Welcome to the Royal Dutch Shell 2018 Quarterly Results Announcement. There will be a presentation followed by a Q&A session. I would like to introduce the first speaker, Mr. Ben van Beurden.

Thank you very much. Ladies and gentlemen, welcome to the Shell second quarter 2018 results call. Of course, let's start with the disclaimer with which I'm sure you are familiar. And then today, we are taking another important step towards the delivery of our world-class investment case with the launch of a $25 billion share buyback program. This move complements the progress that we have made since the completion of the BG acquisition back in 2016, to reshape our portfolio through a $30 billion divestment program, new projects, to reduce net debt, and to turn off the scrip dividend. This quarter, our cash flow from operations excluding working capital movements is the strongest since the first quarter of 2014 and the oil price, as I'm sure you all remember, was above $100 per barrel. Our financial framework remains unchanged. Our free cash flow outlook and the progress we have made to strengthen our financial framework gives us the confidence now to start our buyback program. And our intention remains to buy back at least $25 billion of our shares over the periods 2018 to 2020. That's, of course, subject to further progress with debt reduction and oil price commissions. Now in today's call, I will first take you through Shell's performance across a range of critical areas with updates on HSSE portfolio, project delivery, and more. And then, Jessica will cover in more detail our financial performance, the financial framework, and some highlights from our business. But before anything else, let me talk about our health, safety, security and environmental performance. Nothing is more important in Shell. It is the bedrock on which everything else is built. Goal Zero is our goal so zero harm to people or the environment, and this is critical for the responsible delivery of energy…

Thank you very much, Ben. The pillars of our financial framework remain unchanged. Firstly, a strong balance sheet. We aim to achieve AA equivalent credit metrics through the cycle, for which gearing is a proxy. At this point in the cycle, we think that 20% is adequate, but we expect to go lower than 20% as we continue to reduce net debt over the coming years. Secondly, maintaining an attractive U.S. dollar dividend per share. And thirdly, distributing surplus free cash flow to shareholders in the form of share buybacks. The announcement of the share buyback program today shows that we are confident that 20% gearing is within reach, based on expected organic cash flow and divestment proceeds, that we are firmly committed to capital discipline through the cycle and that we have confidence in our 2020 free cash flow outlook. Our financial framework has not changed and our cash flow priorities have not changed either. We're progressing to 20% gearing, we removed the scrip in Q4 2017, and we generate enough cash to cover the dividend. We're confident that our cash generation and continued divestment proceeds in the coming years will be sufficient to allow us to reduce debt and deliver AA equivalent rating metrics, while using additional free cash flow to buy back shares. We want to deliver on our financial commitment in a disciplined and predictable manner, even though the actual pace of delivery might vary from one quarter to another as a result of performance or external factors. Now let us have a closer look at our financial performance at the end of Q2 2018 on a four-quarter rolling basis. At an average oil price of $64 per barrel, CCS earnings excluding identified items amounted to $18.5 billion. ROACE on a CCS basis excluding identified items…

Thanks, Jessica. So today, we announced the launch of our share buyback program and the decision is founded on our strong performance track record, our cash generating outlook, and strengthened financial framework, unchanged commitment to capital discipline and our rigorous capital allocation, and of course, our strong confidence in the longevity and the competitiveness of our portfolio. So we are delivering on our commitments. Now with that, let's go to questions. Please, could I have just one of two questions from you each so that everyone has the opportunity to ask a question in the remaining time. Operator, can I have the first question, please?

Thank you. We'll now begin the question-and-answer session. We'll go first to Oswald Clint with Bernstein.

Oh hi. Good afternoon. Thank you. My first question was really on the Integrated Gas earnings, which I guess in the first half of 2018 are almost double what they were this same time last year. Obviously, oil prices explained a little bit of that plus, plus Gorgon, but I want to know was there any information or color you can give us on where you're selling the bulk of these LNG cargos these days. Has there been any noticeable shift or mix change in the countries? Is this more and more of Shell's cargoes going into China, kind of relying on that strength in Chinese LNG import demand continuing? And does it pose a particular risk if that was to end some point in the future or is it you know across most of the Asian countries? And I guess if it is more balanced, and you spoke about BC Canada, but shouldn't you be really telling us to buy more LNG projects coming to the development queue? And that's the first question. And then secondly, I just – I mean, Jessica, you mentioned North American shale restructuring. I look at the second quarter of North American upstream earnings and it looks like one of the highest earnings you've done at least the five years. The – I guess your blended realizations are pretty flat year-over-year. So, I guess it's hopefully evident that you have really taken out some of the cost base of that particular onshore U.S. business. I really just want you to confirm that if I interpreted that way, its evidence to show that the costs have lowered within not North American shales business? Thank you.

Okay. Thanks very much, Oswald. Two very good questions, I think both for Jessica.

Right. So, indeed, IG had another, dare I say, fabulous quarter, a very strong first quarter and followed by a very strong second quarter. It reflects a number of things. First of all, the overall production for the business, gas production is up 16%, so the business is growing with Gorgon coming on stream. But importantly also, bringing more feedstock into MLNG and into Trinidad as well. So, our utilization rates across the portfolio have been increasing over the year as well. Indeed, the market conditions have been good. The trading conditions have been good. We saw some very high prices in Mexico that we're able to secure cargoes going into it. So, across the portfolio, a good performance, good trading conditions indeed. China demand continues to be strong and we continue to provide supply as you see with our underlying liquefaction volumes going up but also our LNG overall volumes going up as we also pick up spot cargoes to take advantage of good market conditions. And indeed, I think it's well said in terms of what you're seeing happening in our North America business. Of course, that is both our shales business and our deep-water business performing very well and coming through in these earnings numbers that you're seeing. Both of those businesses have done an exceptional job of driving capital efficiency. And you hear the stories of Vito, of Kaikias, and the piece that I gave on the unconventionals business in terms of wells and completion costs. So, great capital efficiency story, but as you said also, a very strong operational expense story where our operating costs in both of those businesses have declined over the last couple of years. All of that contributing to what you're seeing in terms of positive earnings in our North American business.

