殼牌 (SHEL) 2005 Q1 法說會逐字稿

Welcome to the Royal Dutch/Shell Q1 2005 results conference call on Thursday, the 28th of April, 2005.

Throughout today's recorded presentation, all participants will be in a listen-only mode.

After the presentation, there will be an opportunity to ask questions. (Operator Instructions).

I will now hand the conference over to Mr. David Lawrence.

Please go ahead, sir.

Hello, and welcome to the first-quarter results teleconference and webcast.

I am David Lawrence, Executive VP-Investor Relations, and with me today is Peter Voser, our Chief Financial Officer, who will lead the call.

Before we start, as we always do, I'd like to refer you to the disclaimer, which you should have at the beginning of the slide pack.

I urge you to take a moment to read it.

We will begin today with a short presentation providing an overview of our results and then go directly into the questions and answers.

Let me now turn this over to Peter.

Thanks, Dave, and good afternoon to everybody.

When we reported out on our full-year results in February, we said we would focus on three things -- implementing our strategy of more upstream and profitable downstream, raising the performance bar and delivering one Company with unification of Royal Dutch and Shell Transport.

As you will see in our Q1 results, we have made good progress in all these areas.

Go to chart one.

We are delivering on fundamentals with very strong performance across all our businesses.

In exploration and production, our production for the first quarter was at the higher end of our expectations.

Exploration results in the quarter, both with the drill bit and through access to acreage, are encouraging.

We continue to grow our leading LNG position with volume growths of 15%, by continuing to expand our portfolio through new integrated gas projects recently in Qatar and Gorgon.

The downstream continues to provide strong profitability, cash generation and operational performance in our products and chemicals.

But folio reshaping is progressing.

Its first-quarter investments of 2.8 billion, mainly in upstream, and divestment proceeds of some $1.1 billion along with the announced sale of InterGen last week.

Next slide.

Our financial performance is very strong.

As you review the financial statements, please note that the results are shown under IFRS, including comparatives with the first quarter last year. (technical difficulty)

Divestment proceeds for the quarter were $1.1 billion, bringing us well on our way towards our guidance of 12 to 15 billion for the year 2004 to 2006.

Most of our divestments were in oil products, as well as some mature fields in the North Sea.

Our CapEx for the quarter was 2.8 billion, excluding the minority share of Sakhalin.

Consistent with our strategy, 2.3 billion was invested in EP and gas and power.

Next slide.

Breaking down the earnings a bit more, every business made significant contributions.

EP earnings were supported by an increase in liquids realization of 44% and gas realization outside the U.S. of 26%, offset by lower volumes and somewhat higher costs.

GP earnings of 476 million include the gains of 48 million mainly from divestments.

Last year, there were 166 million such gains.

Excluding those, underlying GP earnings were 17% higher, reflecting higher LNG prices and continued volume growth from Nigeria, Malaysia and Australia.

Oil product earnings increased almost 60%, benefiting from higher refining market in the U.S. and Asia and strong operating performance offset by weak market conditions for retail.

Chemicals operational earnings tripled to $663 million, excluding the impairment in Basell of 214 million.

The increase reflected higher operating rates of our manufacturing assets and higher margins.

Earnings in other industry segments, corporate and minority interests improved $89 million versus a year ago, with lower net interest expenses as a major contributor.

Go to exploration and production in the next slide.

In EP, earnings excluding net charges and gains increased by 22% versus first-quarter 2004.

This reflects the increase in oil and gas realization offset by somewhat higher costs and depreciation.

In line with previous guidance, costs increased by about $1 a barrel versus a year ago, and we continue to see industry cost pressure in the business resulting from higher service and commodity costs and the weakness of the dollar.

We of course at the same time benefit from higher price realizations.

The impact of increased depreciation on earnings relative to a year ago was about $200 million, reflecting higher expected asset retirement costs, production mix as new projects come online and reserve situations.

We expect that future quarters will also be impacted by higher depreciation rates.

Net adjusted cash flow was 4.6 billion for the quarter.

Let's turn to production.

Production at over 3.8 million barrels of oil equivalents was at the higher end of our expected range for this quarter.

And it reflected the ramp-up of new production exceeding declines in mature fields.

Ill performance in the North Sea impacted production.

On the chart, a decline shown by other is primarily the impact of the end of a gas contract in the Middle East.

Excluding the end of this contract, as well as divestments, production was 2% lower than a year ago.

