6.25p
 
Interim dividend 2004
per 25p Ordinary share

Malcolm Brinded (left) Managing Director of Shell Transport and Vice-Chairman of the Committee of Managing Directors and Lord Oxburgh (right) Chairman of Shell Transport

The half-year results outlined in this review show a satisfactory performance, helped by high oil prices and refining margins. Net income of $8.7 billion was 7% higher than the same period in 2003. The cash flow from operations, at $12.6 billion, helped to fund $6.3 billion of capital investment and a 2.5% increase in interim Sterling dividends for Shell Transport shareholders which is equivalent to 17% in US Dollar terms.

While the results from our downstream businesses were encouraging, first half earnings in Exploration and Production

were 7% lower than a year ago as the impact of higher oil prices was offset by write downs, tax increases and lower production.

There was some positive progress with the start of two major projects, Kashagan in Kazakhstan and Ormen Lange in Norway, and the start of production at the Coulomb, Glider and Llano fields in the Gulf of Mexico. However, the combined performance on production, costs, and reserves replacement has been disappointing. Production this year is expected to be some 3.7 to 3.8 million barrels of oil

Stanlow Refinery in Cheshire, UK

equivalent per day (boe), down from 3.9 million boe in 2003. The production outlook in 2005 and 2006 is expected to be in the range 3.5 to 3.8 million boe. Our outlook for our reserves replacement ratio for 2004 is estimated at an unsatisfactory 60% to 80%. I do, nonetheless, remain reasonably confident that we will meet the 100% reserves replacement forecast as an average over the next five years.

To improve upstream performance we will focus on five main areas. First, we are working to ensure operational excellence in our existing assets. Second, we are taking action to adjust our portfolio to ensure the right balance of long-term investments and short-term projects, and of risks and rewards. Third, we will continue our aggressive programme of exploration and new business development. Fourth, we will improve our project management skills and project delivery. Finally, we must ensure a fully competitive cost structure.

I do not underestimate the challenges this work entails. But I am convinced that we have excellent assets, exciting new projects and the determination

to improve our performance in our Exploration and Production business.

In other businesses, performance has generally been good. Gas & Power’s earnings were similar to last year, after taking account of the effect of divestments, and helped by continuing increases in sales of LNG. The final investment decision for a sixth LNG train in Nigeria was taken on July 30. The Sakhalin project is on schedule to deliver the first LNG cargo by the end of 2007 and further gas sales to Japanese utilities have been agreed. As with all our projects, we are working to ensure that it is developed in an environmentally and socially sustainable way. A key milestone was reached in a landmark gas development, the Pearl GTL project in Qatar, with the signing of the integrated Development and Production Sharing Agreement. This project confirms Shell’s place at the leading edge of this exciting new industry.

Oil Products had a very good first half with CCS earnings of $2.7 billion, up 32% on last year. This has been driven by a much stronger performance in the USA and higher refining margins.

We have also continued to develop new opportunities for profitable downstream activities including the signing of an important joint venture with Sinopec to build 500 retail stations in China.

The performance of the Chemicals business also improved, showing stronger margins, higher sales and better plant utilisation. Earnings increased from $115 million in the first half of 2003 to $553 million this year. The Nanhai petrochemical complex that will serve the key Chinese market is on schedule and on budget and the first world-scale PTT polymer plant has been completed in Canada.

I recognise that the first half of this year has been a difficult time for the Group and that shareholder confidence has been shaken. Restoring that confidence will take time but I think we have now started that process. There is much more to do but there is a real momentum and commitment throughout the business to deliver the high quality performance shareholders want to see.

Malcolm Brinded Managing Director of Shell Transport and Vice-Chairman of the Committee of Managing Directors. August 2004.

CMD

The Committee of Managing Directors (CMD) guides the Group by providing strategic direction, support and appraisal to Group businesses.

Jeroen van der Veer Chairman of the Committee of Managing Directors.

Malcolm Brinded Vice Chairman of the Committee of Managing Directors and Chief Executive of Exploration and Production.

Rob Routs Group Managing Director and Chief Executive of Oil Products and Chemicals.

Linda Cook Recently appointed Group Managing Director and Chief Executive of Gas and Power with effect from August 1, 2004.

The Royal Dutch/Shell Group’s net income of $8.7 billion for the first half of the year was 7% higher than the same period last year. Earnings on an estimated current cost of supplies (CCS) basis were $8.1 billion, down 5% from a year ago. Earnings reflected lower hydrocarbon production and higher hydrocarbon prices; higher LNG volumes which were offset by lower marketing and trading income in Gas & Power; and higher earnings in Oil Products and in Chemicals.

Cash flow from operations was $12.6 billion. This cash, together with proceeds from divestments of $2.0 billion, continued the strong

cash generation and funded the investment program of $6.3 billion (including minority interests), dividend payments and a reduction in debt. As at the end of June the debt ratio was 17%. Cash and cash equivalents amounted to $2.4 billion.

Crude oil production decreased 4% year on year. Gas production decreased 5%. Excluding the effect of divestments and price effects on production entitlements, overall production was down 1%. Average Brent crude oil prices were $33.68 a barrel, 17% above the same period in 2003, while US Henry Hub natural gas prices averaged 7% lower. Exploration and Production segment

New CMD member

Peter Voser will become the Group’s Director of Finance from October 4, 2004. He will also be appointed a Managing Director of The “Shell” Transport and Trading Company, p.l.c. and a Group Managing Director of the Royal Dutch/Shell Group of Companies. At present he is the Chief Financial Officer and a member of the Group Executive Committee of the Asea Brown Boveri (ABB) Group of Companies, based in Switzerland. From 1982 to 2002 he worked for the

Royal Dutch/Shell Group of Companies in a variety of finance and business roles. Mr Voser was born in Baden, Switzerland and is married with three children. He graduated in business administration from the University of Applied Sciences, Zürich, Switzerland, in 1982.

