殼牌 (SHEL) 2014 Q4 法說會逐字稿

Welcome to the Royal Dutch Shell Q4 and full year results presentation.

There will be a presentation, followed by a question-and-answer session.

(Operator Instructions)

I would like to introduce the first speaker, Mr. Ben van Beurden.

Please go ahead, sir.

Thank you very much.

So good afternoon, ladies and gentlemen.

A very warm welcome to all of you.

I'm sure you're familiar by now with the disclaimer statement.

As we said, I'm looking forward to updating you on what we achieved in 2014 and what are our plans for the future.

We have Simon Henry here, as well.

He will talk to you a little bit more about the results and the plans in detail, as well.

Let me first of all start with the health and safety of our people and our neighbors and the environmental performance that remained top priorities for Shell.

As I've said many times before, I do believe that we have the right safety culture in the Company; and also this year, I can say that our track record is improving and I believe very competitive here.

At the same time, I also have to say that regrettably we had fatalities in 2014 and other safety incidents, so we will have to continue -- as a matter of fact, we will always have to continue -- with our safety drive, which we call at the Company Goal Zero, for obvious reasons, to further improve and to stay on the improving track.

We are following a long-term and a very consistent strategy to grow cash flows across the cycle and to deliver competitive returns.

And I firmly believe that Shell is the industry leader when it comes to deepwater to integrated gas technology integration at a large-scale project development.

We have some of the most talented people in our industry working at Shell and are working on adding more value for our shareholders.

And I believe our dividend track records are second to none, $15.2 billion of dividends and buybacks in 2014; and that's clearly on the lines of commitment to our shareholders.

Let me first of all make a few comments on the macro, and I will start with the longer term picture.

We expect the world's population to grow from 7 billion people to 9 billion people by 2050.

And this is driving, fundamentally, a very strong demand for energy, a 50% increase already since 1990, another 50% by 2050.

So this really is the investment opportunity for companies like Shell, investment opportunities to create shareholder value.

However, to meet this demand in growth, governments and society also need to deal with a number of realities.

Fossil fuels were 80% of the energy mix 20 years ago; they are 80% of the energy mix today.

And if we are looking around to the future, and if you look at what the IEA and others and ourselves expect, they will still be around 20% of the energy mix in 20 years' time.

Altogether, they're going to be important parts for decades to come.

And the (Indiscernible) that there won't be a market for hydrocarbons in a few decades misses the point that more energy is required, as well as, of course, less CO2.

Without the sustained and substantial growth investments, there will be considerable shortfalls in our gas production in the next decades, not a surplus of supply.

And that's due to demand growth and, of course, natural field decline.

Now there are some important energy transitions underway in response to requirements from society to mitigate climate change, and reducing coal emissions in the energy mix has to be an imperative here.

Coal has doubled the CO2 emissions of gas in the power generation sector; and we think that using more gas in the power sector and deploying more carbon capture and storage both have a key role to play here.

Overall, to address the dual challenge of more energy and less CO2, we need to have a more balanced debate, a debate that is based on realism and on economics, not on sound bites, so that we can provide solution-oriented policies for the ripe investment climate.

So this by way of some comments for the longer term energy supply position.

Let's turn into the nearer term and the weak oil price environment that we have seen at the start of 2015.

A year ago when I updated you in the fourth quarter in 2013, oil prices were at $108 a barrel.

They are quite a bit lower today, of course.

Now volatility is a fact of life.

It is what it is, and we have to manage through it.

And there are some very important lessons to learn from history here.

The short-term movements in the oil price can be driven by perception and prices tend to over react, both on the upside and on the downside.

In the medium term, supply and demand fundamentals tend to reassert themselves again around the marginal cost of supply.

We have not changed for our long-term planning assumptions of $79 to $110 Brent.

But the long-term outlook remains robust and industry under investment today simply leads to more upside risk in oil prices in the future.

However, we need to think carefully about the implications of today's prices, which are below our planning and premise range.

And we don't have much visibility as to how long this downturn will last, months, years.

So we set out a program in early 2014 to moderate our capital spending and our growth outlook; and that was, at the time, due to inflationary and affordability pressures.

And with the benefit of hindsight, the timing of that change was actually pretty good.

Today, we are taking steps to preserve Shell's financial flexibility, a this includes a freeze in dividends and a slowdown in capital spending in 2015, taking the tough choices on Shell's rich portfolio funnel and also opportunities, of course, to take out costs, because there is a multi billion dollar opportunity in our own cost base and, of course, in the cost base of the supply chain.

But at the same time, you have to be careful not to over react to spot prices.

So we are maintaining a downward pressure on our capital spending.

We have plans in place today to further reduce our spending, if need be.

But at the same time, we are continuing with a very attractive suite of projects which are under construction and we are preserving, where we can, a competitive set of options for medium term shareholder value growth, as well.

Shell's financial performance has improved in 2014; and that was, of course, from a much more challenging base in 2013.

And the underlying earnings and returns, our CFFO, have all increased last year.

This is reflected then in a 4% increase in dividends last year and $3.3 billion of share buybacks.

But the Company is well-positioned into the lower oil price environment in early 2015, with 2014-15 asset sales program already completed, $25 billion of free cash flow in 2014, and the gearing at 12% at year-end.

So the plans that we set out a year ago are yielding returns, as we are indeed now balancing growth and returns.

We delivered a more robust financial performance and we have made progress with restructuring oil products and the North America resources plays.

Our capital efficiency drive is now starting to show up in the results.

And our projects came online as planned.

The new deepwater start ups, especially in the Gulf of Mexico, with around 150,000 barrels of oil equivalent per day of potential for Shell.

And of course, last year also saw the successful integration of the LNG Repsol acquisition, which delivered more than $1 billion of CFFO in 2014; and that's well ahead of the potential we had assumed when we bought that position.

I think we also came a long way with bedding down the changes that I wanted to see in the way we managed the portfolio and the appraisal on behalf of our shareholders.

We have a series of performance units, 140 of them.

They really drive bottom-line thinking in the value chains and in the major assets that we have in the portfolio.

And I and my executive committee colleagues were personally appraised against some of these performance units in 2015, as we did in 2014.

And for the most part, of course, this appraisal will now be done by the top 200 managers in the Company.

We've implemented a stronger, more centralized decision-making process on portfolio choices at a much earlier phase, before we enter the feed phase, for large projects.

And the top 200 managers will have to own at least 1.5 times base pay in Shell shares.

And that's 7 times for me.

So I think we've achieved a lot in 2014.

But of course, the macro environment today has moved against us.

Maybe that's actually an advantage.

And there's no complacency here, let's be very clear about that, as well, because we do believe we have plenty more to do.

I'm convinced that we can deliver better profitability from the Company for our shareholders, whatever the oil price happens to be.

So I believe the approach that we set out in 2014 is working, so I want to continue with this approach in 2015 and beyond.

So we'll continue to drive to improve the competitive financial performance, including restructuring underperforming businesses and reducing our operating costs in 2015, compared to 2014.

Capital efficiency is, of course, key in our industry, which we want to continue to invest in medium term growth, while at the same time managing our affordability and improve our returns.

So we expect to reduce our spending for 2015; and this is forcing us to make some healthy choices in the project set.

We're setting high expectations for value from the supply chain.

At the same time, Shell is retaining flexibility for both opportunistic, incremental plays, but we will further reduce capital spending, should market conditions warrant that step.

On the growth side, we will see the benefits of the 2014 start-ups in this year's results; but overall, 2015 will be a transition year ahead of the contribution from the next wave of large projects from 2016 and onwards.

A year ago, we said that the financial performance in both the North American resource plays, as well as oil products was frankly not acceptable.

And we were working hard to turn this around, with some $8 billion of asset sales, capital ceilings, $7.5 billion of write-downs in the 2013-2014 period in both of these areas of combined.

And we will continuing in 2015 and beyond with a strong performance drive in oil products and also in worldwide resources plays, so not just North America, but also international.

And we want to also improve our upstream engine plays, so the mature upstream assets, where free cash flow has fallen substantially in recent years.

And let me give you some more details on all these three restructuring themes, and let's start with the resources plays.

I think we've made a good progress in North America at restructuring in 2014.

As I said, we are extending this into the resources plays worldwide.

In recent years, the Company had, of course, taken up quite a bit of acreage and options in a number of countries around the world; but in many cases, we have seen pretty mixed well results and also a few above ground issues.

But this, combined with the capital ceilings that I referred to earlier, means that we won't go forward with all of this portfolio.

For the resources plays spending outside of North America will be cut by around $200 million -- that's 20% in 2015 -- and we also expect, frankly, to exit from quite a few positions.

This may, of course, potentially result in impairments and some well write-downs that we still carry on the books that will not always be taken as identified items, because of their size.

But we will update you on that as the year progresses.

In North America then in dry gas, we have a strong position in Western Canada which we are targeting for the Energy Canada project, and we have gas acreage in Appalachia where we are [praising] some very interesting new discoveries in the Utica.

And in the liquid rich sales, we have retained [Western] Canada and the Permian acreage for further appraisal and development in the years to come.

But North American resource plays will remain in a loss for 2014.

It's $1.2 billion last year on a clean basis; but it does actually represent quite a positive swing of $1.7 billion, when you compare it back to 2013.

And as you know, we are working hard to get a much more competitive cost structure here, taking out some $550 million on operating costs and capital costs on a like-for-like basis.

But it will be a multi-year program to get this business to profitability, simply because of its maturity.

It's a difficult area, and it's an area with a lot of focus; but we are determined to staying, to get it right, and to make it a strong business for our shareholders.

But overall, resources plays, again, are an area where we are continuing to dial down the spending, because we can and we have to, as we moderate out growth outlook and implement the capital ceilings across the Company.

Let's turn to Downstream, then.