Let's turn to exploration progress, next chart.

The first quarter was encouraging for exploration.

We drilled successful wells in Nigeria, Norway, in the USA, Malaysia, in Holland, the UK and Oman, though we will have to wait on completion of evaluation and government department approvals before we can give more definitive information.

We added exploration acreage in the Gulf of Mexico, Alaska Canada, Algeria and Egypt.

So an encouraging start for EP, which progressed filling the resource funnel and production at the higher end of the range, though there are industry pressures on costs.

We're very focused on managing these cost pressures and operational performance.

Now let's move to GP, the next chart.

The first quarter, we continued to build our industry-leading position in LNG.

In gas and power, underlying earnings were up 17% on comparable Q1 '04 results, excluding gains from divestments.

Our net adjusted cash flow for the quarter was $400 million.

Earnings in cash benefited from higher LNG prices and volumes offset by dividend phasing.

We achieved record LNG equity sales with volumes up 15% to 2.9 million tons, following the ramp-up of the Northwest Shell's trade for (ph) and continued Malaysia Tiga buildup.

We expect sales volumes to decline in the second quarter, reflecting normal offtake seasonality and plant shutdown activity before building back up through the end of the year, in line with our 14% average annual increase over the period 2004 to '08.

We continued to add to our LNG position with the signing of the Qatargas 4 heads of agreement and the memorandum of understanding for the Greenfield Olokola LNG project in Nigeria, with two trains of 5 million tons per annum.

With the integration of interest in the greater Gorgon area, Shell will hold a 25% interest in the joint venture to construct two LNG trains.

We received approval for our Gulf Landing offshore LNG terminal in the U.S.

Gulf of Mexico and announced a development agreement for an LNG terminal in Sicily, Italy.

Finally, both Sakhalin 2 and Malaysia Tiga LNG projects were awarded long-term supply contracts to Korea.

Our efforts in gas and power to reshape the portfolio have progressed with the announced sale of InterGen and 10 of its power plants for 1.75 billion.

Transaction is expected to close mid-'05.

Let me turn to our products, the next slide.

Lansing (ph) had another highly profitable quarter.

In oil products, CCS earnings of almost 1.9 billion were up 59%.

Unit earnings of 280 per barrel in the quarter are very strong.

Net adjusted cash flow for the quarter was $3.1 billion.

Excluding the current cost of supply adjustment, oil products earnings were up almost 94% at over $3 billion.

We continued with significant progress in our downstream efforts to reshape the portfolio, completing sales in Romania, the Canaries, the Caribbean, the LPG business in Portugal and the Bakersfield refinery in California, all of this with total proceeds of more than three-quarters of $1 billion.

Our focus on operational performance positioned us to capture the upside from refining margins and the light heavy crude referentials, particularly in the U.S. and also middle distillate strengths in Europe.

Globally, refinery utilization was up over three points and in the U.S., unplanned downtime now declined to 4.3%.

General industry retail margins, particularly in the U.S., suffered due to the impact of rising product costs, but we managed to deliver good oil products results despite of this.

And at the end, building on our announced new strategy of shifting our portfolio to the East, we launched our retail joint venture with Sinopec in China, with more than 200 retail stations in operation by the end of the quarter.

And also entered into a JV with Shanghai Automotive Corporation to develop 600 lubricant sale and servicing outlets in China.

Let's turn to chemicals, next chart.

In chemicals, our focus on costs and operating performance is paying off.

High utilization rates allows chemicals to capture the benefits of integration and continued favorable market conditions.

Chemicals earnings, excluding Basell, tripled to $663 million.

Chemicals generated significant cash this quarter, with debt adjusted cash flow of $1.1 billion.

Regarding new projects in the portfolio, the Greenfield Nanhai petrochemicals complex in China is on track for commissioning at the end of this year on time and on budget.

Together, downstream oil products and chemicals had earnings of 2.3 billion and generated over $4 billion of cash.

Let me turn to the financial sides.

Next slide on cash generation.

At our Q4 results, I said my focus was on cash.

Delivering on the fundamentals across our businesses positioned us to capture the benefits of higher oil and gas prices, downstream margins and deliver more than 9.2 billion debt-adjusted cash flow.

On top of this, divestment proceeds added another 1.1 billion, so we generated more than 10 billion cash in the first quarter.

