Very good to be live. Ladies and gentlemen it's a pleasure to welcome you here again this afternoon and I look forward to have a -- good afternoon we are talking about results, talking a little bit about some portfolio developments since management day and I can sum it actually already for those of you who are in a hurry in a few words. It has been a great year there has been a transformational year. We said 2017 would be a year of delivery, well I think we delivered in 2017. That was all before the disclaimer statement but let's talk about 2017, '17 was a year I think in which we showed that we have what it takes to be a world class investment -- it was a year of a very strong financial performance and our relentless focus, value, achievement and our competitiveness meant that we were able to deliver very strong earnings from a high-graded portfolio. New projects more than offset impact of divestments, we had a record LNG liquefaction but also LNG sales volumes and downstream the volumes also increased excluding divestments. But let's talk a little bit quickly about the financial results for 2017. '17 a year of very strong financial delivery from each of our businesses and we achieved this in a pretty volatile environmental. 2017 current cost of supply earnings excluding identified items were around $16 million, cash flow from operations $36 billion and free cash flow was more than $27 billion and all of this at an average brent price of $54 a barrel. We also further reduced net debt in the year by $8 billion and the declared dividend for 2017 amounts to some $16 billion, the Q4 dividend you will have noticed will be fully paid in cash this…

Thanks, Ben. Good afternoon, everyone. It's good to be here today. Let me update you further on our fourth quarter results, on our operational performance and on our financial framework. In summary, excluding identified items, on a current cost of supply basis, Shell's earnings in the fourth quarter were some $4.3 billion, $2.5 billion more than in the fourth quarter of 2016, which represents an increase in earnings per share of more than 130%. On a Q4-to-Q4 basis, we saw higher earnings in all business segments. This was driven primarily by higher oil and gas prices as well as improved business performance. You'll note that lower depreciation and a lower effective tax rate, excluding identified items, primarily driven by changes in deferred tax positions, also contributed to these strong earnings. Cash flow from operations was $7.3 billion or $8.4 billion, excluding working capital movements. This is $1.4 billion lower than in Q4 2016, primarily as a result of higher tax payments in this quarter, $1.6 billion more than Q4 2016. These higher tax payments reflect the outcome of positive developments. They were driven mostly by higher profitability, but also by divestment completions and the overall positive resolution of various tax matters. Cash flow was also impacted by margining on commodity derivatives in our Integrated Gas business. Our dividends distributed in the fourth quarter of 2017 were some $3.9 billion, of which $1.6 billion were settled under the scrip program. Dividends per share were $0.47 to be compared with $0.52 per share on a CCS basis. Turning to reserves. Our SEC proved reserves at the end of 2017 were 12.2 billion barrels of oil equivalent, which is a decrease of around 1 billion from 2016. Excluding production and the impact of divestments, reserves additions in 2017 amounted to 1.8 billion barrels,…

Thanks, Jessica. So strong Q4 earnings concluding a very strong 2017. And we entered 2018 with continued discipline, confidence, committed to delivering very strong returns and very strong cash. And with that, let's do some Q&As. Just 1 or 2 questions at a time, and I'm sure we will be able to cover everybody.

Can I start with you? Sorry.

It's Michele Vigna from Goldman. I was wondering if you could elaborate a bit on what would be the trigger to start the buyback program. Is it the 20% gearing? And what would be the key drivers to determine the pace at which you'll execute the buyback from there?

Okay. We anticipated that question, actually. Jessica has the answer for that.

Great. Thank you, Michele, and we covered this a bit this morning as well. So I'll be consistent with what I said earlier. I can understand the attraction to trying have one metric that will be the trigger when we'll start the buyback program. What we've tried to do is be clear on our decision framework, and what I mean by that is clear on our intention. So we're very much committed as a leadership team, as a company, to increase shareholder distributions. We are clear about our commitment of achieving the $25 billion in the '17 to '20 time frame. We've been clear in terms of how much cash we believe this company can generate, so the $25 billion to $30 billion in 2020. We've been clear in terms of our financial framework. We want gearing to reach 20%. I'd say it's more of a line-of-sight number than a hard number that we must meet, but we need to have clarity in terms of line of sight with that. But of course, there's other factors as well. There's the macro environment. There's the performance of the business. And all of these pieces come together for very holistic approach and integrated approach to making that decision. What I can tell you is we have confidence in the cash-generation capability of this company. We believe this company will be able to achieve the organic free cash flow of $25 billion to $30 billion. We believe we can move the gearing down to 20% and in that time frame, be able to start the buyback program.

Let me add a little point to that. We have a tremendous sense of urgency, of course, to do this. There's two things we have to balance. Of course, making sure that our credit metrics are resilient. But at the same time, of course, getting into a buyback program as quickly as is sensible because, obviously, it's the most expensive way to fund the company. So don't get me wrong. It's the same argument that I made on the scrip and you all wanted to have an algorithm for when exactly would we cancel the scrip. And as the same sentiment, as quickly as possible because it is just not a good position to be in or it's a better position to start buying. So -- but again, the algorithm, I'm afraid, will not be revealed today. You are next, and then we'll go to Theepan.