We've been pretty busy here, as well, with portfolio restructuring and a lot of self-help programs.

And the changes that we have made in the Downstream in the last 18 months have unlocked substantial new revenue opportunities and taken out a lot of costs.

So it's good to see, now the Downstream has a return on capital employed which has increased to 11%, and the cash from operations was $11.3 billion for 2014, which is, of course, a significant improvement over 2013 levels.

And in a lot of ways, we are effectively already delivering the (Indiscernible) that we were targeting, as you can see on the slide.

Now the main drivers for that, aside from, of course, industry margins, which have helped, was also an uplift from self-help, including the cost takeout that I referred to, and of course, exits from some low margin portfolios.

So we are redoubling our efforts on the Downstream on the cost side, with a new multi-year cost program that we launched in the second half of 2014.

And this will include staff reductions, increasing the use of low-cost shared service centers for back office activities, continued drive to improve global contract management for capital and operating spending, et cetera.

So it is overall a very much improved position, but there is more to come here still.

It is also here a multi-year turnaround strategy, because we need to have $10 billion a year CFFO and a 10% to 12% return on capital employed on a sustained basis, not just for a few quarters.

We are continuing, of course, to take a hard look at the portfolio in the Downstream.

And there are some very strong businesses with growth potential, think of China, lubricants and chemical positions.

And on the flip side, there are also parts of the portfolio that I think others can, frankly, add more value or where we would rather spend our capital in another part of the portfolio.

So you will have seen the divestments that we took in Australia and Italy on the positions last year; and of course, you've also seen the successful launch of the US midstream master limited partnership, altogether releasing $4 billion of proceeds in 2014.

And that it was good to see that also Motiva returned to profit in 2014, despite the pressure that was very clearly there also in the fourth quarter of the year.

Then there's other areas where still we have some issues, like for example, Singapore Fuels, where the recent start-up of the debottlenecked ethylene cracker and the new cogen plant that we will be bringing on stream in 2015 will both improve integration value.

And Malaysia, the refinery there, as well as Europe more in general, remain very challenging areas in oil products.

So we need to fix these assets.

That's what we are doing now.

But again, I want to be clear, this is not a quick fix, this is a multi-year program that we will stay with and we will complete.

Let's then turn to the Upstream engines, where as I said, the free cash flow has been falling quite sharply recently.

And this is now also a major focus for the Company.

So these Upstream engines are Shell's mature basin.

So think of off-shore Europe, also South East Asia, where we are in many cases producing oil and gas from fields that basically have run for many years longer than their original design intent.

That was because there was an uplift in technology and, of course, there were higher oil prices to try and justify them.

There are some pretty good success stories here, as well.

I think of example, [Oman], where again, production has been steady, at around 200,000 barrels per day for Shell in recent years continuously offsetting the effect of natural fuel decline.

Looking further in the future, we have a series of projects on the construction in Europe Upstream, which is currently, of course, then also reducing our free cash flow.

And while this is still in the investment phase, some of this will reverse as the CapEx rolls off and the assets come into cash generation phase and that will particularly happy in 2017 and onwards.

But fundamentally, though, I want to be clear that our engine businesses in Upstream around the world, with a few exceptions, are under pressure, from aging assets, from depleting fields; and there will be some pretty tough decisions ahead of us there, as well.

You know we are allocating our capital on a global thematic basis, and here you can see the main categories, as well as the financial performance.

So we have the engines businesses, the Downstream, the Upstream engines.

They are mature assets and they are there to provide free cash flow, $7.5 billion of it in 2014.

And we have the growth priorities, integrated gas and deepwater, where we have a leadership position in the industry.

And then we have the longer term categories, which cover potentially very large positions for the Company in the future.

And these are the resources plays that we referred to, heavy oil, countries like Iraq.

It's good to see that there was actually pretty positive momentum in earnings and returns in most of these themes in 2014.

And that is despite the average drop of $10 in Brent since 2013.

The Company has a rich near-term opportunity pipeline.

We've said that many times before.

And we are in a position where we have to manage spending downwards firmly to balance return and growth.

That's also a recurring theme.

We have to moderate our overall growth outlook.

[So if we go through] with our potential spending as we came into 2015 further, positioning [FIBs] that were planned in the existing base portfolio, and for our new growth projects, as well as setting expectations for cost reductions in the supply chain.

So 2015 organic capital spending will be lower than 2014 levels.

And the final outcome will, of course, be driven by the pace with which we will take decisions on our portfolio, and of course, also in responses from the supply chain.

But we are continuing to challenge ourselves and everyone in Shell that our plans have to be credible, that they are competitive, and of course, very important that they remain affordable.

We must get the balance right between retaining our growth pipeline that we have worked on for so many years, at the same time having the levers to pull if we need to further reduce capital spending.

Asset sales, including the US midstream MLP, $15 billion delivered in 2014, that also has focus here, both from an affordability perspective, but also driving a better performance mentality from the Company.

Now let me hand you over to Simon, who will give you a few more details on the financial framework and today's results announcements, and then I'll be back a bit later.

Thanks, Ben.

It's good to be here with you today.

I'll update you on the financial framework, but first, obviously, I'll start with 2014 summary.

Actually, the identified items, the underlying current cost of supply, or CCS earnings, were $3.3 billion for the quarter.

That's a 13% increase in earnings per share from the fourth quarter last year.

On a Q4 to Q4 basis, we saw lower earnings in the Upstream, where oil prices were sharply lower, $32 a barrel.

Some offset from strong volume growth, better operating performance, and fewer well write-downs in exploration.

And we had substantially stronger results from oil products.

And with impact of the good trading and marketing environment and the benefits of the improvement programs that we've put in place in Downstream showing through.

Cash flow from operations was some $9.6 billion.

That's an increase of nearly 60% Q4 to Q4.

That includes a $7.5 billion swing positive in working capital, so the negative impact around $3 billion on the [Cozer] adjustment to offset to an extent, reflecting falling oil prices in the quarter, in both cases.

So looking at 2014 overall, the underlying earnings, cash flow and returns, they all increased compared with 2013, even though Brent prices fell by $10.

On the full-year basis, clean return on average capital employed was 10%, and the free cash flow was $25 billion, distributions were $15 billion -- $15.2 billion in 2014.

That includes the dividend declared and the share buyback.

Turning to the businesses in a little bit more detail.

So excluding the identified items, the Upstream earnings fourth quarter were $1.7 billion.

That is a decrease year-on-year.

And that decrease was predominantly due to the lower oil price.

The results also did include a $313 million, the clean result, negative impact from the Australian dollar rate exchange movements, and that's an impact on our deferred tax assets and has not taken there an identified item.

Americas Upstream was in a loss making position in the fourth quarter.

Profits from deepwater and heavy oil directly impacted by the oil prices, still profitable, but not large enough to offset the losses elsewhere in the Upstream Americas.

Operating performance itself was strong this quarter, and it certainly has improved overall this year, less down time in 2013 and new high margin production lifting the bottom line.

Headline oil and gas production for the fourth quarter was around 3.2 million barrels a day oil equivalent.

That's an underlying increase of some 7%, supported by ongoing ramp up in the Gulf of Mexico, Nigeria, Malaysia, new volumes from existing fields, deepwater Brazil, and the Gulf of Mexico.

The LNG sales volumes were up a quarter, 26% Q4 to Q4.

That's very strong growth, driven, of course, by the acquisition of the Atlantic and [Peru] LNG positions a year ago.

Just turning now to the Downstream.

Strong result, made up higher oil products figures but lower results in Chemicals.

Overall, we've seen the outcome of the actions that we've in place to improve the profitability in Downstream.

Ben just gave you some oversight.

In oil products, we benefited from increased contributions from the trading activities, where in the market there was higher price volatility, as well as lower costs and taxes.

And we've been seeing better marketing results throughout the year.

The Chemicals earnings Q4 on Q4, $260 million lower.

And that's mainly the impact of the unit shutdowns in Nordic in Netherlands, as a result of the two incidents we saw earlier in the year, which were well flagged.

A couple of slides on our resource base.

You will find the details of all of the SEC reserves, approved reserves reporting, in the annual report, the 20-F filing that we make in March.

We're expecting the 2014 headline, the proved reserve replacement ratio headline, 26%, three-year average there, 67%.

The preliminary three-year average ratio, replacement ratio, on an organic basis would therefore be 85%; or in the single year 2014, 47%.

That's when you set aside acquisitions, divestments and the price impact.

The total reserves base was around 13.1 billion barrels oil equivalent, 11.2 years of reserve life at the current production level.

You're well aware that we actually look at resources when we're managing SPE turn, which is 2P plus 2C.

And these are only the resources in active management investment phase.

The chart shows a subset of that total position.

The resources on stream, the red bar here, they remain relatively stable, despite the asset sales and the production in the year.

Now with fewer larger investment decisions last year, as we reduced the capital investment, and with the decisions to sell some positions, defer future FIDs, there is a reduction in the barrels in the under construction and the design categories.

But you can see, there's a series of large projects in the decision queue, in front-end engineering design, but not yet investment decisions.

So Appomattox, Gulf of Mexico deepwater could be 150,000 barrels a day oil equivalent.

Vito, similar, 100,000 barrels a day oil equivalent.

Several other examples.

Also, just let me update you on commercial exploration, where we are really pleased to see the performance improving in 2014.

We drive strong top-down decision-making in exploration.

The capital allocation is very much considered at that level in a series of precise risk and size banded categories.

The drilling adds short-term value, where we're in near field activity.

But also, we look for medium and longer term potential through expanding the heartlands frontier exploration and ultimately, hopefully, in the Arctic.

We held the 2014 conventional exploration budget flat, at $4 billion.

That included absorbing the increased exploration spend on Libra in Brazil, which we really acquired right at the back end of 2013.

