Welcome everyone to Shell's 2025 capital markets day. I'm Muhammad Hamid, executive vice president for investor relations and strategic planning. It's wonderful to see so many familiar faces in the audience and some new ones as well. And a warm welcome to those of you who are joining the live stream online. I'll start by outlining the run of the day. First, our CEO Wael Sawan and our CFO Chenade Gorman will kick off with an overview of the Shell investment case followed by a Q&A. After that, we'll have a short break and when we come back, Wael and Chenade will take a deeper look at our businesses followed by another Q&A session. And then for those of you who are here with us in New York, we will be joined by some key business leaders who we have in the audience with us today. But before we get started on some of the content, please note the cautionary statement behind me on screen. And I know many of you are familiar with this. It's also available in full online. And before Wael and Chenade begin, we'd like to take a moment to play a short video that nicely summarizes our journey to date. For those of you who are more familiar with the Shell story, you'll notice a phrase, and some would call it a promise from the past that will be key to our journey going forward. And with that, let's play the video. Thank you.
There's a global company that's connected energy to people for over a century, delivering on a lasting promise. You can be sure of Shell innovation. It's been in our DNA from day one. Through pioneering technology, we've made energizing the world our business. Commissioning the first oil tanker passing through the Suez Canal, fueling the first ever transatlantic flight, delivering the first shipment of liquefied natural gas by sea, and helping to guide the first astronauts to the moon, providing new forms of reliable energy to a growing customer base with pride, passion, and commitment. And through challenging times, Shell has always been there for its customers, keeping them moving, keeping them warm, keeping them bright. But that's only part of our story. Today, we are a world-leading integrated energy company serving 33 million retail customers, over 1 million businesses in more than 70 countries. We're constantly evolving and innovating, delivering on our strategy and commitments, guided by our principles of performance, discipline, and simplification. Strengthening our portfolio and capabilities to realize our potential for our people, customers, partners, and shareholders. So, as the world changes and your needs evolve, we'll deliver more value with less emissions and keep our promise just as we have done for over a century. You can be sure of Shell.
Thank you very much, Muhammad, and welcome everyone to our 2025 capital markets day. It's great to see so many of you here in the room in New York Stock Exchange and also a warm welcome to all of you joining us today online. As Muhammad alluded to, the video uses a phrase that many will have heard before. You can be sure of Shell. That phrase has been used in different ways over the years, but it nicely encompasses what we've been trying to do to restore and to bring life across this organization. So what do we mean by that? Well, it comes down to confidence. Confidence that we will create even more value for our shareholders while reducing emissions. Confidence that through performance, discipline, and simplification, we will deliver what we say and confidence that we are strongly positioning Shell for the future. Resilient irrespective of how the energy system evolves. Now, let's go back to Capital Markets Day 2023 or CMD23. We knew we had an organization of great people and some world-class businesses, but we also knew there were questions on our consistency, our focus, and our ability to unlock Shell's potential. And we agreed with that. So, we moved with urgency and conviction. We decided to course correct, challenge internal dogmas while undertaking a cultural reset. And that correction spanned multiple areas. We sought to drive improved performance, embed cost and capital discipline and make fundamental decisions across our portfolio. We sought to transform the company. And whilst there is much more to do, we are proud of where we are today. Having taken the difficult steps when we needed to, the from and the to are clear, we reduced the number of targets significantly, ensuring that the ones that we did set were purposeful and would instill focus across the organization. We also introduced the principles of performance, discipline, and simplification. And as we proceed to the next phase of our journey, they will remain our guiding principles. These are major changes which require significant efforts especially by our staff. I could not be more proud of how they are rising to these challenges and how they are enabling our transformation helping us deliver the successes that we have enjoyed so far. I'm also pleased to see our collective efforts reflected in our shares outperforming peers and at the same time helping to drive our lowest net debt in nearly a decade, which positions us well for all scenarios. This gives us the momentum to keep improving and to deliver even more for our staff and our shareholders as we continue on our journey to deliver more value with less emissions.