Jason Gammel with Jefferies. Clearly, the cash generation trajectory is quite impressive. But I would say that based upon what we were expecting in 4Q, it seemed a little bit light, and I recognize you have made reference to some timing differences. But if I look, for instance, at the Upstream cash generation in the quarter, if I just take earnings less DD&A, the cash performance was less by a couple billion dollars. So I was hoping you might be able to quantify what some of these timing differences are and whether this is something we can get back over time. And maybe just emphasize it's not systemic, if nothing else. And then just one other quick question on the 1.8 billion of reserve additions you've made this year. Can you quantify how much of that was price revision-related?

Okay. Would you mind?

I'm sorry. Just the last piece, I missed that. 1.8 billion, yes?

The 1.8 billion of reserve -- there's 1.8 billion of reserve additions from other. Can you quantify how much of that was price revisions?

Okay, good. So okay. So indeed, fourth quarter, I think it's important to keep in mind that our fourth quarter typically is relatively soft from a cash generation perspective. So if you looked at the last 4, 5 years, you would see cash flow typically softens in the fourth quarter. That has to do with normal seasonality of our business, particularly in the Downstream business. One, there's seasonality in terms of kind of top line growth. But it's also the tax-paying season as well, and so we make some important tax payments in the fourth quarter, which also affects cash flow from operations. So that's, in general, what happens in the fourth quarter. Specifically, what happened in this quarter were a couple of things. Tax played a major role in the story for the fourth quarter. It was a help to our earnings and a hurt to our cash flow. So you had kind of two different effects, but the underlying story of what's happening in tax is a positive one. So what's generating the higher tax payments? Three main things. The first one is higher profitability that generates higher taxes. That was -- around $400 million, $500 million of that number was driven by profitability. The second piece of that is divestments. As you divest, there's usually a tax component. It happened to be relatively higher in the fourth quarter as we've been closing out the transactions. And then the third component of that was settlement of some tax issues that we had in -- around the world. We're pleased with how those have been settled. Those are relatively one-off. So I'd say about $500 million of that was the profitability piece, and the balance are these relatively more one-off elements of divestments and settlements. I think that's the main story. There's another piece of the story around kind of the mark-to-market movements in our business and the margining in our business. Those are timing differences. So as you put hedges in place, what you recognize in the financial statements is relative to the future price, but it depends on how those contracts actually close out with the physical. So those are true timing differences. Turning to your reserves question on the 1.8 billion, I'd say around -- let me -- I was trying to do the math on that. Less than 1/3 of that was price-related, yes.

Yes. I think you had the mic there already or not? Yes, okay, sorry. But -- and then I will come to Theepan here.

Christyan Malek from JPMorgan. Three questions, please. Just first of all, I just want to be clear about your capital allocation. So you get to 20%. You've got all these free cash. What do you do then? Do you gain more? Or do you return it back to shareholders? I just want to understand the priorities beyond your 20% target. And leading into the second question, to what extent will you dig here to prepare yourself for future M&A? And within that M&A, whether it's bolt-on or more wholesale, what's the priority? Is it short-cycle a U.S. shale? Or is it energy? Because you've obviously got the $1 billion to $2 billion, but I'd like to understand sort of life beyond 2020, what is that actually in terms of competing for capital allocation. And third question, your CapEx target of $25 billion to $30 billion, does that include the efficiencies you've talked about today? Or is that downsides of that range? Does that include the efficiencies that you framed in terms of the further technologies and things you're doing on the well? Or does it incorporate? Or could we look at that as downside to that range potentially?

Let me have a first go at answering your questions. So I think we've been pretty clear. I think Jessica has also been pretty clear in the priorities for cash going forward. So there's a number of things that we need to achieve. Yes, we need to get the gearing to 20%. That's the point that we have made a number of times. Will we then sort of stick with 20%? No, probably, over time, we will continue to get to a sort of gearing level that we were at before the last downturn happened. When and how that will happen and how we will sort of pace that in conjunction with buying back is going to be, of course, very much an optimization on a quarter-by-quarter basis, depending on how much excess free cash flow we have, et cetera, et cetera. And that's basically the game that we believe we will be playing, but with intense concentration to get it right. Ultimately, we've been very clear on it. We're going to buy back for starters $25 billion worth of shares. The intention, of course, is to significantly take away the dilution that we've had in recent years, both with the scrip program as well as from the BG acquisition. But at the same time, we need to get the balance sheet back into the shape that it was before the down cycle because we want to be ready for whatever comes next. Now whatever comes next is kind of hard to predict. It may be another sort of macro event. It may be another set of opportunities or both. We have a policy of not trailing what our intentions are exactly, and I'm not going to make an exception here. But of course, we want to be able to…

Yes. It's Theepan Jothilingam from Exane BNP. Just coming back to cash generation. And I know you may be reticent to talk about one specific quarter. But when I think -- we're thinking about 2018 versus 2017 and the impact on cash taxes of disposals, just trying to get a bridge. I was just wondering what the impact you sort of see preliminary in terms of an '18 versus '17 sort of delta, if that's possible. And the second point, could you perhaps explain in layman's terms what actually happened in terms of the Integrated Gas business and you talk about the increased margining? Is that transitory? Is that something now that's done and the cash is consumed?

I think they're for you, Jessica.

