Welcome to the Royal Dutch Shell Q2 Results Announcement Call. There will be a presentation followed by a Q&A session. I would like to introduce your host, Mr. Ben van Beurden. Please go ahead sir.

Good afternoon, ladies and gentlemen. Let me introduce myself. My name's Trevor Mulvaney. I'd just like to give you some important health and safety and general housekeeping for this afternoon's event here at Haberdasher's Hall in Smithfield. There are no planned fire drills this afternoon. So, if the alarm does go off, it's the real thing. The two exits are here to my right and down the stairs for those of you to this end of the hall. And for those of you at the back end, it's behind where the camera in and one of my colleagues at the back. All the entrances go down – downstairs and follow the directions out, so they lead out through the front door. And the assembly point is in the ambulance station area at the front of the building. And the second equally most important thing is the restrooms. They're located the way we came in, back down the stairs and around to the right. Thank you. Ben van Beurden - Chief Executive Officer & Executive Director: Okay. Thanks very much, Trevor. So, ladies and gentlemen, good afternoon. Great to see you here. Welcome to today's presentation. I'm struggling a little bit from a voice that is gradually deteriorating during the day, but I'm pretty sure I can last another two hours. So, today, we've announced our quarterly results and we're going to talk about that, of course, in some detail. But I thought we also spend a good party most of the time on updating where we are overall. And of course, there will be, as always, plenty of time for your questions in the Q&A session. Quickly, the disclaimer slide, which you are familiar and then let's get going. So, our integrated business model and our performance drive that we've…

Thank you. Jon Rigby. I've already been told today actually I speak too quietly, so it's good job you've got the microphone. Can I ask two questions? First is on the CapEx and changes to CapEx. With the new plan, are you still investing at an activity rate that sustains the business, so are we talking about gradations on growth in terms of outlook, or are you actually shrinking the business because of liquidity issues around what you spend? So, if you can sort of give some granularity around that? The second is I take your point about the LNG market, but I think it's fair to conclude that we are moving into a position in the market for the next three years or four years where supply will start to increase and the market dynamics will change. So could you just talk about whether you see, I guess, challenges, but also opportunities because, of course, you are large marketers, traders, if you want to use that phrase? And can you sort of talk about the challenges, but also the opportunities around the LNG market over the next three years to four years? Thanks. Ben van Beurden - Chief Executive Officer & Executive Director: Yeah. I'll make a start on both of them and then I'm sure that Simon will have quite a few points to add as well. Jon, this is the key thing that we have to get by. When it comes to capital, we have to make sure that we hit two objectives at the same time, that we invest at a pace that we can afford, but at the same time that we invest to keep the company long term healthy. I think we're getting that right, but we cannot get it right by just making…

Thank you. Thomas? Thomas Y. Adolff - Credit Suisse Securities (Europe) Ltd.: Hi. Thomas Adolff from Credit Suisse. I want to stay with the LNG theme really. If we think about future projects to really kick them off, you need $10 to $12 per MMBtu unless liquefaction costs come down materially. I think the industry has talked about upstream cost deflation, but I wondered what you are seeing on the liquefaction cost side, which might be a little bit more sticky. The second question is – if I look at your LNG portfolio, it's got (48:48) LNG. You've got (48:51) expansion, you've got LNG Canada, they've got Tanzania amongst the -- I guess the better projects in the portfolio in my view. What is the kind of order of preference you see right now, but also as you sign off-take agreements or contracts, are you willing to give or are you willing to remove the destination restriction to the customers as well as willing to give higher DQTs (49:23)? Thank you. Ben van Beurden - Chief Executive Officer & Executive Director: Let me start with the liquefaction because you're absolutely right. Liquefaction costs have come up quite a bit. As a matter of fact a lot of planned costs have gone up quite a bit over the last years. Not sure whether I've said it in an audience like this before, but if you look back for the last 10 years what we have seen in the industry is that typically – well, not only productivity has fallen, but the amount of man-hours required, engineering hours required per piece of equipment have gone up by a factor of five. That has to do with complexity in regulation, higher standards, probably also has to do with competence, and other efficiency measures.…

Thank you. Theepan Jothilingam from Nomura. I'd just like to come back to capital investment. And I know that process is dynamic. But I was interested in looking at that 2016 estimate that you provided for the pro forma entity and the comments around pulling levers if they're required. So my question there is sort of what oil price assumption have you made the next year? What type of cost deflation have you assumed from current levels? And what are the levers, is it pre-FID, is it short cycle exploration? And just – the second question is just on exploration and the reduction in CapEx is today for 2015. How much of that $3 billion was a reduction in exploration? Thank you.