This year, we are planning on drilling in Alaska, subject to getting the permits and the legal clearance, and that will mean higher spending in Alaska, if we're successful.

At the same time, though, we're keeping the overall spending on conventional expenditure flat, at $4 billion, as part of the overall capital ceiling.

And obviously, arithmetically, that leaves the spending outside Alaska will be less than $3 billion in the year, which is quite a reduction from the 2014 levels.

And that's required some deferral.

For example, the Gulf of Mexico, China offshore, Malaysia, we have been releasing rigs.

Drilling last year, you can see the details on this slide, resulted in 10 material new frontier and heartland discoveries, Malaysia, Gulf of Mexico, and Gabon frontier, for example.

In the Gulf of Mexico, the Rydberg discovery, at just over 100 million barrels, takes the Appomattox area resources, the potential there, to over 700 million barrels -- we're around three-quarters of that -- and the Kaikias oil find in the Mars basin that should become a pretty high value tieback into an existing platform that we have in the region.

We've also made two further discoveries in the Gulf of Mexico in the fourth quarter, Gettysburg, which is close to Appomattox, and a newer prospect called Power Nap, which is near the Vito prospect.

We're currently assessing the potential of both of these finds.

And that takes the total number of discoveries in the Gulf alone to four in 2014 and contributes to over 1.3 billion barrels of high-value resource that we've added there for Shell in the last five years.

We also made 41 near field finds close to existing infrastructure and activity, in Oman, in the Netherlands, in Brunei, in Germany, Egypt and Australia.

These should be high-value add-ons.

Some of them are already hooked up and producing in the Upstream engine business.

So all of those mark a pretty substantial step up.

In the exploration performance, 2014 was probably the most successful year that we've had with the drill bit for many years.

We did drill a lot more, of course.

But very competitive performance in the sector, whoever we compared with.

So it's a better performance from exploration, and we're laying the foundations for the future.

Now this slide shows a few points for forecasting and thinking about for 2015 and, of course, the fourth quarter.

Clearly, there will be various production and tax effects related to last year's divestment program, as well as higher levels of downtime, especially in Upstream and Chemicals.

Relative to 2014, the impact of these turnarounds is expected to be several hundred million dollars negative in both Upstream and Chemicals.

Although it does seem like 2015 might be a good time to be doing this work, particularly in the Upstream, with the Pearl GTL maintenance planned for the first half of the year.

So turning to the financial framework.

Straightforward, not changed.

Although we're clearly going to be tested, the downside on oil prices in 2015.

We used the cash, after servicing debt, to fund a competitive dividend, after that, to invest for future growth.

Dividends are the main route.

The cash returns to investors, obviously high priority for the Company, and we believe a track record second to none.

Today, the oil prices are relatively low.

And we slowed down on the share buybacks at the end of 2014 to conserve cash.

We take on debt in the down cycles -- that's what the balance sheet is for -- or when the Company is in the capital intensive stage.

This still is and will not be a formula for the right level of debt.

We want to keep gearing below 30% and above zero.

Short-term moves outside that range, in theory, acceptable, as long as we can see a clear pathway to return back into that range sustainably.

There are cost reductions in place across Shell today.

They look not only to our own costs, but they're also very much focused on the supply chain, third-party costs.

These programs are balanced against the different strategic activities in the Company, and we're not chasing cost does for cost's sake.

Very careful to make sure none of this compromises safety.

Just think of the cost of the safety incidents.

We're planning to put our own operating costs on a downwards trajectory here.

OpEx in 2015 will be lower than 2014 levels.

That's around $45 billion.

Now you can see an example of cost take-out on the slide here, the North American resource play shale, where we reduced OpEx and CapEx in total by some $550 million in 2015, excluding the portfolio effects, like-for-like activity.

The Projects and Technology division -- Harry's with us here this afternoon, so you'll have a chance to talk to him later -- is very well placed to work on supply chain costs, where the annual contracting and procurement spend annually remains over $66.0 billion.

Overall, we think there's a multi-billion dollar cost opportunity for Shell here, particularly in the downturn that we're seeing in activity at the moment.

Divestments.

Of course, they're another route to increase or improve the operating efficiency of the Company.

But importantly, just as importantly, it helps to refocus the executive management time and the dollars that we do have available into the most attractive investments.

The real uptick is in the focus, the upgrading of the portfolio.

So the asset sales program, we set out a year ago, pretty much to the day, $15 billion over two years, done, completed.

And it feels good to have delivered before the downturn in the oil price.

We do expect to see $5 billion, $6 billion a year divestments as part of an ongoing portfolio management activity.

But we do expect 2015, the pace will slow.

Clearly, it will slow from 2014.

But the overall market, clearly, it's more difficult than a year ago, because there's just less financing capacity for potential buyers out there.

But we're ahead of the curve.

Despite that, we are marketing some position sales, such as non-core Downstream Scandinavia, some deals still underway in Nigeria onshore, and potentially we look to dilute some of the growth positions as a means of deferring capital early monetization.

There's no fire sale here.

That's not what we do.

But let's see how this progresses over the next year or two.

It's a dynamic decision-making environment.

It's not a spreadsheet driven outcome.

Production averaged 3.1 million barrels oil equivalent in the year, and that's down 100,000 barrels a day oil equivalent versus 2013.

The positions we sold last year, including the license expiring in Abu Dhabi, that reduced the headline production by around 6%.

And there will be a further impact in 2015 from divestments we've already completed of over 100,000 barrels oil equivalent a day, or another 3%.

But at the same time, we brought high margin production onstream, Deepwater Gulf, and we consolidated the Repsol LNG acquisition, which of course, came to no production, but very solid financial performance.

So the underlying volume growth picture, underlying, was an increase of 2%.

On the right-hand side here, of course, the financial results are much more important than the barrels.

Excluding the oil and gas price effects, working capital, the Upstream cash generation, cash flow from ops, that increased by a quarter, 25% year-on-year, averaging around $30 a barrel, compared to $26 a barrel oil equivalent last year, or 2013, on a like-for-like oil price.

We exited positions with low unit cash flow and, in some cases, high levels of ongoing capital spending.

We've seen the benefits of the Iraq cost recovery, and we increased our high margin production.

A lot of this reflects decisions made strategically many years ago.

High-cost oil sometimes has a good fiscal environment and a high unit margin.

That's what we're seeing.

All of this led to enhanced profitability in 2014, and we'll continue to prioritize profitability ahead of volumes.

Good that we started that 10 years ago.

We are allocating capital in the Company through several lenses, you see on the left and on the right.

On the left, from a portfolio and a strategy perspective, we want to continue to give priority to growth in LNG and deepwater.

There are clearly themes where we've got a strong competitive advantage and compelling growth opportunities.

This accounts today for about 40% of the total capital investment.

At the same time, obviously, we continue to invest in maintenance programs, selected growth opportunities in the mature business, both Upstream and Downstream, and a level of investment in the long-term plays, shales, Iraq, heavy oils.

We look for balance in the portfolio.

On the right-hand side of the chart, you can see the perspective in terms of the time frames to delivery of the different types of capital allocation.

About 40% of this year's budget is on a combination of care and maintain, asset integrity, and small projects in the base set of assets, plus short cash cycle activities, such as the shale and Iraq.

Returns on these small projects are usually attractive, given the quickly, sure payback.

And that's against the backdrop of the portfolio that's onstream today.

So you're using existing infrastructure.

Around 50% of this year's investment is targeted at the much larger post-FID growth projects, new infrastructure, and options that could reach final investment decision in the near term, most in the next six months.

The remaining 10% is that conventional exploration budget.

So 80% of this year's capital investment will be adding to cash flow within the next four years, by 2018.

Just let me close by updating you on the cash flow, the balance sheet and the payout.

It's important to look at our financial position over several years, as well as annual and quarterly, because that's how we plan it.

Sometimes things happen in a particular time window which is, to be honest, artificial when look at the strategically managed financial framework.

You can see the difference here between 2013 and 2014, on that basis.

Cash flow from ops over the last three years, $132 billion; average Brent price, $106.

Over the same period, the net cash outflow, including acquisition divestments, was $121 billion, and that's less than the inflows.

That activity included $17 billion of acquisitions, $23 billion of divestments, plus the $1 billion on the MLP, and $34 billion of payout to our shareholders.

The free cash flow declined in 2013.

We had some good discussions about that 12 months ago.

We are moving through a phase of higher acquisitions and fewer divestments.

We said that that position would improve in 2014.

You can see that here.

It improved to $25 billion.

That also includes the cash flow growth from the new projects we talked about.

All the six major projects came onstream, ramped up well during the year.

So clearly, factoring in the debt movements, net we came down.

The gearing started around 12.2% at the end of 2014.

It's a few points down on 2013.

The dividends that we announced during the year -- and they are not all paid with cash -- but $11.9 billion, increase of 4%.

Total share buybacks, $3.3 billion.

We have carried on in January the few hundred million dollars, up to yesterday.

We are expecting an unchanged dividend in 2015.

Being prudent here, given the rapid fall in the oil price and the outlook for the operational cash flow as a result this year.

Just a reminder, the $10 move is about $3.2 billion, $3.3 billion earnings and cash flow, every $10 move per year.

So taking 2014 and the expected 2015 dividends into account, and the buybacks we've completed there to date, the total is likely over to be $27 billion to the commitments we made last year to some $30 billion of dividend and buyback.

So let's see where we end the year with buybacks in 2015.

They are, of course, going to be subject to oil prices and the availability of cash and the balancing act that we need to do.

So with that, I'll hand you back to Ben.

Thanks, Simon.

So 2014, I thought, was a pretty successful year for project delivery.

Simon said, we started up a number of new projects last year, including the large operating developments in the deepwater, like Mars B in the Gulf of Mexico, Gumusut-Kakap in Malaysia.

