Thank you. Ladies and gentlemen, good afternoon, and welcome to Shell's First Quarter 2019 Results Call. Before we start, let me pause on the disclaimer statement. Shell delivered another strong set of results in the first quarter of 2019. Building on the successes of 2018, in Q1 2019 we generated cash flow from operations excluding working capital movements of $12.1 billion and CCS earnings of $5.3 billion. These results show the combined strength of our strategy, portfolio and operational performance. We have reshaped Shell to deliver higher returns across our upstream integrated gas and downstream businesses. Today, I will present our Q1 results and then talk about portfolio highlights before providing more insight into our earnings and cash flow, including the impact of the new IFRS 16 accounting standard. As I go through the results, please keep in mind they are presented on a post IFRS 16 basis. For Shell to deliver a world-class investment case, we need to generate leading, growing and resilient cash flows and returns and be disciplined with our cash allocation. In the first quarter, we did just that. Cash flow from operations excluding working capital movements, were $12.1 billion, once again the highest in our sector. This was at an average Brent price of $63 per barrel. Our organic free cash flow for the quarter was $3.4 billion. This includes a working capital impact of some $3.5 billion. CCS earnings excluding identified items amounted to $5.3 billion and ROACE reached 8.4%. We are continuing to demonstrate progress towards ROACE of 10% by the end of 2020, even with the headwinds associated with IFRF 16. For Q1 2019, our gearing is 26.5%, post IFRS 16, or 21.9% on an IAS17 basis, in line with the expected change. I will talk through this further later in the…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] We will now take our first question from Oswald Clint of Bernstein. Please go ahead. Your line is open.

Thank you very much Jessica. Yeah, my first question is just about cost trends. If I look at your underlying production and manufacturing costs, I think they were just $0.5 billion year-over-year. Obviously, a lot of moving parts. But looks like $0.3 billion of that in the Upstream and $0.2 billion in the Downstream. And I just wanted to check if that's right and if you could specifically talk about what's happening in the Upstream to, kind of, take out that much cost year-over-year. Is it just mix effects from divestments? Or is there some actual progress with cost reduction there? And then secondly my – my second question was just stepping back and thinking about this growing premium, I guess, for assets or for M&A, especially within the unconventional spacing inside North America. And also, aligned with your previous comments that you would like to deepen your position there, could you, perhaps, just put those two – those statements together and talk about your appetite today for continued bolt-on deals in North American and unconventionals? And I guess, perhaps, just if possible, just finish that answer with, if there were deals in the future, what sort of ballpark magnitude are we talking about? Are we talking about $5 billion or $10 billion or $50 billion type deals, please? Thank you.

Great, thank you. Oswald, for the two questions. Starting off on the cost question. A couple of things are at play right now. First one is, IFRS 16 had a positive effect on our operational expenses, some $400 million in the quarter. And in the slides we've provided, on Slide 23 you'll see a reconciliation of all of the IFRS 16 impacts, and you can have some further detail there. There's also a positive effect of FX as well. But I would also like to emphasize that our focus on operational expense efficiencies and simplification of the company is ongoing. And we have initiatives in all of our businesses that are impacting our refining business, are impacting our Upstream business. So we continue to have significant ambition to increase availability of our assets, which certainly affects unit cost but simply to run our assets that much more efficiently. So there's ongoing focus throughout the company in our assets in the corporate office to simplify and reduce costs. But there's a number of things in play for the quarter that's contributing to that reduction year-on-year. In terms of the shales business and appetite for M&A, I'll start off by just saying that we're very pleased with the performance of our shales business and the portfolio that we have today. We're generating some 370,000 barrels a day from that business. That's a 13% increase year-on-year. So we've been growing that business steadily. If you look at just the Permian position that we have, and we think we've got some of the best acreage. In the Permian currently, our production is up from 70-plus percent over the year, and we see a significant growth opportunity with our existing position in the Permian but also in Canada and in Argentina as well. And last…

Thank you, thank you.

We will now take our next question from Lydia Rainforth of Barclays. Please go ahead. Your line is open.

Thank you and good afternoon. Two questions if I could. The first one, Jessica, just around the outlook for the renewables business and I think some of the comments you made by the [indiscernible] that's out wanting to be the world's largest power company. I was just wondering if you could clarify what exactly you understand by that or what you think that statement means? And then secondly, could you just talk around the Integrated Gas business a little bit more, obviously it was a good result in business and just in the context of would have been some low prices. I guess could you give couple of examples of some of the optimization opportunities that still exist. Thank you.