Yeah. You want to take it? Simon P. Henry - Chief Financial Officer & Executive Director: I'll try and go backwards. Exploration reduction this year relative to what we're looking at in January. It's pretty minimal, a few hundred million because we weren't planning that much. In the first place most of the wells were already committed. This year the 35 through 30 that we've seen over the last six months, 30% has been improvements in the supply chain, that's not just deflation. There are a bit more subtleties and sophistication, about $1.5 billion of the $5 billion. As we go forward, expect that to apply to a bigger proportion of the total CapEx, Appos (55:46) are good indicator. If we can take 20% out over the 15-month to 18-month of the detailed design phase, that should be seen as pretty much as a minimum going forward because the market will deflate and deflate further. So that's one of the key levers. The primary levers for next year are the phasing of any new decisions. And on the slide you see what we pushed back. You can also see some quite significant decisions, some of which we just mentioned in LNG, but there are deep water and Vito (56:19), Gulf of Mexico, and Brazil. Our exploration spend is being absent Alaska, taken down towards the $2 billion level anyway, towards the $2 billion. Probably we won't drop below it. And the primary levers were still in the short term, the choice of when to take new project decisions.

Getting back to cost deflation, Simon, how much cost deflation do you assume in that 35%, or can we see some benefits come through in that mark-to-market when we revisit (56:56)? Ben van Beurden - Chief Executive Officer & Executive Director: The 35% is based on today's environment. If we were planning at a higher price, the 35% will be higher because you would be then seeing prices come back up. So could we go below? Don't know because remember 35% includes about finger in the wind type guess, and what BG will be doing based on their public statement. But they're probably under no more obligation or hurry to invest in big new projects than we are at the moment, and that's an underlying assumption. Can we take more out? We will take more out depending on what the environment we see, but it's not just about price or deflation. Of the total cost of any supply chain third-party contract or investment, 40% is design and scope driven, 40% is logistics and demand management and 20% is price. And we're working pretty hard on the first 80% because then quite often, you don't have to worry too much about the last 20% because you're both winning, us and the supplier.

(58:01-58:06) Simon P. Henry - Chief Financial Officer & Executive Director: Yeah. Do the best of our ability to estimate, of course, You can never predict with greater certainty when a divestment will occur. But yeah, that is factored in as well. Lydia (58:20)?

Thanks. If I could come back to the BG deal and you do think we're talking more cautiously now than you might been in January or April about prices. Would that have changed your view on what you would have paid for BG in terms of the valuation of the structure of the deal? And then secondly, and I suspect partly related to that question is, I realize you can't give synergies over and above, what, the 2.5 billion that you've given, but are you able to talk about an order of magnitude or give an example of where those synergies would come from? Ben van Beurden - Chief Executive Officer & Executive Director: Why don't you talk about synergies? I think, no, the – we talk perhaps differently, but fundamentally it – the ingredients of the communication are still pretty much the same. Going back to the response to Jon's point, we have to balance two things at the same time. We have to make sure that we have an investment program that will continue the company and its cash flows for a prolonged period of time. The iron industry where cash flows fall off all the time in the Upstream. So you have to reinvest to keep the company strong and healthy, and we therefore take a view on what we believe the long-term oil price is, because typically our projects, therefore, 30 years, 40 years, 50 years sometimes, and we do believe still that in the mid to longer term, so typically in the range where we planned the life of our projects, the oil price will come back in the $70 to $90 range, which is where we normally plan for our life projects anyway. But what perhaps is different or what I think I want…

Synergies?