Okay. Thanks, Jessica. Thanks, Oswald. Can I have the next question please?

Moving on, next is Jon Rigby with UBS.

Yeah. Hi. Thank you for taking the questions. Just a couple. The first is on operating cash flow. Am I right if I do a quick bit of mathematics, is that if we were to take the bottom end of your free cash – implied free cash flow range and then work that through to operating cash flow at $75, you probably should be generating $13 billion or $14 billion of operating cash flow against the $11.6 billion working capital movements? And I sort of look at that in the context, I think the comments you made about additional $5 billion of performance improvement – cash flow performance improvement coming through in the second half of the year. So, I wonder whether you could go into bit more detail about what are the things that has to happen over the next 18 months or so – 12 to 18 months or so to get us into the range of implied operating cash flow that you've talked about, if my arithmetic is correct. The second is I think – then you talked about one of the main issues on creating the world-class investment case was to create predictability and visibility around earnings. And I just wonder whether there's been a pause for thought around that given Jessica had to do a lot of work at 1Q, explaining some one-off items and reference the fact that she'd had to do the same in 4Q. And it feels again at 2Q that you're having to do the same thing to explain earnings, and I think if I look at expectations, are somewhat disappointing. So, I just wonder whether there's more work to do on the predictability of the performance of the business. Thanks.

Yeah. Thanks for that, Jon. I'm sure that Jessica would want to talk to both questions, but let me have a first go at the second one as well. Yes, of course, you're absolutely right. Predictability really helps. We know that very clearly. And it – and I think we have been doing quite a bit, to also have better disclosure that will help and indicating a little bit better how things flow through our earning statement, getting a number of things out of clean, so that you have a better understanding. How – what is after all a very elaborate and complete portfolio with a wide range of businesses in a wide range of countries subject to lots of macro effects, hopefully gives a little bit more insight. Having said that, we, you know, much though I would love to have completely flat earnings or at least linearly going up, we don't manage for earnings, we don't manage for results, we manage for value. So, some things will fall in a certain way and there is not much we can or want to do about it. And therefore, there is a certain amount you will have to take, and we will have to take as well. Bear in mind also that, of course, we've been in the middle of a very significant portfolio restructuring and upgrading program, which of course also throws a number of changes off, both on balance sheet, but also flowing through to P&L. So, that's another thing to consider. But Jon, I'm well aware that sometimes, our results in some quarters can be hard to get right because there are things that are invisible to you. And I'm very mindful that that is – that is uncomfortable and that we have to do whatever we can to give you more insights; and where we can, where it actually makes value sense, avoid that. I'm sure that Jessica has more to say on this particular quarter, where some of the perhaps unexpected earning effects came from, but then also, I give you a bridge to the free cash flow and operate – and operating cash flow for the end of the decade.

Jon, thank you. Thank you for the questions. And building on what Ben said, indeed, the preference is to deliver consistent, reasonably predictable earnings, and for those earnings to be growing over time. And that's certainly what we're trying to drive in terms of underlying performance of the business. Accounting is not always kind of easy to deal with and macro effects such as FX can also bring noise into the numbers. I wish that weren't the case. We're certainly trying to drive as much transparency in terms of what's causing these effects as we can. We had one of the most rapid appreciations of the dollar against most currencies around the world in the last quarter. It was up some 16% against the Brazilian real. That's kind of one of the fastest ramp-ups there has been. And with the nature of our business, that is going to flow through our financial statements. And so, what we can do is provide transparency on that. We can't predict where FX will go, at what pace it will change, but we can certainly explain what's happening to our business because of those – because of FX effects. And that's certainly important for the quarter. That was some $600 million, $700 million of the impact on earnings for the quarter that impacted our corporate segments. It impacted our Downstream business as well as our Upstream earnings as well. As Ben mentioned, divestments is another piece. As you remove $30 billion of assets and entities from your financial statements, there's all kinds of accounting implications around that. Again, we try and bring the right level of transparency. Some of that should smooth out as we kind of close out that program over the coming months. There'll be some amount going on in the future,…

Okay. Thanks, Jessica. Thanks, Jon.

Thank you.

Good questions. Can I have the next question please, operator?

Yes. We'll go next to Thomas Adolff with Credit Suisse. Thomas Adolff - Credit Suisse Securities (Europe) Ltd.: Good afternoon. Hi, Ben. Hi, Jess. I just want to start with the mid-year report. I had mine earlier this week. And I just wanted to focus on two areas; namely, working capital management and refining and trading. How can one do a better job managing the working capital? It's been a big drag for the past four quarters, about $6 billion or more than that. That's $10 to your breakeven. Your competitors are not seeing such a drag from a working capital. So, I wanted to get a bit more insight into how you can do a better job here? Second is just on refining and trading. Again, the past three quarters, either I'm just modeling it incorrectly or something is happening here. It's – what happened to the magic of capturing the margin; whereby, it rises, which also in turn reduces the earnings volatilities, the machine working according to plan? And then, I guess, just a quick question on LNG. You've highlighted there's a supply gap potential in the early 2020s, which kind of means for greenfields, it could be too late, and the brownfields will have to fill that gap. And I'm just wondering if you are looking at any brownfields within your portfolio or backing some other brownfield projects funded by other companies? Thank you.

