Welcome to Shell's Fourth Quarter and Full Year 2023 Financial Results Announcement. Shell's CEO, Wael Sawan, and CFO, Sinead Gorman, will present the results and then hold a Q&A session. We will now begin the presentation.

Welcome, everyone. Today, Sinead and I will present to you the 2023 Fourth quarter and Full year results. We had another year of very strong performance, delivering the second highest cash flow from operations in Shell's history despite the external uncertainty and volatility. Starting with safety, which remains our top priority. Our personal safety results last year were slightly lower than in 2022, and our teams are determined to make sure 2024 is a year of improvement. I am, however, really pleased that our safety results set a new record for Shell, confirming our top-tier performance in the industry. We are also making good progress across the targets outlined at our Capital Markets Day and expect more to come as we progress through 2024 and beyond. In 2023, we demonstrated our strong commitment to capital discipline by delivering at the lower end of our $23 billion to $27 billion range. In addition, we have already achieved $1 billion in structural cost reductions, well on our way to a reduction of $2 billion to $3 billion by 2025. This reduction is a first step; this is not a one-off change program. We are building the capability to continuously adapt to changes through the energy transition. The reductions will be staggered. The most significant contribution in the short term comes from focusing on where we play, essentially our portfolio choices. At the same time, we are emphasizing a bottom-up focus to create a leaner, more agile organization that delivers more value. We are also leveraging new technologies such as artificial intelligence to improve the performance of our assets. We have millions of sensors collecting over 5 trillion rows of data that our AI models, combined with our conventional models, use to monitor equipment 24 hours a day, 7 days a week, alerting engineers to anomalies from a distance. This enables us to intervene and fix issues early, improving our performance. We continue to high-grade our portfolio and position the company for growth into the future. This past month, we agreed to sell our Nigerian onshore subsidiary, SPDC, subject to government approvals and other conditions. This is an important step for the company, and we hope to complete the deal as soon as is possible. In 2023, we saw production growth with the startup of a number of key new projects in our advantaged upstream business. The projects that came on stream this past year, at their peak, will add over 200,000 barrels of oil equivalent a day. They are part of our larger funnel set for startup by 2025. Together, at their peak, all projects will add more than 0.5 million barrels of oil equivalent a day to our production. And they will enable us to continue providing the energy security that the world needs while delivering cash flow longevity into the future. We also continue to invest to help enable the energy transition in areas where we can create value. Last year, we invested $5.6 billion in low-carbon energy, such as our Nature Energy acquisition and the CrossWind JV, which will supply renewable power to Holland Hydrogen I, Europe's largest electrolyzer. In short, we're working hard to deliver the energy the world needs today, and we're helping to build the energy system of the future. Our relentless focus on performance, discipline, and simplification allowed us to deliver compelling returns and create more value for our shareholders in 2023. Our shareholder distributions for the year were over 42% of our CFFO. And today, we increased our dividend by another 4%, taking our total increase over the last 12 months to around 20%. We continue to progress towards our destination of a net zero emissions business. Our preliminary results show that we have further reduced our Scope 1 and 2 emissions in 2023. We are only halfway through the timeline to our 2030 target, yet we have already achieved more than 60% of the reductions needed to reach the target. With that, let's go to Sinead for more financial results.

Thank you, Wael. We delivered strong results in Q4, driven by our strong trading and optimization in LNG and robust operational performance. One of this quarter's highlights came from QGC in Australia. This quarter, they had their highest ever LNG production, which helped deliver Cargo number 1000 since startup. Moving to our financial results. Our adjusted earnings were $7.3 billion for the quarter, and $28.3 billion for the full year. In the fourth quarter, we saw $4 billion in post-tax impairments driven by macro outlook and portfolio choices in line with what we announced at Capital Markets Day. We generated $12.6 billion of cash flow from operations, contributing to a total of $54.2 billion for the full year 2023, our second-best year ever. Our strong performance allowed us to return $23 billion to our shareholders, delivering in excess of our 30% to 40% CFFO range. And today, we have announced a new $3.5 billion share buyback program, which we expect to complete by the time of our Q1 results announcement in May. We have also announced a dividend increase of 4%, in line with our progressive dividend policy. Our balance sheet remains strong with net debt reducing by $1.3 billion year-on-year. And looking forward in 2024, we will continue to target shareholder distributions of 30% to 40% of our cash flow from operations through the cycle, while maintaining our focus on delivering more value with less emissions. Now I will hand back to Wael for more on what's coming next.

Thank you, Sinead. So, this was another year of strong results for Shell, marked by one of our highest ever annual adjusted earnings and cash flow from operations. We achieved this and much more despite volatility in the energy markets. In 2024, we will focus on delivering our first sprint through performance, discipline, and simplification. Building on what we have achieved in 2023, by focusing on areas where we have differentiated capabilities and core competencies, we aim to be the investment case through the energy transition. In the coming weeks, we hope you can join us for our LNG outlook and our annual ESG event, which will also cover the energy transition strategy 2024 publication. Thank you.

Thank you for joining us today. We look forward to sharing our LNG outlook and discussing our annual ESG event in the coming weeks, which will also include our energy transition strategy for 2024.

Thank you for joining us today. We hope that after watching this presentation, you've seen how we delivered strong results and how we continue to focus on our guiding principles. Today, Sinead and I will be answering your questions. And now please, could we have just one or two questions each so that everyone has the opportunity? And with that, can we have the first question, please, Luke?