Yeah. Simon P. Henry - Chief Financial Officer & Executive Director: Just briefly on synergies, remember we putting a company with a $40 billion cost base together with a company that has lower than $10 billion. This is not a synergy driven deal. We can do as much on our own base as we can on the combined. So the $2.5 billion that was signed off in the deal only $1 billion was cost. $1.5 was less exploration, which we clearly won't need as much of in the combination. The value uplift was always the driver of the deal, synergies are not – the cost synergies are nice, but the value uplift is why we're doing the deal for the gas and the deep water positions. Simple example, we work in Brazil with Petrobras. They're already a good partner. I think they may take a positive view on having a partner like Shell for technology, for our operational experience together to drive value out of that portfolio. The LNG market, we and BG have the first best and the second best LNG portfolio for trading and marketing in the industry. It's a matter of opinion, which is best, but they are clearly the two strongest in terms of the supply source, market access and the ability to optimize within that. The value, we bought Repsol's LNG marketing business. We have 25% of the cash upfront back in the first year from optimizing that portfolio and several hundred million in the first year from optimizing it better than it had been. Together with BG -- it's well-managed portfolio anyway, BG's of course, bringing that together, there's a lot of scope there. We just can't put a number on it today. Ben van Beurden - Chief Executive Officer & Executive Director: Okay, (01:03:27). No, sorry, (01:03:33)

Good afternoon. I had a question on disposals and another question on your North American portfolio. On the disposal side of things, if you assume that oil prices will stay kind of around this kind of level – maybe slightly higher out to the end of 2018, I was just wondering about your confidence on the target and how the split would look between, say, Upstream infrastructure and Downstream, as I think the MLP will be quite important in there? And then, the second question kind of relates to the Permian assets and then kind of looking at those in the context of your capital reductions. Essentially, you didn't have that in your kind of turnkey projects. But it seems like an asset that could grow substantially over the next five years or so, could throw off substantial cash flow. But then, at the same time, it requires some substantial investment at the moment. I think, if you were going to sell it today, you'd get probably several multiples times what you spent for it, and you could bring somebody into to accelerate that asset. Just wondering in terms of the asset, how you're thinking about it in this environment where there are people still willing to pay very high multiples for that type of asset. Thank you. Ben van Beurden - Chief Executive Officer & Executive Director: Yeah. The Permian is a good asset. I'm sure that Simon will have some more to say about it. In general, about disposals, yeah, you're right. It is a little more difficult to sell in a very, very week oil price environment, an upstream asset. We have no intention to sell assets for below their value. We have to make sure that we get full value for it, as we see it…

Yeah. Ben, Iain Reid from Macquarie. Just talking about Brazil, you mentioned earlier that you can bring to bear Shell's operational and reservoir management experience, et cetera. But the reality is it's all operated by Petrobras. And now Petrobras is in somewhat of a crisis. I wonder whether this is now the opportunity for you to start to make approaches to actually operate things or acquire things you can operate in Brazil. Has that process started between yourselves and the Brazilians? And the second question is, again, back to LNG on Browse: you talked about affordability and break-even prices, et cetera, but Browse seems to be going ahead, or at least looks like it is. Can you say what oil price breakeven you have on that? And what the status of that project is right now? Ben van Beurden - Chief Executive Officer & Executive Director: You take Browse; I'll talk a bit about Brazil. Simon P. Henry - Chief Financial Officer & Executive Director: Yeah. Ben van Beurden - Chief Executive Officer & Executive Director: Yeah. Well, operatorship in Brazil, it would be very interesting component of our proposition and our position in Brazil. Actually, we do operate things in Brazil, of course, not in the presale Polygon (01:16:11) that is legally privileged for Petrobras. So we will have to see a change in legislation first before operatorship can be granted to others. Will that happen? We can speculate about that. I'm sure if it was to happen, it will take some time and some political development for it to materialize. But one thing I know for sure that if it does happen and if we feel that indeed it would be beneficial for us to take on an operatorship role; being the preferred and lead partner of Petrobras…

Just a short verification, the $100 billion figure as you mentioned, is that comparable to what it was sort of two years ago, the $60 billion figure? Ben van Beurden - Chief Executive Officer & Executive Director: Yeah. The $100 billion includes the cash. We have got $27 billion of cash on the balance sheet at the moment included in the capital employed. So other than that yes, in definition terms, yes. Simon P. Henry - Chief Financial Officer & Executive Director: Waiting to go away, yeah. Ben van Beurden - Chief Executive Officer & Executive Director: The cash has a home to go to... Simon P. Henry - Chief Financial Officer & Executive Director: Exactly, yeah. It's going to BG, yeah. Okay. Another one in the middle and then we move to you there.