Great, thank you, Lydia. So in terms of our power ambition, we are – we believe the energy system will transform and will shift to power increasingly over the coming decades. And we aspire to lead and thrive in that energy transition and are positioning ourselves for that future. We're not pursuing scale for scale's sake, much as the conversation we've been having over the last couple of years for the Upstream business that it's value over volume. We have absolutely the same philosophy and strategy with our renewables and our New Energies business, and that is the foundation for all of our activities. We have belief in terms of how we can create value and how we can competitively differentiate through an integrated offering. I spoke about a bit of that in the presentation. That's what's underpinning our belief, but we're going to prove that. And we're going to prove that we can make competitive and attractive returns before scaling-up. And if we do that, we think we have the opportunity to be certainly leading in the sector, but it's going to be driven by value considerations above all else. In terms of the IG results, the business continues to perform very strongly. I know I've hedged a bit on some of the quarters saying, this isn't necessarily the sustainable levels, and then each quarter, we keep generating I believe, very impressive cash from the business. I think the fundamentals of the business are strong, and that's what you're seeing coming through. There – if you looked at the results that we achieved in the quarter, it's essentially based on our structural position that we have with our contracts. There is some trading optimization that happens, that's part and parcel of our business. But it really is trading around the asset positions that we have versus any kind of speculative positions. It's really driven by the strength of the portfolio, the contractual natures that we have. I'll point out that we have a significant oil exposure in our contracts, most of our contracts are long term, the majority of those are oil linked, a portion of those is linked to J.K., K minus 3, so you're not seeing the full impact of the price reduction coming through. So we have that benefit in the quarter. But even with taking that into consideration, just the underlying performance of that business, the increased supply we've been able to achieve and utilization we've been able to achieve, so operational excellence has also played a part, continues to make this a pretty sustained level of high cash and, hopefully, achieving a new normal with that business. Thank you.

Thanks very much.

We will now take our next question from Thomas Adolff of Credit Suisse. Please go ahead.

Good afternoon, Jessica. Two questions for me as well, please. Firstly, these results provide confidence in meeting your 2020 target, you say in the release. Once you adjust for different macros, would you say operationally things are progressing better than expected or largely in line with your expectations, your budget? And secondly, in regards to your LNG portfolio, how do you feel about your pre-FID hopper? You've recently exited Baltic LNG, and you still don't have an agreement on the gas supply for Schiehallion Train 3. While in Indonesia, Badi is still many, many years away before you can consider FID. This really leaves you with Nigeria, which is a great project, but I'm not so sure about Lake Charles. Some of your peers have deeper options so – yet have fewer contract expiries over the medium term. Thank you.

Thank you, Thomas. Indeed we have confidence in our ability to achieve the ambitions that we've set for 2020 and really pleased with how the company has progressed over the last couple of years. And we said a couple of years ago, we're going to reshape Shell. I think a huge portion of that reshaping has occurred. And I think focusing on the strategic choices we've made, the portfolio choices we've made are really underpinning the high level of cash that you're seeing coming through, particularly in our Upstream and IG business. Repositioning our Upstream business to be more oriented towards the Gulf of Mexico and Brazil, the acquisition of BG and the bringing together of the two LNG portfolios and the LNG capability and the leadership, Steve Hill and our – running our LNG trading business, all of those things have come into play in terms of generating the levels of cash that you've seen consistently coming from the company over the last couple of years. And continued discipline on the capital side and continued discipline on the operational expense side, all of that is contributing to the results that you're seeing. I wouldn't say that these are better than expected. I'd say they're in line. And I believe there's more to come and there's certainly more to come from a projects perspective, we still have Prelude to come up on stream and Appomattox, those are significant assets for us. And we should have some $3 billion to $5 billion of an incremental CFFO coming through over the next 12 to 18 months as we bring those projects and other projects on stream. So I'd say a very good quarter but in line with expectations. In terms of the LNG hopper, overall we're pleased with our portfolio. Of course, we took the LNG Canada decision last year, so that's part of the next generation of equity supply for us. We do have a number of other projects, as you said, in the hopper. These things can feel relatively hot or cold depending on the moment in time. We did make important progress on Lake Charles in 2018. We've got NLNG, as you said. We've got Indonesia, Tanzania; further opportunities in Australia as well. So there's a number of things to keep us busy. So I'm confident in terms of our ability to continue to grow that business and grow the portfolio in line with market, as we've done in the past. Thank you.

Thank you.

We will now take our next question from Christyan Malek of JPMorgan. Please go ahead.

Hi, good afternoon, Jessica, and congratulations on another strong quarter. Two questions, if I may. First, just coming back to M&A., I mean, there's always plenty you can deploy additional capital towards, whether it would be more shale barrels or Brazil transfer of rights. But the backdrop of M&A in the U.S., I want to ask from a portfolio perspective, why M&A is even on your radar and particularly in shale when you've got a portfolio that gives us – arguably is a stream of cash flows over the medium term? Deepwater has gained the strength on strength. So why are you even having this conversation around M&A? You've done BG, shouldn't that be it in terms of consolidating going forward? And secondly, over the past 12 months, has anything changed in the IG business or the structure or the way you manage trading and optimize volumes? And it's part of a broader question, which is, what are the lessons learned from last year's performance that drove some of that volatility in quarterly cash flow?