Good, and I'll do my best to make it in layman terms. We'll get that in a moment. Okay. So your question on 2018, it's a bit difficult, and it's not because I don't want to be transparent. But every transaction is completely different. And so for me to give you a sense of kind of steady state, it depends on which transactions close, how they close, their ultimate structuring, et cetera. So that's difficult. I don't think it should be a material differentiator for you in terms of 2018 in terms of thinking about a modeling of our cash flow is what I would say. Okay, now hedging. So what's the business fundamentals? Let me try and start there. So for a relatively small portion of our portfolio, I think that's important to start with. There's parts that we try and risk manage and in particular, cross-commodity exposures. So for perhaps buying or selling Brent or buying and selling Henry Hub, where we have kind of a net cross-commodity difference, we may choose to try and use derivatives to manage that risk. They essentially lock in a margin. That's the business fundamental. Whatever derivative you use will be marked to market depending on those forward curves. So if you have a derivative that's a color put on Brent or on Henry Hub, that will be marked over the life of that contract. And depending now on how curved move, you either have an unrealized gain or an unrealized loss. This is part of our business. You'll see every quarter -- for a very long time going back, you'll see that we'll have our Integrated Gas business unrealized gains/losses. In the headline number, we take that out, and it's not part of our clean earnings. So that's kind of the business piece of it. Now what's the -- there's another element of it, which is the margining. So those mark-to-market positions with the exchanges, if you're in or out of the money, you need to post margin. Again, this happens in our business every quarter. You may not always fully appreciate that and kind of all of the entries associated with it. In this quarter, it was part of -- we had a margin call, and that was part of what reduced the cash flow from operations for the Integrated Gas business. Again, it's normal course of business. It's in our numbers. Unfortunately, it was also happening when a lot was happening on the working capital side. So we had some major payables paid down in Integrated Gas business. We also had inventory increase as well as prices have gone up. That also impacts our inventory, obviously, and then our working capital. So all of those things came together and made the cash flow from operations look rather low, particularly relative to our earnings at a group level and in the Integrated Gas business.

Okay.

Iain Reid from Macquarie. Ben, just a question on your kind of New Energy activities recently. Like you've now bought utility. So how much of Shell should we kind of think about as a utility-style business going forward? I know it's going to take, obviously, some time to be material, but is this sort of a path we should think about in terms of where you're going as a business? And what are you buying utility for? Is it for the customers? Is it to learn about how they work? Or what exactly are you trying to build here? I'm sure we have a kind of a target in mind for what the size of the market you're trying to access here in regional terms.

Okay. Only one question? Okay, good. Yes, let me maybe address something that you didn't say but what I think I also heard with the word utility. I sort of sense that you were thinking of a relatively low-grade business that we are buying. Sometimes we utility rate of returns to characterize a certain part of the business. Let me just characterize this completely differently. So yes, in New Energies, we said we would focus our strategy on two main streams, one is basically new fuels. So think of hydrogen, biofuels. These are relatively well-established activities, of course, that have great adjacencies and similarities to our existing businesses, particularly, of course, the biofuels piece, where we are already one of the largest global players. And the other one was to focus on the power value chain. Now what we have done -- or rather what our strategy is on the power value chain is we want to be an integrated player. So that means that we will be exposed to the generating part of the chain, but also on the midstream part, particularly the optimization and trading end of the chain and on the customer part of the chain. So it will pretty much be analogous to how we participate in the oil products value chain with refining, supply and trading and in the end, marketing. And the way we play in that chain, of course, is in integrated value optimization, which gives us superior returns than just being exposed to just one part of the chain. And we typically tend to be underexposed to the manufacturing end. So in the OP analogy, refining; and in the power analogy, generating. So now we think we have, because of that adjacency, very relevant competencies and skills that we will bring to…

It's Lydia from Barclays. Two questions, if I could. The first one, can you talk about the decision-making process on CapEx now just in terms of if you're going from $25 billion to even sort of the top of the range? How are you making decision on the marginal projects and keeping that disciplined approach going forward? And how is that different from what it might have been 3 years ago? And then secondly, just picking up on Jessica, the digitization and efficiency program. I think you said $9 billion to $10 billion of additional opportunities there. Can you illustrate in more detail that -- what you're doing on that and how you're deploying that across the organization?

You want to go first?

Sure. Well, do you want me to touch on both or...

No. Well, yes, and then I will talk about CapEx.

Okay. I'll make just a couple quick comments on capital stewardship and then go to digitalization, and you probably have some things to add to digitalization as well. So capital stewardship, so it has -- it's been a central theme in terms of driving improvements in the organization. We've put a number of important governance pieces in place in terms of how we think about capital, how we govern and how we make decisions. I think it starts with being clear on what our strategy is and what is the portfolio you want aligned with that strategy and being clear where you want more or less exposure. And I think we've done a very good job in the last couple of years bringing clarity to that. So you well know where there's going to be more capital. It's going to be in our Deepwater and our Chemicals businesses because those are our growth priorities. So I think that clarity and thought is important in terms of how you then engage in the choices. I think relatively speaking, we're rich with options. So we've got a lot of internal competition that's allowed for a natural, I think, upgrading and high-grading of the choices that we have. The last couple of years, the low-price environment and our requirement that projects not only are value-accretive, but they're resilient. So they work in a $40 world, $50 world, again, has driven a whole way of thinking about projects and as I mentioned before, how we design them, how we deliver them, execute them in a very different place. And I don't see how that will shift. And we're maintaining all of those same practices, ways of thinking and decision models as prices have gone up over the next -- over the last couple of…

Not much to add. Okay, good. Oswald?