Looking into the next few years, in 2015, we will see the benefit of the ramp-ups of these 2014 start-ups, although the headline production for 2015 will be lower than in 2014, due to divestments that were also mentioned.

There are going to be relatively few new start-ups in 2015, and we should see a more fundamental growth in the 2016 to 2018 timeframe, as the next wave of large projects comes on stream, with over 700,000 barrels per day of oil and gas and 7.5 million tonnes per annum of LNG currently under construction.

And we regularly benchmark our project delivery against the rest of the industry, for example, using IPA.

We know there have been problems with some non-operated projects, but I'm pretty comfortable with project delivery in the parts of the Company that are under our direct control.

Let's talk a little bit about the pre-FID opportunity sets.

So a decade ago, as you know, the Company, frankly, was short of investment opportunities, and that was after several years of under investment.

Made a lot of progress in addressing that with higher investment levels and exploration, where we had success, for example, in the Gulf of Mexico, but also with bolt-on deals, such as Repsol LNG, and working on development lab opportunities, like the ones we have in Chemicals, Iraq, Upstream.

And today, we are working through that enlarged opportunity set to make sure that we have the right order in our investment priorities.

So investing in growth plays that have the returns and the cash flow, to ultimately, of course, replace the declining Upstream engines portfolio.

Coming into 2015, lower oil prices, affordability constraints have actually helped us to further sharpen our minds here.

And we have made some choices in the investment portfolio to curtail our spending.

This has resulted in over $15 billion reduction to our potential capital spend for 2015 to 2017 period, and a much more concentrated suite of projects to take FID on in the next few years.

I think it's very important that we do not get in a slash and burn mentality.

So I wanted to have a measured approach, with levers to go ahead with new developments or to pull back further if the financial framework calls for that.

Let me give you a few examples.

In Chemicals, along with our partner in Qatar QP, we have recently agreed not to go ahead with the proposed chemicals project in Qatar.

We're working hard to reach FID on three new chemical projects with a total of 2.7 million tonnes per annum of capacity.

But of course here, it also still remains to be seen whether we will actually take those FIDs.

In integrated gas, we have slowed down some new developments which, for example, means that the Arrow greenfield LNG project is off the table.

Abadi floating LNG, Browse floating LNG have been rephased to optimize the concepts by the operator there.

And we are prioritizing the North American LNG options in that time frame, so LNG Canada and Elba.

In LNG Canada alone, there's a 13 million tonnes per annum project, 50% of which is shelved.

We've slowed down the pace in Deepwater, retaining potentially four big FIDs in the next two years in the Gulf of Mexico, with Appomattox and Vito, that Simon mentioned, with the first at PSO and Libra, and potentially a large development also in Nigeria.

And in our longer term themes, we are continuing to pull back on the resources play, as I mentioned earlier, but more exits to come and we will delay Phase 3 and 4 of the Carmon Creek project in Canada.

At the same time, we're also looking closely at the next development stage of Majnoon, for example, all part of an FID option set that overall could be over 700,000 barrels of oil equivalent per day for Shell.

So several hundred thousand barrels under construction and options for a further 700,000 barrels per day on the table.

Now before I close, let me update you on the competitive position.

As you know, we take a dashboard approach here, looking for more competitive performance on a range of metrics, and, of course, over time, not single point outcomes.

So our CFFO development has become more a little more competitive in the sector, has been a major strategic objective and focus, of course, for Shell in the last few years.

But it's also good to see our return on capital employed and the free cash trending much higher this year.

But we also know we have more to do here, and we have to drive this and other metrics higher.

We also realize, of course, that these charts will look pretty different with $50 oil, although our aim is to be competitive across the price cycle range.

So let me assure you again, there is no complacency here.

And there's still a lot to do.

So in summary, I believe that the plans we set out a year ago are showing results, as we balance growth and returns.

I believe the approach is working, and I want to continue with this emphasis in 2015 and beyond.

So we'll continue with the drive to improve the competitive financial performance, on our uptime, our costs and supply chain opportunities.

Capital efficiency will remain key, more key in our industry.

So we are trimming the 2015 spending, at the same time also driving for better value from the supply chain and managing our financial framework with the hard choices on the portfolio.

And this will translate into new growth also in 2016 and beyond.

So I think Shell has delivered where it counts in 2014, with stepping up our drive for stronger capital efficiency, while also being careful not to over react to the recent fall in oil prices.

So I think the Company's taking the right decisions here to balance growth and returns.

And with that, let's go into Q&A.

Can I again ask you to have one or two questions each, so we can go through the room and also some people who are on the telephone.

And who can I ask first?

Irene, I think you had your hand up first.

Thank you.

Irene Himona, Societe Generale.

I had two questions, please.

So first, I appreciate 2015 CapEx is still under consideration, but can you give a rough idea of the range?

So are we looking at $2 billion off last year's level, or $5 billion?

And secondly, the Downstream.

There's a slide on page 14 which shows that $200 million of the earnings improvement was from self-help, and actually the rest of it, the bulk, is from better margins.

Now you don't disclose your view of sustainable margins, but you do disclose that you aim for 10% to 12% sustainable Downstream returns.

So if you were to restate your 2014 numbers on whenever your sustainable margin is, where was the return?

So how much more have we got to look forward to, in terms of improvement?

Thank you.

Thank you.

Let me take the first one.

Simon will talk about the Downstream.

So what we have done, and I think it's probably good that we explain that a little bit more, because I always sensed that there is a little bit of an explanation to do on how we treated the CapEx piece.

So what we said, we would take a view for three years where we have a decent amount of visibility on how phasing of projects and decision points would come up.

And we basically wanted to balance the financial framework within the parameters that we thought were reasonable, and we came out with what we thought was an affordable capital level against staying within the constraint that we had set to ourselves.

We concluded that if we wanted to do that, comparing that with amount of money that we could spend on options that we were developing that we were working on, there was going to be a big mismatch.

So the first thing we did is to just retire or postpone a large number of options, about 40 projects of different sizes across the entire portfolio.

But clearly, we could not see that we would go ahead under that sort of financial framework.

So that's the $15 billion, 40 projects and projects in there of the likes of the Qatar chemicals project, [Kitero], and there's a few others that's in [that].

So that was one.

That would leave a certain amount of capital to spend.

And then we said, well, that's really what we want to spend.

Because if we do not spend it, we seriously impair our capacity to grow the business.

And of course, we are here collectively driving shareholder value in the mid-term.

So growth is important, as well.

And as I said, I didn't want to go into a very early over reaction mode, because many of the things that you may do out of excessive prudence basically means that you lose them.

They won't come back anymore.

So what we had agreed, we will keep the capital, for now, flat on an organic basis compared to last year, but as a cap.

So we will be driving it down.

And as a matter of fact, we will be driving it down as much as we need to, depending on how the outlook develops for us.

So at this point in time, Irene, I cannot tell you exactly where we will end up.

It depends how we see, during the year, the oil price work out and how much we want to lock in future spend with the FIDs that come up.

If we feel later in the year on key FID decisions that there is insufficient clarity or insufficient room to maneuver to take that FID and lock the spend in, then we will not take that FID, and then the number will come down further.

We will probably then also lose the opportunity to do the project.

Because as I said, many of our projects have a limited degree of flexibility.

But where we can, we will incur flexibility.

So there's a very clear message out to the organization, do not work your behind off to come to an FID as quickly as possible, give us options and a range to work with, a sense of the range to work with.

So it will be a navigation process this year.

But we've very clearly said we're not going to go beyond the same organic spend as we had in 2014.

Does that sort of explain the thinking?

Okay.

(multiple speakers) The Downstream question.

$200 million was the self-help on costs, but the market and trading margin is also primarily self-help.

It is, I think we spoke about a year ago, we changed both the organization and the way we are setting accountabilities, particularly for the fuels value chain into the refinery to the customer.

So we did a few things there, but primarily ownership of the full value chain clear and managed in exactly that way.

That has, I think, in my words, unleashed an entrepreneurial spirit that was perhaps hidden, maybe even, we thought, lost within the Downstream business.

There's a quite different discussion today, I can tell you, with the leadership team.

I was at a gathering a bit bigger than this in Germany a couple of weeks ago.

And they're talking a figure, just for them in the German/Swiss Austrian business, bigger than $200 million.

So to come, significant amount.

And just to be clear, the Downstream is basically five businesses.

Retail; what we call Global Commercial, which is lubricants and some of the commercial fuels and specialty products; Chemicals; and what is now in Trading and Supply, where we move most of the commercial fuels, the bulk fuels, managed by the traders looking through the refinery as a value chain.

We sell 6 million barrels a day.

We only refine 3 million.

And that's how that piece is managed.

Each of those four is a billion dollar-plus ratable business.

Trading is not a volatile business, but it's ratable.

But each of those four is billion dollar -- manufacturing should also be a billion dollar; it's not yet.

That's how it's been made up.

Significant underlying sustainable improvement already in the numbers, but we can probably double what we've already done.

And that's certainly what John is needing to do, targeting to do, to get to that 10% sustainable bottom end of the cycle.

(multiple speakers)

Just wait for the microphone, also, for our people on the phone.

Ashley Meyers, Viva Investors.

Thanks for the presentation.

Simon, you said that you were planning to go ahead with drilling in the Arctic, should the permits come through.

And I just wondered how comfortable you felt with the economics on that, given that we've heard that 500 million barrels might be the minimum required to make that economic.

But also on the risk perspective, both operational risk and reputational risk, as well, given there's still some outstanding issues on the spill response and the report that came out last year.

You'd better do the strategic piece.

I can do the numbers.

(laughter)

You're right.

It seems to be the big news of the day.

But of course, we always maintain that capability to go back to the Arctic -- or to Alaska, I should say -- when the conditions would be right.

We did not retire the entire armada of ships that we have and all the other elements of the supply chain.