(01:25:14). Can I just clarify on that last point? So in the planning process that you go through every year, you're still using $70, $90, $110 for the (01:25:23) planning process? Simon P. Henry - Chief Financial Officer & Executive Director: I didn't quite say that, the projects. The planning process long term tends to tend those projects screening values, but in the short term reflects current reality.

Yeah. And that is actually quite an important clarification. So sometimes the words planning and screening are sort of easily interchanged and may give their wrong impression. If you look at a project and if you look at how this project is going to do over its life being 30 years to 40 years, we use screening value. Sometimes we also use the word planning values, and that's the $70 to $90. So indeed, we compare portfolios of projects at the $90 level. We have been doing it for some time and we just make sure that it is an NPV positive project at $70, quite often it's of course NPV positive still at the lower level. Now, when we make our business plan for next year and we plan for cash for next year, we don't use $70 or $90 or whatever. We use what we think your price are going to be next year. And we make sure that financially the company is resilient and robust and attractive, can pay its dividends, et cetera, et cetera, et cetera, at whatever we think the oil price is. But whatever we think the oil price is for next year, we're not going to use for the next 30 years for the investment decisions that we take next year, that will be nonsensical. So we have indeed multiple ways of looking at oil price for financial planning purposes, as well as for screening projects. And sometimes these things get interchanged and they produce funny results on how people think we are behaving, but I hope this clarifies it. Yeah.

(01:26:55) come back to – in the January presentation.

Yeah.

I think you extolled the virtues of your macro theme. And I don't mean this to be a facetious question, but what has changed in their view in the market in the last six months...? Simon P. Henry - Chief Financial Officer & Executive Director: And sorry, and who's view...?

In the macro, your internal macro team?

The economics team.

Yeah. Ben van Beurden - Chief Executive Officer & Executive Director: Yeah. I think fundamentally not an awful lot. It is just that also we don't know ultimately how the oil price is going to develop with all the factors that are weighing into it. The fundamentals – where this is the point that I made at a time, and I'm of course – by reiterating it, I'm at risk of again falling in the same trap perhaps that I fell in in January. The fundamentals are that there is a bit of a floor at $70 if you take the longer term view at it. There is a demand growth that – well, you can argue how big it is. Is it 1%, 1.5% or 2%, it depends a little bit on how China and general developing countries grow. But if you assume a modest GDP growth that correlates to a 1% oil demand growth, then that is one factor. The other factor is that supply shrinks all the time. Don't know quite how fast this is shrinking at the moment. Typically it shrinks at about 3% to 4%, but the more we hold back as an industry and as countries in investing in existing fields, the faster their drop off in supply goes. At some point in time the market will balance. The market is not going to balance with all the investments that are just going ahead at today's oil prices. Well, of course, it will ultimately balance if we would see a continued deflation in cost. It could, of course, balance at today's oil prices as well, and then, of course, the whole thing will right itself and we will make money at lower price levels. But as we see it at the moment assuming a…

Yes. Thank you very much. Just two, I guess, quick questions. First, really back on the divestments and given the comments about LNG deep water as a focus, gas being the fuel of the future, lower CO2 world, I just want to get your thoughts on the oil sands, where should Shell be in oil sands, or is that – I'm not sure if that's part of the divestment plan, but could we see something more radical just related to oil sands going forward? The second question, really I guess I'm noticing a couple of the other CEOs been able to get some tax concessions or lower content in certain countries or have been able to tweak pricing or taxes. So, are you having any success or should we expect to see any Shell success in pushing back with some of the rising fiscal tick? Thank you. Ben van Beurden - Chief Executive Officer & Executive Director: Yeah. Okay. Simon to say a few words on tax and fiscal tick (01:37:45) in a moment. I'm not sure whether you wanted to ask Martijn's question slightly different way, but what we need to do with oil sands, oil sands, of course is a relatively high cost operation. I think in the first quartile when it comes to cost per barrel. But there is, in my mind, also a further potential to take costs out and a necessity to do it, of course. We are at oil price levels. If you look at North America and then if you look at the discounts that we see in Alberta, even versus WTI, we are approaching, of course, oil prices that are very, very close to the breakeven or to the cost of production. So, we have to therefore focus even more than in…

Yeah.

