殼牌 (SHEL) 2003 Q4 法說會逐字稿

Ladies and gentlemen, good morning.

Welcome.

I'll just check that the volume is OK.

Everybody can hear?

Like other times coming over to the U.S., I was really looking forward to today.

Of course, today was supposed to be about the results of the fourth quarter in 2003.

And I was going to talk about how the fact that 2003 seemed in total, has been a pretty year, record cash, generation - $26-$27 billion, record earnings - 13 billion, pretty competitive return on capital employed at 16%.

But then, I have two other themes - the first of them a bit more negative dealing with underperformance.

And of course, we had some write-downs that were announced in December.

I guess they're the ultimate evidence of getting to grips with issues, facing the music, doing the necessary restructuring, and then moving on.

We also divested something like $4.5 billion of stuff, some good selling at the top of the cycle, as we think, and other stuff that we feel is worth more to other people.

The second theme I would have had, and will have I hope later, is about something that's very close to my heart, establishing new strategic positions for Shell.

Those kind of long-lived assets that last for decades that underpin great companies, and we would talk about acquisitions in Russia, Sakhalin, Gas to Liquids, Afabasca (ph) Oil Sense (ph).

We'll go into all of that.

But sadly, I know that today this session is rather overshadowed by this question about reserves, and I acknowledge that.

Late last year, a couple of catalytic events happened and suddenly I was in the mode of all hands on deck.

And I remember writing down the words myself and then saying them to other people, "Get the facts and do the right thing."

And we needed to do that as soon as possible, and people worked intensively over the next few weeks, through Christmas and New Year, in order to make that announcement on the 9th of January.

And it was the intense effort to get sufficient certainty, and we had to do it in great secrecy, lest there be a leak of an unsubstantiated number.

And of course, as soon as we could, on the 9th of January, we made that announcement.

That was the fact that we had a 20% reduction in our approved reserves.

Fortunately, we were able to say that the financial impact was not material.

The barrels are still there.

They haven't gone away.

They've simply been recategorized.

And also, there would be no immediate impact on our short-term production forecast.

But that was not, I can tell you, a happy day in my life as we had to make that announcement.

And bad news, in the end, is bad news.

And I'm very conscious of two questions that come out of that.

Firstly, people who have watched Shell, invested in Shell, or shareholders, people who work in Shell, they were shocked.

And they asked themselves, well, how did this happen?

Why did it happen?

And I was very conscious that the answers to what we were saying on the 9th of January raised more questions than we gave answers.

The second thing is that the fact that I wasn't at that initial teleconference disappointed some - frankly, annoyed others.

Now, I could think of a whole number of perfectly logical numbers why I wasn't there, and they were mentioned at the time.

But frankly, with the wisdom of hindsight, it was a mistake.

And as I said yesterday, and some of you may have seen it, I regret that.

I'm sorry that I wasn't there.

But I do hope that during today's proceedings we'll make amends for that as I address the issue of reserves now, and then Walter will continue in more depth, and then during the questions and answers that we will have after the presentation.

May I go a little into what we've been doing since the 9th of January.

Obviously, we've been doing a lot more data analysis, and we'll show you more data today.

We've been having exchanges with the SEC, and you will no doubt have questions about that.

You'd be surprised if we hadn't been having meetings with the group audit committee of the Shell Group, which is made up of non-executives from Royal Dutch and Shell Transport.

And of course, they are conducting their own independent review, using a team with external counsel to do that.

We've been listening to our boards, having meetings with them.

We've been listening to shareholders, and we'll be listening today, and understanding their reactions and viewpoints.

And as you can really imagine, we've been reflecting on the inputs we've been receiving.

It's been a pretty hectic four weeks.

We'll be giving you a progress report today, and I'm sure it will be necessary in the future to have other progress reports as we deal with this issue.

The big challenge for me and the leadership that you see here from the committee of managing directors is to help our people around the world to stay focused on their day to day business that they're doing, that they don't get distracted by all of this, that they can deliver good results like they did in 2003.

But what is the bottom line on this reserve story at the moment as far as we know it today?

What was said on the 9th of January still stands?

That question, why now, what were the catalytic events?

Things came to our knowledge late last year with the combination of two major operational reviews.

Why did it happen?

There were clearly fundamental issues as to how we booked crude reserves and applied the test of reasonable certainty.

We believe that those bookings were made to the best of people's ability at those times and in those circumstances.

We've always believed, and I've always believed that Shell in aggregates was materially compliant with its own and the SEC guidelines, and we relied on audits and assurance processes.

But with the benefits of hindsight and the stricter booking rules we have and controls that are in place today, judgments about reasonable certainty were made that probably wouldn't be made today.

That's why we're having to get to grips with this issue, recategorize and take it on the chin.

And we have to put in place extra controls to ensure that it never, ever happens again.

How do I feel about this?

Frankly, pretty distressed, and I'm disappointed for our shareholders.

I take a measure of comfort from the fact that we found it ourselves, we disclosed it as soon as we could, and we're now fixing it.

And my hope is that through this process, and its impact on leaders and people in Shell, we'll actually come through what is a pretty painful process a better company than we've been.

And as you well know, and I'm sure some of you will have questions today, something that started about reserves quickly widened to other issues, controls, governance, management, credibility, even questions about the group's structure.

We're having discussions with shareholders.

We'll be listening today, of course, and meeting many shareholders over the next weeks, face to face, to hear their concerns.

Now, if we may, I'd like us today to start with the results and I'll ask all of my colleagues to participate in that process, and then we'll have another section on the reserves question that Walter will lead for us.

If that's OK, I'll move on to the results section.

This disclaimer is normally the tried and tested one, but you'll notice a little bit extra this time with regard to the SEC.

Let me start by giving you the highlights of the year and perhaps using that to remind you of our strategic priorities.

The 2003 results show that we are delivering performance today.

Net income of $12.7 billion, 35% up on 2002.

CCS earnings, as I said, were a record of $13 billion, up 46%.

Nearly $22 billion of cash from operations, 34% higher, and that was augmented by $4.5 billion from investments, a total - actually, a record at $26.4 billion.

Sixteen percent returns, as I mentioned, on a current cost of supplies basis, remains competitive.

And we made considerable progress towards our strategic goals, with - I think with some great milestones.

You see them in the light blue box at the bottom, building on our strengths, particularly in deep water and LNG, to create new positions for profitable growth, and taking also some decisive portfolio action, dealing with underperformance, recycling capital into better places.

Our first priority is to sustain dividend growth for our shareholders, at least in line with inflation.

On the left-hand side you see there we have achieved double this in dollar terms over the past five years, even more over 10 years.

On the right-hand side, you see the cash to shareholders for the last years, and note the steadily rising dividends.

And our strategic direction is reaffirmed, emphasizing the investment in our upstream businesses to raise our returns, while pursuing continued profitable growth in the downstream for resilience and cash generation.

You'll hear those threads running through the presentation as we go along.

We set this course in 2001.

We need to reinvigorate the portfolio.

We're busy doing what we said we would do, and I think we've made real progress in 2003.

I'll come back to that strategic process in a moment, but first I'd like to hand over to Judy to talk about the 2003 financial results.

Thank you, Judy.

Thank you, Phil.

If you don't mind, I'm going to speak from down here.

The stage is a little tight.

So, from a results standpoint, 2003 was actually another very good year.

We did have record cash.

We used that cash to strengthen our balance sheet and to grow the business.

We also focused on underperformance, as Phil said with our fourth quarter charges, and updating the portfolio as well.

The fourth-quarter charges were certainly a disappointment, but I think they are absolutely a clear signal that we're getting after underperformance wherever it is in our business.

So let's look first at the quarter.

The quarterly income was $1.856 billion, the $984 million unusual charges were just about equal to what we talked about in December, although the composition was a little bit different.

If you take the unusuals to the side, E&P was up, because prices were up, and that more than offset 4% lower production.

In GP, the increase had to do with a charge to the power sector in the fourth quarter of last year.

In OP, we had stronger refining conditions in the fourth quarter, which offset lower marketing and somewhat higher costs in the fourth quarter of the year.

Now, while the quarter was down year over year, as Phil mentioned, we had a record year in terms of CCS earnings.

Total earnings for almost $13 billion.

The total of the one-time items, for example, the gain on the Vergas (ph) sale about offset the unusuals for the entire year.

All of our key businesses except chemicals had a very favorable business environment this year.

In AP, prices were up for the entire year.

In GP, LNG prices were up and we had record LNG volumes, and the gain on the Vergas (ph) sale certainly helped, and more than offset some charges on power that we had during the year.

In OP, you're starting to see the improvement in the U.S. downstream business, but they also benefited from strong refining conditions, really, globally throughout the year.

Chemical still is suffering from a poor environment, and you also see an impairment charge coming through in this change year over year.

Now, in Chemicals and OP, both of those businesses really benefited from improved cost positions during the year.

In all three of the businesses, EP, OP and Chemicals, all took restructuring charges during the year, which I think is an indication that we're dealing with our cost structure going forward as well.

We did make our unit cost reduction goals, 3%, that we've talked about.

In terms of the cumulative amount to the bottom line, over two years, we've improved our cost position by over $1 billion, and there is another year to come.

But this particular focus on unit cost is certainly not the end of our focus on cost.

We're really committed to look for structural improvements in our business, and there are a number of areas that Phil is going to talk about later where we're really changing how we're doing business to improve our cost position.

We also delivered the synergies we promised on the deals we did in 2002.

The synergy promise is $1 billion, delivered a year earlier than we had promised.