We've been upgrading our drill ship, both of them, actually, the other rig that the (Indiscernible Navy) brought in, as well, all of it we view as we should be ready to drill in the next season, so that's this summer.

There's a number of conditions to fulfill, as Simon said.

So first of all, we have to make sure that we are ready from a logistics perspective and a technical perspective.

I think we will be.

It would be incredibly disappointing if we had to conclude towards the end that after so many years of preparation and pauses, we would still have issues.

So I think that will be fine.

We need to have the permits, and we still have quite a few major permits outstanding.

We are working very hard with the US authorities to get those permits.

But they need to be good permits.

We're not going to accept permits that we cannot comply with, which is something we had in 2012.

And then third, we demanded a few legal blocks that need to be removed, as well.

They're actually a legal block against the Department of the Interior on the environmental impact assessment of the original lease sale.

So that needs to be resolved, as well.

So less control, of course, over the last piece, because it's, of course, in the legal system.

But the Department is pretty confident that they will resolve, and we're working with them, of course, quite closely to do this.

I think, if you get a green light on all three of them, and indeed we do have a good ice-free season, we will be out there drilling.

In the meantime, Simon will give you numbers.

We will have, of course, the meter ticking on all the assets that we have been cast in theater or close by, and we will be stepping up, of course, that spend in this year, when we go ahead.

We are very minded that this indeed, then, is a very important year for us to prove that we can do it.

There is reputational concern around this.

I think there are no amount of explaining our approach, the caution that we will take (Indiscernible), the context that is there, the long history of operations that we have, and I think the industry has, the preparedness with multiple lines of defense.

There will be a very significant part of society that will simply find it unpalatable that we drill in the Arctic, no matter how good we are or how prepared we are.

So we have to face that, as well.

But the price needs to be significant for us to go ahead.

If you talk about 500 million barrels a day, I don't think that will cut it, it must be a multi, multi billion barrel discovery that we have there.

That will justify going ahead.

It will take years to unlock.

And of course, we need to have an oil price outlook that matches the cost that we enter against that.

But let's first of all see how much oil is there.

We have, of course, high expectations on porability and on outlook, but we need to prove first that we are right, in terms of expectations.

The economics will work if the structures are full of oil, simple as that.

(Inaudible) The $4 billion of conventional exploration, over $1 billion is what we will spend if we drill.

At the moment it's, as the meter's ticking, a decision three or four months from now, at which point it will be close to $1 billion committed by then, even if we do not drill.

So the meter is ticking at quite a rate today.

(other than important) But the $4 billion I talked about is on the assumption that we do drill.

(Inaudible Question)

The no go decision there of what we call the ramp-offs, if you get the meaning of the word, will be there, of course, any time.

If there is another major legal block popping up or whatever, then we will not go ahead.

If you get the permits that are up and workable, if we find a fatal flaw in our preparation, then it will all be no go.

And for the rest, we will continue to go ahead.

So it's basically monitoring do we still believe we are headed for, do we still have green lights?

And then of course, it will be a final moment pretty close to the season, to just understand when it is ice free, when do we mobilize, how do we get people out there, et cetera.

But basically just ramping up and preparing as if it's going to happen.

It's just a matter of will we call it off, rather than will we go ahead.

You were next.

Then I'm going to you.

Thank you.

Good afternoon.

Theepan from Nomura.

A couple of questions, please.

Firstly, coming back to capital allocation.

Could you talk about the process in terms of how you think about your reference conditions, if and when you'd choose to change them?

I think you're using $90 long term in borderless Henry Hub.

And then just as a reminder, a recap of the chart that you show on 2015 CapEx, how much committed CapEx is there in 2016 and 2017?

The second question was more along the lines of, you talked about the Upstream engine being under pressure.

Could you just elaborate?

Is that decline rates, integrity cost?

Just a bit of color there would be great.

Okay.

Simon can talk about the numbers for the years out in a bit more detail.

In terms of how do we look at the rates, with the screening rates that we have, and when will we change them.

I think it will be very hard to predict when or whether there will be a time when we change them.

Basically what we do is we, of course -- it's very, very detailed modeling of the energy system of the whole project suite that we understand for the basins.

As a matter of fact, the IEA believes that we have superior planning modeling and forecasting capability than they have.

They're always jealous of the work that we do.

But basically, what we do is we look out to understand how demand will evolve.

Of course, we have an economics team to understand how economic growth and energy intensity of GDP development will evolve.

And we have an understanding of how decline rates will manifest themselves, given certain investments scenarios.

Basically, what you are looking at, if I simplify the whole modeling story little bit, if you're looking at about a 1% to 2% demand growth every year, GDP growth would have to drop down to 2% for oil demand to stay flat.

So an oil demand decline scenario is rather unlikely, and certainly over the longer run.

And if you look at existing assets with existing investing programs to arrest decline, you will still see a decline rate of 4% or 5% perhaps per year, depending a little bit on how much investment goes in there.

So the more you see investment being pulled back, for debility reasons or other reasons, the more -- not because it doesn't pay, or whatever -- the more you will see the decline rate accelerate.

Very quickly, if you look five years out, you will see that you need a very, very significant amount of investment simply to close that gap.

Now you can take a view on how much cost take out could happen in the supply chain, et cetera, et cetera.

But looking here, over the next five years, that half a trillion dollars of investment that the industry collectively has to make just to have supply meet demand.

That investment level, if you look at then the cost of supply curve of the different projects that we look at, about 400 that we look at all the time, basically says to just break even, you have to have $70 oil, which happens to be the lower level at which we planned.

And if you want to have a little bit of a return on it, you'll probably be looking closer to $90.

So that analysis gets updated all the time.

We probably crank the handle a little bit more frequently under today's environment.

But basically against that sort of modeling, we take a view and say, do we see anything fundamentally new?

Do we have it wrong?

Are our models wrong?

Is our thinking wrong?

Is there a different paradigm happening?

And as long as we do not see that, as long as we see that we need, the world needs, $90 oil to just have supply and demand match, we will work with that planning premise.

It doesn't mean that we will look an infill project for 2015 that will basically run for two years at the same screening values.

We will then have a much more near-term assessment, very bespoke to the project in question to do the economics on that.

But for the long-range gains, this is the view that we take.

We normally do our capital allocation October, November.

And at that point, normally, you're committed one year down 90%, two years 70%, three years 50%.

Those numbers seem to hold true, axiomatically.

We didn't complete in October and November this year.

In fact, it's still an ongoing, dynamic process.

What we've done is cap certain levels of allocation and said that certain choices remain basically [for them], in terms of the big projects.

But crucially, a lot more emphasis on taking cost out of post-FID activity.

And certainly, out of pre-FID.

If we look forward from today, there's less than 10% flexibility for this year, absent significant changes in unit rates on what we're actually building to date.

That improves as we go forward; however, some of the larger FIDs, they absorb a significant amount of capital because they're so big.

Appomattox, Vito, Canada LNG, [Geobifa, the Blands] these are big projects.

That's why we take some care, because in and of themselves, you're talking tens of billions of dollars out over five, six years investment period.

Hence, the reservation from the Chief Executive.

(Inaudible) the multiple question earlier I think, under pressure, is it cost, is it decline, is it integrity?

It's all of the above to be [brutally] honest it depends where you are.

Cost levels are very high in the North sea.

We have assets going beyond design life in Southeast Asia.

We have high decline rates in Denmark.

It's one or the other everywhere.

And they've all have come together over the past two to three years to make a significant reduction or dent in the free cash flow that's available; hence the choices we need to make about fix or go.

Hello.

It's Martijn Rats, Morgan Stanley.

I wanted to ask a few things.

You said about the dividends, you expected dividends of $0.47 this year.

But it didn't sound too committal.

I just wanted to make sure that that is still in place.

The second thing I wanted to ask is with regards to the amount of unproductive capital.

If I remember well from the 2013 annual report, 31% of capital employed was unproductive.

And I was wondering if that number now coming down, because that sounded quite high at the time.

And then finally, about exploration expenditure.

I know the figure of $4 billion.

By the time we get the 20-F for 2014, the amount of expiration cost incurred, that number.

That is the number we can compare to other companies.

What will that number be for 2014, and what do you expect that number to be for 2015?

Let me be clear about the dividends, and Simon will take the unproductive capital and the expects number.

I think we have done nothing different than in previous years, Martijn.

$0.47 for the fourth quarter.

We have an expectation of what the first quarter 2015 dividend will be, and then we have a track record for what happens after that.

And there's no change to that.

On unproductive capital, it grows as you invest, comes off as you come onstream.

It's growing again.

We had deepwater come onstream.

It was $42 billion at the end of the year, work in progress.

And technically, [Calispan] is no a longer work in progress, because in practice, it is.

Because it came on, then stopped.

So you can add another $6 billion or $7 billion for that.

The $21 billion, I think, was a exploration asset, signature bonused held ahead of development.

You're talking over $65 billion, which is [obviously around] 30% of the totality.

[Ex-specs], I don't know.

I really don't.

Because we spend $4 billion on conventional, that's the number that matters.

That's the comparable, of which last year close to $1 billion, with Alaska, I think, would be over $1 billion, Alaska.

It's between $2.5 billion and $3 billion, conventional, this year.

The rest of what gets reported as ex-specs can be -- on last year, it included Libra.

By definition, that's exploration, but that was an acquisition.

It includes the activity on unconventionals, which all intents and purposes, at the very least appraisal, and sometimes development, but the rules say it's exploration on our reporting.

So actually, I neither know nor care whether that's exploration.

What it is $4 billion a year of spend in shale.

We are not actually planning lots of acquisitions like Libra this year.

You'd have to know opportunistically what may come up and burst.

So the actual number can be impacted by all of those factors.