I wanted to ask two questions, if I may. The first one is about your lineup of new projects. You've got one of the strongest pipelines in the industry in Brazil, Gulf of Mexico, LNG, Canada, but also with the full restart of Monarch and Prelude. I was wondering if there is a way to guide us on what you think could be the incremental cash flow from these assets by the time they fully ramp up, let's say, by 2025, 2026? And then my second question is related to the European and the global gas market. We're mostly focused on price upside in the last few years and how to capture it, and Shell has certainly built a very good portfolio for it. But what I was wondering is, in an environment where, especially for the second half of this decade, we could see an oversupplied LNG market that challenges a bit arbitrage between the two sides of the Atlantic. Does that change your contracting strategy, and how well set up is Shell to effectively successfully navigate what could be a tougher gas market for the coming years?

I'll start by asking Sinead to address the first one, and I can take the second one.

Sure. No, thank you, Michele. And indeed, thank you for the recognition of what is an incredibly strong funnel. Going forward, you listed many of the different projects. So, as you say, Gulf of Mexico, LNG Canada, Monarch up and running, Prelude, but let's not forget, as you go past 2025, we have up until '25. We said greater than 500 kboe a day in terms of new projects coming in. And let's remember that we had more than 200 kboe day at the peak, as well mentioned earlier, coming through as well. But beyond that as well, we also have things like Crux coming in; we will have the Qatari volumes, et cetera, coming in. So, there's a great wealth coming through. Rather than guide some specific CFFO dependent on price, et cetera, what I suggest is we look at, you saw a promise of 6% growth on free cash flow through decades, so that's the sort of number to look at, and you can see we're easily meeting that in terms of our promises so far. And remember, in terms of Sprint 1, very much we're talking about a 10% growth per share. So, you can see, of course, that's been easily met at the moment when we're doing things like 6.5% of the company being bought back last year in 2023. So great momentum going forward, Michele, and you're absolutely right. We have a wealth of projects to be delivered.

Thanks, Sinead. And Michele, to your second point, I think if I start just by reemphasizing our conviction in the growing demand for LNG going into the future, I think underpinned both by, call it, energy security considerations in a place like Europe, but also in Asia, continuing to see very strong demand as well as to replace the declining domestic gas in several countries—Vietnam, for example, the Philippines and others have become recently importers of LNG. So, there's quite a lot of latent demand. And I think what you will find is that as the price, as is happening at the moment, starts to stabilize again and the market fundamentals reassert themselves; you will see a lot of that latent demand starting to come back to the market. So, I think that in the first instance just gives a lot of confidence around the demand profile going forward. On the supply side, for the next year or so, there's very little in terms of new capacity coming in. But indeed, you see that stepping up both on the American and the Qatari side predominantly into the second half of the decade. As Shell, as you know very well, Michele of course, we play across the commodity exposures. And so, for us, it's the ability to be able to pick up from Henry Hub and to be able to be exposed to Brent or indeed across TTF and JKM and others. And so, it is no bad thing to have a period of time with more supply coming into the market because it allows us to contract on the side of offtake agreements, which we have done in the past. And so, we're not looking to bet on one period or the next. What we are looking to do is to continue to build an advantaged portfolio that allows us to take advantage of those cross-commodity exposures. And that has been the power of this LNG business for us and will continue to be. Thank you for the questions. Luke, if I can go to the next question, please?

Thank you, taking my question. The first one is on the dividend. And I guess you've raised your dividend two times into June and 4Q. I'm trying to understand what the cycle is from here going forward. I guess, if I think about the two reasons you'd raised the dividend, one is the underlying growth in the business and then there's a share count reduction in the buyback. So, should we assume you do it once a year and combine both into one going forward? And the reason I ask because typically predictability is quite important there. And then the second question is just on the Venture Global issues. This has been ongoing for a few months now. We don't really have clarity on the sort of process or the timing and so on. So obviously, seen the letters flying around between the various parties and indeed, anyone who's looked at the export data can see that the project has been actually much more reliable than other projects. And if you think about the ARBs between U.S. and Europe and the gas side over the last two years, you could be talking about multibillions in lost earnings per share. So, it seems like a strong stance that you have. I understand this is a legal process, but can you talk about what happens from here process-wise and then the potential outcomes thereafter?

Great. Thank you for the questions, Biraj. Let me start with the second one and then go to Sinead on the dividend. I think you characterized the issue well. As far as I see at the moment, in terms of what is publicly available, Venture Global have, I think, sold around 250 cargo, so far, 250 commissioning cargoes. And what we see is that the plant is at or near capacity and has been consistently. So, we're very much focused on continuing to enforce our legal rights and protect the sanctity of contracts that are there. I won't get into the details of the legal proceedings. Suffice it to say that we have pulled on the lever of arbitration that exists for us and continue to have the required discussions to be able to fundamentally point out that this is not just an issue between two counterparts. Actually, it's many counterparts, all of whom are not receiving the offtake commitments that Venture Global had committed to. But also, it starts to undermine the confidence in U.S. LNG for the longer term, something which, of course, with the recent announcement of the pause by the government, by the U.S. administration, would continue to erode that confidence in the longer-term potential of U.S. LNG, which is a real shame, I think, given the potential it has. Let me pause there and maybe ask Sinead to cover the dividends.

Indeed. Thank you, Biraj. And indeed, we're very much focused on ensuring we have a compelling distribution to our shareholders. And actually, you saw, of course, in 2023, some $23 billion of distributions back. But you raised the point that we did two, actually increase our dividend by approximately 20% last year; what you've seen this quarter is 4%. And of course, many of you asked during Capital Markets Day last year, would we do something further? Would we do a bigger hike at this time of year? And we were very clear, we will say what we will do. And in effect, what we told you at that time was 4% progressive and that we'd be very much focused on buybacks. And that's pure and simple just a preference towards buybacks, as you know, because of the value lens just given where they are in terms of price, number one. And secondly, of course, we have set the targets out there to say it is creating per share value. So, that's where we're focused as well. So, that should help with predictability. And if you look at the buyback range, it's been pretty predictable over the last couple of quarters. So, what you should expect from us is if we're going to say something, we will do it thereafter. So, I hope that helps.