At CMD23, another area we touched on was our desire to build a track record and earn back the trust of our shareholders. Our mantra of delivering on what we say we will do has permeated throughout the organization by simplifying our processes and standards to help debureaucratize the organization together with setting up more frequent performance cadence and much tighter management of capital. We are seeing real improvement which is visible across all of our key targets. In fact, if you look to the left on the slide, you will see that we are over delivering. This is particularly impressive in the areas of structural cost reductions. We had a target of two to three billion by end of 2025 and as we stand here in March, we have already exceeded this. On shareholder distributions, we said we would distribute 30 to 40% of our CFO through the cycle and we've delivered above that. And it's not just the more value side that we've made progress on. On the emissions side, earlier this year, we reached our target of eliminating routine flaring. We also achieved a reduction in the net carbon intensity of the products that we sell, moving us closer to our target of a 15 to 20% reduction by 2030. In 2024, we introduced an ambition to reduce customer emissions from the use of our oil products by 15 to 20% by 2030. And I can confirm that we are progressing well on that too. Hopefully, what you can all see is that when we say we will do something, we deliver. And I hope that as a result, when you walk away today, you have the same high conviction that we do, that we will deliver on what we have said. And we've learned a lot over the last two years, and these lessons will serve us extremely well over the next period of our transformation.
We are clearer on where we want to go as a company, where we should play, and where we need to step back, and how to help our people and businesses unlock their full potential. As we think through how to measure that potential, our north star remains free cash flow per share growth. And alongside this, as we outlined in the second part of the presentation, we aim to enhance our capital, aiming for ROACE greater than 10% across our segments in a normalized $70 per barrel oil price environment. We're extending our free cash flow per share growth target of greater than 10% per annum out to 2030 and believe that this continues to be a good proxy for intrinsic value creation. Alongside these long-term and more fundamental principles, today we're also outlining the next phase of our transformation with 2028 representing a key milestone year for Shell. We're raising our structural cost savings target to a cumulative 5 to 7 billion by the end of 2028 compared with 2022. We're further right sizing our cash capex to 20 to $22 billion per year from 22 to $25 billion and we will continue to reward investors with higher distributions moving our payout percentage from 30 to 40% to 40 to 50% of CFO through the cycle. So in summary, we're going further on all of our financial targets, building on the strong foundations that we have built during sprint one.
Let me step back now for a moment. Shell has connected energy and people for a hundred years now. It's what we do and what we will continue to do. And while we can't always predict the future of energy, our scenarios help set the bookends of possible outcomes and inform our portfolio choices. Whether it's our archipelago scenario which reflects a world view which is very much focused on owning resources or tighter border and trade security not too dissimilar to what we are seeing today or our recently published surge scenario which incorporates increased demand from AI into the energy system. One message is consistent. Demand for energy will continue to grow. Across all of these scenarios, we see gas and in particular LNG being a winner and that's aligned with our portfolio today and our longer-term vision which I will come to in the next slide. We expect that supplying LNG will be the biggest contribution we will make to the energy transition over the next decade. and we are positioning our portfolio to match this. At the same time, continued investment in oil will be needed to offset the natural decline rates of oil fields. Aligned with our vision to sustain a material liquids production base, we are ready to take advantage of the growth opportunities ahead. And as the demand for secure and affordable energy rises, it will need to be consumed with lower emissions. Lower carbon molecules and renewable power will play an important role supporting the decarbonization of the different sectors. EV share will grow in light transport. Biofuel demand will grow in heavy transport and in aviation together with the increased use of natural gas as marine fuel. All these are foundations for maturing a set of high quality low-carbon business options which we will talk about later. Ultimately, different outcomes and different rates of change across energy vectors are possible, but we believe that Shell's strength comes from a portfolio and balance sheet that aligns with the uncertainty of a transitioning multi-energy system. Now before delving deeper into our plans through to 2030 and the beliefs that underpin them, I want to lay out our longer term vision to ensure that our investors are clear what they are getting into when they buy the Shell investment case. The vision we have is underpinned by the positions that we have created today. From the strength of our balance sheet that you'll hear more about from Chenade in a moment to our strong free cash flow delivery that we will grow further to the momentum that we have in sustaining the successful sprint performance improvement journey that you have seen. I am confident in our future path. That path is about three great franchise businesses that drive our conviction in growing free cash flow. And all three are core to our portfolio. Through our intent to fully fund growth across all of these, our investors can be sure of reaping the rewards of resilient and highly attractive shareholder distributions through not just cycles but decades.