I managed to grab the microphone, thanks. It's Chris Kuplent from Merrill Lynch. Two questions. I heard you mention that the Permian breakeven seems to be even below current numbers, and the Permian is a very special region. But considering what you've learned there and as you say, you can apply in other regions around the world, whether that's Argentina or possibly elsewhere, just over the last six months, has that experience changed your internal thinking about potentially there being more cost efficiency still down the road, not necessarily the next three months but over the next three years to five years possibly denting your longer-term oil price outlook? And the second question, now we've been through quite a few quarterly result presentations this week, and I think there seems to be a bit of a dichotomy between, hey, I can cut CapEx but my decline rate does not get impacted, and I also don't need any M&A, thank you very much. And I think Shell seems to be in a bit of a different position where, obviously, with BG, a lot of growth is coming your way. Does that mean you are a little more – you can afford to be a little more relaxed about decline rates when you're now guiding down CapEx to $30 billion this year and possibly lower next year? Ben van Beurden - Chief Executive Officer & Executive Director: Let me say something on both points and Simon, I'm sure, will have a few very useful adds to that as well. Efficiency, I'm not sure whether you're talking about what we see or what we see the industry can do when it comes to efficiency. It's probably both, yeah. So if I look at the Permian, I think, and for that matter also the…

Certainly is. Gordon Gray, HSBC. You've talked a lot about capital flexibility and adapting the spend to the current environment and saying potentially if the price was higher, you could spend more. If you look at the other side of this equation, for those out there in the market who are less confident than, say, yourselves and many of us in the recovery of oil prices, can you give us a feel for your cash flow sensitivity long-term? I'm thinking – slide 32, I think it is in your presentation, you talked about the $15 billion to $20 billion of cash generation in the three pillars, et cetera, et cetera. How would that look at what you see as a floor for oil prices, that sort of 70 level? And secondly, very briefly and I think quite easily, what are the key milestones you have to get through to be drilling in Alaska of this summer season? Ben van Beurden - Chief Executive Officer & Executive Director: Let me take the second question and give Simon some time to think about the first one. The key milestones we have to go through, actually we've gotten through most of the milestones already and they have been very well commented on over the last months and quarters of course. So, where we are in Alaska at the moment, we have the true drillships and rig in place. We have most of the fleet in place. We are making initial preparations and we are planning to drill the well. We have one well plan for this season over the next weeks, months. So expect the results somewhere in September or so. As it's also very well advertised, we have one of the Finnish icebreakers in Portland being repaired. It hit a underwater object…

Thanks. Rob did very well and restricting himself. I'll try and do the same. Two questions. One, I'm tickled by the LNG complex comments and complexity, and I'll come back to a moment. But analysts, exactly the same in terms of spread sheet, Simon, and you kind of made our life slightly more complicated in ways deferred tax Brazil, Australia. Why does it go through the P&L, why not just through the comprehensive income or statement of income? Why can't we lose it as complication into quarter? And more seriously, two others very simply, the first one organization then. How has it responded to the changes that you're indicating you wish to drive through it? How much resistance, how much pushback, how much – to what extent embracing? I'm just going back to the discussion on that LNG if I might, I guess the difference between gas and growth this time relative to gas and growth historically is it's another fuel source. Coal plays a lot – or coal obviously plays a large role in terms of switching and choice. Do you need a carbon price, do you need a real push away from carbon? The demand for LNG to continue to deliver at the kind of rates that it has over the last two decades, three decades because even at $9 in MMBtu, relative to coal and relative to falling renewable costs, gas is just not as competitive as it was. Ben van Beurden - Chief Executive Officer & Executive Director: (01:53:57) your question...