And in each and every one of these cases, we see additional areas where we can make improvement, and we'll deliver those in this coming year.

Now, all of these businesses are very much integrated with Shell's overall business at this point in time.

Now, on a going forward, we will not be reporting synergies specifically, but you'll see the benefit in our bottom line.

Now, in addition to dealing with underperformance, we really strengthened the balance sheet this year.

You can see from the blue bars that our gross debt stayed about level.

Now, that's only because we capitalized about $3 billion of towing (ph) obligations during the year.

On a like for like basis, our debt actually declined.

The total debt ratio of 20.9% is also an improvement versus the prior year.

Now, the yellow section here - I guess it's purple on this chart - takes into account other obligations.

Things like continued liabilities, operating leases, pension deficits.

We try to keep track of those as well, because we know the rating agencies look at it that way, and there are other obligations.

You can see that in 2002, with those other obligations, we were at pretty close to the top of our range, which is why we chose to reduce our gearings over the last year as opposed to doing stock buyback.

We will continue to maintain a prudent balance sheet, and in addition, to maintain our capital discipline that we've had all along.

Now, going forward, what's important are competitive returns.

You might recall back in 1998, we introduced the concept of normalization, and we did that to track underlying improvements in the business, and it served us well for a while and we delivered those improvements both in terms of cost and portfolio upgrading.

But we now see that that metric is not very useful for either tracking or targeting.

It's really been overcome by events.

I mean, we have a lot of accounting changes, foreign exchange impact, that are non-cash in nature, and so the link between that metric and cash flow has been broken.

And it's also been diluted to a certain extent by the major decisions we've taken on strategic projects that frankly we're very happy to have.

So on an ongoing basis, we're going to be reporting our competitive position.

You can see here that we've performed very well across a large number of crude price and margin conditions and will continue to do so.

These returns, on a growing capital base, is really what's going to create the cash flow, grow the business, pay dividends and manage our balance sheet.

I'm going to finish with our cash balance.

Record cash generation, $26.5 billion to spend, basically.

We paid dividends, $6.2 billion, and I note that compares with $5 billion in just 2000.

So up very significantly.

We bought back about $600 million in shares over the year to hedge our options.

And that's down from prior years, and I might want to say a few words about how we think about share buybacks.

We'll do and think about share buybacks when two conditions are present - one, that we have very strong cash flow and we're happy with our gearing.

And basically last year, we chose to reduce debt and strengthen the balance sheet.

You see the $4.7 billion.

And we also bought out some minority interests for $2.5 billion.

We increased the spending in the business as well -- $13.5 billion was our total capital investment.

That's up about $1.5 billion versus what we announced at the beginning of the year, and that does exclude the minority interest largely associated with - minority interest payment of capital investment, if you will, which is related largely to the Sakhalin project.

So I think this cash wheel really depicts our priorities in action.

We took very strong cash generation, paid dividends, real increases in dividends and in both the U.K. and in the Netherlands on the continent, and of course a very large increase for our shareholders here in the U.S.

Dividends first, strong balance sheet, investment in the business.

And with that, I'm going to turn it back to Phil and my colleagues to talk about the businesses.

Thank you, Judy.

Of course, yesterday we spent the day with three of us on each side of the channel, three at the Royal Dutch meeting, three at the Shell Transport & Trading meeting.

We've got the opportunity to have the whole team together here today.

So I thought it would be good to parcel out the pieces between each of the homes (ph) and have them talk to their own piece, the piece of which they're the Chief Executive responsible.

Walter, Exploration and Production.

Yes, than you, Phil.

This slide shows you one of our core growth businesses, Exploration and Production, and the track record over the last five years, both in earnings and in capital employed.

Two-thousand-three is $9.3 billion earnings, not quite a record.

As you can see, 2000 was a bit higher.

As you see all capital employed, because we are growing our overall asset base, very much aligned with the Stratagega (ph) sale outlined earlier in terms of disproportionate spending in the extreme.

Another important thing to see from this chart is how well balanced in terms of geography we are over the build.

Looking at the production history, the track record over the last five years - yes, report (ph) that we have down 2% in 2003 over 2000, but if you correct for divestments and for PSE effects on the price, we actually were flat.

But overall, you see that we have delivered growth.

Looking at the future, these are the big-ticket items for the future.

Altabuska Oil Sense (ph).

Talked about it for many years, but now fully in ramp-up phase, getting to its capacity production.

This is a major resource holder for the future in our portfolio, with a lot of expansion potential beyond the home (ph) of 55,000 barrels a day, ultimately being able to get up to 0.5 million barrels per day.

As Phil alluded, Russia, a very core area establishing a major position last year.

We have started a differentiating strategy in Russia and are now moving forward through two major projects.

One, the well known (inaudible) projects that the oil and gas development with LNG export scheme, $10 billion overall investment, with oil starting up year-round in 2006 and LNG exports starting a year later.

At the same time, back in September last year, we made the investment decision, a $1 billion gross investment decision on our (inaudible) in western Siberia.

Very (inaudible) is the key (ph).

Thank you, Walter.

We'll now just quickly go over to Gas and Power.

Malcom Brinded is the Chief Executive of our Gas and Power business.

Thank you, Phil.

Last year was a good year for Gas and Power.

If you look at the top left, it was record $2.3 billion earnings, even without the $1 billion for Royal Gas the special (ph) has $1.3 billion, up 60% on the previous year.

If you look at the bottom left, Intogen (ph), you see capacity growing from commitments we've made before, but Intogen's (ph) an example where we're taking tough action.

We've cut the overhead costs by 40%, and we're rationalizing the portfolio.

LNG is our key area of growth.

You look at the bottom right, you'll see it didn't go up that much last year, about 3%.

The underlying growth was 17% in volumes if you take account of the exit from the Satu (ph) project in Malaysia after 20 years.

And if you look at the bottom of the chart, you'll see the extent to which LNG now contributes.

As a proportion of our capital employed overall, we spend $1 billion in LNG last year, and of course we've been rationalizing our midstream portfolio, especially in Europe, with such things as the exit from Royal Gas.

I was here in December and we talked about LNG, and we talked particularly also about Gata (ph) Gas to Liquids.

I think this is a tremendously exciting opportunity for Shell, with the milestone of commercial agreement reached last year now moves us forward with something that I think will not only be a very successful project, but the beginning of a whole new industry, because it offers a new way to monetize gas which is remote from markets.

And of course it produces ultra-clean transport liquids, and you can see from the bottom right-hand side that it's got inherent robustness in terms of profitability.

And if we look at LNG on the next picture, let me just say that we're active all over the globe.

At the moment, our volumes have gone up by two-thirds over the last five years, but we've got a lot of projects in action.

Of course, the LNG industry as a whole is one that is poised for a new era of growth, not least here in the United States.

Over the next four years, we see five new LNG trains coming in, increasing our own capacity by 70%, and we've got other projects that we're pursuing in Malaysia, in Australia, in Oman, and in Venezuela.

Overall, they would add another 5 million tons of equity supply.

Thank you, Malcolm.

This may be a chart that's new to some, I think.

The first time you used it, Walter and Malcom, was in the strategy presentation in March, where we take both the upstream pieces and put them together.

Our unit earnings can be properly compared with our competitors on this basis, and it does show that we've been consistently competitive, and I think we have the potential, and also the will, to do even better in the future.

This is also a chart where we put those upstream businesses together, working together in an increasingly integrated way to (inaudible) of the group's growth.

You see this extremely strong cash flow, some $50 billion from operations and divestments over the past three years.

Also (ph) been a great cash contributor to the group, but you notice in the middle year, 2002, that's enterprise purchase, which we thought would be a good deal anyway.

But with the way oil prices have gone since the purchase was made, it's proved to be a very good deal indeed.

Now with that, we'll move on rapidly to oil products.

I think you'll remember Rob Routs when he was running our U.S. business here, now running the global business.

I guess it's good to be back, Rob.

Yes, good morning.

I was going to say, it's great to be back in the U.S., in spite of the weather out there.

Our products business is basically a customer-led business.

And very often the way it's being viewed is that it's being refining driven.

Now, to give you an indication of that, this is the left-hand picture on this graph.

As has been asked for a number of years by many of you, give us an idea as to what you're making beyond refining.

And you'll see that in the last three years, it's been broken down refining income, or what we call MSD - that means manufacturing, supply and distribution and our global marketing businesses (inaudible).

And the point (ph) is that we get a very solid contribution from our other businesses compared to the volatility of the refining business.

And if you look at that picture, it's given us about $2 billion on average over the last three years.

Manufacturing earnings will remain volatile, but by investing as we do on the global business and retail side, we hope that we bring some stability to that income.

We've also seen a significant improvement in our U.S. results, and that's as a result of all the efforts that we're putting in.

On the right-hand side, you see the capital employed, suddenly growing in the U.S. in 2002 as a result of the acquisitions that we've done, but there's also a bit of growth in the rest of the world, which to a large part is a dollar conversion and foreign exchange effect.

Our business - I said we had a customer (ph) on that business, and it is a very exciting business in terms of over the last couple of years, we've been able to change our retail business dramatically.

The industry belief that gasoline and diesel were a commodity fuel, we have now changed that picture and in many countries around the world - 50, to be precise - we have introduced differentiated fuels.

And you can see in this picture as to how the growth has been there, and it has even spiked up as to how big and deep the uptake has been.

Shell brand is first choice in 70% of our retail sales countries, and these differentiated fuels now being offered to about 80% of our customers.

You might ask the question, "Where are we in the U.S.?"

The answer here would - just wait, it'll come and very soon.