Great, thank you, Christyan. I think it’s entirely a fair point that you're making on – with respect to M&A and in North America, and that's why I framed my response to just keep in mind the strength of the business that we have today, the strength of the portfolio that we have today and the level of cash generation that we have currently as well as what we'll be delivering over the coming years. And against that context, we don't need to do M&A, and I think that is important to keep in mind. That being said, we're always – every day of the year, someone in the company is probably taking a look at an opportunity because that's simply the business that we're in. And we need to look at how do we further refine, shape our portfolio to make sure we've got the most competitive portfolio. And against that backdrop, should an opportunity come forward that looks like it presents a better opportunity than our current suite of assets, is in line with our strategy or where we think we can somehow extract incremental value or differentiated value from the assets, then of course, we're going to take a look at it. And it's really in that context. I would also add, as I mentioned as well, the increased confidence we have in our capability in this business and believe there is more running room for us. And again, we got a – we think we can potentially create differentiated value in the space based on what we're seeing with our – particularly with our Permian operations. For IG, I – it's an interesting question, structural change. I can't point to any structural changed specifically in terms of our contract structures or the way we're running the business. It's more or less kind of the same organizational and business model, if you will, that we’ve had in place over the last couple of years. And with Steve running it, I think perhaps it's the continued optimization and perhaps the virtuous circle that we're able to achieve given the nature of our portfolio and the nature of the capabilities that we have. And our ability to consistently optimize and extract more value per ton sold, continues to be shown in our results. And – so I can't point, Christyan, to anything that's fundamentally different or necessarily what we've learned. I mean I think on the margining side, hopefully, we're providing the right level of transparency that's still flowing through our numbers. But somehow, it's become less prevalent. But in terms of how we're running the business and structuring the business, the fundamentals are the same, and I think just the strength of that business and the strengths of the portfolio that we have is essentially what's coming through. Thank you.

Thank you.

We will now take our next question from Biraj Borkhataria of RBC. Please go ahead.

Hi, thanks for taking my questions. I have got one follow-up on Thomas’ question. Regarding your 2020 free cash flow targets, it looked, as you mentioned, on the whole you're on track. Could you talk about any small areas or any particular areas which aren't currently not performing to your expectations or according to that plan? And then second question is on your Permian acreage. Does the potential takeout of Anadarko and change of control there mean anything for your plans? I know you have the JV with them. So does that mean you have to slow down any activity at all? Or any impact there? Thank you.

Great, thank you, Biraj. So in terms of our 2020 outlook – and I think throughout the presentation and in some of my responses I've already expressed confidence. And again, what gives me that confidence, hopefully, comes through in the materials we have provided today and certainly in the rolling four-quarter cash flow from operations chart excluding working capital, where you can see just the consistent growth we've been able to achieve over the last couple of years. We said we would do that, and we said we would bring more projects on stream. We said we would take costs out of the system. We said we would be more capital efficient. All of those things have happened, and they're happening consistently. So we certainly have confidence in our performance. And hopefully, the market will have confidence in our performance and it's based on that knowledge. And looking forward and seeing what else is on the horizon in terms of what can drive further cash generation, I've spoken a bit about that as well. We've got couple of big projects, Prelude and Appomattox. But also, our Downstream business, which I mentioned, which is humming along very well, you see the marketing results for the quarter, some $1 billion in earnings. That’s in line what it was in fourth quarter. And I’d highlight these are two totally different price environments, and I think that’s a good way of thinking about the strengths of our marketing business to generate those earnings in two very different price environments. So all of that, the strengths of our delivery today, gives us confidence going forward. Now, of course, there’s the macro environment, if the price changes dramatically that would obviously be, potentially, disruptive in terms of our outlook. And we have to stay focused on…

We will now take our next question from Roger Read of Wells Fargo. Please go ahead.

Hello, good morning or good afternoon, I guess I UK, sorry. I would like to follow-up, if possible, on what’s going on in the Chemicals segment? You’re at least the second company to reference some issues there on the margin front. Just, kind of, curious what your expectations are over the next several quarters at a minimum and maybe into 2020 in terms of what’s going on in supply and demand there. And then the other question I had was on the balance sheet side. I know the change is due to the IFRS regulations. But I was curious, given that the company is generating better cash flow, you’ve got your other goals set out on the share repo side and a pretty healthy cash balance, what you would want to do with debt here? And if that’s a better question for June, that’s fine by me.