Sorry, the question is do you need carbon pricing to be reduced? Do you need a real shift away from the use or away from carbon intensity, everything that you've been talking on working towards in December or politicians have been working towards in December to take place to underpin? Ben van Beurden - Chief Executive Officer & Executive Director: Well, I think a number of things need to happen. If I take the last question first and I'll talk a bit about our organization. I'm sure Simon will want to talk about the deferred tax assets on the balance sheet. Yeah, well, I do think you need a carbon price in order to sort of, shall we say, level the playing field against carbon because at the moment, look at what's happening in Germany and it's happening in other places as well. You see the same also happened potentially in places like Japan. It is the combination of low or no variable costs renewables coming in. At the moment you've installed a solar panel, at the moment you install a wind farm, it has no operating cost. It has no fuel cost. And if you place these assets in electricity markets, they're basically always dispatched. Basically, what I do is they push out typically gas. And the next one in the merit order is low variable cost coal. So what typically happens if you – unless you correct something, either the way you price capacity or either the way you put a price on carbon, you basically see strong pushes for renewables coinciding with a resurgence in coal. That is happening in Germany, and it's starting to happen in Japan. So, we have to do something about it. Now one way to work with it is to put a…

I'm talking about the changes that you're or about the changes that you're suggesting you're going to make (01:57:07). Ben van Beurden - Chief Executive Officer & Executive Director: Yeah. I think there's an interesting dynamic in the organization on that. I think there's a lot of excitement, of course, as you can imagine, around the BG deal. People will see this also as a huge opportunity. It is, of course, a sign of financial vigor that we are able to do this. People see a huge opportunity, particularly if you are in integrated gas and if you are in deepwater. And other parts of the organization see this also a little bit more as a threat, and they are, as you are, all figuring out what does springboard for change really mean. That will play out in the fullness of time, but everybody I think is also clear that this is a healthy and a good tension to have that we are indeed going to create a better, a simpler, and a more competitive company. And it's not just going to be a matter of, hey, we have more choices. So, boy, are we going to have an investment program in the next few years? I think that message is very, very clearly understood. That I think is a message that follows on, in my mind, very well from the drive that we have had, on focus, on returns and the bottom line in general for the last quite a few quarters but very clearly, one that I have wanted to accelerate and intensify since I'm in the role. And I think it is playing out. I think you do have a lot more sort of connectivity between people throughout the organization and the bottom line that they are…

(02:01:11-02:01:23). Simon P. Henry - Chief Financial Officer & Executive Director: You need to be in Brazil and Australia in particular. Those are the two that have impacted us most and have a certain tax position, whether you're in tax assets or other. So they may not have the same scale of exposure. Remember, the Americans don't use dollars for everything, so they don't tend to see DIE (02:01:46) changes. Ben van Beurden - Chief Executive Officer & Executive Director: Okay. Who wants to ask the last question? There you go.

Thank you. Aneek Haq from Exane BNP. Two questions maybe if you don't mind. One is hopefully quite straightforward; the second one less so. But I wanted to ask your thoughts on scale and replication, so where you're in a basin where you have longer-term relationships with your partners, you are doing a lot more brownfield activity, what do those project breakevens look like, Simon, as opposed to greenfield one-off, say? And then just on downstream, I know the focus today is a lot more on the upstream stuff. But downstream, that's a pretty big number today. I wondered if we could just try and understand some of the structural growth areas within downstream as opposed to the cyclical elements that have driven number today. Ben van Beurden - Chief Executive Officer & Executive Director: Do you want to go on the replication and I will do the downstream? Simon P. Henry - Chief Financial Officer & Executive Director: Sure, yeah. The brownfield is nearly always more attractive at the margin than greenfield until you get into more mature assets when it becomes a stay-in business type capital. So the trick for us is partly a portfolio one in choosing and spotting the sweet spot of when we may be better off divesting, diluting or thinking about abandonment. It's difficult to give a number, but it does vary, but our strategy is a combination of big plays to open up new hubs, smaller projects to maximize the value of the existing hubs, and even smaller asset integrity/energy efficiency type projects. Typically, the latter category on aggregate doesn't have that higher return because some of it you just stay in business, you protect, you don't add value. Those small projects are usually the highest return and the quickest return. And then…