I'd like to ask a question on marketing. There is some commentary this morning about improved underlying marketing unit margins in the fourth quarter. I just want to know, is that a meaningful step-up? Where that's coming from? Is that the strategy coming through of non-fuel, fuel? Or is that more of a umbrella effect, just slightly higher prices in the fourth quarter for Marketing? Or is that really the marketing strategy starting to show up? Secondly, I guess in the Upstream, the only area that's still a bit negative is South America on an earnings basis with obviously brazil's in there. I know there's a lot of BG acquisition money in there on the depreciation, but with 2 more FPSOs this year, oil prices where they are, should we expect some operating leverage in that South American Upstream business this year to get back to positive net income? And then finally, I'm just curious, I see your move into Mexico with -- obviously Qatar Petroleum getting them in there in quite a big fashion. Does that help you? Or is there something going on where that might help you get into the LNG expansion in their country?

Okay, let me take the first and the last one, and then Jessica will talk about South America. Marketing, of course is an established strength. It was a little bit of a -- maybe a -- I wouldn't say head and jamb because I think everybody in this room will no doubt fill up with V-Power. But it is, I think, maybe something that was a little bit underappreciated in terms of the magnitude, the size, the resilience but also the potential that it has. We have focused on an awful lot in the last years, of course, to not only high-grade the portfolio but then also to be very clear with our growth. That's where we want to push a lot harder. John has come with a -- John Abbott come with a strategy called plus ultra to not only invest a little bit in network and in growth but also have a much more aggressive approach to growing margin. And I think what you see is basically the beginnings of that strategy working out. Digitization has tremendously helped as well. It -- and not only in terms of neat, little things that we can do with customers like TapUp, the filling up pilot that we are running in Rotterdam. You can fill up without being in your car. Or Fare pilots. Maybe some of you will have seen the speculation we'll be going in the taxi business in London. We are not, but it is a position we had to take in order to roll out another app. And there are many ways in which we are using digitization to access other segments of the market but also access a much more sophisticated price management methodology throughout the portfolio using big data, really understanding much more intelligently from…

Good. So South America, of course we run the business from a strategic theme basis, so I'll approach it more from a deepwater perspective and an Upstream perspective more than the region because there can be other things in that. But I think you're focusing more on the Upstream side. Indeed, DD&A has been significant and impacting our earnings and causing the disconnect between the earnings and the cash flow. As projects come online and ramp up, there should be some natural adjustment to that. Also, more reserves additions also will help the DD&A profile going forward. So it's on our mind and making sure that we get that in the right place. But it's also why we focus more on the cash, and the cash generation for the Upstream business, I think you see, has completely transformed over the last couple of years, and so $4.4 billion for the quarter. And I think that's the substance of it, and the value of it is coming out of the cash side more than the earnings side. And that's really what we're focused on.

We'll come to Thomas in a moment, but first want to go to the phones and see whether we have a question there that we can answer.

[Operator Instructions]. And for our first question, we go to Jason Kenney with Santander.

I just wondered if you could give us some more guidance on where Integrated Gas earnings could move and has the potential to move over the next 3 to 4 years. I know there's a lot of growth, there's a few moving parts and billions in sales. But ultimately, there's still a bit of a black box exercise on a point where the margin is shifting and how supported earnings and cash for that business might be.

Yes. Thanks very much, Jason. Good question. Integrated Gas, of course, is a very important part of our portfolio, cash engine -- and a very strong cash engine going forward. I think we gave some pretty clear guidance on Management Day where we think it will be at the end of a decade. Maybe you want to deepen it out a little bit, Jessica?

Indeed. So underlying performance as a business, very, very strong. We had Gorgon ramping up. That -- we'll have the full effect of that hopefully in 2018. We also have Prelude coming onstream over the next couple of years, which will also contribute to growing earnings. We're also growing the business aside from our projects. You see increased LNG sales volumes. It's also contributing to more earnings and more cash going forward. We do provide our ambition from a cash generation perspective more than an earnings perspective and would -- but that's the basis of our world-class investment case, is the $25 billion to $30 billion in organic free cash flow at the end of the decade in 2020. And we expect IG to be a major contributor of that of some 1/3 or just under 1/3 of the contribution to that organic free cash flow. So very strong today and continuing to grow in -- up to 2020.

Okay. Thank you. Let's go back to the room. Thomas first and then, Bass [ph], on to you.

Thomas from Crédit Suisse. I do apologize, I have 3 quick questions. Firstly, just on the scorecard for 2017, and we've talked about the positive aspects of 2017. Perhaps we can talk about the negative aspects or areas where things didn't go according to plan, excluding Pearl GTL and what measures you're putting into place. Secondly, you had a chart where you showed Upstream platform availability or uptime, and it's improved significantly now to 95%. But I wondered, and I'm assuming the definition is different between availability and actual utilization rate. So there's spare capacity in Egypt, there's spare capacity in Oman as far as LNG is concerned, and I'm guessing there's a lot of spare capacity in the U.S. Gulf of Mexico. So I wondered, in terms of the drill-to-fill opportunity you have today, perhaps you can talk about the upside potential. And then finally, a question both to Ben and Jessica. If you had -- you can pick one thing, a key lesson from 2017 where you said, wow, what would it be?