Thanks, Thomas. Let me take the last one, say something about refining and trading, and then, I'm sure Jessica will add to it and also talk about working capital. Yeah, I think large greenfield projects now will come into the window when we expect there to be a significant shortfall between actual supply and implied demand. I'm sure if we were to go ahead with some of these greenfield projects, we will enjoy them. But you're absolutely right, we need to do other things as well to capture as much of it as possible. Brownfield projects are great opportunities to do so. And as Jessica already mentioned earlier on, we have had a lot of focus in the last few years, particularly after the BG assets came in, to really understand how we can improve utilization of existing LNG supply chain. That is working out, and we're now also at a point that we are looking at the number of the bottlenecking opportunities in LNG plants around the world, one of which I think has been in the news recently, which is Nigeria LNG, where we just entered into the sort of defined face, and hopefully, if not late this year, probably more likely next year, we will be in a position to consider sanctioning that expansion. So, yes, absolutely, we are intent on capturing whatever we can by making sure that our assets and supply chains are full and that we spread or expand assets where we can. I think our refining and trading, I think, if you look at the performance and you compare the performance that we have seen in our refining and associated trading business against the margin that is available, we have actually outperformed the market. So but – granted the refining margins had been weak but breaking it down what was available, we have captured and did better than that. While we are on downstream, can I also add that we had a very strong performance in our marketing business where we – in a rising market where we always have, of course, the effect of margin compression and bearing in mind that we had quite significant curtailments on margins in places around the world in Indonesia, in Turkey, in Argentina, disruptions in Brazil, we have managed to find offsets for that. So, our marketing business has performed very well in a different set of circumstances. Let me hand it over to Jessica to perhaps give a bit more color on that, but certainly, also to cover the working capital element.

Thank you. We have a large profitable trading business that allows us to create more value across our integrated value chains whether it's downstream or integrated gas, and frankly, our upstream business as well. That's not to say that every quarter we're hitting it out of the ballpark, but through the cycle and through time, it has proven to be, I think, key to our strategy and key to our delivery is that trading capability that we have in the organization and maximizing value across those value chains. With that, particularly for a downstream business, we have a large inventory of barrels that we use. It's a key element of getting value from our trading operations. In the last year, the volumes of our barrels have come down some 10%, 20%. So, it's not that we've been increasing our volume exposure; it's entirely a price story. So, the price that we've used to value the inventory on our balance sheet has gone up by some 50% and that's really driven most approximately 90% of the increase in working capital that you're seeing for the quarter. So, it is a function of our strategy in terms of using inventory, trading around it. What I can say is that we have a very intense and effective management system in place in terms of choosing what our working capital level should be. It's driven by a view on risk and return. It gets a lot of attention by management to ensure that we are making the right choices around inventory levels and working capital. There's specific return requirements that the business needs to deliver on. So our – the outcome of our working capital is by deliberate choice. We can't always identify the price that the quarter end will land at. And what you're seeing is really a price effect. But underlying that, it is based on our strategy and specific management choices in terms of the working capital that we're carrying.

Okay. Thanks very much, Jessica. Thanks, Thomas. Can I have the next question please? Thomas Adolff - Credit Suisse Securities (Europe) Ltd.: Thank you.

We'll go next to Martijn Rats with Morgan Stanley. Martijn Rats - Morgan Stanley & Co. International Plc: Yeah. Good afternoon. It's Martijn here. I wanted to ask you two things. First of all, reading your outlook statement which regarding to production for the third quarter, it looks relatively weak with both Q-on-Q and year-on-year decline, and if you sort of relate that to the amount of net debt in the firm, I think it's fair to say that the balance sheet is de-gearing, but over the last year or so, the de-gearing has been somewhat slower than we, for example, would have modeled a year ago. So, if you look at the ratio sort of net debt to production, sure that the balance sheet is de-gearing but net debt per barrel produced, and I know this is a somewhat esoteric metric, but it's somewhat interesting nonetheless. Net debt per barrel produced is actually hardly falling and I know you are sort of saying, well, sort of, you know, remain on track for sort of free cash flow guidance that you sort of given and – but I was wondering is this really sort of on track with the plan as you sort of had it maybe a year or a year and a half ago. And somewhat related to that, the second thing I wanted to ask you is that, I think, you know, the buyback program is of course very welcome, but we're also waiting on that, but the figure of $2 billion over the next quarter is somewhat intriguing one in the sense that if you simply divide $25 billion over the remaining 10 quarters between now and the end of 2020, you would get to an implied run rate of $2.5 billion a quarter. So, I don't want to read too much into what might simply be a rounding error, but nevertheless, it sort of suggested sort of the buyback is starting but not quite at the rate that is implied by the overall program, so it's still starting in a fairly sort of cautious manner and I was wondering how that relates to the statement around sort of confidence in free cash flow, the disposals, the balance sheet that you also talked about.

Okay. Thanks, Martijn. I think Jessica is raring to answer these questions and I'm sure I will have an add to it as well.

Yes. Thank you, Martijn, and for introducing yet a new metric in terms of how we think about our businesses gearing to production ratios, not one that I've considered before. I think the main message from this quarter and from the share buyback program is one around confidence in the underlying performance of our business and the cash flow generation over the next two and a half years. And it's a challenge to kind of run the business and have all the metrics work quarter-on-quarter every quarter and predict exactly what it's going to look like. It's a big, dynamic business, so I think focusing on the trajectory and the very clear numbers we've provided around our organic free cash flow, getting to $25 billion to $30 billion by 2020, achieving the buybacks of $25 billion by 2020, and bringing gearing down to 20%. Those – all three of those things we're looking to make true through the next two and a half years. But it's dynamic in terms of how cash flow moves, how working capital moves, et cetera. But I think you should be reading in what we're announcing today and the amount we're announcing and recommitting to the $25 billion, that is the trajectory we're on. And it's I think looking through the quarters and not focusing on any given one quarter is the right thing to do. We're comfortable with the cash flow. We're comfortable with where our production is. We knew there'd be a change in the production profile with the divestment program that's happening, but we're also growing. And the underlying business of Upstream increased by some 2% if you take the divestments out, and there's a number of new projects that are coming on stream that will add another 700,000 barrels of oil equivalent over the coming years. And so that ramp up with Appomattox coming on stream, with Prelude coming on stream, et cetera, there'll be new growth in the portfolio that's going to support cash flow generation and underpin the numbers we've provided.