The number to think about is $4 billion, which could go down if we don't drill in Alaska, could go up if there are acquisition, use acreage or farming-type opportunities.

At the moment, it's more the other way around.

It's farm (Indiscernible) taking place.

We're focused on delivering the drilling program, which as you recall, we actually spent five years putting the portfolio of current drilling prospects together.

It was a three-year drilling program.

In essence, we were sort of halfway through that last year.

So a lot of drilling, great prospects this year.

It can then come off a bit in the next two years after that, because we're not yet committed.

And we are taking the drilling fleet down by the end of this year, maybe half the number of rigs that we had the middle of last year.

(Indiscernible)

Fred Lucas, JPMorgan.

Two questions, one on impairments and one on the dividend.

On the dividend, if you achieve everything you're setting out to achieve -- I hear what you say, it's multi-year improvement programs.

But if you get that and you choose all the right projects and you get rid of all the right projects, what oil price do you need to generate enough cash to cover a $12 billion dividend?

And on impairments, I was slightly surprised that we didn't see larger impairments with the results.

Perhaps the answer is you only tested to $70.

I just wonder, with project exposure to projects like Gorgon, [Katchigan], I wondered if there's a trip wire, if you tested down to $60, whether we could see very substantial impairments pending.

You want me to take them both?

Sure.

The divi, there's a significant potential growth, tested growth projects coming in in two or three years time, by which we expect the oil price to recover.

So breakeven price between now and then, don't really know, any more than I know the oil price.

It will depend on some of the choices we make.

But we've always said, the breakeven price needs to be below the middle of our planning range, which is $90, to a name.

But the breakeven cash price, with an assumed level of divestment, an assumed level of investment, because both of those are factors, will be below $90, not necessary for the next two years, though, because of the --

(Indiscernible)

And we execute well.

(Inaudible Question)

For three years out?

It's below $90.

How much?

It will depend on some of the choices we make in that interim period.

Assuming you made the right choices.

You don't know what the right choices are, depending on the oil price.

It's a dynamic situation.

We don't run the machine by spreadsheet and we don't run the machine according to a particular outcome at a particular point in time.

I have to deal with the world how it is, not how we'd like it to be.

We will make the choices that will enable us to maximum expense possible to protect the dividend and ensure we protect the growth profile, to the extent we need it, to remain a company that has one.

On impairments, the big driver of impairments is your long-term view, unless you're doing only short-term drilling.

The long-term view, (Indiscernible), we have not changed our long-term view.

Obviously, the short-term view, we've changed a little.

So we retested anything that was of interest for three years at a lower price.

And then there beyond, around a $90.

No problem.

On Gorgon [Kashgan], a massive cash generators, at the end of the day.

They're not that high cost, cash cost, once they're up and running, not even close.

There's around $10 billion in assets that stayed at $70, then you might have a question mark.

But actually, no, mostly gas assets in North America were the key decision in how we event and undersize the gas [into L&G or whoever].

So yes, we did it at the lower price.

But (technical difficulities) our criteria, for sure, there could be an impact.

And it could be broader than I just stated.

But we don't yet see the fundamental supply/demand case to do so.

On the OpEx side, what proportion of the $45 billion is actually corporate overhead versus the direct operating costs?

And the reason I ask is how much of the cost reduction is likely to be Shell-specific versus industry deflation in this environment?

And then, for Ben, it's been just over year that you've been in charge now, in terms of what has been more difficult than you expected, as well as being better?

(Multiple Speakers) (laughter)

The $45 billion (inaudible) total overhead of $10.5 billion is a broad definition of overhead, but more specifically, is that I manage it, or my two colleagues running HR, Corporate, Communications, Real Estate, Legal, et cetera, or they manage it.

That has already been run down from the maximum.

It is the likely target over the next year or two of the more aggressive sustainable cost reductions.

We've already taken quite a lot of cost out over several years in a pretty sustainable way at the asset level, which has been offset by two things, new assets and an increasing level of integrity and maintenance spend in those mature upstream assets.

That really does show through in the OpEx quite material.

But the targets for $10.5 billion, just in IT alone, we took $300 million out against expectation last year, and that's just a start of quite a bigger program.

I have actually the same number in sight in Finance.

So every piece of the organization knows where they need to get to.

It's not a single year program.

We don't give a headline number, because that gets us too much into chest beating and driving the wrong behavior in the Company.

We target individual executives, sustainable through cycle.

But given the oil price is $50, do it more quickly, sense of urgency.

And really importantly, third-party costs, because there's a window to take out that third-party cost.

Hopefully, that's give you enough time.

There's a long list of things that I could comment.

It has been a very dynamic year and it's, of course, a little bit difficult to maintain objectivity if you're right in the middle of it and look back and say, well, actually, it wasn't, it just felt like that.

But I feel it has been quite a dynamic year, a lot of things happening.

As you remember, a year ago wasn't exactly an easy moment to stand here.

I think during the year, we have seen a lot of good things happen.

But it took a lot of time and effort.

This is a large company.

It's a complex portfolio to work with, bringing a much more centralized, early view to capital planning does require putting systems in place that just don't come overnight.

I think what has been working very well is the way how the company has responded.

It always takes time to explain what you mean with performance units and how capital discipline in reality gets implemented.

It's very, very important that again you do not create an over reaction.

When we talk about capital discipline, we do not want to have the message in the company, there is no capital anymore, so it's okay to cut everything, and let's send people home, et cetera, et cetera.

So getting the balance right is, I think, quite a challenge as well.

And at the end of the year, indeed we are confident we have a long-term view.

We want to be prudent.

We don't want to over react, et cetera, et cetera.

But it is nevertheless a significant challenge to navigate with this uncertainty.

In a way, what you hear us say is we're not going to have a fire-and-forget plan, where we just say, here's your capital, good luck with it.

We have to work through the year to see whether we are still doing the right things, whether we are sufficiently prudent, but also sufficiently preserving our growth opportunities.

So then I find all that dynamic is stimulating.

I get a lot of energy out of it, as well.

I think maybe -- and I don't want to be flippant here -- but standing in front of you and meeting with our investors, I find it quite a new experience, as well.

Not only because of the experience of standing up on the stage of talking about the Company.

But I think it gives an acute sense of accountability.

It is very, very clear the buck stops with me.

I'm sure that Simon feels that in his own way, as well.

But I still very, very much feel on the spot, and I feel that to be a very healthy thing, as well.

So there is an even stronger sense of personal commitment than I thought I would have when I came into the role.

Does that help?

Okay.

Thank you very much.

Oswald Clint at Sanford Bernstein.

Just a question on LNG.

Could you talk about the resilience of your LNG earnings today, or at least the next year or so at these oil prices?

But also, given you said you're good at LNG, you like gas, and if the back end of the forward curve is at $70 and you breakeven at $70, how does that play into your decision making for future LNG projects as part of Shell?

And also, what do you think about the current LNG price and its ability to prevent or delay some of the big North American projects overall, which could have created a risk to the global LNG market anyway?

And then secondly, just on your divestment targets, 5 to 6, and potentially less this year; could you, though, drop more assets into your MLP, if required, if things get tough?

Is that something that you've included in that number, or could think about?

Thank you.

Let me talk about the second question and Simon will take the first.

Without wanting to say too much about the MLP, I think the idea is good.

This is a very, very good and efficient vehicle to liberate some of the capital on the balance sheet, get cash for it, get the disproportion of distribution rights, if we go ahead with the drop downs.

So this is part of a bigger, longer-term program to, of course, take the most out of this opportunity.

Could we accelerate this?

I'm sure that we will be looking at optimizing the timing from a number of angles.

But we can also look at other structures that we have, MLP-like structures, that will help us structuring the finances of the Company and that may be more opportunity to do, of course, at a time that you really need to understand how the financial framework can be optimized.

On LNG, talk about pricing and prospects in North America?

Maybe a little bit of resilience of the earnings.

Remember, 30%, 40% of what you see in integrated gas is actually gas to liquids, primarily in Qatar, and a little bit in Malaysia.

So that's almost directly exposed, but then the production sharing environment is rather some effective hedge against the lower oil price within the production sharing environment.

The rest of LNG is either big iron, which is low cash cost.

It's not for investing, but in terms of to operate, it's relatively low cash cost.

So it's pretty resilient in cash generation at much lower LNG prices than we see today.

But building new ones is a much bigger question mark.

At $70, very few current LNG projects make a lot of sense, simply because the costs today reflect more $110 environment than the $70.

So the costs are just too high, whether it's in East Africa, Australia or North America.

The push to change long-term pricing of cargoes from oil price linked to Henry Hub price linked doesn't seem as strong when actually that means oil price linked cargoes are cheaper than Henry Hub link, and there hasn't yet been a single Henry Hub cargo delivered.

The first ones will come this year.

There's still only really one project on its way, and that comes onstream (Indiscernible).

But we will see how that develops.

It's been a good reminder to the customers over the past six months that oil price linkage has upside for them, as well as downside.

We expect to see the mix change, but it won't move off the spot.

It won't move off the Hub, and it won't move off of Henry Hub.

And so the resilience and the attractiveness of gas as a fuel for most of those consuming companies and states and utilities remains high enough to support, we think, a very resilient business even at $70, but it will not support a lot of new investment, which will make those of us who have molecules today much better placed.

Thanks, Simon.

Thomas Adolff from Credit Suisse.

Two questions, please.

One on your gearing and credit rating, if anything.

Your target is zero to 30%.

And on the last conference call, you said if you get to 20% rating, you [assume will] knock on the door, because all the off-balance sheet financial leases, et cetera, et cetera.

My question is, how important is your credit rating if, for example, we get to into an environment where there are interesting opportunities for your Upstream business?

The second question, actually, I wanted to go back to the LNG business, because if I look at your Q4 results, I was a little bit surprised by the sequential decline, given that it's all linked, it's got a lag effect, you've got S curves in there, and your exposure to spot market is relatively low.