The refinery reliability (ph) in the U.S. is still an anchor (ph) for us.

It has improved dramatically, as you can see in the right-hand (inaudible) picture, from a 9% level to a 7% level.

Especially the last quarter was good - around 6%.

And the month of December was actually meeting our target of 4% that we've set now for the last three years.

So, there is improvement, but still a lot of work to do in the refineries.

We have, of course, announced two closures, one being - one closure, one being Bakersfield in terms of a - running out of its heavy crudes, and our sale of Delaware City refinery.

If you take those two refineries out of that picture, however, its reliability would be just over 6% today.

We continue to also do a retail restructuring that is progressing very well, and you've seen the Texaco stations change color (inaudible) in the country.

Finally, in terms of competitive return, we measure ourselves always in dollars per barrel profitability.

We're still up there in the back (ph) this includes all the puts and takes, so the Bakersfield impact is also included in the dollars per barrel earning and it has us still at the top of the competition.

Thank you.

Now I certainly don't need to introduce Jeroen van der Veer, Royal Dutch.

Jeroen?

I talk now about chemicals.

If you look at that graph, everybody feels bad about that because (inaudible) 2003 we are in the negative.

I have (inaudible) whatever you say, then, feels defensive, but let me try.

There were 550 million once-off charges.

They are basically three items - three large items there.

First of all, we took an impairment in Shell (inaudible) 286 million.

Secondly, there's a very large item.

It basically has all to do with our catalyst (ph) business and writeoffs we took for a (inaudible) we announced in the first quarter last year (inaudible) a lot of restructurings.

And then the third one, which is nearly one-third of the total, are all kind of restructurings, plant closures (inaudible) for litigation.

So you see, why do you take those writeoffs?

Because we think it is not a satisfactory position even if I correct the results for the writeoff.

If you don't see any positive news in that business, yes, (inaudible) was a very good contribution to the saving and costs (inaudible) fixed costs and variable costs we tried to address.

And after spending our capital for chemicals, and as you know, we are constricting (inaudible) in the Far East and, of course, we have very good prospects for that.

But even after paying for the captive (ph) capital, chemicals are still cash positive, so they are not a drag on the Group results.

They return net cash back to the group.

I don't like to dwell at this moment to look forward, but I hope to reassure you we will attack really where we have any underperformance in this business, and our basic philosophy is that all the (inaudible) we have (inaudible) they should perform in first quartile because why is that even if you have difficult economic times, that is probably the best indicator that you can keep it cash positive.

That's it, Phil.

Thank you, Jeroen.

If we take those downstream businesses and put them together again, they also generate strong cash flow, as you see - nearly $18 billion over the past three years.

Normally these businesses are delivering strong cash to the Group after investment.

2002 was a bit of an exception.

You see there those three acquisitions indicated - strategic focused acquisitions.

Rob (ph) talked about the Texaco one.

Pennzoil, of course, is the - was the missing piece for the global - leading global lubricants business that we now have, which includes the U.S.

The Dare (ph) acquisition in Germany has turned out to be a great deal, and it concerns - that acquisition really confirmed Shell's position as the leading oil products business in greater Europe.

Downstream cash flow over the past three years has been augmented by about a billion dollars a year of divestments.

And as we take a group perspective now looking forward, we're expecting that in the future divestments will predominantly be from the downstream.

Having looked at some annual and quarterly stuff, I'd just like to take a few charts before we move on to our next topic to take a look over a few years.

First, our expanding capital base - it's risen from something like $65 billion capital employed in 2001 to over $90 billion today.

And note the growth in upstream oil and gas.

And also, as you see on the right-hand side of that chart, that's balanced geographical spread around the world.

But what about earnings?

This chart shows that we have delivered robust profitability in both the upstream and the downstream over five pretty volatile years.

CCS (ph) earnings, as we said in 2003, were a record $13 billion.

And on that chart, you see in the blue and the red bars just the reason why we want to preferentially invest in the upstream.

And you see again that geographical spread.

I think that ability to deliver strong cash flow year-in, year-out - over $90 billion in the last five years, I think is a fundamental strength, and more than a third of this was paid out to our shareholders.

We're trying to shape our portfolio so that the cash flow is increasingly resilient, less downside, and more upside.

But when I reflect on the last years coming and talking in New York, we've been talking about costs pretty regularly.

I remember the first target that was set in 1998 that we were going to deliver two-point-something (ph), if I remember, billion dollars of cost savings by 2001, which was eventually a deliver of 5 billion.

That was a pretty rough top-down reduction of costs, and I remember standing here talking about the fact that there's only so long that you can use that sort of approach, and we went to unit costs.

And Judy mentioned just earlier that we promised 3% across the businesses which was equivalent to $500 million per annum.

And this last two years, 2002 - 2003, we've delivered more than the billion.

That continues, but we're now embarked - already embarked for a little time on an effort to go much more deeply at the structural cost reductions that we need to make - a much more structured, deep approach.

You see three illustrated here.

I wonder if I can ask the owners of these particular drives just to say a few words about them.

First, the idea of IT vision, Malcolm.

Yes, well, so, you know, across the world we've been pretty fragmented in our whole IT infrastructure portfolio, systems, and applications.

And very consistent with the globalization of the businesses, the standardization of processes gives us a huge underlying opportunity to rationalize applications, systems, and hardware.

And I think this is one of the biggest opportunities we have to take cost out and improve our global standardization over the next few years, and we're going to go at it as hard as we can.

And Rob, streamline?

In streamline, we try to really get at our overhead costs and the costs in general, and as Malcolm said, really where we have been cost saving, it was in - it has been on a unit (ph) basis and we need to step up now to a global basis to improve (ph) our sale (ph) to retail and sale (ph) to business processes and our procurements costs.

And that always in progress.

An example of this - we were able to do it in the U.S. over the last couple of years, and we knocked some 30% of our overhead cost.

And that's the kind of application that we want to take and overlay on the globe.

Thanks, Rob.

I guess, Walter, you'll be mentioning globalization in the next section, but a few words now?

Yes, thanks, Phil.

Our new operating model went live on the first of January.

We talked about it last year about the price that we saw around it, and processes we've gone through only gives us increased confidence in being able to deliver what we said we would do by 2006.

So, very important.

Thank you.

I've just got two more charts in this section.

Let's go back to the cash wheel that Judy showed.

That was for 2003.

Let's look at 2004 and beyond.

The financial framework is pretty clear and well bedded down now.

Cash is king, and it's driven by competitive returns.

As you see on the (inaudible) line at the bottom, we plan on the basis of cash neutrality, conservative conditions.

That begs the question, "What do you mean by conservative conditions?"

And the - I guess the first coefficient in the polynomial will be the oil price.

And for that, read less than $20 a barrel.

Portfolio upgrading and divestments are a way of life.

We averaged about $4 billion a year for the last years. 2003 was 4.5 billion.

We want at least $2 billon a year.

Our businesses need around $13 billion a year for investment.

There may be opportunities to invest more on some occasions, but then at a certain point, you hit the buffers of affordability.

And you've seen our attitude to affordability in 2003, when we paid our dividends, made the investments, strengthened the balance sheets, and chose not to make buybacks.

The bottom line for our shareholders is that our dividend promise is sacrosanct, and you've see the announcement of our dividends yesterday.

In conclusion, this part of the presentation on our performance and strategic progress has emphasized two key drivers for our business - cash generation and competitive returns - cash generation and competitive returns.

I guess cash is only useful if you've decided on the priorities for using it.

And you'll find that we're crystal clear about that.

First of all, meeting our dividend commitment to you, retaining that strong balance sheet, and investing to sustain the business with the view not just about today but also with a long-term view.

We need to strike that balance between delivering performance now and laying the foundations for future profitable growth.

Ross (ph) is going to say a bit more about some of those projects shortly.

This has been a testing time for us.

We won't see the results of some of these major investments for a while.

We've got some unfinished business here in the U.S. to fix the downstream and other areas of underperformance around the world.

And we're determined to do it.

And we really do need to achieve those costs and better organization of efficiency and effectiveness by working in new ways around the globe.

With (inaudible) results, I'd like to move on to the second part of the presentation, if we may, and hand over to Walter who'll be talking to us about reserves.

Thank you.

Thanks, Phil.

I would like to take you back to the ninth of January when we made the painful announcement on the 20% recategorization of our proved reserves.

That was clearly not a happy day for our business and also for me personally as well.

As Phil mentioned earlier, there were two events that were the catalyst of this whole process around proved reserves.

Two quite distinct and different activities, as one was relating to Nigeria and the other was around Oman.

These results came together in December late last year and drove us to very quickly look at our global portfolio and make sure we had a consistent approach across our globe very much helped by having a new operating model in place.

Reality is, as Phil said, we found it ourselves clearly judgments were made in the past that would not be made today.

But what's the real story about what it means for our business going forward?

Next slide, please.

As we concentrate on the whole area of proved reserves because that was the focus of this whole area all around the definition from the SEC around reasonable certainty to make something in proved reserve.

We told (inaudible) about the totality of 3.9 billion barrels equivalent.

The number today is still 3.9 billion barrels equivalent.

The other thing we have done with some further requirements as we defined the split between proved developed and provide undeveloped, and you will see the proof -- developed is now only 5% of the totality. (inaudible) all the work we've done is that we expect over 85% of the volumes to be rematured into proved over the coming decade.

This is not an issue about how much resources we have in our operations.

They are still there.

One area, I'm not going to cover in any detail today is the whole total definition around resources in the business and a whole life cycle around it recognizing that sometimes a bit of lack of clarity around the definitions.