Thanks, Jessica. Martijn, I think Jessica said it all, but I think it's also important that I underline this myself as well. So, of course, we look at every quarter and understand what's happening. But we also look, of course, multiple quarters ahead to really understand what is going to happen given a certain amount of macro scenarios that we can envisage. You know, we've been very clear. I have been very clear personally that we want to have a track record that is credible, that we deliver on our promises, that we do the things that we talk about with discipline, and with it, of course, a certain degree of prudence because we do not want to get ahead of ourselves. You have to hopefully also give us some credit for the fact that we have delivered on all our promises and have every intention to deliver on this promise as well. And with that, will come a fair degree of scrutiny of what we think the future has in store for us. When we commit or launch a buyback program, that of course will be scrutinized quite considerably over the quarters to come. So, again, I completely underscore the points that Jessica made, that we are at a point where we think we can and need to do this and we have the confidence that we can see it through. Can I have the next question, please, operator?

We'll go next to Christyan Malek with JPMorgan.

Hi. Thanks for taking my question. Just the first question is underlying cash flow evolution, sorry to harp back on this. And second question is on the buybacks again. So first on cash, I come back to the question I've asked in the previous quarter. I was hoping to see improvement in the cash flow capture at higher oil, yet underlying cash breakevens have moved sideways around the mid-60s. Meanwhile, compared to a year ago, and I think the point was made by Jon, Shell's cash flow from operations is down 16% despite oil being up 50%. So, I understand the impact of divestments, quarterly variances in taxes, working capital and derivatives at higher oil but what I don't understand and I want to understand better is within the Upstream business specifically why cash efficacy, so to speak, is deteriorating at high oil. And if you can deliver a cash breakeven at $50 this year, this would imply free cash flow in the second half of around $14 billion compared to $11 billion in the first half. So all else being equal, and I don't want to put you on the spot, but are you comfortable you can deliver what is a 30% uplift in the second half? The second question on buyback. How should we think about the run rate per quarter in the context of the prevailing oil price. So if oil falls below $70 in the next 12 to 18 months, and I understand it's not a fair question, but can we still be guaranteed that $2 billion? Thank you.

Thanks, Christyan. Jessica?

Thanks. Thank you, Christyan, and good questions. I think in terms of looking at our cash and understanding breakeven, it is important to kind of cancel out working capital, that is the timing effect. So, that's a significant impact. I think you were quoting some of the CFFO with working capital. It does bring you down closer to the $60. I think what you'll see happening over the coming quarters is increased cash generation coming from the portfolio we're still continuing to ramp up. We still expect dividends coming in stronger in the second half of the year and the new projects coming on stream. All of that will contribute to higher cash generation and I think moving our breakeven price into the range where we'd like it to be. I think on the share buyback program, I've spoken to it. I think I've tried to convey confidence in terms of the amount of cash we expect to be generating in the second half of the year, but importantly, through the next two and a half years. It really is a multi-quarter, multi-year decision and we're starting it with confidence and that's what the $2 billion represents, that's what the restatement of the $25 billion represents, is our belief that the underlying performance of the company is strong, that growth is strong, and in combination, we'll have sufficient cash to deliver on this commitment. The working capital piece, I think, is important to kind of isolate. It is a timing effect. It's had an impact this year. It's had an impact in the last four quarters. But again, that will right itself through time.

Okay. Thanks, Jessica. Indeed, the curse of rising oil prices. Can we have the next question please, operator?

Yes. We'll go next to Theepan Jothilingam with Exane BNP.

Yeah. Hi. Good afternoon. It's Theepan here. I have a couple of questions actually. Firstly, could you to talk about how important the disposal program is now to the buyback going forward? Does Shell need to be more aggressive than the sort of $5 billion I believe you've indicated per annum beyond 2018? And the second question, I appreciate your comments around LNG Canada and fitting that in the terms of affordability. But how do you prioritize debt reduction buyback and where you sit in the range for capital investment? Would you prefer to be at the lower end of the capital investment program vis-à-vis meeting your buyback and debt commitments? Thank you.

Okay. Good questions, Theepan. Let me take the first one and have Jessica talk to affordability and capital discipline and how that sort of ranks in the priority of use of cash after that. I think in terms of the disposals, of course, the disposals have played a very important role in delivering additional cash that we could use to pay down debt and I think so far we have done this quite successfully. And we are essentially through the program that we announced at the time we did the BG deal. We talked about a $30 billion sort of portfolio high grading program, which indeed had that benefit of delivering the cash, but from a strategic perspective was as much also an upgrading program, a rejuvenation program of our portfolio. I think that is largely done. The numbers that I quoted earlier, $27 billion done, $3 billion announced, $4 billion pretty close, means that, of course, we will deliver against that expectation. We will have to continue that program, Theepan, and of course, it will help if we get some cash from divestments. It will help strengthen the overall financial framework or it will help with the buybacks or whatever way you want to look at it. But we will be driven in terms of our divestment program by the need to keep the portfolio rejuvenated rather than free of cash. So, we think that we need to do about $5 billion a year to just do that. That's not a target for cash delivery. That is the expectation we have if you want to have a strongly rejuvenated portfolio where we do not invest anymore in assets or in markets that are very mature and where we frankly are better off freeing up that capital employed and recycling it into younger and more vigorous positions. So, I do not think we are going to need the disposals for our financial framework, but are going to much more look at it as a sort of natural portfolio maintenance process. Now, how to prioritize cash and particularly how new investment decisions fit in? Can you take that question, Jessica?