Gearing, including commitments such as operating leases and retirement benefits, lost 15.3%, so below our range -- target range of 20 to 25%.

By the end of the quarter, cash and cash equivalents were $8.9 billion.

We paid $4.6 billion in dividends and completed share buybacks of $0.5 billion out of our share buyback guidance of 3 to 5 billion for '05.

I'm going to close with a looking-ahead slide, which is the last one.

Looking ahead, we will continue to focus on delivering on our strategy of more upstream and profitable downstream, concentrating on delivering on the fundamentals across all of our businesses, including raising our operational performance and delivering our major projects.

We continue with reshaping our portfolio and have made progress towards our guidance for divestment proceeds of 12 to 15 for the period '04 to '06.

We are pleased with the recent progress on InterGen.

We announced our first quarterly dividend today.

First-quarter interim dividends, the second of four payments in '05, are EUR0.46 per share for RD and 4.55 pence per share for ST&T.

We're on track with the unification of Royal Dutch and Shell Transport in trading.

The relevant documentation is being finalized, and we expect the documentation for the proposal to be published in the second half of May, for the transaction to be voted on at the June AGMs of -- on June 28, 2005, and for the transaction to complete in July '05.

Now, with that, thanks for listening.

I turned it back to Dave.

Thanks, Peter.

We will now open for questions, and I would ask that for fairness to all of our callers that you limit yourself to two questions, please.

Now, if I could have the first caller.

(Operator Instructions).

Jon Wright, Citigroup.

Peter, you've highlighted the strength of your cash flow, and clearly disposals are coming through very quickly and gearing levels are coming down.

I wonder if you could give us an idea of your thoughts of what to do with all this windfall cash?

Should we expect higher investment levels, perhaps more buybacks, or with acquisitions now taking place across the sector, is that on your mind as well?

John, thanks for the question.

As I've outlined earlier, I'm going to stick to my financial framework, which has the dividend as outlined, which is increasing with inflation and $15 billion of CapEx for the foreseeable future.

And we're not changing that guidance for the time being.

As I explained in earlier calls, you cannot just turn around overnight and spent 10 billion more.

You need resources, you need skills, etc.

And we're happy with the program we have in place for the capital expenditures side so far.

Then, the gearing level is below, given the cash flow we have, and the fourth one is, whatever is on the high oil price scenario, whatever its surface, will go back to the shareholders.

Now, I've clearly said in 2005, we are somewhat restricted by the unification.

I cannot buy back too many shares in the first half, given the closing periods which we have to stick to, despite the fact that we received an SEC waiver for buybacks.

So it's going to be back-end loaded and we are still in the 3 to 5 billion at this stage.

It is problematic to buy more back on a day than X shares and dollars, and hence there is technical limitation this year.

In 2006, I will stick to my framework that everything which is surplus goes back.

I still believe that you have on the acquisition question, that the organic growth performance and ease you can achieve, and the ease you can achieve by giving the cash back to the shareholders, is actually quite a tough one to beat with any acquisitions, given the multiples you have to pay at this stage.

So we will carefully look at that all the time, and for the time being, I don't see the acquisitions being better in that sense.

Mark Ianasi (ph), Merrill Lynch.

Peter, just a quick question.

Through the course of the quarter, we've seen a number of press reports concerning your position in Sakhalin and negotiations with Gasprom.

Can you make any comments on the status of discussions -- what exactly you're thinking of doing in terms of size of stake and maybe what other assets you could potentially be interested in in Russia?

Thanks, Mark.

I think I will stay away from this -- from the percentage discussion.

I think I give you the answer in such a way that we have always stated that we're interested in the Russian partner.

We have had continuous discussion with Gasprom on a potential swap, which would include Sakhalin on the one side and Zapo on the other side, which is a Siberian oilfield and exploration potential.

And these discussions are continuing, and I can't report anything more than that.

Neil McMahon, Sanford C. Bernstein & Company.

Two questions, the first one just on exploration.

I think Malcolm, last year or earlier this year, was very kind enough to give us your hit rate in terms of the number of Big Cat successes you had got out of your Big Cat exploration program, as well as the total volume of the roundabouts there -- your targeted 200 million at per exploration well.

So I was just wondering for an update on that, since you seem to be pretty bullish about it, your success in the first quarter.

And hopefully that doesn't require going into too much details about where the successes were.