First in integrated gas or IG. We are already the number one global listed LNG supplier and we intend to remain a leading integrated gas and LNG player through to the 2040s. We believe LNG will be one of the most durable energy vectors through the energy transition with very attractive growth prospects. We will aim to decarbonize our gas value chains and over time strive to develop and commercialize lower carbon intensity gases. Second, we are today the number one global lubricant supplier and a world-leading mobility platform, but we aim to be the most customer-focused energy marketer and trader through to the 2040s. Our trading capabilities are one of our most important competitive advantages and they add immense value to our portfolio especially through the mobility short. We expect this value uplift which is already material in products and integrated gas to expand over time and help unlock new growth opportunities through deeper integration with our power mobility and low-carbon options. And third, we will sustain material liquids production as we expect demand to fall less than natural field declines. We will focus on basins where we have a competitive advantage and will prioritize cost and carbon competitive molecules which add and high-grade our leading deep water and conventional oil portfolio. I hope you'll agree that we are shaping a winning portfolio for the future, one that offers our investors a differentiated investment case with underlying resilience and attractive distributions. Our portfolio today is more streamlined than it has been for years, but we still have work to do to truly enable us to realize our full potential. Let me introduce a frame which we will use throughout the rest of the presentation to outline our plans across our portfolio. On the one hand, we have world-leading businesses offering focused growth across integrated gas mobility and lubricants. And we also benefit from adjusted earnings and cash flow stability and resilience within our upstream and products businesses. Combined, these represent around 80% of group capital employed and generated an attractive 15% return on capital employed last year. We will continue to allocate capital towards these businesses and are confident that they will provide cash flow duration well into the next decade which is far beyond current market expectations. On the other hand, we have businesses where we are focusing our attention to unlock value and realize upside. Those are chemicals, power, and our low-carbon options, including low-carbon fuels, hydrogen, and CCS. Combined, these constitute the other 20% of the group's capital employed. But in aggregate, they are not delivering adequate returns. Our plan is to further high-grade returns in this portfolio and implement the business models and structures that will unlock the most value. Our overall investment case consists of three distinct characteristics. We offer upside price exposure through our IG and upstream businesses. We offer downside price protection from our resilient downstream businesses. And thirdly, best-in-class volatility capture through our world-leading trading capabilities. Let me now expand on these three to explain why we believe we have a portfolio that offers both focused growth and duration. Firstly, in LNG, we aim to grow volumes within our overall LNG portfolio at a four to 5% compound annual growth rate to 2030, which as you will see later is largely Brent exposed. and across our combined IG and upstream businesses. We also aim to grow topline production by 1% CAGR to 2030 supported by 1.4 million barrels per day of liquids with a clear value over volume lens. We don't believe these growth elements and the resulting cash flow longevity which extend well into the next decade are fully appreciated today but we are confident in their delivery. The second key characteristic of our portfolio is the downside protection as well as the longevity offered by our downstream businesses including chemicals and products and marketing and eventually our low-carbon options. While cash flows from our core IG and upstream businesses bring a certain degree of commodity linked volatility, these downstream businesses offer very stable adjusted earnings and CFO even with external volatility. Lastly, given the commodity and margin volatility that we expect will continue to be a feature of energy markets, we are better positioned than most to capture further value through our unparalleled trading and supply capabilities. The uplift that this provides will continue to bolster and enhance our cash flow delivery from which our shareholders will also benefit.
We don't often speak about our trading and supply capabilities, but our scale and our global footprint are unparalleled across the industry. We've been developing these capabilities and positions for decades, which makes them hard to replicate as the map of our global assets highlights. As a result, trading has shown consistency in performance, resulting in tangible value creation, delivering an average uplift of around 2% of our return on average capital employed over the past decade. Indeed, across this time, we have not lost money across our commodity classes in any quarter. This is an underappreciated and undervalued aspect of Shell that is fundamental to the integrated nature of the company. And looking ahead, we expect our trading and supply capabilities to continue to contribute 2 to 4% return on capital employed uplift. This uplift is possible because our scale in energy markets is just unmatched. We have the largest LNG capacity amongst our peers and one of the world's largest LNG shipping fleets representing 10% of the global market. Beyond LNG, we trade more than 8 million barrels of crude daily. And in 2024, we physically traded more than 10 billion liters of low-carbon fuels with hundreds of supply points worldwide. This portfolio represents one of the largest energy trading capabilities globally. Now, let me hand over to Chenade to detail how we plan to unlock even more value for our shareholders. Chenade.