Absolutely. We believe in order to deliver the world-class investment case, we need to grow the company, grow value of the company, we need to ensure a resilient financial framework, a robust balance sheet, and we need to increase shareholder distributions. We're going to manage all three of those things through the cycle and prove all of them to be true. So, we're going to invest some $25 billion to $30 billion that's going to allow us to achieve our strategy, to achieve our ambitions for each of our strategic themes, and to grow value of the company. We're going to continue to deleverage over the coming years. We're going to use the proceeds – the remaining proceeds from our disposal program going forward to continue to pay down debt as we've done in the last year and that will continue as we seek to achieve a gearing of no more than 20% over the next couple of years. And then, finally, to meet our commitments with respect to the BG acquisition and importantly to increase shareholder distributions. We believe all of those things are important, that we need to manage all of those things. We've been stepping through this process over the last couple of years and demonstrating unwavering commitment in terms of deleverage on the debt side, maintaining unwavering commitment to our dividends, remove all of the scrip program, and we're now in the next phase of the world-class investment case which is increasing shareholder distributions. All of that's important. We believe we'll generate enough cash over the next couple of years for all of that to be true, to allow us to invest in projects like LNG Canada within the $25 billion to $30 billion program and grow value for the company through time.

Thanks, Jessica. Thanks, Theepan. Can I have the next question please, operator?

Yes. We'll go next to Alastair Syme with Citi.

Hello. A couple of questions from me. Your debt metrics are still – your debt rating rather is still two to three notches below the AA metrics you talked about. So, I wonder where you stand with conversations with the rating agencies as you now formalize this buyback, the view of getting that debt upgraded? And secondly, the messages, Jessica, you made about the Permian growth, you're clearly big believers in the Permian. Can I ask your view on appetite to take on more acreage in the Permian if opportunities arose and where you think current market values are so to enable you to do accretive deals?

Okay. Thanks, Alastair. Let me take the second question, and Jessica can talk about our credit rating metrics. Yes, we look at our Permian position with little bit satisfaction. I think it is not only sort of past the inflection point where we see a very fast pickup of growth, but also we expect this position to be a good gas generator in the near term. And it will be a very important component in our overall shale story where we expect to be cash positive in 2019, and then, hopefully, very quickly get into this business being a contributor to our overall dividend cover. Of course, we have made it very clear in the past. We are interested in extending our position because I think relative to our other building blocks of our Upstream portfolio, you could argue we are underweight in Shales. So, we have a positive disposition to looking at bolt-on opportunities and that's what we have been doing or growing in places like Argentina where there is an established system that works for us and where we can bring a difference in terms of scale. But we've also been very clear that we do not want to participate in a gold rush and that we need to be also here extremely disciplined in how we approach it. Moreover, we've also been very clear that whatever we do, we won't go above $30 billion of capital investment in any given year. So, from that, you can derive how we are going to be looking at opportunities. So, we will look at them, but don't expect any big splashes. Jessica?

With respect to the credit metrics and the AA rating, I reference AA equivalent metrics a lot when describing our cash flow priorities, our financial framework priorities and that's remained unchanged for the last few years and I think we've demonstrated that commitment. Why is that? I think it's important to note this reflects the view of the financial framework and the balance sheet that we think is most appropriate for our company. So, given the size of the company, given the size of our capital profile, given the nature of the industry that we're in, we believe a robust balance sheet is an important piece of our financial framework, an important piece of our world-class investment case. It just so happens that translates into a AA credit rating. And so, the metrics associated with that, the amount of cash we should be generating relative to our debt, the amount of debt we have relative to our equity, we believe is important and we're continuing to manage the company to move it to the place where we think it needs to be and it happens to coordinate – correlate with the AA credit rating outcome. As I've said before, by making this choice and starting the buyback program and committing to the $25 billion, we are going to – we're seeking to generate cash over the coming years that makes all of these true that we continue to have debt reductions in the company and generate sufficient cash such that we have AA equivalent credit outcomes in terms of our financial metrics while also continuing to grow the company and do these buybacks. All three of those things we're looking to achieve over the next couple of years.

Thanks, Jessica. Operator, can we have the next question?

Yes. We'll go next to Biraj Borkhataria with Royal Bank of Canada.

Hi. Thanks for taking my question. It's Biraj of RBC. Two please. The first one was on Integrated Gas, given a few quarters of successive quarters of these margin goals and headwinds, I was wondering if you could just give a bit more color on the key drivers behind that. Is that just structural as part of the LNG business or I'm assuming it's a function of the oil price. So, in a scenario where the oil price was to stay flat, would that go from a headwind to a neutral factor? Just some color on that would be helpful. And then the second question is on refining and trading and specifically focusing on the trading contribution, it looks like year-to-date has been quite difficult. I was wondering if you could comment on how big a factor moving into backwardation is to the trading business. Thanks.

Okay. Thanks, Biraj. Can you have a first go at them, Jessica?