So if you can talk around the resilience in the LNG earnings, perhaps, in a $50 oil price environment.

Thank you.

I can quickly do the second.

So what you saw in the integrated gas results indeed is a decline.

You have to bear in mind, about $0.5 billion of that is actually just the oil price exposure that we have in Pearl GTL.

And then the $330 million that Simon mentioned, that was the ForEx effect on the deferred tax asset in Australia, actually all sits in integrated gas, because we consider Australia an integrated gas business.

So add back $800 million, and all of a sudden you see that it's not a decline.

Gearing, zero to 30% that you can see, the rating agencies also do look at pension fund liability, operating leases, commitment, et cetera.

But they add to $20 billion to $30 billion on to what you can see.

They've also both just significantly -- S&P have done it twice, maybe three times reduced their projections on which they use pricing to calculate their ratios on a go forward basis.

And that has put the entire industry on negative watch with S&P.

And Moody's hasn't yet moved.

But it would not be illogical for them to do the same, based on the changes to the environment.

Whatever we do in terms of opportunities that are out there, we'd like the rating to start with an A, maybe not be aardvark, but it will be A. Because that is important, both in terms of access to the market when you need it, the price of so doing, but the confidence it projects with the partners we work with around the world.

Many of whom, when you say, why aren't you slashing and burning CapEx, one of the reasons we are not is because all of our partners work with us precisely because they don't expect us to do it.

So if we said to Petrobras on Libra, sorry, guys, we can't join in, we have no money.

That's not going to help us in Brazil or China or elsewhere around the world.

That credit rating is a de facto indication of confidence through cycle ability to finish what we started.

And that's why it's important.

But the rating agencies are a bit nervous at the moment.

That is very clear.

But so we would not be surprised to see a downgrade, even if we don't do anything differently.

I think you were next and then Jon.

And then I will get to you.

Good afternoon.

Richard Kruger from Canaccord.

Just a couple of quick questions.

You talked about our long-term oil price assumption being somewhere between $70 and above, and yet the markets have come down to $50.

Does that mean your view on M&A changes or is that too early to say?

The second one was on US shale and what you think the breakeven for US shale is going right now and how that plays into the planning scenarios you've talked about earlier when you model out on your forecasting?

I think on M&A, we never comment.

So I don't think this is the right moment to start changing that policy, if you don't mind.

What we do see, by the way, is that indeed, in some cases, partners that we work with in projects or in exploration ventures, a bit more pressurized, of course, than we are.

So there's opportunities coming to us all the time.

On the Shell breakeven, I think it's a bit of a mixed picture.

I'm sure Simon will have a little bit more to say about that, as well.

If you talk about our own breakeven prices, probably a little bit too early to say.

You remember that a lot of the positions that we have are still very immature, so we are working out how we will bring them into development.

And we'll have to just see what the development costs will be, after we also know what we can take out of the contractor universe that is going to help us there, and then how that plays into what then will be the WTI environment.

It's obvious, of course, that with the low prices that we have at the moment, a lot of the opportunities to invest will look less attractive.

And therefore, you will see that quite a bit of the flexibility that we have in our capital program has been exercised in the resources plays and the shale plays, precisely also because it's a little bit more flexible.

So everything that our postpone to spend in resources plays in North America, there is a fair chance that you can catch up later or you can do it later.

Whereas in a deepwater project with a license or a project where you are in a slightly different position with partners, it is basically go ahead or lose it.

So there will be a little bit more focus and a little bit more downward pressure on our spend in the unconventional space.

Now, at the same time, of course, it means that the maturity of this business will be postponed a little bit, as well.

This has been a significant amount of capital on the books, which we will only make a positive return on if we can generate more cash than we have the appreciation.

So that basically means more investment in order to bring it into positive territory.

If we defer the investment program for good reasons, affordability reasons, we will also defer the moment of breakeven.

But in a way, to look at this business is on a cash basis, in my mind, certainly the opportunities that we have ahead of us.

The breakeven production from shale is probably lower than we thought, lower than many of you thought, I suspect.

There's a lot of hedging in place, forward production, the next 18 months.

But they start to roll off, from what we can tell, in about three months time.

So the hedging will roll off.

And a lot of the investment has been done with other people's money.

Six months ago, that was called high-yield debt.

And the FT renamed it, correctly, two days ago as junk.

Refinancing that is the big challenge.

You don't just invest to breakeven, you're repaying high-yield debt, you have to get a return, and a return for your shareholders.

And how that plays out will be important.

So we see a growth in liquids production this year, relative to 2014, from shale in North America.

At current conditions, it will not grow in 2016 relative to 2015.

How far it comes down will depend on price movements.

You can't put those hedges in place again.

There's no opportunity to do so.

The cost are actually quite a bit lower, to be fair.

The good operators on the good acreage have done very well.

But most people are not in that place.

They need better than just to break even at $40.

Jon Rigby from UBS.

Can I preface this question by just saying, if you recognize that if at $50, if you roll forward 4Q option performance, you're going to be close to breakeven, if not loss making E&P, and is that something that's somewhat of a pause for thought?

I had a look back through my model, which does go back quite a long way, and I couldn't find another quarter that was going to look like that.

And that prompts me to think about something we in the markets are going to want to focus on, which is trying to establish through cycle what you are capable of doing.

So you talked about the dividend at $90, and I suppose that's a good jumping off point.

But you have over $200 billion of invested capital.

Is the limit of the performance expectation from a company as large and sophisticated as yourselves to be generating a 6% return on invested capital.

It does seem somewhat meager.

If it's not, and your investment performance on assets is a lot better, and I assume you think it is, what's the gap?

Why is the return to shareholders so much lower?

That was one question.

Reminds me of New York.

The second question is just going back to your discussion around OpEx.

And I think you also talked about how you'd spoken to your suppliers and you were asking for cost cuts and so on.

And so with the experience of 2008-2009, what's the leverage on your OpEx that comes from the discussions, which I believe are quite big ones around cost-cutting, that follows into that $40-oo billion of OpEx; and if you could just clarify that so I can follow the potential there.

Thanks.

Let me talk a little bit about the second question.

Simon, if you'd take the first.

And then I also suggest, by the way, that we talk to Harry Brekelmans, who is sitting there in the back, who is our new P&T director and took over from Matthias Bichsel a few months ago.

That whole contracting and procurement outfit actually sits under Harry.

Of course, the first time you started to see the oil price coming off, we saw the opportunities coming up, as well.

And as we said, Jon, we did exactly what they're doing now also in the 2008-2009 timeframe, where we basically went back to our partners in the supply team and said, listen, we cannot go on as if nothing has happened.

It's not business as usual.

We have to see very, very significant reductions in rates, very significant cost takeout on your side, as well.

The letters have gone out again asking and suggesting 25% cuts, up to 25% cuts in rates.

And we are going through the process of sitting down with all our key suppliers to see just how are we going to do this.

It's a bit early days to say where we are going to end up, but this clearly has to be a multi-billion dollar takeout program.

Certainly, if you have a longer-term period of lower prices, you talked about a year at $50, I can only imagine the amount of spare capacity we will have in the system, if you have a year at $50 and if it extends into 2016.

And of course, if it goes on at a relatively lower level for multiple years, we will have to see a reset in the industry, a reset in the spending.

It could make similar returns, because at much lower oil prices, as well, but of course, the whole cost base that we had in those days was also commensurate with a lower oil price.

We have to get as much as possible out of the system at the time that we have the leverage and we have the need and the opportunity to do so.

Again, we probably have to talk about this as the year goes on, on how well we are doing.

But again, let me tell you, this is a major, major drive in the company.

Not only is it, of course, Harry's first, second, and third priority to look at the cost effectiveness of our projects in general.

Because if we do not have a cost effective project capability, I think in the long run, we lose our license to exist.

Investing in large capital projects is what we do for a living, so we've got to do it incredibly well and incredibly competitively.

And everybody understands, or course, that if you look at a project like Appomattox or Vito or the Pennsylvania cracker, or any large project that will come up for a decision this year, given the way we are going to manage the spend in this year and given the propensity, of course, for downward pressure if we have to do this, everybody understands they're not going to come back with a project and a capital cost that is consistent with $110 oil price.

So cost has to be taken out, otherwise it will be a no go.

No matter whether it is affordable or not, we cannot accept [doing] projects with a cost structure that is basically still living in a $110 world.

So there will be a tremendous amount of tension in the organization to get this right.

But we'll have to see how it plays out.

We said we wouldn't put targets out there, but we will talk about it as the year wears on.

(Technical difficulties)

Yes, and we do.

And you can imagine that in quite a few very difficult fiscal environments, we are having pretty tough discussions at the moment.

Of course, we have in many areas.

And if you don't mind, I'm not going to go public on that.

But in many areas, you can probably figure them out yourselves, either because it has been done very publicly or it's been done privately but it's known.

Of course, layers of fiscals have been layered on old layers, and we are at a point that is sort of okay at $110, but not more than okay.

It looks pretty sick at the environment that we are seeing at the moment.

Much of that is in our engines businesses, the mature businesses, where of course, a government would look at the profits that we are making on a relatively mature asset base and say, well, hold on, we need to talk about resharing this, and of course, additional tax structures were being slapped on.

They need to be peeled off, otherwise we cannot carry on.

So we have quite a few cases where we just say, listen, this infill project is just not going to work, so we have to talk about how we're going to change this, otherwise we will not do it.

We will demobilize rigs.

And in the end, what you will see is your fiscal environment will actually kill yourself.

It will basically drive down income.

So we have to have a different discussion.

And indeed, when it is with heads of state, it is a discussion that I have.

But believe me, we are having this, full on.

There's a question on returns of investor capital, as well, which I must add, for once, a nuance in the question.