Thank you. Let me first start with where we have come from. The first slide that Wael spoke to is one that makes me smile and makes me proud of everything the organization has delivered. We have sought to ensure that every capital allocation decision we take is in service of creating long-term value for our shareholders. At Capital Markets Day 2023, we stood here and outlined a revamped approach to how we allocate capital with a conscious focus on increasing per share value. We went from the myriad of targets that Wael mentioned to an emphasis on free cash flow per share. Our conviction then and our conviction now is that our shares remain undervalued, which the middle chart demonstrates very nicely. This presents the management team with an opportunity to undertake buybacks at an attractive price relative to our underlying cash flows and with the full knowledge that there's much more we have to deliver. And we've been building momentum. We went from a 20 to 30% payout to 30 to 40% and that has translated into tangible results. Over the last three years, we have bought back more than 20% of our shares and also increased our DPS by 25%. Combined, this has helped us deliver peer-leading total shareholder returns. And today, with confidence in our path forward, we are further increasing our payout to 40 to 50% of CFO through the cycle. We continue to see significant free cash flow opportunities across our portfolio and material upside in our shares, which is why we continue to preferentially allocate capital to share buybacks. By 2030, with our share price at these levels, we see the potential to repurchase up to a further 40% of our shares. For a company that has had a flat share count over the last 20 years of the century, our delivery since 2022 and our plans through to 2030 represent one of the most significant shifts in capital allocation in our history.
Staying with the theme of capital allocation, let me outline our plans for cash capex. We remain committed to making every dollar count, being unemotional with our spend, and delivering performance, not just promises. So despite inflationary pressures, we are today lowering our cash capex range from 22 to $25 billion per year to 20 to $22 billion, 2025 to 2028. This is about raising the bar for investment. It's about being strict and allocating more to the highest returning projects we have. And it's about a disciplined approach to creating low-carbon options for the future. We expect to spend around 12 to 14 billion a year in integrated gas and upstream, both of which will continue to contribute significantly to cash flows and allow us to sustain our material liquid production and grow our LNG sales. In downstream and renewables and energy solutions, we aim to spend around $8 billion a year. In renewables and energy solutions, we will take a measured approach, building positions to deliver cash flows in areas where we can leverage our strength, such as our trading capabilities. And as we've previously indicated, our cash capex guidance includes a small amount of capital for bolt-on inorganic activities, and that will continue to be the case. We exclude other inorganic activity from our range, but would expect those, if they arise, to be directed towards integrated gas and upstream. In line with our strategy, given the discipline that we have shown and will continue to exercise, we are driving improvement in return on average capital employed across all our businesses. By 2030, this will mean a shift in capital employed towards the higher returning businesses that Wael described earlier. With that, let me move on to structural cost reductions in 2023 and 2024. The delivery across the organization has been excellent, helping us to reach our reduction target of $2 to 3 billion for structural costs one year ahead of plan. The majority of these savings in 2024 came from non-portfolio activities. For example, we now have a leaner corporate center which helped us save some $700 million including a reduction in the number of contractors by around 30% since 2023. And outside of the corporate center, at the front line, our staff are starting to spend every dollar as if it were their own. As an example, travel costs have come down some 40% compared with where we were 5 years ago. For a while now, it's an important barometer of cultural change. We are transforming Shell. Our people have stepped up and are at the forefront of this transformation. As our ways of working change and our ability to challenge paradigms increases, we continue to identify ways to go even further. We're moving at pace to realize these opportunities, which is why today we are upgrading our structural cost reduction target to a cumulative 5 to 7 billion by the end of 2028 from 2022. This is about putting our principles of performance, discipline, and simplification to work, streamlining processes, and being purposeful in everything we do. The majority of the savings will come from non-portfolio activities. We see opportunities to further optimize our procurement and supply chains. We're excited by the latest technology and AI opportunities, which will help us become even more efficient. And we will continue to identify opportunities to simplify further in the corporate center. All of these will ensure we remain agile and competitive, and we will not stop looking for further cost savings beyond this target.
