Earnings Call: Q1 2016

May 4, 2016

Many thanks. Ladies and gentlemen, welcome to today's presentation. We announced our Q1 results this morning. These results included 2 months of contribution from BG following the completion of the acquisition on February 15. We've taken the opportunity to enhance our financial disclosure across the company today, and I hope you will find the new figures useful, although I do appreciate some of the modeling challenges it may now. Let me give you a summary and then, of course, there'll be plenty of time for your questions. Before we start, just let me highlight the disclaimer. Shell's integrated activities from the wellhead through to the customer do differentiate us with our downstream and integrated gas businesses delivering good results, underpinning our financial performance despite the continued low oil and gas prices at $34 average Brent for the quarter. We delivered $1,600,000,000 of underlying current cost of supply or CCS earnings in the quarter, dollars 9,300,000,000 of similar earnings over the last 12 months. We're already seeing positive effects from our acquisition of BG. BG delivered strong production growth in this quarter and some $200,000,000 straight to the bottom line. We're off to a good start with the integration, building on 6 months of detailed planning before the deal was closed. At the same time, continuing to reduce costs and spending overall across both portfolios with material opportunities to do exactly this in the down cycle. It's early days, but we're extremely pleased with what we're seeing so far from the acquisition. Turning to the results, and I'll start with the macro. We've seen a sharp decline in oil and gas prices compared with a year ago, reflecting primarily the OpEx policy change. Brent oil prices were some 37% lower than year ago levels, similar declines in WTI and the other crude markets. The realized gas prices was up 36% lower than 1 year ago with a strong decline in gas prices seen in all the markets. We appreciate there has been a recent recovery in prices during April, but this does relate to the fundamentals of supply and demand. But it is far too soon to be calling a break in the weaker environment. On the downstream side, the refining margins were significantly lower in all regions, driven by oversupply, higher inventory and a relatively mild winter in the U. S. And in Northern Europe. Chemicals, the industry cracker margin strengthened in Europe and in Asia at the same quarter last year as was driven by the further reduction in naphtha feedstock cost due to the decline in crude. U. S. Gas cracker margins also declined as ethylene prices continued to fall over and above the decline in the gas prices. You will, I hope, have seen the enhanced financial disclosures from the company this quarter. We now report integrated gas earnings separately from the Upstream rather than the subset and in more detail than in the past. In Downstream, we've given an earnings split formally for the combination of refining and trading, obviously separate from marketing. Also taken on board some comments around the exchange rate impacts, which have been a bit noisy over the past couple of years in terms of quarterly impact. So we're now treating noncash foreign currency impact in Australia and Brazil, specifically on the deferred tax assets. We now treat them as identified items. So you'll see a restatement of that in the results tables today, both explicitly and also implicitly in the businesses. As this effect was large and positive this quarter, had we reported on the prior basis, the underlying earnings would have been higher by $570,000,000 Excluding identified items, Shell CCF earnings were $1,600,000,000 that's a 63% decrease in earnings per share in the Q1 last year. That EPS figure for Q1 uses the weighted average number of shares in the quarter. And clearly, that changed during the quarter, much lower opening balance, $4,500,000,000 roughly shares roughly higher by the end of the second quarter due to the acquisition of BG. On On a Q1 to Q1 basis, we saw an increase in the loss in the Upstream and lower earnings in both Integrated Gas and in Downstream. Return on the average capital employed was 3.8%, excluding identified items. And cash flow from ops was around $650,000,000 or $4,600,000,000 excluding working capital movements. Dividends distributed in the Q1 were $3,700,000,000 or $0.47 a share, of which $1,500,000,000 $1,500,000,000 was settled under the scrip program. Turning to the business segments in a little more detail. Upstream earnings, excluding identified items for Q1 2016, were a loss of $1,400,000,000 but with $2,000,000,000 of positive cash generation, excluding working capital. Low oil prices dominated these earnings. That's a $1,400,000,000 