Okay. So, on the first question in terms of the margin calls and headwinds, the margins do just, you know, it represents the cash required depending on where the curves are moving at any point in time. So, it's not really a signal of performance of the business. As you can see, IG has had very strong performance the last couple of quarters. A function of that has to do with our hedging program and with the hedging program a portion of that is subject to margin calls. So, I wouldn't overread into kind of whatever the margin balance is at the moment in time. I would look at the underlying performance of the business and the strength of the cash generation that you continue to see in IG. Indeed, all things being equal, if the – if prices were not to change, then you would see no change in the amount of cash margining that's required for the business. But again, that is an indication potentially of where the position is. But in terms of what that position means and the value we're creating, you really need to look at the performance of the IG business to see that overall the trading business is making a material contribution and a margin is a part of having that business in play. In terms of the second piece of your question on trading, indeed, trading has been a bit soft for us for the first half. It has been a difficult trading environment. On the product side, it's been a bit of a mixed bag going from somewhat weak in the first quarter to stronger in the second quarter. On the crude side, the business has not been as strong as we would have liked, and you know, it's the focus for the business. We don't think there's any structural issues. Some of this just happens to be what happens in a given quarter. So, there's no fundamental concern, but clearly recognition – trading conditions have been a bit harder for us and we look to get more from the business in the coming quarters.

Okay. Thanks, Jessica. Thanks, Biraj. Operator, can we have the next question?

Yes. We'll go next to Christopher Kuplent with Bank of America.

Thank you very much. I've got two questions left; first one, probably for Ben. Ben, I think amongst your peer groups, the only ones without a top line guidance for E&P; and I just want to once again ask you, reiterating the buyback as a strategic element of cutting your annual dividend distribution, that's well-understood and that's one thing. But can you also perhaps give us a little more color about where you see the profile of the company evolve towards 2025 and how do you care about a top line measure versus an overall absolute cash flow generation engine that is the entire group? And then, secondly, I know many have tried. I'm going to try again perhaps, Jessica, for you, to come at it from a different angle. $2 billion of buyback in that quarter, am I correct in assuming that that $2 billion is funded from excess free cash flow left over after working capital changes, or before, or is there no such definition we should even focus on? As I understand it this quarter, if you stripped out working capital, you would have been left with about $1.6 billion of free cash flow, even after deducting the $700 million or so of net interest payments. So, is that the number that gives you confidence to now announce $2 billion for the next quarter or am I reading too much into it? Thank you.

Thanks, Christopher. Let me have a go at your first question and tell me if I read your question perhaps incorrectly if that's the case. So, in terms of top line, of course, giving guidance on revenues, we don't do. That is for that being in the commodity business, I think would be too meaningless to do. If you were referring to production and production growth, then, yeah, we have been abandoning that practice some time ago as we thought and saw it was sort of increasingly irrelevant and actually in some cases quite unhelpful because we felt that not only us but perhaps others would be tempted to chase barrels for barrels sake, which we believe is not the right way to manage the company. So, ultimately, we give – we have given guidance of course on the amount of cash we expect to produce, particularly a free cash flow, which I think is a much more meaningful measure for you to go by. Of course, we referenced that at a certain oil price outlook; otherwise, that would be relatively meaningless as well, so it's $25 billion to $30 billion of free cash flow at $60 Brent real term 2016. And we think that that actually is ultimately what it's all about. Can we deliver a very significant corporate transformation from going from a relatively modest free cash flow to a much higher free cash flow in a relatively short period of time. I think that is how I would like to be judged on our ability to deliver shareholder value, and with it, of course, also a significant improvement in returns, so that you have an indication as to how disciplined and wise we have been in allocating capital. So, I have no inclination or intention to somehow go back to getting production forecasts. Again, because I think they are increasingly irrelevant in a business that is also of course, very much driven by other emerging strategic themes like petrochemicals, like ore products, integrated gas, which doesn't always come with big barrels associated with it. And over time perhaps also power. So, I'm not sure whether that was what you were after. Maybe you talked about a top line measure, but this would be my response if you meant with it production growth.

Indeed. Yeah. Thank you very much, Ben.

Good. And I'll pick up the question on the buybacks and what's driving our confidence. What's driving our confidence is the $11.6 billion of cash flow from operations excluding working capital for the quarter. If you add back the margining, you get to $12.4 billion for the quarter. But importantly it's not only confidence in today's performance, it's expected – expectation and confidence in the second half, cash flow generation, and importantly, as I mentioned before, really looking at this decision, our financial framework, our delivery of the world-class investment case over a multi-quarter, multi-year perspective. And it's having confidence in the free cash flow growth that I've spoken to earlier today. I do think it's important to see through the working capital. That really is a timing effect. And that shouldn't really influence kind of a decision at any moment in time. It's really looking at the underlying cash flow generation of the business and our capacity on an organic free cash flow basis to support the share buyback program. And again, that's what our announcement today signals its confidence in today as well as the future.

Okay. Thanks very much, Jessica. Jennifer, do we have another question?

Yes. We'll go next to Lydia Rainforth with Barclays.

Thank you and good afternoon. Two questions for me as well, please. In terms of the operating expenses, I take your point around the FX issues, are they developing as you would have expected at this point coming through and they just look a little bit higher given where the volume numbers have moved? And then the second one, I'd like to come back to the buyback as well. But in the statement, it just says that it will be subject to further progress with debt reduction and oil price condition. Can you talk about how the oil price plays into either the recent pace of buyback or perhaps we have a different way for this, if fuel price were $65 rather than $75, would you have actually taken the decision to start the buyback with this quarter? Thanks.