And secondly, it looks like from your downstream activities, there has been a reasonably large drop in gasoline sales and diesel sales from the fourth quarter 2004.

I'm just wondering if you're seeing any weakness there in terms of the demand for those products.

Thanks.

Thanks, Neil.

On the first one, yes, Malcolm has given these numbers, and we will be giving these numbers as soon as we have got the necessary clarifications and results out of our expectations.

As we have just done one quarter, it is really a bit early to actually pass that on to you.

I think a Big Cat, if I heard you correctly, you mentioned 2M (ph), but actually we're recalling is 100 million on the Big Cat.

So just correct us down to 100.

We have very -- a good start into the year.

We will further clarify that throughout the year once we have more results, and we will inform accordingly and let you know exactly, again, how many Big Cats we have found, etc., etc.

But it is just a little bit too premature to give you more details.

The second question, on the downstream, I think I tackled the demand in a more general way.

And that would apply for those products as well.

We have seen some slowing down of the demand, but actually not as much as you would expect, given the high oil prices.

I think we have seen some price -- some margin pressure on the retail business, as I have reported.

On the volume, we do exclude, actually, the divestments we've done.

We're slightly down compared to last year in volume terms, but that actually in market year terms, pretty much on the same level.

So that would point towards a slight slowing down in the market.

But at this stage, I wouldn't say this is a rather bigger slowdown.

Just a follow-up.

I'm pretty sure, and you can correct me if I'm wrong, that Malcolm did say that the Big Cats were 200 million barrel growth, and maybe you're thinking about a 100 million barrel net number.

And maybe you could just indicate where you're seeing the slowdown in terms of demand?

I'm pretty sure it is 100, but I will reconfirm that with Malcolm and we will get back to you.

But maybe Dave has something to say.

Yes, it is 100 million Shell share, Neil, that's the guidance.

Yes, that's what I thought was.

And just in terms of where do you -- where were you seeing that slowdown in demand in downstream products?

You see it, I think, in two areas; there is some of -- in Europe, you see some of it, and to a lesser extent in some parts of the United States as well.

Bert van Hoogenhuyze, Effectenbank Stroeve.

Two questions.

You took another impairment for Basell.

I don't see quite see why you take it sort of in bits and pieces and not impaired as completely last year.

And as a corollary to that, should we expect another impairment before the sale is concluded?

My second question was to exploration expense -- quite some lower in the first quarter.

Was this a sort of a quirk of a figure, or should we see some recovery of that in the coming quarters?

Thanks.

On the Basell question, I think you -- what you do is reflect the carrying value at the end of the quarter, and you take your impairment accordingly.

And you take it, obviously, also in view on where you see that you are in terms of your advanced negotiations.

So, from that point, if you -- that's how you have acted, we've said at the end of the year, we're progressing with the negotiations.

We are now saying that we are in advanced negotiations, so I guess we're getting to a rather firmer number, as you can hear out of the words.

But you can only impair to what you have in your books, in that sense, and what you see as your carrying value.

And that's what we have done.

On the exploration side, I think we are staying with the guidance for the year, which is $1.5 billion.

You can get within the quarter some movements from that point if you -- but you can safely assume that we will spend the 1.5 billion during the year, and hence, that's what we should take into account.

David Klein (ph), Exane BNP Paribas:

A question about oil production during the quarter.

You reported substantial declines in most regions.

I wonder if you can just talk through the drivers of those declines on a region-by-region basis.

Okay.

I give you first some general comments and then some regional comment as well.

I think in general, as I've said, we are above the expectations and at the higher end of the range for oil and gas combined.

So we're also in the range for oil, so in accordance to our expectations.

You're having actually throughout the quarter on a total basis our new fields, as the graph has also shown, and the ramp-up production at the new fields has actually outperformed the decline.

If I go region by region, typically in the U.S. in the Gulf of Mexico, you see decline rates, which can go up to 15%.

In the North Sea, we have normally 3 to 5%.

On the worldwide basis you're talking about 6 to 8%.

So that's why you're seeing they're affecting oil and gas in a different way, but they are in line with our expectations.

And taking all the divestments out and the end of the gas contract in the Middle East, we're on a combined basis 2% down, and that's in line with our expectations.

Neil Perry, Morgan Stanley.

Two questions, one is on the dividend progression.

You've just declared your first quarterly dividend.

What's your policy going to be on the way you pay this?

You used to pay a smaller dividend in the first half and then a bigger one in the second half.