Thanks, Sinead. And thank you for the question, Biraj. If we can go to the next question, please, Luke.

Yes, the first one, just on the slides; some good slides there on progress relative to last year's targets on the free cash flow growth. You have the 6% up to 2013 to 10%. You've priced normalized those, which is helpful, but I think you've removed the numbers from the y-axis. We're playing around with it, and it looks like over $25 billion price normalized last year, which I guess is the target for next year. So, the question is, are you surprised by this free cash flow delivery? Was an expectation that might be front-end loaded? Certainly, feels like the 2025 target is well underpinned at this stage. And then secondly, just on integrated gas and LNG, again, probably more 2024 focus, if I could. I mean, the East West spread could be a bit tighter this year. But now we have the Red Sea logistical risks just on top of this. So, could I just get your outlook around business expectations in IG this year, especially with rerouting transportation OpEx or does your portfolio size help mitigate against this? Just how should investors think about this particular issue?

Do you want to take the first one? I can take the second one.

Yes. No, indeed. And thanks, Oswald. Yes, you're right. We did actually remove the numbers very much conscious of doing so. Largely, you're right; we're exceeding where we expect it to be at this point. There's a lot of noise in there. As you can imagine, it's the typical normalization that one needs to do for working capital, et cetera. But yes, true delivery in there is mostly from a range of things. It's, of course, the CapEx reductions that have come through, some OpEx coming through and of course, share count reduction. But let's not forget some of the growth that's actually coming through as well. You saw us bring new volumes on this year as well, the Timmy of this world, of course, pierce redevelopment coming. And you can see that future build as well with the FIDs of Perdido too Victory coming through. Just a range of them are coming Sparta as well. So, indeed, do I have confidence in terms of delivery? Yes, at the moment. I'm looking forward to driving it even further in terms of the things that we can control in terms of taking out OpEx, et cetera, as we continue to deliver what we promised.

I think on your second question, sorry, your second question there, Oswald. Just where the LNG markets are in particular in the context of the Red Sea. By and large, we are not seeing massive amounts of disruption yet to LNG flows because of the reality that, in particular with a portfolio like ours that's blessed with supply points on either side of the Red Sea as well as on demand points, we are able to optimize and do swaps across the portfolio, which has always been our strength; we can truly, through our trading and optimization organization, create value from discontinuities. Maybe I won't project into the rest of the year. I think suffice it to say that Q4 was a very, very strong quarter for us on trading and optimization in the LNG space, particularly because of the opening up of the ARBs across east west, as well as the fact that, as you know, we typically have length this season in the northern hemisphere season. Now those ARBs have compressed since the start of the year. The absolute prices of gas are lower at the moment. And so, the question will be how much more volatility we will see whether triggered by geopolitical considerations, higher than predicted demand in China. All of that will be an important determinant of where the LNG and the IG business particularly performs. But I think it's always fair to say we have good production at the moment, we're pleased with where prelude is at after the turnaround. We're pleased with the progress we're making in Trinidad and Tobago, pleased with the progress we're making in Nigeria. And so, the fundamentals around the focus on performance, discipline, and simplification are coming through. And now we'll need to see where the market goes to allow us to create the value we would hope to create from that market.

Our next caller is Alastair Syme from Citi.

Sinead, the spend in the RES steps up quite considerably in '24. I mean, certainly, in line with what you said at the June CMD. I know you got some strict returns criteria in this business. So, the question is really as you scale up the spend, how you're finding the headroom versus those hurdle rates. And it certainly doesn't feel to me as if it's getting less competitors, but maybe you've got a different perspective. And then secondly, look, I won't disappoint you, Wael. Congratulations on turning the corner on reserves the last two years. Look at, I know Qatar has been a big part of that, perhaps as much as half. And while the financial terms there look pretty good, it is also to some extent an unusual almost one-off situation. So, my question to you is, how do you think about the underlying picture, and how would you think about the gap analysis sort of over the next five years, presuming you don't get another opportunity like Qatar?

Do you want to take the first one?

Sure. In terms of RES, I think it's a great question, Alastair. We've all seen many, many discussions in a variety of media and otherwise around the returns that are available in this space. I think what I would say is we're being very disciplined around it. So, what you're seeing is between 2023 and 2022, you will have seen effectively that our CapEx did go down in terms of RES spend, but it was varied. So, remember, it differs depending on which region you're talking about specifically, so we can't make it a binary conversation. What we're seeing is we walk away from things where we just don't see the necessary returns. So, the last German wind auction that we discussed previously, we just couldn't get there at the end of the day. Whereas in Australia, we are really seeing some decent returns coming through, and that's really where we have an integrated value chain. So, we're able to see on the demand in our own assets. We also have the customer book, but also, we have battery power as well. Between all of the different elements with the renewables, we are able to see an end-to-end significant return coming through. But this is about remaining disciplined and we will be very, very focused on that, ensuring that can we hit the hurdle rates? Do we believe we bring something different? What's our confidence level in doing so?