Yes, I think that the problem -- great questions, of course -- is that I do not have quick answers. But let me try a few and I'm sure that Jessica will fill out as well, if you can specifically talk to availability and utilization. I think on the scorecard, I think you would -- if you would ask some of our employees, they would probably say, wow, fantastic year, didn't quite show up in the scorecard. And I would say, well, no, the scorecard was exactly reflective of the performance because we have a balanced for -- scorecard. So I think we had some outstanding financial delivery. We had some outstanding project delivery and, of course, we have been on a long track record of improving our project delivery both in terms of schedule as well as cost delivery. And again, these scored very strong in the scorecard. In general, our sustainability metrics scored pretty good with one exception, which is process safety. So we had more process safety incidents than we had planned or allowed for. We are, if you look at it in the main, still on a downward trend, but that trend was broken a little bit. We bumped up again. We didn't improve as much as we thought we could or should. Now we take a deeper view on process safety since in the past, we only looked at Tier 1s. We now look at Tier 1s and Tier 2s. And Tier 2 definition is has a lower threshold, which makes it perhaps harder to predict and to meet because there is more variability in it. But I think that part we missed. And I hammer on that very, very stringently because I think process safety goes at the heart of our license to operate.…

Business last year. I think, again, there's more room for us to deliver in that space. The utilization piece is important. That's part of what's driven our exploration strategy, being more focused on near-field exploration because we recognize that's more likely than not the most value-accretive, lowest-cost barrel is the one that feeds into an existing pipeline, an existing platform, et cetera. So places like the Gulf of Mexico in our -- in cases where we have older assets, that's been a clear part of our strategy. Also, in our Integrated Gas business, a number of our older LNG facilities, there's availability in those facilities as well. So that's an important part of that strategy. Again, we're in a relatively short time frame. If we can solve either the resource challenge or the commercial challenge because it depends on a place whether it's a resource issue or kind of a non-technical risk issue. There's multibillion dollars at play, and we've got a lot of teams working these issues across the company.

And you have seen the progress in places like Trinidad and Tobago but also place like Brunei. Oman is a very great focus point. I think when we talk about the sort of updated strategy for Integrated Gas, it was very, very clear. The #1 strategic priority for investment needed to be to backfill the [indiscernible] that we have in existing value chains. We'll go to the back now.

Ben, slightly unfair, I want to start with a forgive me. If you have a choice to invest, what you would you rather invest in? A Canadian oil sands company, Canadian gas company? Or Shell. Given that opportunity is open to you at the moment, what do your actions tell me where you think the better investment opportunity and returns actually reside? Just a comment on that. Secondly, I just wanted, Jessica, some detail. Deferred tax or deferred tax and provisions as ever is a large chunk of the cash flow statement, $3.5 billion or so of cash out. If you could give us any definition and also got any commentary on how we might expect that number to move in 2018. That's also probably slightly unfair. And then thirdly, just if you want to comment on Groningen and everything going on offshore The Netherlands at the present time and the potential impact of various pronouncements on the business and liabilities through the business.

That's a fair question, isn't it?

I thought the others were fair as well, but...

Let me take the first and the last one to start with. We haven't forgotten about the fact that we have some highly liquid securities sitting in the cupboard that we can do something with. And indeed, we have a reasonable position. So that CNRL is about $3.5 billion worth. And indeed, you could argue, why don't you just liquidate it and just use that towards -- for the debt retirement or whatever?

It's more an equity question there, but...

Yes, yes. And again, let me reassure you we haven't forgotten about it. It's not as if I needed reminding on it. But in the end, we also need to make value decisions on how we play this. So when we divested our oil sands position, which was, I think, a very strategic move, the way we could see the asset being valued -- or, rather, the value being compensated was partly in cash. That was clear. And so there's an expectation on what the shares would be worth at the time if we wanted to liquidate them but also a number of other ways and means we could take cost out. We could do further optimization of the value chain, et cetera. All these things, in my mind, need to play out for value. And therefore, I tend to take a slightly more sort of strategic view on what is the best way to go about realizing all of this into cash. And I'm not at all oblivious to the idea that yes, of course, the longer you hold this, the -- well, the shares may appreciate. But at the same time, you're also delaying the opportunity to do something with the cash. And that's part of all the equation as well. Well, it's evident that until now, we have decided to hold on. I'm not going to give you a forecast what I expect of the CNRL share price and what that would mean. That would be unfair. But it -- but again, let me reassure you that we don't forget about these things. We know what we are doing, and we are optimizing our decisions for value here, yes. On Groningen...

And Shell is a better investment.