So I'll just give it -- I'll say what I want to say.

(Laughter)

6% of $200 billion is not acceptable overall, clearly.

It was 10% on [Burt] return, clean underlying basis last year.

That, if you look at the track record competitively, is an improvement to competitors' position.

We acknowledge, a lot of our $200 billion is a result 10, 15 years ago of not having the longevity in the portfolio and ours lifting investment before the competition.

They've lifted their investment to catch up.

The other factor is, you get half as much per dollar investment as you did 10 years ago today.

So the actual unit rate in investment is double where it was.

If it stays double, then it will be difficult to achieve the same return on capital at the $50, $60 oil price that we did 10 or 15 years ago.

That's not going to happen again.

But we also don't think the $50 oil price is going to happen again for any significant length of time relative to our investment lifecycle.

So improvements come from the downstream.

It'll be probably a quarter of the capital at the end of the year.

That's going to be a double-digit return.

That need to be.

It must be a double-digit return.

The $65 billion of nonproductive capital, we do have to take that down.

And that's partly reduction of investment, partly bringing it on, bringing it on stream.

And we have to take that across everything.

And all of those levers pull together on the return on capital, a few basis points here, a few basis points there.

There's no quick fix.

You can't move your capital base of $200 billion overnight.

But 6% is not acceptable.

It has to be double-digit or more through cycle, really, to be competitive, not with our competitors, but with investors' other choices.

Iain Reid from BMO.

Ben, just on your $15 billion of CapEx you talked about over the next three years, just trying to get a sense of what kind of oil price scenario you have in your mind when you're putting that out there.

Is it some sort of V-shaped recovery, where you're going to get significantly higher prices towards the end of this year and into next year?

And also, has that been agreed with the joint venture partners who are working on the same projects?

Because I presume you're all going to have to look at the same lens, if you like, when making these sorts of decisions on pre-FID, for instance, which you're having to do right now.

And the second thing is on the sensitivity on oil prices, which Jon was referring to, I think, in the first part of his long-winded question there.

Sorry.

I just wondered, the $3.3 billion you talk about for $10, is that a pre-mitigation number?

And where do you think, from a top-down perspective, you should force your organization to take that?

Because as he was saying, that's going to make your first quarter numbers look very sick, if that's really the sensitivity we're looking at in the first quarter next year.

I'll take your first question here.

I'm sure whether I completely got what you were going at.

The $15 billion that we have deferred, you mean, that --

(Inaudible)

I don't think we had a V-shaped recovery in mind for that.

I don't want to go exactly in the way we modeled it.

But basically, what we did we looked under a number of price scenarios, and we had a number of categories of investments that we would be looking at in terms of attractiveness, doability, et cetera, et cetera.

And then we came to the conclusion that under almost all negative scenarios, there would be a significant tail that we would not want to do or we'd want to start deferring.

And then we had a significant amount of capital left, as you can imagine, that we would want to do, even under relatively bleak -- lower price scenarios.

Little bit of a fuzzy line, of course, between that.

And at some point in time, you have to just say doability aspects come into being, precisely for the reason that you mentioned.

In some cases, easier to defer a project because it's a little bit more under our control, or we know that our partner says, well, okay, I don't mind dropping that one, with the outlook that we have at the moment.

And that's how we made that first segregation.

So some of them are pretty much gone.

The Qatar chemicals project.

You have to take an FID decision and decide not to.

Of course, at some point in time, the question will come back again and say, it's a different type of outlook, could we reconsider that, and the feedstock hasn't gone away, or the market hasn't gone away, so could we could reconsider that.

But for now, it's just off the table.

We're not recycling it.

It has been a relatively precise exercise to single out these 40 projects and to put them to one side.

If it would be a very sharp V-shaped recovery, yes, we could, of course, consider bringing them back.

But I hope you get the sense, from the way I worked with the numbers, the fact that after deferring or canceling $15 billion worth of projects, we still have a project suite left which, of course, is a higher graded project suite that still would have us spend the same amount of capital next year as -- or rather, this year than last year.

I hope you will get the impression of how rich our funnel actually is.

So bringing it all back was never going to be completely compatible with the balancing of return and growth that we were talking about.

So we were always going to do a little bit of temporization and pruning.

There's just going to be a whole lot more of it, of course, with the oil price being where it is.

Does that clarify it a bit?

$3.3 billion is a $10 price movement sensitivity on both earnings and cash flow, if sustained for a year.

Absent any other changes, that increases over the coming years, because our oil price sensitivity grows, new production is more sensitive than old production, and there's more of it.

When we get the next wave of projects in (Indiscernible) [Howie and Stones,Gordon, Prelude], they are all oil price direct sensitive and most are tax royalty regimes.

Is there mitigation?

Yes.

We probably covered some of it.

There is some protection already.

27% for production, including F&R, is a production sharing contract.

So it's on the low end.

That figure I gave you is roughly the linearity within the $70 to $110 range, we're outside, probably already, the range of linearity.

And the other mitigation's clearly are cost management, the fiscal discussions we talked about, and the trading capability.

So we don't entirely get caught on the way down.

We're a very strong commodity trading position, and our ability to take advantage of volatility is some protection to mitigate the low price environment, in both gas and oil.

Okay.

I suggest we take the last question from you and then there's, of course, plenty of time for more dialogue as we go out and have a drink together.

But I think you probably -- most certainly, I could do with a slight break and a slightly different environment.

Why don't you take the last question?

Sure.

It's Anish Kapadia from Tudor Pickering.

Two questions, please.

The first one was, saying that you've got a long-term oil price assumption of $90, just thinking about capital allocation for the longer term, because we've seen a lot of change over the last few years in terms of the break evens of the US unconventional plays come down dramatically, and that's without probably a further 20% fall in service cost in the US.

Looking at the US unconventional plays versus, say, deepwater, it seems it's unsure, it's lower risk in terms of geology, longer resource life, lower fiscal risk, as well, compared to the big operational risk that you take on for an offshore project, so not necessarily a better breakeven.

So I'm just wondering how do you think about that over the longer term?

Over the longer term, do you intend to put a lot more capital employed into US unconventionals?

And then the second question is just to try and understand cash flow movements on an underlying basis in 2015.

You've had some one-off benefits in 2014 from the likes of working capital from Majnoon cash flow.

If you were in a flat oil price scenario into 2015 and taking into account the disposals, et cetera, how would you expect cash flow to move year over year, given all those one-off effects?

I think it's, to some extent, Anish, it's impossible to compare the two.

They have such fundamentally different characteristics, if you indeed look at an unconventional position, yes, of course, you could say it's lower risk, in terms of the investment that you make, one well at a time.

Maybe a little bit more predictability, as well.

But typically also, there is a smaller margin to play with.

So it is more flexible, it's more ratable.

It needs continuous CapEx injection in order to keep it going.

And therefore, what we are looking at is much more a game of, we have an existing asset on the balance sheet, four of them in North America together, $20 billion worth of capital employed.

How much more capital do we want to put on top of that in order to bring it into productive use?

And you can play around with that a little bit.

An Appomattox project is a multi-billion dollar investment.

And you half to take it in one go.

You cannot say, we'll do it one well at a time, or one piece of cake at a time.

So therefore, you have to take a very big swallow.

You have to prepare yourself to indeed see that through.

But once it's in operation, you have a completely different cash flow profile.

Very, very high cash margins, because it takes relatively little to keep it in operation.

Of course, it has incredibly high productive yields compared to what you see in an unconventional field.

So you have to have a little bit of both in order to mix and match the financial profiles that you want to have in your portfolio.

You cannot, unless you are a midsized E&P company in the US, you cannot just say, I will have an unconventional portfolio.

We have to mix it and we have to understand how much we want to have in the different buckets.

Random moments are to bite off the quick thing to chew, when the moment is to nibble a bit on the unconventionals piece.

There is more than simply economic considerations coming into it.

The cash flow is a good question.

I'm not sure if flat oil price at $50 or $110 you're thinking.

But where it's still $110, relative to the 2014, we would be seeing those turnarounds making quite a big difference and probably offsetting the benefits of the full ramp up of the projects we've seen.

We don't have a lot of big new projects coming on stream in 2015.

Obviously, at the lower oil price, that impact is exaggerated in terms of the absolute impact.

In terms of the relative impact, it is better to be down and gas up at $60 than $100, in terms of the value of the molecules in the Granby.

So as to who'll give a straight answer as well, because we expect divestments to be low, much lower, but low, on an absolute sense.

We talk 5% to 6% through the cycle.

We'd do well if we get to 5% or 6% in the current environment, I think.

It's going to be lower than that, which effectively may add $10 to the equipment breakeven.

A year ago, we took the scrip option away from the dividend, potentially you look at reintroducing it.

Our number one reason we took that away was constraints around the buyback in the Dutch fiscal system.

To bring it back this year, we can remove some of the constraints, et cetera.

So each lever works on a few dollars a barrel, or $10 a barrel breakeven equivalent.

But it's going to be a tough year.

No question.

The first six months, there are few drivers of the price back up on the fundamentals.

Maybe it plays out better in the second half of the year, and that's what we need to be preparing for.

It certainly won't be in the 40s, the cash generation.

It may not even be in the 30s.

The divestments will be lower.

That's why we need to be pretty tight on every lever we have, to ensure that we end 2015 in as good a position as possible, wherever the oil price is.

And that's a broad level discussion, and clearly it's ongoing, including yesterday.

It's not any single answer.

Okay.

So with that semi forecast on oil price, I think it's probably good to close.

Thank you very much for being here today.

We do the first quarter results on the 30th of April, and Simon will be talking to you then.

I suggest we retire to the hall next door and continue the conversation as you want to.

Simon and I and again, Harry, will be there to answer any further questions that you have.

Thank you very much.

Thank you.