Thanks, Sinead. To your question around resources, I think to the discussions you and I have also had in the past. I mean, in my mind, resources are ultimately a proxy for cash flow, and that's where our focus is. The quality of the resources rather than does it sit under the 1P or 2P. We still have a very attractive funnel of resources as indicated by 20 plus years of commercial resource. By the way, that is even to post the SPDC sale in Nigeria as well. We will continue to have north of 20 years of commercial resource. What's critical is it's high-quality barrels. You're talking predominantly deepwater barrels, predominantly energy barrels. What it gives me particular confidence in the coming years, as you talk about some very attractive high margin projects coming in—for example, Mero-2 that just started up in Brazil at the turn of the year. You have Mero-3 coming through, Mero-4. We have Gato do Mato after that. Vito is up and running and delivering within the first-year top quartile schedule, top quartile availability. We have then, Whale coming after that and Sparta coming on top of that even before you go into the Hattori project. And then, of course, you have LNG Canada that is also making good progress. And LNG Canada, while it does not have a lot of, if any bookable reserves, you can imagine how much value that is going to create. We continue to be very, very focused on the overall cash flow potential of this company. As indicated by our confidence, giving a 6% per annum free cash flow growth between now and 2030, you can see the confidence that we have going through that. Of course, from now to then, we will continue to look at the right opportunities to be able to both hopefully discover resources to acquire the right resources, all within the capital discipline that we have outlined, which is the $22 billion to $25 billion over the next two years. I think that's all I wanted to cover. Thank you for the questions, Alastair. Maybe, Luke, we can go to the next one, please.

Thank you very much. My first question is really one of clarification, where you indicated that, with your forthcoming annual ESG event next month, you intend to cover the energy transition strategy. At last year's CMD, obviously, you retired all the many operational targets relating to that transition. We kind of lost visibility on what the path looks like. Can we expect you will restore that visibility at this ESG Day, please, and will present the new sort of longer-term transition strategy? And then my second question, a quick one on Q4 cash flows, very, very strong EBITDA, and then you had a $1 billion charge for derivatives and a larger $1.6 billion charge for other. I think that may refer to these biofuels’ certificates, but can you perhaps remind to see how that works? And is there any guidance you can give us directionally for that going forward? Thank you.

I'd love to have taken the second one. I will leave that to you, Sinead, in a moment. Let me maybe, I'm going to cover your first one, where if you allow me just a moment to reframe it. What we will be announcing in March is, in essence, the second leg of what we announced in Capital Markets Day 2023 in June. It's one strategy. We focused a lot more on the more value side of it in June, and we will focus a bit more on the, with less emissions when it comes to March. The retirement of a number of targets was not to create a lack of transparency. But really was an intent as we look to transform Shell into the company we want it to be—to focus on the key targets that matter, both the financial targets as well as the carbon targets that you will have seen when we announce them in Capital Markets Day. And so, what you should expect coming in March is real clarity on what are the areas that we will continue to go forward with. Not a whole bunch of new targets, and that is not the intent here. But the intent is to get clear on where we see value opportunities, back to the question that was asked earlier around where we see, I think it was by Alastair, opportunities for investment, for our low carbon spend, of which we invested $5.6 billion last year. We want to be very clear on where we see those value pools emerging, where we have particular strength to be able to compete, where we see customer demand evolving in a positive way, and where do we see regulatory support that enables the overall investment to create the value that our shareholders expect. So, expect more of that, rather than a whole set of new targets. In our annual reports, you will always be updated on the progress that we are making towards the ambitions that we have set for ourselves. Sinead.

So, basically, what you're asking is in terms of the cash flow from operations, excluding working capital; that's really where the question is going. What's unusual? So, when you look at it, the way I always try and separate it out is what is Q4 specific and what is simply not so that you can see both coming through. When I look at it in terms of what is fourth quarter specific in terms of excluding working capital, it really comes down to just a number of things. It's really about timing. So, this is around the German emission certificates that come through and the U.S. biofuels program that we're part of. Those two things happen every Q4, and you see them coming through. That combined with the extra tax that we pay, pure and simple, in Q4; it's the phasing of a tax payment. And of course, given how much profit we made, we had extra taxes that came through. Those three things together actually come to about $1.5 billion. So, you see that hit coming through in Q4, which is unusual to it. Then, in terms of things that are not Q4 specific, what I would sort of direct your attention to is it's really related to price moves. There's twofold. One is cost, so the cost of supply adjustment; it's really just crude prices going down, and the second one is derivatives as you rightly pointed out, and that's around about $1.1 billion. So those combined are just over $2 billion. So, going back to that, you saw a $1.5 billion that is Q4 specific. It's really around timing, and the second bit is really price-related. So, I hope that gives clarity.

Our next caller is Peter Lo from Redburn Atlantic.

I had a question on disposals. You announced Nigeria just this month that you've been linked with several other potential divestments in the press and you, yourself, have said you're looking to exit your Singapore chemical refining asset. Can you perhaps sort of update on how that program is progressing, and perhaps how large disposal proceeds could be kind of this year and in the coming years? And then the second question was on inflation. In your kind of cost reduction slides, you say that, actually, kind of inflation has contributed to an increase in costs in 2023. I was just interested where in the business that's coming through and sort of what level of inflation you're currently seeing planning for?

You want to take both?