You said it. On Groningen, yes, there is -- there has been a lot of commotion, which I think is understandable in the Dutch context. And many of you may not be aware of what happened, and we talked about this morning in the media, as you can imagine, and some of our Dutch guests here today will be able to relate to some of it. I think much to our surprise, I should say and should read as well for that matter, the fact that we basically started -- or rather, NAM started publishing its own accounts last year, which it hadn't done as it was always a part of the Shell may want a consolidated account, the fact that we disclosed the accounts made it redundant for the company to have a 403 declaration, which was basically a guarantee for suppliers to NAM to just say, you can't see the financial statements of the company, but don't worry, you can rely on Shell to back them up, yes, your -- the commitments. The fact that we publish the accounts make the declaration redundant was, I think, a straightforward thing. And somehow, and last weekend, this got reinterpreted as Shell walking away from its legal liabilities that it would have if NAM could not fulfill its liabilities. It was completely unwarranted. It was completely not intended. We tried to explain this. It sort of got a little bit away from us in a very sort of febrile environment with earthquakes, et cetera, so we had to be very categorical about that position. NAM is a very strong company financially. It can take on all the liabilities that will flow from damage that has been caused to it -- by earthquakes. But the main point is, we had to be very clear also to the population of Groningen that they don't have to worry that NAM somehow walks away from its responsibility and that we don't walk away from NAM. That was the commotion that was being caused. I think it has been sort of put back to bed again, yes.

So tax was in an important part of the Q4 story. In terms of deferred tax assets, a lot moves in that space. Given the size of our company -- we're operating in 70-plus countries, $16 billion of earnings -- tax movements will be material and significant. And a lot of the movements that happened in the fourth quarter reflect agreements we made with different countries on different items and -- as part of the normal kind of course of business of a company of our size. Going into 2018, it would be difficult for me to kind of give you a sense of how that might play out. What I did say earlier was on the cash tax piece, I think I can be clear what were the main drivers of the variance between last year and this year. I think that's relatively straightforward in terms of the increment of $1.6 billion more of cash taxes in the fourth quarter of '17 versus '16. I stepped through that. So I think that gave you a sense of what portion of that might be recurring versus one-off. Hopefully, that was sufficiently clear. But in terms of all the other movements, it would be very difficult. And a lot of those, of course, are noncash as well, and that's important to keep in mind.

Jon?

It's Jon Rigby from UBS. Can I ask 2 related questions on shareholder distribution and one on the numbers? So on distributions, the first is I think you referenced the conditions in which you'd start a buyback, and I think you talked about strategic performance, visibility on 20% gearing and recovery in the oil price. Given what you said about visibility on disposals reference what Lucas just said about the $3.5 billion in your cupboard, I think you -- wouldn't that suggest that you have visibility on each of those 3 conditions for a share buyback right now? The second is on your dividend. I think you said you progressed the dividend on underlying performance, which, I guess, your preferred measure is share -- is cash flow. But you have quite a big step-up in target cash flow over the next couple of years. So should I understand that there is a certain threshold you would expect to get to, which is sort of consistent with your existing payout, before you start to then grow the dividend on the underlying progression thereafter? I'm sorry, that sounds a bit complicated. And then lastly, just on your Downstream. When you do this presentation, you tend to reference Q4 to Q4 in your Downstreams. My impression was that Q4 '16 was something of a disappointing result for your Downstream. Q3 '16 and particularly Q3 '17 were pretty spectacular quarters for your Downstream. So could you just talk through some of the moving parts that get you from Q3 '17 to Q4 '17? I understand the refining margins have come down somewhat and Marketing margins have come down somewhat. But it looks like there's a significantly greater delta than the macro conditions would suggest.

Let me make a start with both of them and then Jessica will fill it out a bit more. I appreciate the desire for clarity on how exactly the use of the excess free cash flow will be. And we are resisting to sort of reveal exactly how that will work because much of it, of course, will also depend on how things will play out. So there is not going to be an algorithm or a formula that I can show you and say, if X and Y, as that happens, the following is going to happen as a result of it. I think what is very important to note is, first of all, that yes, you're right, Jon, there will be a very significant step-up in the free cash flow of this company going forward. And yes, we will have no hesitation to say we are going to limit the amount of use of the free cash flow for extra growth. So in other words, we are going to cap very clearly our investments. And how then exactly the mix of that excess free cash flow will be deployed to buybacks, to dividend growth and to further debt retirement is something that we will play on a quarter-by-quarter basis. But let's be very, very clear. There will be, first of all, a strengthening of the balance sheet. There will be enhanced distributions to shareholders. And we will listen very clearly to what shareholders have to say in terms of this. And you may, of course, appreciate that different shareholders have different expectations as well. Now on the quarters and the comparisons and particularly on the oil product side, because you talk about Downstream, I think it's probably fair to say let's take Chemicals out of this. Chemicals is…

So on the buybacks and the dividends question, I think Ben did a pretty good job covering up, and I'll say a few more points as well. And going back to what I said before, it's very much an integrated decision. I think all the points that you raised in terms of line of sight are valid. We've tried to be very clear in terms of what we think the company will generate over the next couple of years, and I think having that perspective is important. Again, our commitment is to embark on this buyback program as soon as we think it's prudent to do so. It's on the horizon if you kind of look at our numbers and what we think we're going to achieve by 2020 in terms of organic free cash flow generation far exceeds our dividend commitments. And through that period, between the underlying cash generation of our business, further divestment proceeds that we'll realize this year and next year, our ability to get to the gearing level, I think, is, again, on the horizon for us. So I think we're very clear in terms of what we're trying to achieve. Ben said it's where we're urgent. I was with the Upstream leadership team a week or so ago talking about 2018 and what our priorities were and, of course, prices increases. There's a certain amount of buoyancy in the room and also very strong delivery. So the team's feeling really good. It's also a team that's wants to grow their business, and they'd love to have more capital and talking about that with them and being very clear that our priorities are as we've said, we're going to pay down the debt, we're going to keep capital investment between $25 billion and $30 billion, even in a $70 price environment, and it's important that we embark on this buyback program sooner rather than later. And that's the exact words that I used. So that prioritization in terms of where the excess cash is going to go, I think, is very clear in the organization. But again, we want to do this prudently. We want to do it the right sequence. We started with the script. We're going to work through that. We're going to keep paying down the debt as we've done. We paid down some $12 billion of our debt last year. That's important to know and recognize. And we'll continue on that journey. And we think the cash generation in the business will be sufficient to not only do that but to start the buyback program within a good time frame.