All that we have focused on so far is proved reserves, but as you can imagine when you move proved reserves out, it will also have an impact on your probable - call it the 1P (ph) and the 2P (ph) - possible, and then some of the other reserves characteristics.

That work is still in progress and I will report as soon as we have closed out the totality on our resource base.

OK, let's look at the main categories around the recategorization.

Split in three areas - one very much focused around our producing areas, one around what is (inaudible) areas in line with SEC definitions where there's more of a commitment and clarity needed on government support infrastructure, et cetera, and then the last category - smaller category around (inaudible) hydrocarbons and a year (inaudible).

Let's look quickly through the various categories.

Project maturity - Nigeria - an area where we've been for decades and decades - huge, huge resource base that continues to grow not only in terms of our understanding onshore but particularly also what is happening on the offshore.

The issue, though, around the business that we're putting in place is now very much an integrated oil and gas business.

And only last month, we made operational our offshore gas gathering system that is now allowing us to supply gas from our offshore facility all the way to Bonny to the Nigerian LNG facilities.

And all that we're focusing on is to make sure that we continue to have the reliable gas supply to the Bonny facilities to continue to grow our overall LNG business.

That requires not only that we bring in associated gas but also unassociated gas to continue to build up that capacity.

That is ongoing.

The issue where we have difficulty with is the pace of the developments and the maturity given the complexity of the onshore operations there and all the issues around funding delta communities, et cetera, to work our pace (ph) of developing the integrated oil and gas development onshore.

And that's why we went through this bottoms-up review in 2003.

At the same time, Nigeria continues to grow and good things are happening in Nigeria.

We're now producing gross of about 1.1 million barrels per day.

Given alternative funding we had (inaudible), you see there's the large contribution from that facility and seeing that we've had now a record for good production for the last 22 years.

We also on the offshore are progressing - continuously growing our portfolio and continue to grow attractive opportunities.

Oman, totally different case.

Oman.

We've had an enormous track record of continue to build, to build, to build production and then we experience some unexpected decline in some of the mature assets in Oman and we have been concentrating over the last year in trying to define for the forward plans to stop the decline and actually start building production again.

Very active with the government and EDOR our company out there which you will see that part of it is maturing more complex developments like water (inaudible), like EOR projects that are going to be more costly that we're now working through and feel confident that we start turning the corner.

Let's look at some of these new developments in (inaudible).

You know Gorgon immediately jumps at you but there are couple of others as well.

We trying as part of this process to be totally transparent around when some of these volumes were (inaudible).

One thing that also to be clear about what we currently expect when these projects are going to mature and still move forward because all of them are relating to very attractive projects that are moving forward, it's just that we're now looking at different time scale than was originally perceived and as you see being very confident for instance that the BISCASSIAN Project we hope to get the final decision in 2004 at the same time see more encouragement around Gorgon moving forward as well.

(inaudible) we made our decision late last year together with all the partners and the support from the government in submitting our final development plan there having resolved all the issues around intergovernmental pipelines, et cetera around it.

But the reality is that's where we are.

Lowest known hydrocarbons.

A simplistic picture here.

This is part of the increased understanding around SEC rules.

We had them in 2003 that you should not incorporate improve reserves anything that is below the lowest seen hydrocarbon, irrespective engineering dates that you may have for the sites makes pressure grading or whatever.

The rules are the rules and we are now correcting for that.

The last category is around "Year-End Pricing."

This is all to do with BUC's where historically we have been using some of our reference pricing and thinking, but now - as of now we're now correcting using year-end prices recognizing it creates solidability to your numbers with the core recovery around these BUC's that we have implemented.

This effect you get probably offset by some our tax royalty based on year-end prices as well.

OK, looking at the totality of forms this is an attempt to try to show when the forms when we look at the totality of 3.9 billion, when do you think our best estimate is when these were (inaudible) in time.

This is not totally accurate.

It is the best estimate we have at this point in time, particularly around the blue area which looks at booking around mature areas.

There is no confusion around the yellow area, but it's the blue area that we're still working to make sure that we get absolute clarity of.

Very much a big part of that is the Nigeria situation.

It appears that as you see will ask to amend our filings on the 20F filings when it relates to reserve reporting and we're in discussions with them trying to finalize it because it is clearly important in the totality and the transparency how (inaudible) have built up over time.

As you see, post-2000 there's very little to see.

The only things as you know, was Kashagan where we all aligned in thinking back in 2002 that there were full support amongst all parties and governments and then they changed it last minute and for simplicity we linked all the facts of lowest known hydrocarbons and BUC's at the end of the graph.

Let's look at some more transparency in our reporting.

This is something you all have not seen before historically in our 20F filings.

We have been talking about other Eastern Hemisphere.

Here you can see the other Eastern Hemisphere being broken out into three categories.

Looking at Africa.

Looking at Asia-Pacific and looking at the Middle East here and CIS.

So this is new reporting that we are proposing to do from here forward to make sure that you see the increased transparency around the business was actually totally aligned with the way we run our business.

This is the five regional CEO's and their accountability and who you're operating with.

Again you can see, not all of impact on area such as America and Europe.

Africa dominated by Nigeria, Asia-Pacific includes Gorgon, but it also includes other areas like Bruni, Middle East and Ruhgras, including the Kashagan's and Oman.

Oman's different category than Nigeria as he said earlier apart from Gorgon and Nigeria.

Everything else is left in 10 percent of the totality of the volume we're talking about.

Now if we look at those numbers and our best estimates and we state that historically when some of these reserve bookings have been, we can have a new look at our historical report that reserve replacements.

This simple graph is trying to show you both on the five and ten-year efforts, whether you look at the totality of reserve replacements or whether you look at organic you see roughly - whatever metrics you look at it's about 20 to 30 percent reduction in our reported reserve replacements.

This includes the 2003 reserve replacements which we reported on yesterday as well.

Again, both in totality and 98 percent while looking at it as we exclude the best estimates in our portfolio.

So this all brings all these numbers together.

If you take that a step further, then you can start looking at the impact of key performance metrics that are generally used in the industry.

While as the unit finding and development costs and any other unit development costs.

Units finding and developments costs as commented in the past and last year, is a metric we think if you don't take a long enough period doesn't accurately reflect the whole efficiency of the business given the timing of how the whole (inaudible) change works, particularly in some of the big material things as they mature through the portfolio, but if we do recalculation you see the adjustments in the increase on that metric.

On the unit development costs, you see far less of an impact because that's only dealing with proof developers or being fit to small part you will see very little impact and that is sort of looking at the forward measure of your efficiency of business.

It's not always that easy to calculate as we did our best estimate to put it in a competitive context still showing that we're competitive on that measure.

Let's look at financial impact.

The totality of the financial impact as Phil said is immaterial.

You can see from this chart is the largest contributor to the financial impact has actually moved into year-end pricing given the low margin areas where the proof developed contribution came in that's only very small part of the total impact on our reported results.

You will also appreciate that as part of this exercise, we looked at all the book values of all the assets that were associated with this all recapitalization and we concluded we didn't have to make any write-ups.

Let's go forward in terms of what it meant for what we have internally built in our business.

We have clearly improved the overall controls of the business not only at the expiration and production level, but also as a group overall new measures being put in place to make sure that something that happens will never happen again and there's clear authorities and trigger levels in the systems and refute process that signs off on any changes as we go forward.

Let's go and move to the business.

What does all this mean for our business?

Phil and I already alluded earlier about some of the big steps that we're made in 2003.

This is just again just flushing all this to make sure you appreciate both on the heartlands successes as well as the success on the new Pathensis, plus at the same time we open and transparent about two things in performance area.

We're not very happy with one being there, the steeper the client than we expected in Rufus and on the OGAR Satellite which we experienced based on rest of our complexity and the other the delay on the Bonga project where there's more offshore work still that needs to be done facilities on the site, but there's more growth in offshore workup costs as well as the work that needs to be done to connect all the rises and the delay in the start of (inaudible) as we now expect it by the end of this year.

Expiration.

Key part of our portfolio.

Having made great strides over the last couple of years aided with the new operating model around expiration that were real a list of global fuel around priorities about reducing the number of countries that were active, but also about gyrating our portfolio to more material prospects allowing us to see the continuous slides that look at five-year efforts of bringing down our unit finding.

So you can see on the slide also some of the successes in 2003.

A lot of them excepting the areas where we want it to be.

No point in finding reserves where you can't multiply them we defocusing on the heartlands where we want to position our portfolio and it's now a whole issue of having these (inaudible) and putting all the driving into move them into proof reserves and production.

Let's look at our production outlook.

I know this star looks a little bit fake but we also - your hand cards, but what this is trying to depict is whether current best estimation of where we see the production going and associate an investment with.

We talk about the total number of (inaudible) billion dollars between expiration and production and gas and power and you can see some on the pipe yards some of the splits between where the money is being sent showing how much is still going into Heartlands, the blue side, and still how much is going into these new positions - these legacy positions that we're building for the future and where are the other expenditures are including expiration.

The key message from this slide is indeed saying that 2004 we expect to be flat with 2003 and we actually expect to dip in production in 2005.

The dip in 2005 is because of the combination of various elements - the effect of some of the clients we've been experiencing in Brutus and the UK, it's a fact of choices we make on upgrading our portfolio and some of the divestments that will continue.

You will continue to see the areas outside the Heartlands where we make some of the divestments and it's also showing that at the end of this year - especially you see that the (inaudible) portfolio coming to within and having an impact of 100,000 barrels a day negative net in 2005.