Sure. In terms of divestments, you mentioned specifically SPDC and Singapore. SPDC is a great step forward, gaining momentum. I'm very, very pleased to see that as an outcome. That will happen in the course of this year, we hope, waiting for those approvals, et cetera. You'll also have seen we announced at the time that, approximately all of the proceeds that came with it, so I'll leave the detail there because there's some financing in it as well. In terms of Singapore, which is really the refinery, Bukom, Jurong, the refining and chemicals plant together. We have confirmed that we are divesting, and we're progressing through that. I'm hopeful to be able to update you later in the year on that, Peter. In terms of the proceeds, of course, wouldn't talk about commercials at this point, but both of them are more about ensuring that it fits our strategy rather than significant cash flows coming in from divestments. That gives you a bit of an indication. Secondly, in terms of inflation, yes, I'm glad you picked that up. If you look at our OpEx, what you actually see this year is that the OpEx year-on-year has come down. We're very pleased to see that because what that means is not only do we deliver the $1 billion of structural savings that we have discussed and that we have promised us on our route to our $2 billion to $3 billion, but more importantly, we also did we at inflation and we managed to cover acquisitions coming in. And there were quite a few of those with Nature Energy, with Volta, and many other things, including new production, which drives cash flow as well; so significant performance by the business, which is pleasing to see. What are we seeing on inflation? It is considerable. We're beginning to see that come down, of course, as you go into 2024. Our own view on that is specifically that it'll probably be between 3% and 7%, roughly speaking, but the way we structure our company, we are very much comfortable that we will be able to absorb that with our contracts and the variety of things we will do. We will see how it plays out in the year. It's very much sticky in certain areas rather than others. Where do we see it specifically, Peter? We are seeing it more in some of the electrical installations and some of the fabrication areas specifically and of course, RES, without a doubt, the renewable space is there. But that gives you a bit of a feel. I think fundamentally, the message to take away is that we have done exactly what we said. We have been able to deliver structural savings, eat inflation, and absorb new production or acquisitions coming in.

Luke, can we have the next question, please?

Thank you. First question is on your payout level in 2023, which came above the upper end of the 30% to 40% range. And just trying to frame these and understand sort of what's your approach, and are we allowed to talk about 40% as a soft ceiling like we used to with the previous range and under what circumstances you would be considering keeping it above that level? Second question is on Namibia. Just wanted to check what's your work plan for this year? I think there is one more exploration well. I just wanted to check what's your planned types of activity on the Pelt of 39 this year?

Thanks, Giacomo. You want to take the first one?

My preference is definitely not to introduce any new targets or anything else in. Let's keep it to the fact that if we say something we are going to do, Giacomo, and that's what you see coming through. So, 30% to 40% is through the cycle. That's very much what we have said in Capital Markets Day, and that's what you will continue to see us deliver. What is our thinking around that? We have a 4% progressive dividend, as you know, very attractive returns overall. Our shares remain undervalued by any metric that you want to look at, and therefore, we are looking to preferentially allocate towards those, really clear of why we would do that when you are sitting at 15% free cash flow yield. Of course, we are going to be going after the shares. Comfort in terms of leaning on the balance sheet when I need to lean on it. But fundamentally, what I'm doing is looking through the quarter, so it's not specifically just on the individual quarter. I'm making sure that I take a pragmatic approach to it and basically have confidence in what are the cash flows going forward of the company. Hence, the fact you saw the distributions that you saw so far.

Giacomo, on Namibia, a little to update at this stage. I think, as you are well aware, we have been drilling some exploration wells, some appraisal wells. We have a couple actually that we plan to drill in the coming months. As I have said in the past, there is no question around the volume of the resource. The biggest question is around finding the sweet spots within that resource, within the rock to be able to create the opportunities for exciting developments there. And that's what we have to be able to find out. We will take our time and be thorough in the way we look through that because these are significant capital investments, and therefore, we want to make sure that we are able to deliver return for our shareholders, and this is why we want to really derisk the opportunity. And, of course, it helps that we're not the only ones drilling there. So, there's other activities in the basin, which will, of course, provide more data points that inform the broader picture around the prospectivity of the basin and our ability to create value from it.

Our next caller is Josh Stone from UBS.

Two questions, please. Firstly, just the recent elections in the Netherlands and the potential impact on Shell. I appreciate coalition talks are still ongoing, but do you see any risk to an impact to your green investments in the country? I'm particularly interested in the biofuel and hydrogen projects. Do these continue regardless of the regulatory environment, or could we see a slowdown if there's a change in mandates? And then second question on Nature Energy. And maybe could you just talk about how that business is performing versus your expectation and how the integration of the wider business is going, and if you've learned any lessons in the biogas market in particular?

I'll take the first one if you want to take the second one. I think what's critically to say is all of our investments it's irrespective of the country. I think you have to be resilient to multiple administrations, multiple governments coming in and coming out, Josh. I mean, that's the reality. For the specific projects that you talked about in the Netherlands. Of course, the underpinning of the regulatory support is EU support, not just the Dutch support. A lot of what we tap into are the renewable energy directive, number one and number two, and potentially one day number three. Those are what create some of the broader support for those projects. And so far, we don't see any moves away from that. And that's going to be a key determinant of the success of those projects. We will continue to look at opportunities to be able to, of course, engage with the government when it comes into power. For now, all the indications are support for the continued investment that we are making in the Netherlands, which is substantial, by the way, predominantly in the low carbon space, as we also unwind our presence there on the Groningen field.

And with respect to Nature Energy, it's quite early to tell at the moment. So, we're into the first year of it, not even finished the first year so far. What we're seeing is a lot of learnings going back and forth because what you may remember is when we actually bought Nature Energy, we said we would actually fold some of our renewable natural gas activities within Europe into it as well. So, there's a great opportunity for us to be able to see the information flow in both directions and actually learn from the team there as well and then to see the trading opportunities that we have as well. So early days, information flowing, making sure we actually get in place both the standards that we want to have from both sides and making sure that we have the ability to be able to move the molecules where we want. So, looking forward to provide some updates into the future as well.

Our next caller is Lydia Rainforth from Barclays.

I've got to say two questions. On the first one, there's obviously a lot of free cash flow within the business, and it is quite remarkable how much you're generating. And I agree with that, your shares are undervalued. Did you ever think about giving an annual number for the buyback? And clearly, I could take 40% of my forecast and get to a number. But just from your side, why not have the confidence to give an annual number? And this is vaguely linked. But on the acquisition side, we obviously have seen a lot of acquisitions across the globe. Is there any point where you think that you were missing out on this? And then secondly, on the chemical side, on the Pennsylvania cracker. Where are you now in terms of certification of some of those products? And it does appear that it's going to be difficult to meet that cost of capital hurdle. When you are thinking about that process, would you do it again essentially? Or how would you not make that sort of investment and one way it looks like it's not going to make the return? Thank you.