One of our key priorities when embarking upon our first sprint was repositioning the portfolio, and we've certainly been busy. There's a lot on this slide, but we wanted to highlight the key strategic decisions that we have taken since we were last here. On Singapore, we moved from strategic review to divestment at pace with the transaction expected to complete next week. We announced, signed and recently completed the divestment of SPDC, which has been an overhang on our stock for some time. We showed cultural change in action by pausing and responding to a changing context, making a difficult decision with a project in flight, which is something we have not done enough of in our history. And finally, we showed a willingness to challenge long-held positions such as our presence in the North Sea, whilst exercising both agility and creativity in announcing a new JV, which will leave the combined entity better off than the status quo. We use the phrase pragmatic in our approach, dynamic in our response at CMD23. And we hope as we stand here today at CMD25 that you can certainly see this in action and you should expect much more to come.
So moving from the positioning of the portfolio to the positioning of our balance sheet, we stand here from a position of strength which we have worked really hard to create over a number of years. In fact, we have one of the strongest balance sheets amongst our peers and the strongest we have had in nearly a decade. Excluding leases, our net debt at the end of 2024 was around 10 billion with gearing at 5%. Despite the progress we have made, we remain committed to maintaining a strong investment grade rating through the cycle, reinforcing the financial strength that underpins our long-term strategy. So as Wael mentioned earlier, we have delivered on our free cash flow growth targets and we remain confident that with our portfolio and performance focus, free cash flow will continue to grow through 2030. We will further outline how we will achieve this when we delve into the respective businesses in the next section. Our dividend remains a financial priority and our confidence in sustaining a progressive approach is well supported with our dividend break even at around $40 per barrel. Additionally, given that we view share buybacks as an attractive use of our cash, we will continue to allocate capital towards buybacks even at $50 per barrel world utilizing our balance sheet strength if necessary. We have been clear that free cash flow per share is the key financial target for the company. At CMD23, we introduced a target of free cash flow per share growth of greater than 10% per annum to 2035. And today, we're extending this target to 2030 as we drive intrinsic value creation. This is relative to 2024 based on organic free cash flow before working capital and derivatives and at a $70 per barrel Brent price in real terms. We have exercised discipline and focus to enable us to reach this position. And although we are pleased with where we are, we're not done yet. So, let me tie this all together and outline the rest of our financial framework. A progressive dividend growing 4% annually. Cash capex spend of 20 to $22 billion allocated towards higher returning businesses. payout percentage increased to 40 to 50% of CFO preferentially allocating towards buybacks all whilst maintaining a strong investment grade rating. As I said in 2023, we take our responsibility as custodians of our shareholders capital extremely seriously. We believe in pragmatism and balance allocating capital based on value. We remain confident in our path forward and free cash flow generation. So in summary, a strong balance sheet and a strong portfolio means a stronger Shell and that is good for investors. With that, I'll hand back to Wael.
Thank you, Chenade. At CMD23, we set out four financial targets and we clarified our four carbon targets during the energy transition strategy in 2024. We've met the financial targets and we are on solid footing to achieve our carbon targets and ambition. So today we leave our carbon targets unchanged while stretching the financial ones further. We're extending our target for free cash flow per share growth of more than 10% per year through to 2030. We're increasing our structural cost reductions to 5 to 7 billion dollars by the end of 2028. lowering our capital spend to 20 to 22 billion dollars a year from 2025 to 2028 and increasing our shareholder distributions to 40 to 50% of CFO through the cycle. We've come to the end of the first part of our presentation. Now before we go to Q&A, let me summarize our position. We're creating a portfolio that is built to win, that delivers more value with less emissions, that allocates capital and carbon with discipline and a value focus, that accelerates delivery through performance, discipline, and simplification. And that rewards shareholders with consistent, competitive, and resilient returns. We'll do this profitably for our shareholders. delivering both high returns on capital and high returns of capital. Thank you for your confidence and for your support. Muhammad, back to you.
All right. Thanks. Well, before we start, we'd really appreciate it if you could stick to sort of one to two questions each to allow for as much time as possible. Um, and please do state your name and firm. hands are already going up which is great but uh yeah with that let's start I'll try and I'll try and cover the room and there are some online as well why don't we start here at the front um we've got a few let's go with Paul first.