Are you now going for four relatively equal ones, or how is that going to progress?

And secondly, you talk about gearing, and the gearing level including off-balance sheet liabilities and so on.

Some of your disposals -- InterGen, Basell, and possibly the LPG business -- have some off-balance sheet debt associated with them.

Can you just tell us what the impact on gearing is of those disposals, as in not just the equity value, but also the amount that you're going to be taking out from your gearing calculation as you do those disposals.

On the first one, let me put it this way.

I think you can expect that we're going to try to have them pretty equal in the quarters.

But I have to state I maintain the flexibility in my hands to change when it is needed.

But you can take it for granted that we will try to aim for equal portions.

On the gearing side, I would not see that it has a big impact in the sense of the total number including off-balance sheet.

It has mainly an impact on the capital employed and not actually on the debt side.

We're accounting for InterGen and Basell on an associated basis.

So it's not going to be material in that sense.

So you'll not see a big movement there.

Mark Gilman, The Benchmark Company.

Two questions if I could.

First, in spite of the comments, I guess I'm a little bit disappointed in the gas and power earnings in light of the volume increase and the rather obvious increase in price realizations year-over-year.

And I'm wondering whether this might have to do with the comment about lower dividend payments.

Could you clarify that a little bit?

Mark, good morning.

I will do.

I think you are spot-on.

We are benefiting from the volume but also from the increase in prices, etc.

But we have the rephasing from the dividend side, last year included a dividend which this quarter didn't include, and that's the explanation.

And that dividend was attributable to Malaysia or Oman?

It was one in the East, actually -- yes, it is Malaysia.

My second question has to do with this gas contract in the Middle East and the termination of it.

Is this something different than the 100,000 equivalent a day impact that has been discussed previously relating to a production sharing contract, or is it over and above that?

No, it's exactly the one you mentioned.

It's 100,000.

It's relatively low margin.

That's the one we announced already.

I think it was on the third of February or so, we mentioned it, and that's exactly the same.

So there is nothing above that.

Tim Whitaker (ph), Lehman Brothers.

Could you give more explanation on these North Sea operational difficulties?

Clearly, they were a significant factor, as shown on your chart.

And secondly, could you comment on whether you expect any material change in costs in Nigeria following the recent government bill to lift local content to 45% by '06 and 70% by 2010?

North Sea, we had various smaller shutdowns in that sense of some fields which have contributed to what we call -- or what we have explained in that slide.

So nothing too big of a concern.

We're just dealing with these operational issues.

On the costs side in Nigeria, I think the answer is I wouldn't expect this to be a major issue at this stage.

But it is a little bit early to say, and we're watching this situation and we will revert back as soon as we have vertical clarity.

But the expectation at the moment is not seen as being too material for us.

On the first question, I'm not sure you gave very much more detail.

Could you explain what the problems were, and I know some of your partners have mentioned some fields, for example, sheer (ph) water.

Maybe you could say the major fields, what the problems were and whether they are now cleared?

Yes, I can do that.

That's not a problem.

I can confirm, obviously, that we had sheer water as well.

I think we had some in Brent and Gannett and then I would also mention Nelson, and that's it.

And were there any specific reasons -- I know that they (multiple speakers) sold?

No.

No.

But they are solved and they are producing no specific technical reasons in that sense.

These were operational issues and nothing where you can actually build a common seam out of it.

Colin Smith, Credit Suisse First Boston.

There's been a few things on the news wires suggesting that you may be at risk of losing one of your fields in Block 6, where the contract was recently extended in Oman.

Can you comment on that?

And secondly, can you give us an update on when you expect Bonga to start up?

I take the second one first.

Bonga, we said in the third quarter, that's still on.

I think it's -- I would be saying now a little bit towards the end of the quarter, in that sense.

But still on track for the third quarter.

In terms of the Oman one, we can confirm that we are, as a shareholder in PDO, we are in discussion with the government of Oman on this particular field you have actually mentioned.

Let me just give you some other backgrounds as well.

We're operating more than 100 fields on behalf of production in the PDO area.

It is absolutely normal that you have a plan of how you are going to relinquish acreage in the various -- in a 40 years concession, in that sense.

We're operating more than 90% of the Oman's liquid production.

And as you have rightly said, we have just achieved a 40 years concession.

So we're just studying at the moment how we can better explore that particular field, together with the Omani government.