Thank you very much, Lydia. I think inherently three questions. I will take the last two. I will start with those and then come back to you, Sinead, on the free cash flow generation. I think, let me start with Monaca, then go to the acquisition. On Monaca, you recall the last update I provided was that the first two polyethylene trains, two or three, were running well. They are running at or above capacity and continue to do so, which is pleasing to see. I also updated you at the time that there were equipment issues on the third train. I'm pleased to report that that piece of equipment now has been installed, a compressor that we needed to put into place is in the process of being started up and will ramp up through the course of the coming weeks. That allows us, hopefully, to stabilize the plant from thereon. Our focus right now is on volume, on just pushing the volume through the plant. And why is that? That's because the differentials at the moment between the gas price and the product price are significant. Even before we get, very forensic around the potential grades that we have, that we can actually crack out there, the real focus is on just getting flow through, and that's what the team is focused on for the coming months. And then over time, of course, we will continue to optimize value through the opportunities that we have technically to do so. On your question around acquisition, I think the worst thing you can ever do is get FOMO when others are acquiring. We set out a very clear strategy in the middle of last year. And if anything, we stand today in a position where we are very pleased with not just the progress we are making but the momentum that we are building towards that strategy, and we are absolutely convinced that that strategy, if we can continue to deliver on the pace we are delivering, will unlock significantly more value than any other acquisition. Of course, you see that playing through. You see it through the stability of our cash flow generation. I mean, our Gulf of Mexico business, this last quarter produced at record highs, the highest in over two decades. Our Queensland Gas Company asset base is producing at a record high, the highest since it started up ten years ago. The quality of the CFFO is strong. Yes, there's more to do to get Prelude and Monaca up and running. At the same time, Sinead has already alluded to the growth in CFFO coming from the 200,000 barrels per day and new projects that will be coming through. Cost is coming down. CapEx discipline is showing. I think you see all the credentials to be able to really focus on unlocking that value from the first sprint, and we are only two quarters into a ten-quarter sprint. And so, I do think it's a unique opportunity for us to continue to use that surplus cash to be able to lean in and do more buybacks, which is exactly what you see us do, and we will consistently do that inline with what we have said we will do.

Sure. I think that's the perfect answer to the first question as well. I think my sort of brief response would be when we set a target, you can see that we are looking at performance not promises. We will meet it and hopefully beat it. You can see that preference is to not set a huge number of additional targets along the way. Just look at our track record. If you look back over the last, however many quarters, six quarters, whatever it may be. It's a very tight range in terms of the buybacks. So hopefully, it gives you complete predictability in terms of what's going forward, Lydia, as well. But fundamentally, I'll always look at the performance of the company in the quarter and looking forward as well. That's why you see a $3.5 billion share buyback at this point.

And maybe a fine point there, Lydia, as well. You'd asked me whether we would do Pen Chem again. I think what we will continue to do is to be very clear on where every single dollar of capital is going to be prioritized. Does it go into a buyback, or does it go into other projects? We have said we're going to keep our capital employed in chemicals flat through the decade. So, of course, that's a key consideration. And we will make sure that we do less of what we would call the mega projects. That is very much the philosophy that we are adopting. Small and replicable is beautiful, and we see it in the context of a Vito to a Whale to Sparta. And so more and more of our capital expenditure is going to be in areas where we feel we can really get our hands around those opportunities. And only in exceptional cases, where we truly see value add, will we go for the bigger projects.

Our next caller is Christopher Kuplent from Bank of America.

Thank you. Good afternoon. Just one each, if I may. Wael, maybe you can tell us where your, as you call it, ten-quarter sprint so far is frustrating you. Where have you not made progress as you would have hoped? I appreciate it's early on asking you that question, but if you can give us a bit of color, and maybe my particular hobby horse, your experience from what you did in Pakistan, is that a model that you're hoping to roll out elsewhere when you think about cutting the tail in your retail network? And one for you. I'm really sorry, Sinead, but I do have trouble calculating a 42% CFFO payout ratio on 2023. It seems like you're giving yourself a lot of credit for working capital inflows, etc. So, is it fair to assume that the underlying payout ratio is significantly higher once you go below the CFFO headline? And that to me would be a very bullish interpretation going forward when working capital changes perhaps go the other way.

Thanks, Chris. Let me cover the first one and then have Sinead cover the second one. Look, I think, I just outlined earlier, Chris, the strong confidence I have but also humility to recognize indeed we are early in the journey. What are the frustrations? Let me sort of provide a couple of maybe live examples rather than just talk theoretically. So, one of the things that gives me confidence. Well, let me step back. What we are doing well clearly on the cost reduction side is the portfolio. And we are moving maybe I'll pick up your retail question there. We are looking at every option for those tail markets or for those tail assets to be able to monetize them or shift the structures around them, shift them into trademark license agreements or the like to really make sure that our capital employed and our energies and our focus are on the right areas. So, we will continue to do that. The real focus and we always do the hard yards come from the structural cost reductions. And there, we are really making progress in a number of areas. I'll give you one simple one, but I think is iconic in the bigger scheme of things. Our asset managers have historically had some 1,800 standards that they need to be complying by. So, we spent time last year really focusing on how do we simplify those standards and we have reduced that requirement by 70% while still living up to all of our safety and reliability expectations. But that's down from 1,800 to 500 standards. Now I wish we could do that in a week. I wish we could do that in a month, but that takes work because we really need to go back and de-bureaucratize a lot of the activities we have. I wish it could be faster, but there are other areas, where I look and say, actually, teams are getting it. Places like the Gulf of Mexico, I talked about their record production. I would also reference how they are being able to, for example, challenge the way they do work, reducing their overall people movements offshore by some 35%, allowing us to reduce our demand on helicopters by 50%. Just small examples of where you see the momentum starting to build. I’m sure I speak on Sinead's behalf as well. Both of us would love to see that to go even faster. But we also recognize we have to take an entire organization along, and some of it is unpacking things, which we have ingrained into our business for a long, long time. This is a transformational journey, which is both exciting but also, of course, one that is going to take its time. Sinead?