Okay. Thank you, Roger, and good morning to you. In terms of the Chemicals segment, clearly the macro environment affected our results, as is true across the sector. Margins across the board were much lower than they were a year ago, and that’s a combination of supply and demand factors. So new supply coming on stream and softer demand, particularly in Asia, coming through, and that coming through in our results. I still think, relatively speaking, we did okay, but it was against a very, very difficult backdrop. Very difficult for me to predict how these things will move. These things don’t necessarily correct themselves quarter-on-quarter. But for us, the main point around our Chemicals business and why we continue to invest in the business is, we think the long-term fundamentals remain very strong with demand expected to exceed GDP for the coming decade. It’s – a huge growth is on the horizon, and we really play to the long term and not so much quarter-on-quarter. We expect these kinds of dynamics to happen, as we’re currently seeing in this quarter. That could continue for a couple of quarters, but that’s not going to shift our current view that the long-term prospects around this industry are very attractive to us. And we think we can generate attractive returns through the cycle. On the balance sheet side, we’re clear in terms of our current ambitions through 2020. We believe in having a robust and resilient balance sheet to weather volatility and, through time, create someplace flexibility for us. And we would – we have been clear that we would like to get back to a balance sheet and gearing levels that were pre-BG, and that’s at and around the 20% level or below. And we’ve been working towards the 20% and making very good progress over the last couple of years. That remains our ambition through the end of 2020. In terms of the overall financial framework, we’ll go into greater detail in terms of how we’re thinking about our balance sheet and allocation of cash in greater detail as we the look into the 2020s at our Management Day presentation in June. Thank you.

We will now take our next question from Jason Gammel of Jefferies. Please go ahead, Your line is open.

Thanks very much. I wanted to ask two on the Downstream, if I could, please, one short term and one more strategic. First of all, the Permis refinery and Moerdijk chemical facility had some industrial action. I just wondered if you could update us on the status of that and whether it’s going to have any effect on 2Q volumes? And then second, more on the strategic side. You made reference to wanting to really drive the footprint into trading hubs and integrated facilities with Chemicals in the Downstream business. Do you think you’re essentially now at that point? Or should we expect to see further divestitures in the Downstream business?

Thank you, Jason. With respect to Permis and Moerdijk, the industrial actions have been resolved and stopped. So that’s no longer an issue for those assets, and I would not anticipate any impact on 2Q volumes associated with any of those activities. So hopefully, that’s fairly straightforward. In terms of concentration around the trading hubs, indeed there – integration takes its form in different ways. Sometimes, it’s physical integration where we have our Chemicals assets and our Refining assets and perhaps our storage assets all co-located and that creating value through integration from that perspective. And then there’s integration with our trading activities as well, which also allows us to maximize value in terms of what goes into our refineries and chemical plants and what comes out and how we bring those to market. And that’s what we’re pursuing, both types of integration in terms of creating distinct value in the value chains that we participate in. In terms of our portfolio for our Downstream assets and Refining, I’d say we’re always managing our tail and always managing to ensure that our portfolio is optimized, whether it’s our Upstream or Downstream business. So I wouldn’t rule out other things happening in our Downstream business, but I wouldn’t say that we’re – I wouldn’t want to signal anything specific at this point in time. But it’s part of our normal portfolio management that we do.

We will now take our question from Jason Kenney of Santander. Please go ahead. Your line is open.

Hi, Jessica, thanks for taking the question. Just going to build on some of the earlier questions around Integrated Gas, if I can. I think you’ve had five quarters now over $2.5 billion a quarter of earnings. So I’m just wondering if this is the new norm and whether I should be looking at, say, around $10 billion in earnings for IG this year? And that’s assuming a liquefaction in an 8 million to 9 million ton per quarter or 36 million ton per annum kind of business. And then looking ahead, if I were to think of expansion the – towards 45 million tons per annum over the next couple of years, do you think earnings moves proportionally up on that basis? Or are you still expecting improved margins over the next couple of years so that you take the volume increase and you get a better margin? And then, my second question, just going on the gearing. I think you’ve mentioned that 20% line of sight on the pre-IFRS 16 basis. Should I be thinking of that as 25% on a post-IFRS basis? Is that the kind of the clarification we need?