Hi, thanks for the presentation. It's Paul Qatara, RBC. The slide that kind of stuck out to me was that slide 10 where you addressing head-on 20% of your capital employed is basically not generating adequate returns or negative returns in this case and I'm assuming there are different answers to rectify that issue across the segments that you've outlined, but could you just walk us through in a bit more detail, how you expect the path to go from minus 2% ROACE in those segments to a more adequate return. And then the second question is just on kind of market perception. So you've been on this journey since CMD23. The sprint one I could you could argue is quite successful. shares have outperformed the peers but largely due to the earnings performance rather than the multiple. So as you're thinking about the journey going forwards, is it now the time to start thinking about doing something more radical in terms of value unlock or is that more of a discussion for a few years down the line as you develop this track record? Thank you.
Thank you for that, Paul. I think your first question and correct me if I'm wrong Chenade, we will cover in a lot of detail when we go into the second phase. So we will go Paul plan by plan on chemicals, power, and then some of the low-carbon options like LCF, hydrogen, and CCS. So if you don't mind let me park that and we'll come back to it and if you feel that we haven't fully addressed it we can come back in the second set of questions. On your second question around what we feel where we are at the moment. I think firstly we came here almost 18 months ago, 19 months ago to be able to tell the story and to be able to re-earn confidence and I do think we stand here today in a much better place having indeed built up a consistent track record of delivery, having out delivered on the promises we made, and having the momentum to be able to accelerate our strategy as the next version of the story. As you touched on, whether it is measured on TSR improvement which is some 30% or whether it's on share performance, we have outperformed our peers but we haven't fundamentally rerated. Right, at the end of the day what we are focused on is very much what are the sequence of actions we need to take to be able to achieve the outcomes. We've taken the first set of actions today. You'll hear a bit more about what we're doing for that 20% including chemicals, etc. You've seen us continue to revise upwards from 20 to 30% all the way up to 40 to 50% our distributions. We are confident as a result of that we will continue to move in the right direction. And what you will see is that we will continue to focus on unlocking value for our shareholders through that sequencing of decisions that we are taking. And so while all that's happening, the one big arbitrage opportunity that we are able to play for the benefit of lifecycle returns for our shareholders is buybacks. And hopefully what you've heard today with a 40 to 50% CFO, the preferential allocation will continue to be to go after those buybacks as Chenade said with an ambition to be able to continue to grow that towards the potentially 40% of shares being purchased over the next five to six years.
Okay. Should we take a question there, Kelly at front, Lydia, please?
Thank you. It's Lydia Rainfor, please. Two questions I could. Shore of Shell, it's probably 20 years since I've heard that phrase actually used. So, can you just talk about the confidence level that you have to actually go back and use that and how much support there is internally actually for that? And then secondly, just coming back to the cash flow side of it, I think it was slide 11 where you have that really interesting chart of the longevity from integrated gas and marketing actually growing into next decade and sustaining and ultimately that looks like it covers where your capex level is today. But is that part of what gives you confidence around that 40 to 50% number being able to sustain that longer term and potentially more?
Sure. No, indeed. And thank you Lydia. The only thing I will say is it's really nice to be able to say with confidence you can be sure in Shell. It has a resituation across the organization. In terms of the cash flow, you're right. So on that chart, what we're trying to show you is the different parts of our business. So of course we have upside potential without a doubt in terms of price and you see that through our upside, sorry, upstream and integrated gas businesses. But what you see and why we put marketing and IG together was exactly that growth potential. So the IG, our integrated gas business through our belief in terms of LNG sales. You see that 4 to 5% coming through, but also marketing and what you'll hear a little bit more about later is really about how we intend to generate even more cash flows from those businesses. So you hear us talk about premium etc and where we expect to go there. But those combined actually add sort of that growth story for the company. There's much more to the growth story and we can take that through and unlock it a little bit more as we proceed. But there is that confidence. Beyond that, of course, is the growth that we see in terms of upstream as well. So when you put upstream and integrated gas together you end up with a 1% production growth CAGR through to 2030 and that's really well backstopped by projects which we'll delve into the specific projects and where we see the break evens of those coming up. Thanks, Chenade.