In terms of the question of just your point on the calculation of the payout ratio, we actually haven't changed it year-on-year. As you know, if you look back at the previous year, '22 where we had actually working capital outflows and quite substantial ones as well, we calculated on the back of that. When we looked at it in '23 where we had inflows, we looked at that. So, working capital, you're right, does vary with us. It goes in and out, across the period, but we keep it pretty consistent. What I'm probably more interested in, regardless of how I calculated is just simply put, am I giving a compelling return to my shareholders or not. I think with $23 billion across the year, we have definitely done exactly that in terms of that mix. I hope we can look through that to continue to regardless of the working capital. So, like the working capital inflow this quarter or not. I'm still looking through it as to be able to say, ''Do I have confidence in the future cash flows of the company to be able to continue to distribute, which is why the $3.5 billion?'' Hopefully, you'll see that tight range that I mentioned before in that track record coming through. Happy to work the details of the calculation with you through IR at any point. Thanks.

Luke, let's go to the next question, please.

Hi. Hello. I've got two, if I may. If you look at sort of the 4Q results and also the full year 2023 results, I have a question about sort of trading and optimization. Because previously, you have indicated that trading and optimization is sort of a 2% to 4% point uplift to return on capital for the company at large. But sort of backing this out is always, it's tremendously difficult. But it looks to me like in 2023, it was either at or possibly even above that range. I was wondering if that is indeed the case. The reason why I'm asking is that if it is indeed the case it has become a very, very large share of the company's sort of overall earnings. The other one I wanted to ask is about the disposal of onshore Nigeria. If you could say, a few words on how that might impact sort of earnings cash flow sort of going forward. What are the implications of that that we should take into account from a modeling perspective?

You want to take both? Indeed, thanks, Martijn. In terms of trading and optimization, particularly this quarter, we saw really good results from LNG trading and optimization; it's a pretty exceptional quarter. Q4 tends to be very good, as you know, for them. We saw that repeated again. You are right. We said 2% to 4% in terms of Capital Markets Day in terms of the uplift that comes through. It's very difficult to guide quarter-on-quarter, of course, because there is that volatility that comes through. The way I tend to look at it is it tends to be linked to either the opportunities that we have or in effect, weather. What we tend to see, of course, is that with respect to the LNG side set up for the northern hemisphere, as Wael mentioned earlier, Q4 and Q1 tend to be the stronger ones. Not surprising as gas at the end of the day, so this is about the winter there and of course, about the volatility in ARB opportunities, which were very strong as he already alluded to as well in Q4. What we see in chemicals and products and particularly on the product side, of course, is that although there's a weather element of that. So, of course, with gasoline, driving season, etc., and diesel, you see much more. It's about the opportunities that come about. Q4 tends to not be there, and that's why we get that volatility over it. So, we see that 2% to 4% is a pretty good representation, but you're right, IG tends to be on the higher end of the to 4% within that range, and you tend to see the chemicals and products more middle to lower end of it, so it gives that blend across it. In terms of the disposals, you talked about particularly Nigeria, what are you talking about there? Well, in terms of the reserves, just to give you a bit of a feel, it's less than 5% of our reserves. But as we know, when we talk about any of these barrels, it's less than a 100 kboe a day as an example. But, of course, it depends on price, and it depends on your ability to get paid as well as it comes through. So, each barrel is not created equal, and I think that's very much the case in terms of Nigeria. So, we're not worried about in terms of the impact coming out of the cash flows. And, actually, when you look at the disposals we have announced and the disposals we've already done, that growth element that Wael and myself have both talked about, whether it's Timi, Vito, LNG Canada, all of those different ones coming through, they more than exceed the cash flows from the divestments, which is the key point to take away here.

Luke, can we have the next question, please?

I wonder if I could push you a bit on chemicals or a little bit more on chemicals or maybe you could help me out. Wael, looks like you lost about $2 billion at the EBIT level on Chemicals this year. The losses were larger in the fourth quarter than they were in the third, despite your indication of margins being improved and the comment that two of the three trains, etc. at Monaca are working. Can you help me understand, as Monaca comes on, hopefully, as Singapore goes out? How do I think about the progress that one might expect to see in terms of EBIT, cash flow improvement across that business? And which chunks of the business are actually making money at the present time, if any? Just walk me through the business and give me help me determine how to think about the profitability or otherwise the ones likely to see as we go through this year and try and leave the macro behind, which I don't think is going to help you greatly, unfortunately?

Was that it, Lucas? Have I missed anything that you wanted to ask as well?

No. That was probably far too long anyway, Wael, but appreciate any insights.