Thank you, Jason. And maybe last question first. Yes, so 20% is equivalent to 25%, and I mentioned that in the speech as well. And it’s in some of the slide materials where we provide a bit more detail. But that’s the right way to talk about it. And again, in Management Day we’ll walk through all of the implications of IFRS 16 because it touches so many of our metrics. But for this year, it’s – we’re providing the information, both on an IAS 17 basis and IFRS 16 basis, to help people navigate between those two different worlds. In substance, we’re not changing anything. So it’s just the metrics need to change because the accounting has changed. On IG, it’s a fair challenge. And perhaps, in some ways we’ve been a bit sheepish ourselves. We’ve done some divestments over the last year. We’ve seen some unique weather events in the last year. And those elements felt less repeatable, and that’s part of some of the hedging, no pun intended, that I’ve provided in the prior quarter calls around our results and not simply just to think this is the new normal. I think it is getting little bit challenging to keep repeating that. But there is a certain amount of the – obviously, the price environment, the market dynamics have a meaningful impact on our results. We’ve continued to manage those well. But I certainly wouldn’t – we don’t give guidance in terms of full year numbers on earnings, and I wouldn’t want to do that. But I would say that we should have confidence certainly in the underlying performance of the business. I’d like to think we’re getting to the new normal. But again, we are subject to the marketplace, and I wouldn’t want to be too strong in terms of signaling this level going forward. In terms of contemplating growth and how that plays out, indeed we do want to grow this business. We want to grow in step with the growth of the business in terms of – kind of, we’re roughly around 20% of the sector today. That role that we play or that position that we have allows us to do, as I’ve mentioned, a lot of optimization and create differentiated value. We’ll look to continue and extend that going forward. But in terms of the nature of what those return profiles look like, will they be less or more? I think I would look to, kind of, how we’re currently producing and currently generating cash as a good baseline. But our ambition is never sloppiness. I indicated earlier, we have ongoing cost initiatives, simplification initiatives, digitization initiatives across the company where, frankly, we’re trying to improve the margins in all of our businesses. So in that sense there’s certainly more ambition, but that’s – that needs to be developed and brought to the bottom line before we fully bake it in.

We will now take our next question from Martijn Rats of Morgan Stanley. Please go ahead. Your line is open.

Hi, Jessica, thanks for taking my question. A couple of weeks ago, I read the Energy Transition Report that you published, and I thought it was very interesting. And there was one – particularly one thing, sort of, that I spotted. In that report, you published a cost curve, and there are two interesting things about that cost curve. If you look really just all the way towards the left, the first block that you plot there is North America light tight oil. In fact, you plot North America light tight oil in that cost curve left of OPEC. And at the same time, if you look at deep water, it’s all the way to the right in that cost curve. And in that block, there are almost no deep water projects, with breakevens lower than $80 a barrel. And actually, to an extent, sort of, this cost curve surprised me a little bit. It’s – do you – is this truly how you see it, i.e., do you truly see North America light tight oil now, on average, being more cost competitive than OPEC? And also, do you – is it really true that in your estimation, very few deep water projects, on a full cycle basis, have a breakevens less than $80 a barrel? And also, if this truly is how you see it, then you have to invest more in shale and less in deepwater, right?

Martijn, thank you for the question and thank you for reading the report. I think that came out about a year ago. So unfortunately, I don’t have that kind of kind of weld in the top of my mind in terms of which chart you’re looking at. And we can come back to you with more detail, but I’ll make a few comments on some of the points that you’ve raised. In terms of breakeven prices and the way that we’re looking at our business, we’re achieving breakeven prices in both our shales business and our deep water business of below $40 a barrel. And – so this is why we are interested in both of those businesses. We find them both attractive. They have different characteristics. We bring different capabilities to bear. We find them complementary in a lot of ways. But both of those businesses for us, we think, generate some of the most competitive barrels in the sector, and that’s what’s driving our continued investment in the deep water business, our focus on the shales business and potential future investment in the shales business, subject to the caveats that I gave earlier in the call. But Martijn, we can come back to you a bit more specifically on that chart and make sure that we’re all seeing and understanding things in the same way.

We will now take our next question from Irene Himona of SocGen. Please go ahead. Your line is open.

Hello, Jessica. I had two questions, please. Firstly, back to Integrated Gas and thinking about the time lags and the potential impact of the lower spot LNG prices we have seen so far this year. You both buy and sell material volumes in the spot market. Is it feasible you could continue to surprise positively on LNG earnings, helped by your improved optimization and perhaps despite the weaker pricing environment? And my second question is on working capital. You have said before that you actively manage working capital. Now we have seen some extreme movements in Shell’s working capital, particularly in the last couple of quarters. Assuming no major price changes, is it possible to provide some indication of what your working capital might do over the full year 2019?

Thank you, Irene. So in terms of the relationship of the LNG spot market to Integrated Gas’ result, I think that was the essence of your question, most of our business and our cash generation is related to our contracted portfolio. So we have spot activity, as you said. We buy some on the spot market and we sell on the spot market. That’s somewhere between 10%, 20% depending on the moment in time. So it’s – the vast majority of what we’re buying and selling is within contractual arrangements. Now we can optimize within that contract structure and that’s part of what our trading capability does in terms of how the molecules actually flow and then can you create value simply from optimizing within that portfolio. But indeed, stepping in and out of the spot market to buy or sell also creates further opportunity for us to create value and we certainly do that and that does contribute to the performance that you see in the quarter and in prior quarters, but it’s not the driving force behind the underlying cash generation of this business. It is an optimization lever that we’re working with. And of course, that is subject to the market conditions. And this is where it’s difficult. If there’s not a lot of volatility. If, yes, there’s not a lot of demand in the spot market, et cetera, those market conditions that we don’t have control over may make more or less opportunity be available from spot transactions. So I think there is a capacity to provide upside to our numbers, as you indicated, but that’s really difficult to fully bake in because it is subject to whatever is happening in – from a market perspective. In terms of working capital, we do actively manage it,…

We will now take our next question from Jon Rigby of UBS. Please go ahead. Your line is open.