On the you can be sure, I think if I step back for a moment, Lydia, what are the winning characteristics of a company in our sector? Firstly, consistency of delivery and distributions. Secondly, resilience through the cycle to the energy transition. And thirdly, disciplined capital allocation and holding making the right calls even when the macro is challenged. So that you can be sure of Shell for us from an investor lens is making sure that we're playing across these. But you're exactly right to broaden you can be sure of Shell. It starts with the confidence that our customers have to buy our products. It starts with our staff, our people whom hopefully many are watching today. There's a spring in their step and I have to acknowledge it's been hard because we are changing a very big company. And I still remember walking off the stage after CMD23 and no one asking me about the content, but saying to me, 'The monster is going to consume you guys. You won't be able to deliver what you're saying.' This is a testament to them and what they've been able to do over the
Years. And once we have that spring in the step, that's why we can start to move forward. And so that you can be sure of Shell for me is yes confidence but importantly with humility because the world is uncertain and what we need to be able to do is to focus on what's in front of us, what we can control, and to build that confidence through the good and the bad times and to be able to have a team that's hungry to win and to be able to hold on to that mantra for well into the future.
Should we take the table?
Uh thank you. Uh Paul Chen, Scotia Bank. Uh we just curious that I mean compared to your peers uh they are targeting to grow the liquid production. Uh you guys is looking to stay flat for the next several years. Um is it a function of your view on the global oil market or that is more uh opportunity or organizational capability limit that to make you make that decision and what kind of reserve replacement uh target that you have. Uh the second question if we look at full out I think one big thing for you and Chennai is that simplification and make it more efficient organization. Can you give us some example? We talking about cutting off some of the layer I mean with your recent announcement in the management change you actually have two head uh for integrate gas and upstream instead of one head before. So we just trying to understand that I mean how that reconcile in terms of simplification and make it more efficient. Thank you.
Thank you very much. Let me take the second question if you want to address then the liquids one. Um the blessing and the curse of being a 115 year old company with an incredible portfolio is that over time um you allow bureaucracy and complexity to creep into the organization. Um and a big part of the sprint was to just call it out and start to be able to declutter that. Um the couple of points you touched on there. I mean one around how we are structured I think organizationally. Um Zoe and Hybrid have made a huge contribution to getting us to where we are today. What we have announced recently is that colleagues who were reporting into them have essentially moved up. So we have delayered the organization because in this step of the journey what we want is much shorter lines of communication. We're doing the same by the way with our capital allocation where one of the biggest things you should take away from today's presentation is a performance going further and two an appetite by this management team to go after capital reallocation in favor of unlocking healthier returns out of every dollar we are employing. And so we are moving the role of capital allocation squarely to Shenada and myself with the support of the incoming executive committee to really get much tighter on a much more frequent cadence around this. Those are some of the bigger examples of simplification. Chenet touched on things like travel and the like how we've been able to just do work in different ways but there are multiple examples. I do these recognition calls on a regular basis and one that sort of came through recently from legal for example we do thousands of non-disclosure agreements all requiring a lawyer to prepare through one of our business operations in Krakow and Poland we have now developed essentially a risk-based NDA where some 85 to 90% of our NDAs you can press a button and have them without talking to a lawyer and 10 to 15% require or get escalated to a lawyer because of the context. There are 20 of those examples and we can talk about them in the break. The point being every single one of these is now starting to come bottom up and that to me is the sign of culture change. Thank you. Apologies. You're gonna have to wait until I do the oil one. Paul, your first one is really around our views on the global oil markets etc. and why our liquids production um you commented on is flat. So what I'd remind you of is we very much believe in the need for oil and gas for decades and decades to come but specifically on oil which is what you're referring to here. So our liquids production what we're looking to do is of course ensure we maintain or sustain that very material levels going out. What you'll see as we talk through in the next section is we'll talk into a little bit more detail on it. We'll talk about the fact that whilst we have very attractive businesses, there is a decline rate to that and we will continue to invest to be able to have that materiality going through, there is no cap. That's not what we're suggesting on that. We're basically just simply giving you a view out to 2030 which is not priced in at the moment. So I think that's very important because I don't see you pricing that in. So that's showing you that we will be able to maintain all the way through to 2030. It's not about organizational capability or anything else. It's purely about our focus on ensuring that we backstop out to 2030 and show you line of sight to 2035 which will be the next um discussion. You also alluded to sort of the uh reserves replacement targets. You've heard me say this before. I don't have a target. What I care about more is how I make money out of this stuff and therefore it's very much focused in terms of the high margin barrels that'll come through. We'll spend a little bit of time on it in the second section where you'll see some of the numbers and our thinking around that which is why I'm not going to go into more detail now. All right.