More important though is to see that after this year, we will go and start into a growth mode again and it's not just about the new positions I will show you, but it's a combination of still enormous strength in our heartlands and actually seeing that overall we are able to manage our heartlands because new things come in as well.

If we talk about heartland, it's not only about current asset base, but that's also where the (inaudible) position, the Gorgon positions, the whole things et cetera all those projects that part of the existing heartlands, but also we're very comfortable that we're going to see with improved fraction and expiration some of these new volumes and existing discoveries we have made, whether they're deep water Brazil's; whether they're deep water Nigeria's et cetera, whether it's a new find from the Gulf of Mexico, are going to come through and they are captured under that top white slide.

It isn't an issue of timing, but I just wanted to get you to comfort that we are going back into growth mode.

This slide, I won't spent much time.

This is for just for you to remind what we call our real six heartlands areas still actually jewels in the crown for a long, long time to come and I think in there like the Bru National Asia, they don't decline.

I mean some of them actually still ae going up.

Let's look a little bit at these new positions.

We've talked about these new positions for a long time, but they're actually now real and they're happening and you see that these are major portfolio of developments here that is going to deliver more than a million barrels a day in production.

The deep water of Nigeria is happening now.

Kashagan as he said, we're very close to final agreement to move this project forward.

Sakling in construction now, not a dream anymore. (inaudible), happening and we're already thinking about expansions that Phil and I said earlier about for the future.

COMPFAR as (inaudible) major, major resource for the future.

All of these assets are not only assets on itself, but they also offer enormous future expansion potential and growth potential.

And then the Siberia issue around Salmon, North America, or Pinellas in Brazil coming to, so these things are now real and coming through in our portfolio.

The things overall as we look at the business we obviously have gone through a painful process over the last year and we're absolutely taking learning out of that, but we also have the benefit of renew operating model that allows us far stricter accountability and controls in our business and the energy to take this thing forward.

Looking at the strategy.

Heartlands, still the major contributors for cash for a long time to go.

New positions coming through.

Expiration call it rebirth, being on the move, clearly seeing how that expiration is going to be a major contributor to the future of our business.

In the setup you can see successes in the past.

Basing maximum benefit of the integration between gas and power and gas commercialization.

The overall - the business is focused and ready to move forward.

Thank you.

Thanks for the opportunity to bring the presentations on results and reserves.

We're going to have a Q&A session.

I think we have some microphones around.

We just getting people to come and get organized with the microphones.

Some of you I know, many of you I don't.

For the sake of the audience, could you please introduce yourselves and your affiliation as you ask your question.

It would help if you could restrict yourself from the normal 17 questions.

I'm sorry about that.

So that everybody gets a chance.

Let's start over here.

Phil thanks, Mark Gilman.

I'm trying to reconcile in my mind the re-categorization in particular the 3.4 billion that goes out of the proved undeveloped category and reconcile that with the comment that 85 plus percent will move back into the proved category.

I guess I'd feel an awful lot more comfortable and confident of that if that 3.4 billion went to probable rather than scope for additional recovery which I guess in my mind is somewhat synonymous with possible.

Walter, Phil.

Could you clarify exactly why it moves in the manner that you've shown in the slide that suppose to go into probable?

Walter.

Mark, thanks for the question and I think that there's something perhaps in the future we have to spend a bit more time on.

Typing it would be quick.

I mean we talk internally, we talk about reserves and then we talk about scope for recovery.

Scope for recovery when we talk about the re-capturization these are still technically and economical commercial sound reserves.

The definition is more around reserves.

If you don't have a producing assets, you cannot have probable and possible reserves.

That's just the definition of reserves.

But when something moves out, if you look at unproven, undeveloped proven reserves, if they move out they cannot have by definition two-fee or three-fee associated with it.

There's a lot of confusion around some of those definitions, but that's just a classification if you look at overall resources and probabilities with it.

The only two arrows I showed on the chart is that some of the lowest known hydrocarbons relate to reserves and some of the PFC effects, they move up in probable because they're still proof reserve for length of (inaudible).

It's just a definitional issue and indeed as I said before, what you will see going forward is a total alignment of investment activities and the re-categorization volumes moving back into proof categories.

Microphone please.

If I understand your comment Walter.

If there are no facilities in place, it can't even based on the definition you're suggesting be even probable or possible, never mind proven.

Is that what you're indicating?

You know, it's a bit confusing sometimes Mark.

What I'm saying is that the impact of this whole exercise will also come through on our probable reserve, proof is probable.

We haven't finished all activity yet, but if you don't you can only on a particular project and we need to look at a project base; if you have a project that is currently at where we had proof and developed reserves, if the project gets re-categorized, you won't have any more 1P, 2P or 3P associated with it.

They all move over to call it non-contingent or other resources as we (inaudible) for recovery.

So what you're saying is if we had a number for probables, specifically, it would be another shoe to drop as it were with respect to a similar re-categorization of probables.

Some, but of course to a far lesser extent, and that is the work that is currently ongoing and well be concluded within the next month or so.

Thank you Mark Gilman.

Hi Phil (ph), Fred Loufer (ph) Bear Stearns.

Have three questions regarding ENT.

The first is kind of a simple one.

I still don't understand the basic question, the reserve, the re-categorization, which is why some of these reserves were booked to begin with, particularly natural gas reserves that's all the United States that didn't have in fact, today still don't have sale contracts.

It seems to me maybe something beyond a liberal interpretation of the SEC regs, because many of your partners still have not booked the reserves there.

So I guess the first question is really why did that happen, what where the management controls at that time, and what are they now?

What was the board's involvement in the whole process in the past versus what it is now?

And that's probably more than one question, but a bunch of parts to the same question.

The second is Walter (ph), I didn't understand the impact on the reserve replacement ratio that you showed us.

You said that the re-categorization would change reserve replacement by about 20-30%.

It looks like 3.9 billion equivalent barrels equates to, perhaps, four, maybe five or certainly four years of total reserve replacement organically.

I just, when I ran the numbers, back in the envelope last night, it showed the five-year reserve replacement after this change to be much, much lower than what you did.

So I'm just curious how you did the calculation and how you get to that 20-30%.

And then the last question, the third question is just, are you sticking with your 3% growth target for production out through '07 and I forget the base year you're talking about, but it was never '03, starting to forget the base years, since everything keeps rolling out year after year after year, but we started a couple years ago, we were talking about 3% and are you still there?

Thank you.

Thank you Fred.

I'll make an overall responses to the first question that you asked, and it's that why did it happen, that question.

When the fact of the matter is that we have processes in place, audit assurances, people were following those processes down the years.

It's very much a distributed organization around the world, 30, 40 different operating units.

And the fact of the matter is that today, with the wisdom of hindsight, with the stricter controls that have been put in place in the organization over the last couple of years and the better processes that we have, and then triggered by those reviews that were made in two of our major countries, that itself, lead to a global review, leads us to the fact that we have 3.9 billion barrels that we have to re-categorized.

And as I expressed and I think Walter said, judgments were made then that we wouldn't make today.

Now we can then go into each one and ask whether it's a matter of project maturity or whether the final investment decision wasn't taken or whether the government approval actually wasn't there and you can imagine that we are discussing these sorts of issues with the SEC at the moment.

And you'll forgive us at a certain point if we don't go into some details, because of the, you know, the status of those reviews that are taking place.

But to you specific question, on the reserves replacement ratio, 20 or 30% in the past, Walter?

Yes, Fred, maybe I was not clear enough and my apologies.

But what we did on that chart to show the 20-30% reduction is two things.

We used the chart about when historical booking were made.

So out of that 3.9 billion barrels equivalent, you will only find in that five and 10-year effort the number of when we think the bookings were made only 3.9, and some of them fall outside those particular windows.

It is our best estimate to use that.

The second thing of course that we included in that assessment was, as I mentioned to 2003 reserve replacement.

So if we forget about the 3.9 billion booking, we of course booked an additional 1.4 billion barrels equivalent, that's 98% reserve replacement.

You look at those two in combination and then the phasing to arrive at that number.

Is that perhaps clearer?

Yes.

Yes, sorry, I was keeping track, don't worry Fred, we've learned.

Three percent production growth.

Yes, I think ...

It's an old number.

I think Fred, I think what we're saying there is that the 3% reduction growth from it, which was related to capacity growth was window 2000, 2007, you don't hear me saying that today anymore.

And one of the things that we conclude is that we give you a feel as open, as transparent as possible, what we think is going to happen in the near term and where we think sort of new growth will come in, but we don't see it as another production promise.

We're not making a new promise on production, ultimately it's about the type of performance and looking at the overall value of the business.

It clearly indicates where we're going to be in 2004 and 2005 and we also indicate that we're back in growth mode seeing these things coming through thereafter, and that's where we are.

I think there is a point that especially in word value that Walter used at the end of that comment, you know, we are at the moment, selling some upstream profiteers, divesting of them, which doesn't do a thing for your number of barrels you're producing.

But we think they can be worth so much more to other people for particular reasons, and then we have great opportunities for recycling that capital into these major products and the like.

So it's an emphasis on value as well as volume growth.

I was going to take the gentleman there who would introduce himself.

Mike Mayer, Prudential Securities.

It's Mike.

I'm sure everybody has about 26 questions they want to ask, but I'll only ask one or two.

My first is regarding the financial impact of the re-categorization, it's pretty well known that Shell and other companies received a substantial reserve bonuses in Nigeria, relating to the booking of reserves.

Can you share with us what, what you have booked to earnings over the period in question and then say how much of that might have to be reversed or paid back to the Nigerian Government?