Hi, Jessica, thanks for taking the question. Two. One is it, you – you did actually reference this, but I just wanted to go into a bit deeper, is it – what were – a decent set of numbers in 4Q had one area that I was a little disappointed in, was that your marketing business didn’t seem to get a pickup from the fall in oil prices that we saw. But conversely, the marketing business was extraordinarily robust or it seems to me, in the first quarter with the oil prices raising. If you look historically, it’s been much more volatile. And I just wondered whether there’s something going on, whether through the process of portfolio management, through the changes in the business that have been taking place or whatever, that something has been happening within that marketing business that makes it more regularized even as prices are volatile, first question. And second is that, you’re not going to like this, but in the last four or five years, obviously you’ve not increase the dividend. And I understand the reasons why. I mean one would argue probably that the payout was too high back in 2013 and 2014 and you’ve effectively been growing the business into the dividend over last three, four or five years or so, post-BG. But the problem with that is that the signaling device is very useful that comes from the Board of Directors who can see underneath the hood, so to speak, of the businesses, but they can signal positive progress, which I think you’re indicating you’re very comfortable with. They can see positive progress underlying. So I just wondered whether – notwithstanding the fact that you, obviously, want to be cautious about long-term payout commitments, whether you can see an argument starting to reflect some of that progress within the dividend over the, sort of, short to medium term.

Great. Thank you, Jon. So a good question on the marketing business and what’s driving the consistency of these earnings in very different pricing environments. There’s a few things at play. I’d say the first is we’ve really built up our capability in the organization in terms of how we manage pricing in all of our markets. So we’ve become increasingly sophisticated in how we manage pricing and pricing exposure, which I think has helped in is driving better consistency and less volatility. We’ve, of course, also diversified our product offerings. More V-Power, which is higher margin; nonfuel retail, an important piece and the product offerings that we’re offering, particularly in Europe, making an increasing contribution to our bottom line. And then, the diversity of our business around the world and the different geographies which have different dynamics that also lead to more a consistent performance in the business. So I think all of those things are in play, that are contributing to this outcome. And again, part of the reason why we’re focusing on our marketing business and our marketing capability is our confidence in the delivery we’ve been able to achieve and the consistency we’re able to achieve and we think our strategy in the business model and the levers we’re pulling will allow us to create even more value from this business going into the 2020s. We’ll talk about that more at Management Day in June as well. In terms of the dividend increase question, I get it. And what I would say is a couple of things. First of all, again, this will be an important part of the engagement that we’ll have at Management Day in June. And we recognize this is as a really important part of the story for investors to have a…

Our next question is from Lucas Herrmann of Deutsche Bank. Please go ahead. Your line is open.

Thanks very much, Jessica. One straightforward question and one more a view, maybe a little more conceptual. But straightforward, it’s just on Gulf of Mexico production this quarter relative to a year ago. Could you just give us an indication of what the absolute numbers were? And the second is, there’s been a lot of debate around shale oil on growth capital investment and the reserves and reserve replacement ratios, etcetera, in terms of years. I don’t really want to get into that debate. But I do want to think a little bit more about or get some commentary from you, Jessica, on bookings. The observation, very simply, is this, if I look back at – or if I look at your reserve bookings 2017 and look at the assets that you sold or the resources that you sold to Chrysaor, you sold from memory about 120,000 barrels day of North Sea production, and you de-consolidated just under 90 million barrels of reserves, which would imply – 120,000 a day is broadly 40 million – 45 million barrels or so a year of production. It implies that the reserve life is around two years. Chrysaor indicated they bought 350 million barrels a day of 2P reserves. Clearly the two numbers 1P, 2P it’s their interpretation, but a long way a part. The reason for the question is, it’s not the absolute number. It’s more conceptual. And to what – I think you’re a company that’s very conservative around bookings. But the point to which conservatism around bookings actually starts to play on shareholder value and to play on perception of a company, which need not necessarily be fair. And I just wondered why it is that Shell should appear to be so conservative at times around the booking of resource if that interpretation of UK. numbers and I could use other examples, is appropriate. So if you view base in essence on the booking policy if you adopt and whether actually they end up being value and shareholder destructive through giving a false impression of the resilience and the resource depth of your company.

Great. Thank you, Lucas.

Too long. Sorry Jessica.