Uh We have we'll show some love to this side of the room. Michael's got his hand up at the front here.
Devino from GMAX and congratulations on the very strong delivery since the last capital markets day. Um I wanted to ask you really one question in two parts. Um we see two big discrepancies in valuation. On one side the issue of some of the parts for instance your marketing business could easily trade on 10 times EVA as shell you trade between three and four and then the other big discrepancy is US versus European valuation. I was wondering clearly you're doing everything you can to improve the quality of the business, the resilience um and the profitability but at some point do these discrepancies come to the point where something needs to be done? And on one side for instance for marketing I'm thinking do the synergies with the rest of the business justify keeping a business that could be so valuable on a standalone basis and on the other side I think also the issue of relocation clearly very complex very difficult to execute but at some point if that valuation gap really doesn't close year after year with improvement in returns is there something that needs to be considered?
Given this is one question two parts you going to kick off and then I can supplement. Does that mean I get to go in either direction? Anywhere you want to go. This is good.
Um, so in terms of I'll give you the relocation one because I think that's more suited for the CEO at the moment. Um, the marketing business. So for your point, let's just take it back to what's the principle. Our overriding principle is about creating intrinsic value. You know that that's exactly what's on our mind. There are no sacred cows in this company. We look at exactly where we can realize value across all parts of it and you see it whether that's you know going after things in the North Sea which has been you know core to our heart. We are in the North Sea and yet we're creating a joint venture but we saw an opportunity. We saw an opportunity to partner with somebody else to create value. So when you talk about our marketing business and we'll spend some time on it later which I'm I realize I keep dancing back to later on these what we're doing there is focusing in on improving the underlying. So improving the actual performance of that and I hope you see that I think there's some team here who'll be able to answer some of the detail for you at the table as well. But what they are doing is actually driving improved reactions across that business and it's coming through. They're really delivering each and every day on that. We see a huge amount of integration for a marketing business. It creates a short and I think while talked about that a little bit in the um in the speech as well. So our trading business is able to maximize value and frankly what we see is an awful lot of um the trading houses trying to buy into some of these whereas we have that integrated chain. Um I'll leave for you to do.
Yeah, thank you Shen Mati. Thank you for that uh for the question. Let's step back right. So where are we, where were we in 2023? At the end of the day I have to trust that the market is going to value a share in the right way. We have a very comfortable proportion of US investors in the shell share right so we went back to fundamentals. That's what we believe in. The fundamentals said at 20 to 30% we weren't distributing sufficiently and we were inconsistent in our delivery so the sprint was a compressed two 10 quarter window to really just re-earn that um confidence around the consistency and the competitiveness. And so we addressed one part of it, but we're not done. The other part that we still need to do is to continue to improve that competitiveness, but it is important to recognize that the longevity question has been a big question and that's what we want to also try to dispel today. Right? You've seen the first part of dispelling it, which is the IG, the marketing growth. You'll see a bit more as Chenade's already alluded to around the underlying liquids growth. I would very much like when you walk out of the room today to have line of sight not to 2028 only but to 2040. This is what this company is building. It's building for the decades ahead, not for the next couple of years ahead. In addition to that, we are looking to build resilience because we are quick to forget the difficult times today. We are still in a very healthy macro overall. And so we want to build the resilience that gives us the ability to navigate whether it's through buybacks at $50 or potentially counter cyclical moves. That's what we're trying to do. We're playing this game for the long run. Not trying to sort of uh get a sugar rush for our share price in the short term. That's not what we're doing. What you can be assured of is the following. We are always going to look at opportunities to unlock more value for our shareholders and we will be very deliberate and methodical in the way we're going to sequence our moves to make sure that we are pushing the right buttons at the right points in time so that over the coming few years we truly are able to realize the value that sits within our portfolio.