And also relating to financial impact, a bit of a pointed question, were bonuses paid to Shell Executives over the period in question related to excellent reserve replacement results that now appear to be no longer valid, and what action would the corporation take with respect to those?

I think Walter will deal with the Nigeria thing, which it was just a little bit different as you probably know Mike.

But let me deal with the bonus aspect.

The reserves replacement ratio has been on the scorecard in different forms for the expiration and product business for I guess seven or eight years later, it was never, even figured for more than about five or six percent of the total scorecard.

This has never been one of the key determinants of the scorecard, because at the top of the scorecard, you get the heavy influence of financial performance the return on capital employed et cetera, so it's always been rather modest and frankly, within the probable era with which you can measure a scorecard and the impact of an element like that, if I take that to group level, the impact is of reserves replacement ratio is actually negligible.

I hope that's a straight answer to that question.

Never was a big leaver in bonuses.

Walter, Nigeria?

Yes, Mike as you will appreciate, normally we don't disclose any details around commercial agreements in place, in particular countries, but it seems to be a well-known fact around MOU that was in place in Nigeria, between '91 and '99, that there was an element around reserves, totally separate from what we're talking about here, it was a far broader definition around reserves.

We have been in negotiations with the government around some of the disputes around for quite a few years and we continue to do so, but ultimately that's not any detail we would like to disclose and it is totally separate from the issue we're talking about here.

Please supplementary.

You know, I'm confused how it could be totally separate if you in fact booked reserves in Nigeria and in fact, received a cash payment or reduction in royalties or taxes from the Nigerian government and now you move those reserves.

Why isn't there a financial consequence?

Well the, I mean there are, goat knows how many definitions there are around reserves.

In Nigeria there was a far broader definition around reserves and let's not forget that he said, oil is not gone.

The oil is still there.

There's still plan to develop these resources over time, it will, the pace will be slower and it will be later, but the oil is still there and given the definitions we have, there are two totally distinct issues out there and negotiations that have been going on for years.

And it was not booking on the basis of provide reserves.

That was not the link for the bonus.

IT related to what we would in our phraseology, terminology, call expectation reserves, which didn't even necessarily need the drill bit, could be, for example on 3D seismic.

I hope that gives you a bit of feeling for how it was based.

Thank you.

I'm going to be democratic and take a table at a time now.

There's one here.

Shall we take this table and then we'll consider one on the front here.

Bob Ping (ph) of UBS.

Follow Fred's precedence and ask three questions as well.

First of all, in your ongoing discussion with SEC and your own internal review process, can you give us some reasonable reassurance that there will be another shoe to drop on the proven reserve side, not the probable, but on the proven reserve side?

Are you totally comfortable that there's nothing out there that you worried about on the proven side.

Secondarily, I still don't have a good feel as far as to exactly what process, procedures, organizations have to put in place to give us some reassurance that you're going to minimize the chance of this type of event happening in the future?

Lastly, can you talk a little bit about capital expenditure program for upstream, given your shifting capital base, it seems like to me you're saying that your cap ex is going to increase over time, can you quantify that?

Is it going to be above $9 billion?

Give us some feel for that please.

Thank you.

Let me deal with the SEC in the first instance.

You could well imagine that when this came up, as I said, when I get the facts and do the right thing, on the 9th, we were already in touch with the SEC and we have been doing that in a totally cooperative and transparent fashion.

We've had meetings.

We've had exchanges and this process is ongoing now.

And we want to get that through that as expeditiously as we can.

And going to the specific question about the proven, whether there's a second shoe to drop, my big challenge to Walter and his organization was is this fit, because there was, you mentioned Nigeria and Oman and then the global rapid look that you had Walter, I mean I'll ask Walter here the question I asked in the privacy of our own offices, you know, is this it as far as you can ever know that, absolutely.

Yes, I think as I sort of alluded to, the number today is still the same as it was the 9th of January, and we've just completed sort of closing our books on 2003 and that's why we also told about the additions in 2003.

Was (inaudible) estimation always has in it inherent uncertainties and sort of a distant call surround it.

We have been very rigorous in our process, consistent approach, moving away of course from what we have in the past to the 35 for the separate operating units now rolling up to the five regional directors, five, actually going to approaches from a regional level, (inaudible) regional technical director as to regional CFO signs off on the numbers as we rolled it up to what we call our reserve committee that has had it by our ENV and CFOs.

So if going through this rigorous process those controls have had, are now in place and that's how we came up with the numbers.

And Judy (ph) you may want to add a comment about ...

Group ...

Group internal audit.

Right, as Walter said, he's increased a lot of the controls within the business, because reserves have such a large technical judgment associated with them, the process and the main part of the controls are in line.

However, what we've done is we've added on top of that, complete reviews with the group audit committee with the CMD, we've increased the number of reserve auditors and we moved that group from EP into the group internal audit area, so that you will have a check from outside of the business.

Thank you.

Judy, (inaudible).

Use the microphone.

There's another

Sorry.

What's the likelihood of hiring external auditors?

Well right now we feel that that this upgrade will significantly improve the controls and will give us enough protection.

Our external auditors now follow very limited procedures associated with reserves, because they're not really part of the financial statements.

They're supplemental to, but not part of the financial statements.

And we're going to watch it, the CMD is going to watch it and to see if we need something further, we'll certainly consider it, but right now we think this step change, both at the group level, and in the business that Walter's doing with his new organization, will be sufficient.

And we know of course, that the SEC themselves are asking themselves the questions about those sort of issues and we'll be following that rather closely.

Right.

Now coming to your last point, on the level of cap ex, and we're more and more talking about cap ex for the upstream and cooperating both the classic EMP and then the, particularly the LNG part of gas and power, and I think out of the overall $13 billion group level, you're seeing strong emphasis on the upstream, what's the latest number you guys are looking at?

It's 10 billion, we said on the presentation, combined 10 billion, extreme gas and power, as you know, many of these projects were joined at the hip why you told gas to liquid selling deep projects, it's very important to look at the facility as we move the business forward, also because it brings with it added sort of earnings in the process going forward.

That's 10 out of the 13?

Is that 10 to be compared with the 9.2?

Ten billion comparable to the 9.2 that you've released for 2003, if not what's the apples to apples comparison there?

Be careful, because I think the 9.2 related to ENP and there was another $1 billion LNG, and that's right Malcolm?

Billion on LNG, yes.

Yes, billion on LNG, so it was actually 10.2 in 2003.

That's the sort of level, after the 13 that we're looking at.

We're going to go to the gentleman next to you Paul.

Thank you.

Paul Chang, Lehman Brothers.

Phil, based on just what Walter and Judy described in terms of the new processes, it doesn't look like ...

About the ...

The new processes, in terms of the reserve book (inaudible), it doesn't look like the most senior management is directly involved.

I think a lot of your competitors such as (inaudible) or (inaudible) or Conaco Phillips, when we come to a certain scale of the project, in terms of the project's engine, as well as the reserve booking, I think the motion the management may have a bit more intimate involvement on that.

Wondering, in your current system, we're up to a certain scale of the project, whether it's a $1 billion, $500 million, when you're going to send (inaudible), when you're going to decide to (inaudible), will that go for a directly (inaudible) presently by you or by your senior management team to make sure everything is under control.

Let me sep, they're not separate, but let me address the two aspects, first projects themselves and then the reserves booking process.

Projects up to $100 million come to CMD as we're sitting here, projects more than $100 million Shell share go to the (inaudible).

That's the rule.

If you have a project that costs 90 million, and then you find you've got a cost overrun, and it goes up to 101, it goes all the way to the top.

That's the rule that catches incrementalism.

And they are absolutely rigorously applied, and it's not a happy process, but people have to know that that's how it's going to work.

Now with regard to reserves booking, Walter described the process that is now in place and that culminates in him in the ENP business, but you saw also in that chart that he showed, this group overlay, that will also go to the CMD, all right, so that comes to me annually for the annual report, and it also goes to the group audit committee.

I think we've put approaches in place, sufficient that I'm satisfied that we prevent this happening again.

All if I may come to the front here, coming back in a moment.

Thank you.

It's Paul Sanky (ph) at Deutsche Bank.

You mentioned in terms of your normalized planning assumptions that you're essentially dropping that.

Do you now have a new outlook for returns or some sort of external target for returns that we can track you against, or should we also consider that to have gone with the normalized planning assumption, number one.

Number two, in terms of the cash cycle, you are talking about less than $20 oil now.

Is that an increase, a de facto increase in your planning assumption from perhaps the 16 that you're previously talking about and any observations that you might have further to the cap ex that Paul talked about.

And finally, could you talk about the U.S. downstream target that you had for full year 2004 and reiterate where we are with that one please?

Thank you.

That's all I've got.

That's all that's into one question.

Normalization, I though Judy was rather crisp and clear about that.

It really has been overtaken by events.

And to a certain point, if you're in that situation, you better substitute it with something that sensible.

Now as Judy said, why don't you go for that in a bit more detail if you would Judy?

Right, well I think going forward, looking at competitive results is going to be very important.

And if I think about competitive results in some ways, it does normalize across the path, because it's measuring everyone in current conditions.

And to be able to perform in all types of environments I think is a very important thing in our industry.

The other thing it picks up is different choices in terms of strategy.

So, you know, as you track that, you'll be able to see how our strategies come to fruition vis-à-vis others.

And at the end of the day, success in the sector I think is going to be being towards the top of that pack, growing your capital base with excellent new opportunities, as we have in the funnel.