And as the name has been mentioned in the press release, Occidental is involved in that.

And as soon as we have further clarity on that, we will revert back to the market.

But this is normal under a concession contract, that you do analyze areas or acreages you want to or you should to -- I can't say the word anymore -- relinquished and it needs both parties, actually, to agree with that.

John Rigby, UBS:

Peter, you spoke about your CapEx number being about 15 billion for the foreseeable future.

But I think you've acknowledged in the past production costs under inflation pressure.

What are the assumptions that are -- surround that CapEx number, and how certain are you that it's relatively robust in the context of the current market?

As we have said, we're not changing the guidance.

We have increased it last year, and clearly we see, actually, two pressure points at this stage.

One is related to the weaker dollar, and that's always difficult to forecast.

We have taken some weakening into account.

We'll see how the year actually progresses on that one.

Then there is a clear halting or heating up, in that sense, of the EPC market.

There's a lot of construction, etc., going on, and that has a certain impact.

And also, the raw materials, obviously, have increased, particularly, as well.

So we're watching that.

We are reviewing our costs on a constant basis.

So far we are okay with our $15 billion guidelines.

We will see how -- what the rest of the year will bring in terms of further raw material increases or tariff increases on the EPC side and the weakening -- continued weakening of the dollar.

And then we will revert back if there's anything more to say.

So far, so good.

We're managing within the $15 billion.

(Operator Instructions).

Angus McPhail, ING.

A quick question on gas and power.

I notice that your USA earnings are still in the red.

Is that connected with your trading operations there, or is it more to do with the retention of U.S. power assets from InterGen?

No, it has to do with our operations, which are in coral (ph) in the United States.

Thanks.

Any others?

Mark Gilman, The Benchmark Company.

Guys, is InterGen treated as a discontinued operation in this quarter?

And if not, why not?

It is not treated as discontinued because we are not under IFRS rules.

We're not selling the whole of InterGen yet.

It's only 10 plants out of the whole.

We still have plants in the United States territory and one in Colombia.

So we will then have a look at that later on in the year.

Peter, can you give us an idea of the contribution one way or the other of InterGen to the results in the quarter?

I think I would only do it in such a way, Mark, that is it is not material in the GP results.

Are there any other questions, please?

William Farrah (ph), W.H.

Reeves & Co.

Two separate questions, one in response to a comment that was made earlier period of varying possibly the quarterly dividend rate.

What would be the thought process behind not maintaining a perfectly stable quarterly dividend rate unless or until it would be appropriate to raise it, I assume, as opposed to decrease it?

Secondly, unrelated, and a comment regarding costs;

I believe the comment was that costs have risen approximately $1 a barrel.

Was that in reference to year-over-year changes, and did that include or exclude the change in depreciation charges?

Thank you very much.

I think on the dividends, to be frank and honest, at this stage I can't give you a reason when we would apply this.

But I think it's just normal and good practice that a guidance is given, but management in dividends actually would maintain the right to change it.

It can go upwards and downwards, as you correctly say.

But I think you can go or take it as pretty stable.

On the cost side, the $1 is on a year-on-year basis.

That's correct, so it's reflecting the cost increase of the year.

And the depreciation will be excluded, not included in that.

Could you identify any one or two aspects of the cost change that might either be troubling and continuing, or something that you have perhaps reined in, so that we won't expect a further increase in the acceleration of costs?

Yes, I think I just said that in the answer before.

I think we see continuous pressure in the markets, and I can't take that away from the industry at this stage, which is really the BPC contractor area has increased costs, for example, drilling is on the rise.

Rigs are on the rise.

And we'll have to take that into account.

Now, a lot has been absorbed, but the market is still heating up in that sense.

So I think that's where I would leave it at from an example point of view.

I also mentioned the exchange rate.

Now, what we're doing internally, because obviously we're not just sitting here and doing nothing, we have reorganized the exploration and production organization and have gone to a global organization.

Also, for example, we have put into motion a global procurement approach, which gives us more purchasing power and hence gives us better rates.

So from that point of view, we're optimizing as much as we can, but the industry is facing such cost pressures and we will have to watch and manage that over the year.

Thank you very much for listening.

We appreciate your questions, and we look forward to talking to you again next quarter.

Thank you.

Thank you a lot.

Bye.

Thank you.

This concludes the Royal Dutch/Shell Q1 2005 results conference call.

Thank you for participating.