No. That’s good. So in terms of Gulf of Mexico, the quiz question on production levels, the numbers that I had, but my team is giving me the exact numbers, the numbers I had is the Gulf of Mexico has gone from – sorry, that’s a deep water business in total. That was 400 to 883. Usually all of North America, though, not just Gulf of Mexico. So Gulf – let us come back to you on the quiz question because I’ve got various numbers here, Gulf of Mexico, some 370,000 barrels a day today. And we’ll come back to you in terms of what the growth has been over the last couple of years. I don't have that at my fingertips. In terms of reserves bookings and our philosophy, there's a couple points to make there. The first one is we're really trying to get as much focus on the cash generation of the company as possible because that is such a strong indication of the value characteristics of the assets and the portfolio that we have. And once again, shifting from low-value barrels potentially in the Middle East to barrels in Brazil and Gulf of Mexico, you can get exponentially more value from those positions. And we have made a very conscious strategic and portfolio choice over the last couple of years to reposition our portfolio in those higher-value positions of the Upstream sector. So that's the first thing. And so in that sense, the reserves and production numbers are secondary to what is the right value choice and how do you maximize the most cash and the most value from a given dollar of capital or given dollar of OpEx you need to spend. And that's really what's driven the portfolio choices. And I'm hoping that as…

We will now take our next question from Alastair Syme of Citi. Please go ahead your line is open.

Hi Jessica. Coming back to the comments you made on acquisitions a while ago. You said anything will have to sit within your financial framework. So I just wanted to confirm what you meant by that. Does it mean what you said in the past that the $30 billion CapEx ceiling includes gross acquisitions, it's not net of any disposals? Is that the right way to think about it? My follow-up. In your introductory remarks, you pointed out Shell's cash flow is the highest in the peer group, but it's also true that your ratio of CapEx – and I'm referring here to the total capital investment on the ratio of CapEx to cash flows is somewhere the lowest in the sector. One explanation could be that your dollars go a lot further than peers, but that's not really borne out on the return of capital. So how do you think that we should interpret the spending ratio?

Great. Thank you, Alastair. Indeed, I want to reiterate our commitment to the financial framework as we've laid it out and looking at achieving the cash flow levels, the gearing levels, importantly, that we've laid out by the end of 2020. And anything we would do needs to fit within our overall financial framework. Anything that we do needs to have the right value characteristics. And we would not go gently into any significant transaction without ensuring we're doing the right thing from a financial framework perspective and also from a value perspective. From a cash flow versus CapEx, I think what we’ve demonstrated over the last couple of years, if you look at our CapEx level and you look at the cash flow growth that we’ve achieved, I think there’s a very strong case that we’ve materially increased our capital efficiency and have, perhaps, the most competitive capital efficiency in the sector. And from ROACE perspective, we’ve been improving that quarter on – quarter in, quarter out. And this quarter, we’re at the top of the ROACE chart. So I think we are demonstrating a competitive – leading returns at this point as a company, and the level of cash flow that we’ve increased against our capital profile, I think, is a good proof point that we are getting more for our dollar and continue to grow our cash flow significantly with the current CapEx range that we have in place. Thank you.

Can I just come back on the first answer? So you referenced achieving cash flow levels and gearing levels. I think in response to this question in the past, you’ve referenced the CapEx ceiling. Is that not the right way to think about it any longer?

The capital ceiling has been – is important for us. The $25 billion to $30 billion range has been important for us. We have indicated this includes inorganic spend as well. This is been an important part of driving capital discipline in the company, and it is an important measure for us in terms of how we’re managing investment and it’s part of managing our financial framework.

Great thank you.

We will now take our next question from Henry Tarr of Berenberg. Please go ahead. Your line is open.

Just two quick ones. One, an update on Prelude, we’re still waiting, I guess, for the first cargo of LNG. You suggested it’s going to be in 2Q. But how is that project coming on? And then secondly, South America delivered pretty strong results in Q1. A strong turnaround against Q4. I guess you have the FPSOs ramping up in Brazil. But just from a pure, sort of, volume perspective, it wasn’t a huge increase Q-on-Q. But is that the key driver? Or is there something else also happening in Brazil to improve profitability Upstream? Thanks.

Great. Thank you, Henry. Prelude, we are actively starting up the assets. Our priority is to ensure a safe and robust startup process. It’s been really important for us to not put pressure on the team because safety is paramount. And of course, this is a large, sophisticated asset that we hope will generate significant cash for the coming decades. And so a day or a week or even a month here or there at this moment in time is not really what we’re focusing on but ensuring that each step of the process, we bring the right expertise and professionalism to play to ensure that we start that asset up. And we’re hoping to have our first LNG cargo in the second quarter. We’re really in the middle of the startup. I think there’s – they’re normal challenges of any startup of an asset of this size and, again, what we’re trying to do is just really manage it at the right pace and not create any pressure from a time perspective because I think startup is imminent and, again, it’s more about doing it appropriately rather than quickly. For South America, the main driver is continued ramp up of assets in Brazil. So there’s nothing other – mysterious going on or other structural change in the business to point to. It’s simply the performance of our South America business primarily driven by our Brazil deep water operations. Thank you.