And that is, in combination, is going to increase the cash flow and keep the trajectory going.

But you're right with your second question, Paul, but you started with a normalization, which we've always felt is a surrogate for cash and then your second question is about cash, and it's cash neutrality that conservative conditions, and thus we say it's less than $20 a barrel.

Now, I think we probably fell into a bit of a trap, perhaps lead you into it too, to some extent, with the use of a single number oil price.

For a long time, we've always used a grid.

And we use a low price, which we want to test the resilience of the things we do, especially very big things, because then you can really lose your shirt.

We use a mid price, base price, which on our grid, if anything tends to be a little conservative, so as to give you a buffer, because a lot of people in the organization use this.

And they're sometimes minded to play the system as you can imagine human nature being what it is.

But then we want to test at a higher price.

So we now have a grid that goes from the teens well into the 20's, and we've moved away from saying one price, because imagine the projects, a project with a 10-year payout is very different from a project that's a one or two-year payout where you can tolerate you know, if you're in a higher price environment, you tolerate this that you do it, it delivers quickly, we would be forced to do that with something with a 10-year payout.

So we're trying to tell it how it is.

We have our grid.

We're not talking the details of that grid, but it goes from the teens into the 20's and then when we talk about, look at our cash, when we say conservative conditions, we're making the point that it's less than $20 a barrel.

The last 10, 15 years has averaged a $20 brand oil price.

The last five years has averaged probably closer to $25 a barrel.

So we think that is pretty conservative and that something that we can use to manage the total group portfolio as we go forward.

U.S. downstream, targets, Rob (ph).

Yes, been to this audience and you ask a number of times that the progress on the U.S. downstream and what our plans were.

If you remember way back Shell was not happy with the joint venture with Texaco and when the opportunity was available to actually buy them out, you had a choice.

For us it was very evident that we couldn't continue to operate the way we were, so our choice was to buy Texaco at the same time and I think at a reasonable price.

We then set in these targets that are basically based on competitive performance, Exxon, and others in the market were doing much better than the joint venture was doing at the time.

And that got translated into some firm targets through our normalization et cetera.

And like the rest of the group, we tried to drop, we're dropping a normalized environment and we're basically saying that we don't get to the same place, if we get to the same type of competitive performance either in return or as I, in the dollars per barrel.

Now so far so good.

I mean this has been one of the best years in the U.S.

As I said earlier, we've cut our cost, our overhead costs by about 30%.

In terms of the retail system, they're doing the more than a massive regrind the exercise, which now has 4,000 (inaudible) stations, and the Texaco stations.

In the process, we've done away with 22,000 of them that were not profitable.

And we continue to offer the Shell to shell conversions.

On the refinery side of, I've told the story, we've got room to go and that's an upside.

And finally we also, a fourth point that we never addressed really at the outset a couple years ago, was our portfolio and I think by the time we're done this year, we probably had shed about $1 billion in assets, between retail and pipelines in the refineries.

And you'll see time and time again, we talk about what we aspire to is competitive performance at the group level, Judy's charts, the upstream earnings that chart that you saw, the chart that Rob had for our global earnings per barrel.

And we think that's going to be the most transparent thing that you see how we do it, relative to the competition.

I'm going to go to the middle table if I may, exercise a little democracy.

Yes, Al Anton, Carl, Forsheimer and Company.

I have a question on reserves and a question on the management and information flow in the upstream organization.

The question on reserves is I can understand sort of what happened in Nigeria and some of the more mature areas.

I have a problem with Gorgon (ph) in that the time that you booked reserves, I know you didn't have a sales contact, but also there was some dispute about where the gas could be landed and whether you get permission to and it in what's basically a nature preserve of some kind.

At the time I think you had three partners.

I think Texaco and Chevron were separate and Mobile was the partner, it's now Exxon Mobile and one of those booked reserves.

I would wonder in the case of large projects, wouldn't you talk to you partners about reserve bookings to make sure that you're all on an even playing field.

My question about the production organization also sounds somewhat critical, I'm afraid, going back 10 or 12 years, Shell was by far the leader in the Deepwater Gulf of Mexico, and you had many of the early discoveries.

And since that time you've been eclipsed by BP and others.

There's some criticism that you tended to look at Gulf of Mexico in a more static sense and your competitors were looking for new plays and new prospects and were able to beat you out in that way.

Also some of them took information about the deepwater in the Gulf of Mexico and applied it to places like Angola in a much more concentrated way that Shell did.

And in fact, if you'll, Angola, a non-OPEC country where you don't have to worry about production controls, you find that BP and ToTal (ph) and Exxon, you know, have major discoveries in shelf had to sacrifice, surrender one block and is relatively minor player.

Are there better procedures, information controls that could have enable Shell to not only maintain its position in the deepwater Gulf of Mexico, but get into other deepwater areas like Angola the way your competitors did?

It was Al, wasn't it?

Yes.

Yes, Al, at, they may be critical questions, but I think very fair questions, if I might say.

Walter the Gorgon (ph).

Yes, I think Al, I mean, I think on the Gorgon (ph) story, ultimately we all know Gorgon is a world-class resource and therefore have confidence that it will find its place in the market.

I guess in 1997, based on our sort of knowledge around market opportunities and being leader in the Asia Pacific on LNG, somehow in the technical definition around insurgency, around the resource base, those people to the conclusion that reasonable certainty was reached and they booked the reserves.

Quite clearly today we would not make that judgment and that's why we re-categorized them.

I think the, that's just the reality of where we are.

Today the organization, try to explain, works quite differently.

For example, on the Gulf of Mexico, I think this person also said, a couple of years ago, indeed we were the absolutely, deepwater Gulf of Mexico, but we lost the (inaudible), (inaudible) with the (inaudible) place and that's just where we were.

I think the situation today, though I think it's different aging.

Yes, very much.

I think, as I currently look at our ability to see things and do things underneath the (inaudible), even in our sort of real (inaudible) basin, enormous amount of (AUDIO GAP), clearly we're very optimistic in the Eastern Gulf, very much optimistic about what you've (AUDIO GAP), Gulf of Mexico.

So yes we lost it in the Gulf of Mexico for a while.

We've learned from it and I think we're really feeling very confident going forward.

Yes, unfortunately I also have to agree as Phil said, that getting the knowledge of the deepwater Gulf of Mexico, our American organization across to the rest of the globe, will spar from our deal and it will link to some of the separation.

As you know Phil fix in his time, early '99, early '99 to solidly bring those together and until that time, it was a little bit yes, very interesting, but and it's sort of didn't quite happen.

So, which we're learning from that.

We just didn't have those linkages Al, thank goodness the exploration and production business and gas and power were globalized in '99 so that landing flowed across.

You mentioned Angola, perhaps I could just say about West Africa.

Angola's a sad story, because Shell actually made some discoveries I think that were in Block one, and we're very excited about them, chased them and whatever and they came to nothing.

And meanwhile, others who hadn't got that acreage were going off into the deeper water.

We tried, got the wrong block and to a large extent, missed out.

I'm pleased that we did so well in Nigeria, as we're saying with the not only the Bonga field, but Bonga West, isn't it, Walter (ph), Bosee (ph) and all those other fields in which we're - we have a place.

Maybe, Phillip (ph), I just made that because I want to make sure to give answer to all your questions.

It is not the normal practice, whether we like it or not, to distribute (ph) amongst partners what you do in terms of reserved bookings.

That is something people keep very close to the chest and there may be some stories out there, but it formally not something that is (inaudible) I just wanted to flag that out.

And the last thing I want to flag is, indeed, that (inaudible) mentioned on our exploration story, this is, of course, where we are currently with organization (inaudible) consolidated our resources and got the right critical mass in the right places.

We're far more adept (ph) in doing regional studies across the globe, taking one area to the other, and (inaudible) not just in the Gulf of Mexico but also other deepwater basins of the world we are extremely competitively positioned.

And some of these things given the sensitivities we can't talk too much about, but I absolutely feel convinced.

At the same time, I still wait for someone to actually take me over deepwater production in Gulf of Mexico, as well.

They may have stories, but let them do it first.

(inaudible) I'm going to go to the table there. (inaudible)

Good morning.

Tom Coleman with Moody's.

Two quick questions - would you verify I think what I heard you say was that to your best current knowledge there won't be any further proved reserve events.

And I'm just not sure whether that's what I heard or not.

And two, could you relate what happened in the 2003 recategorized reserve bookings that went into your bookings for 2003 - relate that to what it was and how it fits into the new way you're looking at your reserve booking practices and how it stacks up with - internally and with the SEC?

I think the short answer's to the first question, and I'm glad you used (inaudible) to the best of our knowledge.

The answer is, "Yes."

On 2003, Walter (ph)?

Yes, just so to be clear around it, I mean, we always - we live with uncertainty.

But in terms of 2003, in terms of volumes that were added that were recategorized when we looked at our end (ph) 2002 provisions, we mentioned that in a press release (inaudible) 80 million barrels associated with that.

One was linked to (inaudible) is the project that I mentioned that is moving forward.

And the other was around activities around supply of train (ph) four and five for Nigeria NLNG where you know we had firm contracts in place and that, then, allows us to book the reserves, which we didn't do earlier but we now feel is part of having a firm sales contract in place to book those reserves in 2003.

That's the same story if you know that they use in (inaudible) in terms of their (inaudible) mature reserves improved.

We only book those cash reserves at the length to their - to the LNG commitments that we had in place at the end of 2003.

Thank you.

Thank you, Tom (ph).

I'm going to come here to Mike (ph).

Was there another question there at the back also?