The Company’s Annual General Meeting held in London on June 28 was well attended by shareholders.

Lord Oxburgh opened the meeting and outlined the changes that had been put in place to ensure the failures that led to the restatement of the Group’s proved reserves could not happen again. Malcolm Brinded then set out a review of the Group’s activities over 2003 and outlined the strategy that would improve performance and total shareholder return in relation to the Group’s competitors.

During more than three hours of debate, Lord Oxburgh and the other Directors answered a wide range of questions from shareholders. They addressed concerns about the

reserves restatement and subsequent changes in management. Shareholders also expressed their views on the Group’s structure and governance and these views will be considered as part of the ongoing review into these issues. In response to questions about particular projects, Directors were able to provide further information about the steps being taken to minimise the environmental and social impact of Shell’s activities around the world.

All the resolutions put to the meeting were taken on a poll and passed with substantial majorities. This included the adoption of the Annual Report and Accounts; the approval of the remuneration report; reappointment of the auditors and the election and re-election of a number of Directors.

earnings of $4.7 billion were 7% lower than a year ago. Higher oil prices were more than offset by lower production, exploration write downs, a charge relating to mark-to-market valuations of certain UK gas contracts and increased tax charges.

Gas and Power earnings of $0.9 billion compared to $2.0 billion

a year ago. Excluding last year’s income of $1.0 billion related to the sale of Ruhrgas, earnings were similar to a year ago. LNG volumes increased 9% year on year.

Oil Products had a good half year with CCS earnings increasing by 32% to $2.7 billion. This included much stronger performance in the USA with better

refinery utilisation and higher margins. The rebranding and upgrading of the USA retail network is on track.

Chemicals delivered substantially improved results with earnings of $0.6 billion, 381% higher than for the same period a year ago. This was driven by stronger demand and increased reliability.

The Directors have declared an interim dividend of 6.25p per Ordinary share in respect of the year 2004, payable on September 15, 2004 (6.10p in 2003). This represents a total distribution to shareholders of £604 million (£590 million in 2003).

The dividend will be paid to shareholders on the register on August 13, 2004

and to holders of bearer warrants who surrender coupon 214.

The last day for receipt of applications to join or leave the Dividend Reinvestment Plan in respect of the interim dividend is August 24, 2004. Share certificates for the shares purchased under the Plan on the payment date of September 15, 2004

will be despatched to shareholders on September 28, 2004.

The amount to be paid to holders of New York Shares will be determined by the dollar/sterling exchange rate on September 15, 2004. The interim dividend will be payable on September 21, 2004 to holders of record of New York Shares as at August 13, 2004.

The Boards of Shell Transport and Royal Dutch have established a review of the Group’s governance and structure. This review is being carried out by a board-level steering group chaired by Lord Kerr. The other members of the group are Maarten van den Bergh,

Sir Peter Job, Jonkheer Aarnout Loudon and Jeroen van der Veer. Its terms of reference are to explore the possible modification of Board and Group management structures and to review ways of improving decision making processes and enhancing the leadership of the Group as a whole.

Financial and legal advisors have now been appointed. The steering group is expected to make initial proposals in November and its work will be informed by the views of shareholders. Final proposals are expected to be put to the Annual General Meeting in 2005.

Shareholder Information The “Shell” Transport and Trading Company, p.l.c.

Disclaimer statement
This document contains forward-looking statements that are subject to risk factors associated with the oil, gas, power, chemicals and renewables businesses. It is believed that the expectations reflected in these statements are reasonable, but may be affected by a variety of variables which could cause actual results or trends to differ materially, including, but not limited to: price fluctuations, actual demand, currency fluctuations, drilling and production results, reserve estimates, loss of market, industry competition, environmental risks, physical risks, the risks of doing business in developing countries, legislative, fiscal and regulatory developments including potential litigation and regulatory effects arising from recategorisation of reserves, economic and financial market conditions in various countries and regions, political risks, project delay or advancement, approvals and cost estimates.

Cautionary Note to US Investors: The United States Securities and Exchange Commission (‘SEC’) permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions.

The “Shell” Transport and Trading Company, p.l.c.
Registered Office: Shell Centre London SE1 7NA, United Kingdom. Registered in England No. 54485
The companies in which Royal Dutch Petroleum Company and The “Shell” Transport and Trading Company, p.l.c. directly or indirectly own investments are separate and distinct entities. But in this publication the collective expressions “Shell”, “Group” and “Royal Dutch/Shell Group of Companies” are sometimes used for convenience in contexts where reference is made to the companies of the Royal Dutch/Shell Group in general. Likewise the words “we”, or “us” and “our” are used in some places to refer to companies of the Royal Dutch/Shell Group in general, and in others to those who work in those companies. Those expressions are also used where no useful purpose is served by identifying a particular company or companies.

Designed by Radiate.
The paper for this report contains 80% de-inked post-consumer waste. The remaining 20% is best white waste.
The manufacturers of the paper are accredited with the ISO 9002 Quality Assurance and ISO 14001 Environmental Management Systems.

Contact addresses