Okay. We go to Chris and then we do Irene.

It's Chris Kuplent from Bank of America Merrill Lynch. One for you, Ben, and one for Jessica. I was going to refer to your buckets, as you like to call them. There's lots of cash engines there, which I suppose are great. And I've noticed that in terms of reserve replacement, reserve life, your growth and future opportunities, those 3 remaining buckets, don't really contribute, whether it's Chemicals, shale or New Energies. So would it be fair to say that you are increasingly comfortable with not your 1P but your 2P reserve life as you look at the future and go, you know what, even deepwater, even LNG now is a cash engine? So I just wanted to see whether you could broadly put that into context, how you're thinking about the next decade. And lastly, for you, Jessica, I wanted to see -- you referred to the internal competition. I'm sure people are keen in this macro environment to FID projects. Whether you could give us a flavor, a, how much of that $25 billion, $30 billion is committed already and earmarked and spoken for in 2018 and '19, and which projects are currently in the lead. That's probably unfair but maybe a handful.

Thanks, Chris. I think I've said it here before. And it's not because I do not have a reservoir or engineering background, but I am somehow less obsessed with reserves and reserve life than perhaps others might be, including some of you. For me, it's all about the longevity and the running room in the business from a cash perspective. Of course, it is very important to understand how much do we have to work on. So like, for instance, on the Deepwater business that you referenced, it is important for me to understand when is the stock of opportunities that we have in the pipeline, when is that going to run out and when will this business go and decline unless I do something about it. Well, we just actually did a very detailed strategic review of the Deepwater business in the board yesterday, so I can use the numbers that are current. But our business, our Deepwater business, will be at the level where we will get it to by the end of the decade, well into the next decade. And by 2026, you will see that if we have no success, nowhere, and don't add to it, this business will go into decline. So that's the reason why we are working now well in advance on restocking the opportunity set, participating in bid rounds in Mexico and in Brazil. We will continue to look at other bid rounds and other opportunities, also some modest amount of frontier exploration, with a view that come '26, '27, we will be ready to start up another tranche and another wedge of new projects. That's the way I look at it. And that's the only sensible way I look at it. I'm not going to look at some sort of R…

So indeed, competition is strong for capital within the organization, and I think that will continue for the coming years. So I think we're fortunate for the suite of opportunities that we have in all of our businesses. So all of them are consistently coming to the Executive Committee and asking if they can grow more, with most, if not all, having, I think, good opportunities. In terms of what's committed, so of the $25 billion of spend, I think it depends what question you're trying to answer. So I think we've tried to give an indication of the composition of that. So if that's what you're interested, there's -- an important part of that is asset integrity. There's another piece of that which is kind of small projects, kind of easy growth options that you have within an asset. And then you have kind of the next generation of truly kind of greenfield new projects. Most of our spend is kind of the first couple categories, and kind of a smaller portion of that $25 billion is that kind of true greenfield, new project opportunity for us. If you're interested in kind of the resiliency question, how much flexibility do you have in that $25 billion, I think that's a different question. We can -- there's a lot of choice we have in that spend of $25 billion. It gets increasingly more value destructive, but there is flexibility. We can choose not to grow as much in Mexico with our Marketing business. We can choose not to grow as much in Permian, things like that. So if you're -- there's still a decent amount of flexibility, but it's increasingly value destructive and would not make sense to go below $25 billion. But in general, in January 2018, we have a good sense what we're going to spend the $25 billion on. So in that sense, it's relatively committed, if you will. There is a little bit of flexibility and choice in there, but most of it is clear in terms of what we're going to do for this year and next. Important decisions that are on the horizon for us with no preference because that's not appropriate, but we're looking at things like our Vito projects in the Gulf of Mexico, LNG Canada, another important decision for us in the next couple of years. Our Marketing business, which Ben mentioned we're growing in Mexico, China, India, these are either new or expanding markets for us. Relatively low, but those are decision points in terms of how we're growing our business.

Irene Himona, Societe Generale. You conduct a lot of your business through associates and JVs. In fact, about 1/3 of your earnings is from associates. And if I look at the cash dividend, you've got about $5 billion last year, which is a material amount. I wonder if you can give us some granularity, some rule of thumb, anything. As you move on to the journey of delivering the $25 billion to $30 billion of free cash flow, what can we expect to see in terms of that $5 billion cash dividend that you got last year?

You want to have a go at it? I don't think I have the number quite at hand, but...

Indeed. It's an important contributor. Do I see it growing disproportionately? I don't. So we're not relying on that as a major contribution. Most of our growth in our cash flow is going to come from the growth of our underlying -- our own business. So I think it remains important. It's an important contribution to our cash, but it's not going to be a growing portion of our cash as we grow the business.