Mike Mayer (ph), Prudential: Maybe we'll give you a chance to give some good news.

There's a lot of rumors about the Shark wildcat (ph) well.

Has it reached target depth (ph)?

What was the total cost?

And, you know, can you give us any guidance on results there?

That would be question number one.

Question number two - in the downstream, it appears that the capital employed in the United States is on the order of $10 billion currently.

What is your objective for returns over the course of the next three to five years in the U.S. downstream related to that capital base?

And then my final question relates to the way Shell discloses its results in its supplementary disclosures on oil and gas producing activities.

The company does not give complete financial disclosures for the associated or equity companies, whereas - and they're substantial.

They're on the order of ...

Yes.

... (inaudible) to 10% of your reserves in production and earnings - about equal to your U.S. operations.

And that does not allow us to fully analyze those activities.

Does any of the reserve recategorization relate to equity companies?

If not, are you - are those reserves suspect at this point?

And finally, I would like to ask you to consider giving the full financial disclosures on those activities in the interest of transparency as most of your competitors do.

Thank you, Mike (ph).

Walter (ph), Shark (ph)?

Yes, unfortunately there was a bit of premature noise around Shark (ph), and I think we would normally not make any announcement on a well like that before we completed the full evaluation.

As you know, that is a very high-risk well in the shallow waters of the Gulf of Mexico in the deeper horizons (ph).

And I must admit I haven't checked the last couple of days, but the key issue there will be around producibility and it is still too early to say and to make any further announcements.

Mike (ph), I think it's very kindly not saying very much. (inaudible) Can we go to the $10 billion, Rob (ph), in the U.S. and the downstream?

Yes, you - certainly (inaudible) that figure is about right.

I also said that we're addressing our portfolio quite aggressively so some of that will disappear over time.

We remain with the - with the saying that we will go for competitive returns, and leave it at that.

If you think about the - again, the advantages of normalization and disadvantage of normalized returns, there is quite a bit of noise in there when you normalize for product prices or refining margins and retail margins and then you have things like heavy/light (ph) differentials moving all kinds of ways on you.

So, it was not and hasn't helped us to measure our business very well.

But in 2003 without the 188 million writedown on ...

2003 - that's a number that certainly is available.

It's 9.5% return in the downstream overall worldwide that was severely affected, of course, by exchange rates certainly in Europe and in the Far East to the degree of 2%-2.5%.

In the U.S., we reached the 5% level before the Bakersfield writedown.

As the manager of that business, what is your objective in terms of the return?

What are you targeting?

We basically are targeting to be as good as the competition is if not better.

What do you assess the competition's returns at?

Competitions returns are - you know what refined (ph) returns have been over time, but competition's return historically have been in that 8%-10% range.

I'm at least glad to see real progress in 2003 when Rob's (ph) business made in the U.S. - what? - $570 million.

Before the writedown, it was about ...

Before the writedown ...

... $550 million, which is quite a bit of money compared to (inaudible).

It's well on our way to the target that we used to have.

Thank you.

(inaudible) question, Michael (ph), (inaudible) companies - what we went through, of course, is a refuel (ph) for global resource portfolio wherever it sits.

So trying to be consistent across the globe on all our - on all our report (inaudible).

I guess we'll need to think a little bit more on your second question around what additional disclosure would be - would be helpful.

Are you saying that none of the reserve recategorization relates to associated companies?

You looked at all (inaudible) around the world, didn't you?

Looked at them all.

OK, OK, so it was included in the review?

Yes.

Yes, yes.

Thank you.

The gentleman here, and then I'll go to Mark Gilman again.

Al Silver (ph), Breen Murray (ph): Al Silver (ph), Breen Murray (ph) - my impression is that to accomplish production growth in the future, you have to rely more and more on capital intensive projects like gas to liquids or (inaudible).

And currently, your upstream earnings are very much bootstrapped by legacy positions in the North Sea or in the Gulf of Mexico.

Going forward, with increasing DDNA (ph) per barrel of production and with the higher lifting costs or production costs per incremental barrel, is this a threat to your profit margin in the upstream and do you come into a situation where you have to again look at acquisitions because the cost of acquiring reserves looks attractive in relation to building incremental reserves by investment?

Thank you.

I'll add a bit on acquisitions, but Walter (ph) - heartlands and new heartlands, I guess?

Yes, I mean, first of all, I don't think that Phil (ph) will probably say the same (inaudible) prices as they are would normally not be time for acquisitions.

And the cheapest way, of course, we continue to find is to add profitable barrels is either through exploration or through building some of these (ph) positions by getting preferential access as we've shown to by (inaudible) of this world.

I think if you look at our overall portfolio, it's the mix of portfolio you have to look at.

We start looking at that - at Nigeria deepwater that is coming in, there are higher profit margins than we have on shore in Nigeria.

And at the same time, we're still seeing a lot of growth potential in a lot of our existing heartlands we will continue to see with improvements and efficiency drives that we have that will continue to be the key cash generators for the future.

We know (inaudible) we initially go and establish these positions like (inaudible) and the (inaudible) of the world (inaudible) cost structure is pretty heavy, but the reason for getting associated with these (inaudible) to look at the cost of the incremental barrels that you can develop at later stages.

And that's why we like to get into those major resources and ultimately make the choices about some of the areas we're quite happy to get out of because they're going to get you that running room that ultimately can get the margin for the future.

And that's what we're looking at very carefully as we now (inaudible) sort of look at on a global basis where we're positioning ourselves.

I joined the company as a seismologist and did some economics at one stage, and you go to the places like Brunai (ph) - the old legacies of Shell, and you could have that wonderful marginal economics.

But these assets eventually - I mean they're still going strong, but they get older and tireder.

And the future of Shell - expression and production of gas and power - is going to be about getting these new legacy possessions that last for decades.

And it's - once they're in there - and you're right, it's expensive to get that position, but once they're there and the infrastructure's in, you have the basis on which to operate those marginal economics again and they last for decades - generations.

And that's why I'm so thrilled about the performance of Shell in this last couple of years.

And what's coming through now is we're seeing a handful of things that when I joined the company 30 years ago we were proud of and we want to be proud of those things, you know.

Shell ought to be a great place for young people to be joining today, and I think in those businesses, it really is.

Mark Gilman?

Thank you, Al (ph).

Phil (ph), thanks.

I have a production question, and just so Jeroen doesn't feel left out, a chemical question.

On the production side, Walter (ph), when you were going through the '05 outlook, you very quickly alluded to 100,000 barrel equivalent per day effect that just went right by me, and I was hoping you could clarify it.

As a part of the '05 outlook, I for one certainly appreciate the elimination of a reference environment for the purposes of characterizing production.

Unfortunately it doesn't eliminate the entitlement sensitivity to prices, and at a time where we're staring at $33, your comment in the context of flat '04 - down '05, does that assume that the price remains at the average '03 level in both periods?

My question for Jeroen - "When is enough enough on Bizel (ph) and how much is the remaining investment?"

Yes, Mark Gilman, I'll try to answer that.

I referred to this special PSC (ph) that as of 2004, which has a negative impact and then in our '05 volume of about 100,000 barrels a day Shell share (ph).

I don't go given the sensitivities around it more specific saying that it's in the other Eastern hemisphere.

And the other thing I wanted to mention on the whole issue of production outlook, if you'd look at the production outlook as represented in terms of our best estimate, it's basically consistent with a comment that Phil (ph) made around sort of (inaudible) below $20.

If you look at production outlook in the chart that I showed, that does not assume 2003 prices of $30 whatever you assume going forward.

It does not.

(inaudible)

I think, Mark Gilman - sorry, you may not have - if you speak up, Walter (ph) - he was giving the answer specifically to that question, Mark Gilman.

If I talk '03 and '04 flat, then in the end of the day what relative flat means assuming the same price assumption.

I think what I say when you talk looking forward in terms of growth forward and in terms of how to look at these numbers, you should look at the number that is close for (ph) $20 to $20 a barrel if you see their (ph) long-term forward projection.

OK, thanks, Mark Gilman.

I think we've just got time perhaps for (inaudible) Dr. Freud was encouraging.

(inaudible) if you go back in the last 10 years (inaudible) and if in fact over the last 10 years it is a beautiful company where you go to their research and ideas and the products they are developed, but if you look as a shareholder to it, it is basically a lot of disappointment and real deep disappointments.

And even now if you (inaudible) people still expect (inaudible) industry will grow.

If you see (inaudible) in Bizel (ph) for the (inaudible) we are only in 50% shareholder there is this is (inaudible) about plant closures taking huge cost take out reducing man power because the first priority is to make sure that you don't lose cash because (inaudible) no need to put new cash into the company.

That is the worst thing. (inaudible) you can use as long as you don't bring new cash to the company you have to figure it out why is that you are disappointed and that what would it be for the future because you have not only to look at Bizel (ph) (inaudible) for one step upstream - I'm talking chemicals now that are (inaudible).

So, whatever you can do with Bizel (ph), you have to think what means it for your total portfolio, and then you go from Bizel (ph) to, let's say, the Crackers (ph).

And (inaudible) are, again, linked with the refineries.

So, basically you have to think through the complete strategy.

We took an impairment.

We are not very open what is left in the books, but I think it is very conservative.

We do the basically Bizel (ph) is accounting in euros, and if you take a figure which is more than 1 billion and not less than 2 billion - somewhere in the middle, maybe you are pretty close.

(inaudible)

Last question?

If not, thank you very much for the time spent.

We'll be around if you want any personal questions.

Thank you.

Thank you.

Thank you.