
SAFETY TAKES PRIORITY
And our six EP Business Priorities:1. RRR at least 100% over 2004 – 20082. Production 3.5 - 3.8 mln boe/d in 2005/63. Grow resource base 4. Effective Project Delivery5. Operational Excellence6. Competitive Cost Structure
Deepening professionalism – inspiring our people
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Accountabilities for ensuring global targets are met
1. RRR at least 100% over 2004–83. Grow our resource base
– Working the maturation funnel
EP Business Priority
John Darley
Growth Leadership Forum: Malcolm Brinded (Chair),
John Darley
5. Operational Excellence
3. Grow our resource base – Aggressive Exploration and NBD– Reshaping the portfolio
4. Effective Project Delivery
Regional EVP Forum: Tom Botts (Chair),
6. Competitive Cost StructureSimon Henry
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… Responsibility for delivery unchanged
1. Regional proved reserve addition targets2. Regional production targets3. Regional HC maturation targets 4. Value delivery of projects against GIP5. Drive delivery of performance improvements6. Delivery of operating cost targets
Matthias Bichsel
Guy Outen
3. Grow our resource base – Aggressive Exploration– Working the (front part of the) maturation funnel
3. Grow our resource base – Aggressive NBD– Reshaping the portfolio
Delivering each Priority
Regional EVP’s
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ion So, how do we contribute?
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Safety takes priority
Safety is, and will ALWAYS remain, a priority
In the event of conflict, safety takes precedence
Everyone can and must contribute to this priority and the relentless pursuit of improvement.
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HOW
Common global processes and standards Winning “Hearts and Minds” of staff, contractors &
suppliers Visible leadership
And, we will focus on contractor safety as we move into big new frontier development projects
Safety takes priority
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Business Priority 1
RRR average 100% over 2004-2008
A significant driver of long-term value for the Group and a key business goal in the planning cycle
HOW:Get staff back to development activities Increase Petroleum Engineering resourcesFocus on proved reserves in the business planning cycleAccelerate new project FIDsTreat proved reserves bookings as projects
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Business Priority 2
Production 3.5 –3.8 mln boe/d in 2005/6
The biggest single contributor to Group financial success in the short-term
HOWFlawless start upSingle global total reliability processTop quartile uptime Improved drilling performance Best practice sharingExtra production-generating opex
Pro
duct
ion m
ln b
oe/d
20043.4
3.6
3.8
4.0
2003
Field decline
New Volumes
Divestmentshurricanes
PSC
Other
3.8
2005-6 Target Range
3.5
Half year update: 3.6 b/d
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Business Priority 3
Grow the Resource base
Growth of our overall hydrocarbon resource base is key in the coming 3-5 years
HOW Aggressive exploration &
new business development Accelerate the maturation funnel Reshaping the portfolio
Hydrocarbon resources and development
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20
40
Pro
du
cib
le r
eso
urc
es,
bln
boe
e.g. Bonga, Erha, Holstein, Qatar, Deimos, Ormen Lange, Sakhalin, Kashagan66
e.g. Kashagan Phase-2, GoM Perdido, Brazil Deepwater, Nigeria Deepwater, Athabasca Jackpine mine
e.g. further volumes in Sakhalin, Kazakhstan, Nigeria, oil sands, Asia Pacific gas
Short-term Medium-term Long-term
No change in overall resource base
Onstream by end 2004
Onstream by end 2009
Includes oil sandsExcludes Sakhalin minority interests
Longer-term scope
FID by end 2009
Difficult scope
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Business Priority 4
Effective Project Delivery to ensure medium/longer term production growth
Bring projects onstream to unlock 13 bln boe by 2009Effective project delivery – on time, on budget – is keyCompliance (OPMG) + Competence + Contracting effectiveness
Existing Oil Unconventional Oil Integrated GasNew Material Oil
~40%
~40% ~15%
~5%
2009 Outlook 3.8 – 4.0 mln boe/d
2014 Aspiration 4.5 – 5.0 mln boe/d
~20%
~25%
10 – 15%
40 – 45%
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Business Priority 5
Operational Excellence
Maximise cashflow from existing operations to support growth plansOperational excellence, focused on production operations, technical integrity and well delivery, is key in this.
HOW Focus on fundamentals Top quartile performance Globalisation, standardisation
and simplification
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$/b
oe
Regional Benchmarking: eg GOM Operating Costs
Source : Ziff 2003
Mixed Product Fields
Shell
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Business Priority 6
Competitive Cost Structure
Our cost base has increased – partly by external circumstances, partly by choice - but good cost management is essential
HOW• Clear accountabilities• Budget control• Supply chain management• Reducing complexity
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1
2
3
4
5
6
7
8
9
2002 2003 2004 2005 TGT
$ b
ln
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Deepening professionalism – inspiring our people
Build pride in Shell and trust in leaders
Strong business results and an exciting work environment
• Resource the business – 1300 new staff in 2005
• Expand technical career ladders, extend job tenure
• Improve coaching and development
• Simplify CBD, Progression and MOR
• More frequent two-way engagement• Business direction & performance• Enterprise First behaviours• Employee Value Proposition & Shell People Survey
Half year update: 50% recruited
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One Scorecard
Simplifies and reinforces Enterprise First:TSR reflects EP profitability and growth Cash reflects EP volumes and cost controlEP TRCF within SD measure Production within Operational Excellence
Weighting
Relative TSR 25%
Cash $ bln 25%
OperationalExcellence
30%
SustainableDevelopment
20%
Weighting
EP-Production kboe/d
40%
GP-LNG Sales
10%
OP-Refinery Downtime %
40%
Chemicals-Cap. Utilisation %
10%
Connects directlywith EP
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EP Dashboard Financial and Operating KPIs
Against Target
Global Performance
HSE (EPS) People (EPH) Technology (EPT) Compliance (LSEP)
Strategic Objectives
Proved Reserves (Reserves Committee)
Resources (EPT)
Competitive Costs (EPF, RCEO’s)
FY QTR
Production -1%
Total Costs
Capital Expenditure
Expl. Expenditure
Earnings
Cashflow
Perf vs. Competitors
Operational Excellence (EPT, RCEO’s)
Rationalise Portfolio (EPB)
Exploration (EPX)
Project Delivery (EPT, RCEO’s)
New Business Development (EPB)
+1%
-1% +1%
-1% +1%
+2% -2%
+2% -2%
+2% -2%
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Strengthening performance management
ECMB
Decision Forums
Regions, Global businesses, Functions
EPLT members
Performance Management
Roll-up and corrective
actions
CascadeReport
Strengthened mandate of the Decision Forums
Focused quarterly performance reviews up to ECMB and EPLT members
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In summary Reserves recategorisation now behind usWe can be positive about the futureDelivering on the priorities is key to delivering on our strategy
Safety takes Priority 1. RRR 100%2. Production 2005/63. Grow the Resource Base 4. Project Delivery5. Operational Excellence6. Competitive Cost Structure
We have a long term strategy
We have clear priorities
We know how we must contribute to delivering them both