I'll give a perspective and then invite Sinead to also add if needed. Look, I think, of course, the performance of chemicals has been something that is very much in the spotlight for us. And we haven't tried to sugarcoat that even as far back as Capital Markets Day, and we still realize we have a long journey to go there. I'd say there are three key levers that we are pulling there, Lucas. One is indeed the fundamental is making sure that the $14 billion or so of capital employed in Shell Polymers Monaca, the Pen Chem facility, are generating the return. You don't see a lot of that coming through in Q4; you're right because Q4 was actually those units were down in Q4 as we were looking to complete all the maintenance work on the cracker itself before we were about to bring up the third trying and repair things that we had discovered through the startup process. And so, that startup of those units was, I think, towards the tail end of last year, in the December period and have gone through into the January period. And as I earlier said, the third train is in the process of starting up. So, don't expect much at least for the first few weeks coming out of it until we've ramped it up. What we have said and we haven't changed our guidance is that you should expect $1 billion to $1.5 billion of EBITDA from Monaca, one, it's up and running, which is not going to be in 2024. It's more likely to be in 2025, 2026. That's when you should expect that. The second key lever that we are using is that we're deploying, of course, the portfolio. One you talked about—I won't address that—that, of course, is bleeding. Therefore, the sooner we can move on that portfolio move, we will move the better. We are also looking to high grade our portfolio through something like the recent announcement on Rhineland, where we are shutting down one of the crackers and converting it into a high-quality base oil unit that will supply roughly 40% of Germany's needs. That portfolio transformation is also ongoing. And then thirdly, there is a cost component. We just need to get sharper on cost. And so, what we are doing there is, for example, reducing our IT spend there, as part of a broader corporate focus program on IT, where we have in essence, reduced some 35% of our IT contractors, some 3,000 people since the middle of last year and really getting much sharper on where we want to focus our scarce IT dollars. We have recently announced a significant downsizing of the commercial team in chemicals, down by some 25% headcount. There are a lot of actions to be able to do what we can control or fix what we can control. The margins aren't great. I mean, that's obvious, and I don't know how long that lasts. But what we have to be able to do is to do the best that we can within the constraints that we have, and so we are focused on that. We also haven't changed the guidance that against the indicative chemical margin that we presented in Capital Markets Day. We expect to deliver around $3 billion to $4 billion of earnings coming out of the chemicals and products portfolio. So, that's where we are and there is no shortage of attention nor effort to be able to get this to be the best business that it can be within the constraints of what the business is today, while we continue to look at options to do even better. Sinead, would you have one to add anything?

I think one sentence would be, you're completely right. It is loss making at this point in time, and that's why you can see my confidence and our confidence as we talk about the free cash flow into the future of the company, by stopping that loss-making side of things, by turning it around, by doing the divestments, and by getting Monaca up and running. It just gives us that runway into the future in terms of being able to just see that free cash flow growth. I think you have covered it all.

Thank you very much, Lucas, for the question. Luke, can we go to the next question, please?

Hi, everyone, and thanks for squeezing me in. My first is a follow-up on one of the projects you mentioned earlier, LNG Canada. Could you provide a status update on their completion and start-up timelines, or however you'd characterize it as you see things today? And then my second question is on the structural cost reductions, which, as you mentioned, are already well in flight following a strong 2023. I know you referenced that this is going to be an ongoing initiative even beyond the 2025 timeframe that bounds the near-term target. But could you comment on how you're thinking about sources for and timeline for deliverability for these reductions over the near-term, just at least as far as the visibility that you have and can share? Thank you.

Thank you very much, Jeoffrey. I will take the first one, and then let Sinead address the second one. LNG Canada, you will have—we also addressed this last year. We have seen, of course, the Coastal GasLink pipeline completed mechanically last year and ready and available to ramp up through the course of 2024. The facility itself at Kitimat is now just over 90% complete as per the report from the joint venture. So, they are making good progress. And we would expect that later this year, they would start up the commissioning of the plant. That, of course, takes several months, well into 2025. But it's comforting to see the progress that is being made. And of course, once we start producing those commissioning cargoes will be made available from day one to our foundational customers as you would expect. So, pleased with the progress, but this is no doubt, this is a very, very complex facility that's going to be ramped up. And therefore, we are going to be—to watch it and support the team as they do that through the course of the coming 12 months to 18 months.

And thanks, Jeoffrey. You asked about OpEx. You heard me talk about how pleased I am in terms of the progress to date; $1 billion after only seven months, great progress. We talk about it in terms of where we play and how we play. In terms of where we play, the portfolio moves on the predominance of that at the moment. And you can see, of course, is ramping up with Pakistan coming through, Nigeria coming through and many others that you will see flow through as well. So, you'll see some of the OpEx come down. The reason I don't give you timing on that is, of course, it's dependent on approvals and when that will actually occur. So, we expect those to happen towards the back end of this year, more than likely 2024. The higher we play, that's a difficult stuff, that's the bottoms up. Very much in terms of three areas I'd look at; Leaner Corporate Center, Wael already alluded to IT and taking out contingent workers there, but across all of the functions, making sure it's fit for purpose. We, of course, look at it in terms of pacing the growth in terms of our downstream and RES business. They're really going after things while talked about chemicals, etc., and the thoughts of taking costs out there. But of course, also, you see it in terms of low carbon fuels where we've got this mixture of actual growth coming through with Natural energy but of course, moving away from some of the aspects of hydrogen into mobility in California, as an example. So, you'll see a bit of a mix there. And finally, we're looking at continued improvement, of course, in our upstream business, where you see the aspects of going after hard where we spend money in terms of maintenance, making sure it's really bang for our buck, etc. So those ones you will see come through in the course of the year, but the big meaty ones will be probably towards the end of the year. What I hope you're seeing on all of this is, we've given you a promise in terms of $2 billion to $3 billion. We're already $1 billion through there. So indeed, it's a wide performance rather than the promises, and we're really continuing to drive that hard.

That's a great way to end. Jeoffrey, thank you for the questions. And hopefully, the theme of today you would have taken is this is a company that is truly delivering now on its sprint and we are building the track record that we said we want to build. Thank you all for your questions. Thank you for joining the call. Wishing you all a very pleasant end of the week. Thank you for your time.