We will now take our next Jason Gabelman of Cowen. Please go ahead. Your line is open.

Thanks for taking the question. I wanted to ask the capital framework question relative to M&A in a bit of a different way. I appreciate you have that $30 billion ceiling. But within that, kind of, $25 billion to $30 billion framework, does that contemplate an acquisition funded by cash? Would it be cash and debt being taken in? Or would it also potentially include some sort of equity that would be issued for M& A? I mean asked another way, does that $30 billion CapEx ceiling account for the entire enterprise value of a potential acquisition? Thanks.

Jason, thanks for the question. And I appreciate the heightened level of interest of potential acquisitions in the shale space given all the activity. At this point in time, I really don’t want to signal anything with respect to appetites nor potential structures. Anything would be speculative and not necessarily helpful. If anything arises at the right moment in time, we will let you know. I think that the important thing is to signal that we – as I said, we’re committed to our financial framework, we’ve got the right portfolio today, we don’t need to do M&A. If we do it, it will be value accretive and it will be within the context of our financial framework. Thank you.

All right. Let me then shift to the Downstream segment. Topic that haven’t been touched upon is, the Russian pipeline contamination. I’m just wondering if you see increased feedstock costs into your Germany plants. And any outlook on when the issue there is expected to be resolved?

Sorry, I was just trying to make sure I understood the question, Jason. And on Russian matters, I’m – as an American, I’m recused from engaging some contemplating reserves. A simple question – a response I can give. And I – in general, it’s probably best for me not to provide any responses in relation to Russia. So I’ll have the IR team get back to you.

Okay, thanks.

We will now take our next question from Michele Della Vigna of Goldman Sachs. Please go ahead. Your line is open.

Hi, Jessica. It’s Michele, and congratulations on a strong quarter. A quick question from me. In Nigeria, we’re now over two months after the presidential elections, I was wondering if you see things moving there and if we could expect an FID on Bonga Southwest or NLNG this year?

Thank you, Michele. I’d say overall in Nigeria, our business is progressing well. There’s always a certain amount of challenge with any of our business and our business in Nigeria in particular. But we’ve worked through a number of those. There’s important extensions for licenses that happened at the end of last year, and we’re continuing to put – we’ve put a number of funding structures in place in the last year to stabilize the relationship with the government and the way funding was happening for the assets. So overall, the trend has been in the right direction with the business. And as you say, things do settle down post the election, which is helpful. The projects you referenced are being actively managed and are important parts of our funnel both NLNG and in Bonga Southwest. But at this moment in time, I would not want to signal in terms of expected FID timing. So they’re important parts of our portfolio. They’re being worked. But I can’t provide any indication of when a potential FID may occur.

Thank you.

We will now take our last question from Christopher Kuplent of Bank of America. Please go ahead. Your line is open.

Thank you very much. Jessica, I’ll try and be quick. Just on Q1. And I think you tried to give us a little bit of an indication earlier. But just wanted to see whether you can go into more detail on the rationale behind increasing that share buyback tranche to 2.75. Is it a reaction to the fact that the 2.5 maximum in the last tranche wasn’t fully utilized? Or is it, as you seem to indicate, simply a signaling of increased confidence in your overall financial framework? That would be question number one. And question number two is, firstly, just quickly looking for confirmation. We’ve got the detail in Q1 of additional derivatives margining at cash outflows. You mentioned the amount of tax payments. Is there anything that is, you would call, a nonrecurring positive that has actually lowered cash tax payments elsewhere? Any additional items that we should consider here as nonrecurring in the cash flow statement would be great. Thank you.

Great. Thank you, Chris, for that. On your last question, no. So – because I put that list together myself, and I had more upside rather than downside. Again, I’m not trying to signal things here, but you’ve touched on the things that would be potentially a positive implication. But from a – upside rather, in terms of positive one-off that’s material, nothing comes to mind to signal to you. In terms of the share buyback, I’d say both. So it’s, one, trying to make sure we maintain the right level of buybacks and to get to that full $25 billion by the end of 2020. But of course, we only do that when we have confidence in our underlying cash flow. So it’s a reflection also of the strengths of our delivery in Q1 and our confidence of delivery going forward.

Great, thanks.

Unfortunately, that is all the time we have for today’s questions, and I will now hand back the call to Jessica Uhl.

Great. Thank you, everyone, for your questions and for joining the call today. A few reminders. Our Annual General Meeting is on the 21st of May 2019. I look forward to talking to you along with Ben and the rest of the Executive Committee further at our Management Day in 2019 on the 4th of June in London and on the 5th of June in New York. The second quarter results is scheduled to be announced on the 1st August 2019, and Ben and I will talk to you all then. Thanks very much, and have a good day.

Ladies and gentlemen, this concludes the call. Thank you for your participation. You may now disconnect.