Okay. We'll do a final question. And you have been very patient with me, so let's have the question from you.

It's Colin Smith from Panmure Gordon. Just firstly, on the underlying operating expenses, that popped up about $600 million quarter-on-quarter to just under $10 billion. And I was curious to know what was driving that, particularly in the context -- I think last year, you were talking about being able to keep that number under $40 billion. And given that you got growth coming through and you're already at $9.8 billion in fourth quarter, that maybe starts to look a bit of a stretch. Then completely separately, obviously congratulations on the well discovery. We look forward to seeing more detail on that. But from my memory, really there has not been much going on in Perdido, at least visibly, since the Perdido project was put in place. So in that sense, it sort of feels like it came out of nowhere. I'm not quite sure whether you think of that as near-field exploration or something that's in a completely different category because I think when we near field, it tends to mean smaller than really big discoveries. And here, apparently, you've got a very large discovery. So I'd be interested to understand the context of that a little bit more and what you think the follow-on potential in this play might be.

Okay, let me take the second question a bit. And then, Jessica, if you want to talk a little bit about OpEx where I know you have a particular passion. I think, well, you may have a better and a longer history on Perdido. You're right that that's -- it's an area where we have been before quite some time ago. It's an area where we have looked at quite a bit of opportunity, particularly also on the Mexican side. This was long before the opening of Mexico with a view that as some of the knowledge we had of that fault belt stretching into Mexico would give us a perhaps unique way of working together with Pemex. I think in the end, nothing came off it, of course. But it was always knowledge that has intrigued us to look and to go after new opportunities, of which we have now indeed materialized in two ways. First of all, the well discovery. We're not disclosing exactly how big it is. We're also still in the appraisal phase, but the fact that we have 427 meters of pay is perhaps an indication that this is not trivial. It's not going to be tieback project, this is going to be a very material development in its own right. What we would like to do also, and our thinking is reasonably advanced on that, is to see whether we can really accelerate the development of this. Typically, if you look at our developments in the Gulf of Mexico, we had been looking at, between discovery and first oil, almost a decade. We have set ourselves a target to significantly reduce that time frame, also to significantly reduce our unit development cost, and I think you saw some of that in the slides that Jessica showed, the ambitions that we have. The well project will be a great test batch to see how fast we can go and whether we can indeed take advantage of certain replication ideas to just really bring this into a fast-track development. So fast-track development in this way will not be a tieback, but a new development but on a really rapid pace. If you want to close out on OpEx, I think it would be actually quite appropriate.

Good. Excellent. So OpEx, perhaps give you a little bit more of a flavor in terms of what's driving that performance in the year. Very pleased with where we landed the year in terms of underlying $37.5 billion, well below the $40 billion. And that reflects delivery across the portfolio. Huge focus on our above-asset costs, our overhead corporate costs, whatever you want to call it, where we've had a real impact. Finance function, we've reduced cost by roughly 1/3 over the last couple of years either by -- off-shoring being an important piece of that. So the growth of our business centers in places like India, Poland, Manila. Increasingly, more work is being moved in there, so that, I think, is real sustainable change. And important to note, it's not just about cost. They're also creating a lot of value for us and the company as well. So a lot of good underlying delivery that's translating to that lower-cost basis. There's also some one-off helps in there. So speaking to your point around how sustainable it is. And I think it's -- an important piece in there is a lot of reduction in our D&R in the year. If you looked at our balance sheet, our D&R provisions went from $25 billion to $20 billion over the year. Some of that flowed through the OpEx as well. Great story. So the same impact we've had with our a P&T organization, reducing cost in places like the Gulf of Mexico in our unconventionals business. We've applied a similar thinking to our Decommissioning & Restoration, and that value is coming through both on a -- in terms of our balance sheet exposure but also in the OpEx. A lot of change in the portfolio. There'll be some pluses and minuses with that, reducing cost. But importantly, with the Motiva transaction, we're now consolidating. That will bring another $700 million or so of OpEx onto -- into our financial statements in 2018 relative to -- in total. So there's actually -- some of that showed up in Q4 as well. So those are indeed headwinds. What I'd say is our ambition is to keep on pushing the organization, and we think there's more opportunity. I personally believe there's more opportunity with standardizations, simplification and digitalization. I don't think we're done. But there are some headwinds. And we are growing the business. My business reminds me of that quite often. But again, I think still there's opportunity and we need to keep on that agenda, and we will, in 2018.

And let me reassure you that Jessica is not the only one who thinks there are more opportunities in OpEx. I think that is completely shared not only by me but also by our business directors. Let me just remind you a few dates before we close. And first of all, thank you very much for your questions. I know there are a few more questions in the room, so we will be available, of course, after this presentation outside as well. But just a few dates. On the 26th of February, we will have the LNG team present to you here in London the outlook for supply/demand. I know that LNG is still very much a topic on people's mind, how is that playing out. And maybe less so than a year ago, but it's still very important and instructive to come listen. And then we have the Downstream leadership team, and they will host a Downstream open house for investors on the 21st of March also here in London. And then, of course, we have our Q1 results on the 26th of April, and Jessica will be presenting those. I'm sure you're looking forward to them.