Okay. Thanks, Lydia. Let me for a change take away a buyback question from Jessica. And I'm sure Jessica will have a few things to say about OpEx as well. No, I think Lydia, let's go back in history a little bit when we came out with the statement that we would do a $25 billion buyback program at the time of the BG prospectives. We very clearly said, subject to oil price recovery. As a matter of fact, specifically, we mentioned getting back into a sort of traditional range of $70 to $90. Now, of course, the business is dynamic, the macro has proven to be dynamic, lots of things have moved. So, you can see that we are much more resilient, probably even than we communicated and expected in those days. But I think an important condition still remains, which is that if we see a – the very significant downturn again in oil price, then of course the pressure on the financial framework will change commensurate with that. Now, we don't have mechanics in it, but it's important to have a disclaimer in there that I'm sure you will understand. We cannot continue doing buybacks irrespective of where the oil price will go. Where we are at the moment, we are very confident that which where we believe oil prices go or may stay and what we believe are forward-looking operating performance, ramp of a project, et cetera, is going to be. We can execute an entire buyback program and that's why we have not only signal to start of it, but again, want to reiterate that our intent very clearly remains to do the $25 billion by no later than end of 2020. Jessica?

Yes. On the OpEx question in terms of expectations, maybe we can start with the larger frame. Of course, we've taken $10 billion of OpEx out over the last couple of years and have been very pleased with the performance of the business in the way we've responded to the circumstance and are running the company much more efficiently and effectively than we have been in the past. And we're going to continue to drive that in the organization. With that being said, what you see in the numbers, there is an effect, that's a bit of a circumstance. That's not something we necessary worry about. It's not helpful in terms of the optics and that certainly playing into the view and the sentiment on OpEx. There's another piece of it which is growth. And there is growth happening in the business, of course, in our marketing business, which Ben spoke about earlier, growing in places like Mexico, India, China, et cetera. So, we bring in costs a bit ahead of when the margins starts hitting the bottom line, some of that is happening, bringing in some of the new energy businesses that's also some of the growth that we're seeing. And of course, the transformation of our assets with respect to the divestment program, bringing the Motiva assets in, all of those have an impact on the OpEx, which isn't necessarily a problem, but it can be a reason for an increase. That all being said, there's parts of our OpEx performance that I'm not satisfied with, but I don't think the EC or executive committee is satisfied with as well. We remain fully committed to driving the right costs in the organization, driving simpler ways of working, delayering the organization. Those efforts are still continuing. Some of them are not necessarily moving at the pace that I would like. A lot of them are and what I would say is there is a soft spot here. We're not completely happy with our OpEx performance, but it remains a key priority for the group and we're going to continue to drive simplification of our business where it makes sense and pursuing the right cost outcomes across the organization.

Thanks, Jessica. Let me also indeed make sure you understand that it's not just the executive committee, it's also the CEO who wants to make sure that we keep completely on top of our cost performance and do not tolerate any looseness in areas where we can be much tighter. Okay. Jennifer, can I have the next question, please?

Yes. We'll go next to Irene Himona with SG. Irene Himona - Société Générale SA (UK): Thank you very much. Good afternoon. I had two questions, please. Firstly, Integrated Gas in Q2 had a $1 billion credit, a special credit. I wonder what that relates to. My second question, on dividends received in Q2, we saw a 17% lower figure. Last year, dividends received accounted or contributed something like 14% of your group cash flow from operations. I think, Jessica, you did indicate you expect a step up in the second half this year, but I wasn't clear. My question is, can you clarify, can you guide whether you likely are looking to make more than the $5 billion in the full year 2018 that you made last year in terms of dividend received? Thank you.

Thanks for the question, Irene. Jessica, can you shine some light on it?

So, on the first question, Irene, I think we'll need to get back to you and so we'll pick that up with IR. That number is not obvious to me at this moment in time, so I just want to make sure that we understand the question and we get you the right answer. Indeed, on the dividend side, we're expecting dividends to come in stronger in the second half. That, of course, is always subject to partners and other circumstances, but given the underlying performance of our various ventures and the expectations, we would expect in the second half that number to be higher than in the first.

Okay. Thank you. Jennifer, can I have the next question, please?

Yes. We'll go next to Lucas Herrmann with Deutsche Bank.

Yeah. Thanks very much. Jess, Ben, afternoon. A couple, if I might. The first one, Ben, can you just put Silicon Ranch in context for me? Maybe this is a little abstract, given where we are in transition and everything else, but just the thinking behind positioning in that asset. And secondly, I just wanted to come back to your comment on competitive with North American or with Gulf Coast LNG, where you understand – in essence, where you understand netbacks to be or profitable netbacks to be or prices to be for Gulf Coast LNG, i.e. what the absolute MMBtu price that you think LNG Canada has to deliver if it's going to be competitive and economic.

Okay. Very good questions. Thanks, Lucas. Silicon Ranch. So, Silicon Ranch is a solar project developer that we bought into with a minority share, but at the same time, gave us access to their IP and sort of trade secrets and capabilities that we could use also outside North America. What we see as part of our new energy strategy going forward is that solar is going to be most probably the single largest growth component in the power system of the future. So, having a capability to develop solar projects is going to be key. Now, we have looked at can we grow that capability organically and we've come to the conclusion that perhaps we could, but it would just take too long. And therefore, we have been looking around which are the sort of relatively modest to small scale solar developers out there that have a very successful track record, that have a good funnel of projects to work on and that ultimately we can integrate into Shell as an integral capability of developing solar projects around the world. We've screened quite a few companies. We've been in dialogue with quite a few companies, and eventually, we settled on Silicon Ranch because we thought it ticked most of the boxes. So, where we are at the moment, we, indeed, we have completed that transaction. That came indeed with an interesting funnel of opportunities, predominantly in North America, actually, exclusively North America. We have seen them deliver on that funnel and actually grow that funnel. So, they're ahead of their own plan and the plan on which we valued that company. But at the same time, we have been able to basically lift capability out of it through staff that we seconded into it and used it for solar…

And Ben, when do you see landed cost...

Can we have the next question please, Jennifer?

We'll go next to Jason Gammel with Jefferies.

Thanks very much. Since the Permian Basin has graduated to having its own slide in your overall deck, just wanted to ask a couple of questions on strategy there. First of all, I'd like to understand what Shell intends to do from an operator perspective, because if my understanding is correctly, your JV partner has been operating about 2X the number of rigs that you have been in the Basin, and I believe operates about 70% of the acreage. So, how much of your growth targets are based upon your ramp up in operated activity and how much is based upon your understanding of your partner's intended activity levels? And then, second to that, clearly, takeaway capacity is a potential restraining factor on production growth in the Permian Basin at least in the near term. Can you talk about what you've done to secure firm transportation capacity out of the Basin for these growing volumes and also ancillary to that, what you've done in terms of natural gas processing?

Okay. Very good questions, Jason. Indeed, the Permian has a growing prominence in our way forward. Let me have a first stab at answering the questions. I know Jessica has been looking at it in considerable detail as well for a number of reasons. So, first of all, we believe we have a very strong track record of delivering sort of competitive drilling and completion cost. It's relatively easy to benchmark it and I believe that we are ahead of industry in the Permian and you can draw your conclusions what that actually means for some of our competitors. We, at the moment, are pretty much at a 50/50 position in terms of rigs. That is not important as such. I think we will make our decisions on the basis what we believe makes sense for us in terms of growth. Of course, there is a little bit of sort of tactics and where we want to make sure that we have the ability to dedicate certain developments to certain infrastructure. But that's not necessarily driving the investment pace that we have. The investment pace predominantly is driven by our ability to generate free cash flow and the returns that such an investment would have. Takeaway capacity. Indeed, it's an issue in the industry. It's very well-advertised. Of course, we have been looking at a more integrated picture for our Upstream piece, Midstream piece, and trading ever since I know and Jessica is very familiar with that. And I'm sure she can comment on it in much more detail. So, we take a holistic view. Not so much, you know, how much can we produce on the back but also how do we get it to market and how do we make sure that the integrated value is truly optimized? Now, that means, we have taken some positions, but perhaps, Jessica, you can explain that in a bit more detail.

Good. So, just picking up on the takeaway capacity piece of your question, indeed this has been on our mind for years. I happened to be in the unconventional business in 2013-2014 and we were looking for growth in our portfolio and the growth in the industry and anticipated to some extent what we're seeing today. And back then, we secured from commitments across pipelines to ensure we had flow assurance for our growth, which we're experiencing today. So, I think that speaks a bit to our trading, the strength of our trading business and the strength of integration and working across the organization to manage these risks effectively and in doing so today. I think on the first piece, on the operative perspective, just a couple of points to add there. We, of course, look to drive value through our partners, whoever is operating. So, in all of our NOVs (01:31:38), we continue to actively engage and bring insight and support where it's needed to drive value. So, it's really kind of passive engagement. We've got a good relationship with Anadarko. We're continuing to drive value for both of the companies. And I think we're frankly getting better at that. We're continuing to see a lot of innovation within our own business, looking at developing multiple horizons with our wells versus kind of one horizon at a time. I think it's part of the next generation of improvements we'll be seeing coming out of the Permian and why people I think continue to see a lot of upside with the Permian acreage. And as I also mentioned, we're doing swaps. Again, we're continuing to kind of maximize or optimize our portfolio, which also has operator implications as well. So, I think there's a number of levers we're pulling, whether it be how we manage our Midstream exposure, how we work with Anadarko, or how we continue to kind of expand our position, even if modestly but wisely with the swaps and pushing next generation of technology and innovation with respect to our shales business.

Okay. Thanks very much, Jessica. Jennifer, can we have the last question, please?

Yes. We'll go next to Gordon Gray with HSBC.

Thanks. It's another question on cash flow, I'm afraid, but at least it's a quick one. All I wanted to ask is you've had these big headwinds in the few recent quarters from these tax settlements. Can you just confirm that apart from what you mentioned on amount, the 2Q numbers are effectively cleaner than any other tax issues, tax settlements? And I guess, more importantly, are there any others in the pipeline, which I'm sure you can't give us details on but then you're talking about what could come through and affect cash flows in the next few quarters? Thanks.

Okay. Thanks, Gordon. Very clear question. Jessica, would you like to take it?

Yeah. I think it's entirely in my realm.

Yeah. Yes.

Thank you for the question. And indeed, a lot happens in our portfolio from a tax perspective, both in earnings and in cash. From a cash perspective, what you've identified or what we mentioned in the call today is the Oman payment was the most material, there was nothing else kind of unusual happening from cash tax payments. For the quarter, they've increased as the mix of our business have changed and we're seeing more profits in Upstream and IG, and there's a natural impact on cash tax payments, which we're seeing, which I think is relatively straightforward. We also provided, you know, some guidance in terms of what to expect to further tax changes associated with the item that came through in Q2, trying to help provide a bit more transparency in that space. It is dynamic and something we talk about in terms of how to provide the right level, the appropriate level of transparency. It is a dynamic portfolio, and also, as I said with the divestment program, that can have particular impacts on both earnings and cash taxes that will continue to see, I think, to some extent for the coming quarters. It's difficult for us to provide that until those transactions actually take place. We're trying to provide more transparency as appropriate. But other than the ones that I identified already, I don't think there's anything really for us to signal at this point in time.

Okay. Understood.

Okay. Thanks very much, Gordon. Thanks very much, Jessica.

And thank you very much, all, for staying with us until the full length of the call schedule was completed. Thanks for great questions, and for me, rest to say, that the third quarter results are scheduled to be announced on the 1st of November. And Jessica will talk to you then. Thank you very much, and enjoy the summer.

This does conclude today's conference. We thank you for your participation.