effect compared to the year ago. However, I think it's very important to point out that the actual operating performance continues to improve. The focus on margins, reliability, enough time, it is delivering. You can see the increase in underlying production contributing. And we also have a decline in the operating costs. Turning now to Integrated Gas. Earnings there were $1,000,000,000 in the quarter, and that compares with 1,500,000,000 dollars a year ago. Lower oil and gas prices reduced these results by some $700,000,000 And results also exclude the dividends from the Malaysian LNG Dua joint venture, which last year were $90,000,000 in the Q1. We exited that joint venture in May last year. Uplift from BG increased the contribution from trading and lower well write offs, they all combined to deliver a profitable quarter despite the lower oil price. The headline oil and gas production for the Q1 was 3,700,000 barrels oil equivalent per day, 16% higher than the Q1 last year. And the uplift from the PG acquisition accounts for the majority of that increase. But let me also note, we're seeing the benefits of Shell's actions to improve the uptime, less maintenance than a year ago, better reliability and uptime, for example, in the U. K. And in Malaysia, all good to see. The LNG volumes were also higher, mainly reflecting higher volumes as a result of the BG combination. Turning now to the Downstream. Earnings there for the quarter, excluding identified items, were $2,000,000,000 mainly due to lower results in oil products. In oil products, the refining and trading results were lower than in the same quarter last year and that reflected the weaker global refining conditions across the board and also reduced availability due to downtime, particularly in the Boukom Refinery in Singapore. Marketing delivered strong underlying performance for the quarter, results at the same level as last year, in fact, driven by higher unit margins and lower costs. Chemicals earnings were 8% lower than a year ago. That was due to the lower margin than the U. S.-based chemicals, noting the margin external margin and the downtime again at the Boukon Refinery in Singapore. This was partly offset by lower costs and recovery of production at the Murdoch site in the Netherlands. So overall, another good quarter for the Downstream. Return on average capital on a clean CCS basis was 18.8% at the end of quarter on a 12 month basis. And the Downstream CFFO, cash from ops, was around $11,000,000,000 over that same 12 month period. We made several announcements on the downstream portfolio during the quarter. In the U. S, Shell and Saudi Aramco decided to end Motiva joint venture on the Gulf Coast. We're dividing the refining and the marketing assets portfolio between us. We've recently completed the sale of the Denmark marketing business for around 300,000,000 dollars We also delivered a $400,000,000 MLP equity offer in the Midstream Pipeline Company in the United States. We expect to complete the Showa Shell investment in Japan and the sale of shares in the refinement company in Malaysia this year. Taken together, the Shosho Malaysia, Denmark and the typical MLP yearly deal should result in around $3,000,000,000 of disposal proceeds this year. And together with potential contribution from the Motiva dissolution, that's a pretty good start for the year. Turning now to the cash position. Cash from ops on a 12 month rolling basis was $23,000,000,000 at an average Brent price of around $48 per barrel. That's pretty close to today's spot. Cash portion of the BG deal was $19,000,000,000 That resulted in negative free cash flow position in total for the quarter. The net debt position, which is around $69,000,000,000 now reflects the total BD balance sheet and of course, the purchase price paid for that. Gearing at the end of the quarter was 26.1%. We have recognized certain operating leases from BG as finance leases. These include FPSOs, some of the shipping vessels and some 1 LNG facility. Overall, the BG deal added some 9%, 9 percentage points at our gearing. 2 percentage points of that is as a result of effectively the finance lease changes. Priorities for cash have not changed. 1st, debt reduction, then dividend, then capital investments and share buybacks compete for the margin. Dividends declared were $12,700,000,000 over the last 12 months. Now more specifically on the BG consolidation, quite significant one off impact. The final transaction price for the BG acquisition was $54,000,000,000 or £37,000,000,000 We'll find details of the accounting impacts to BG in the results announcement. But the headlines, goodwill was $9,000,000,000 and this is an accounting definition, an artifact if you like. Goodwill is the balancing number between the fair value as seen by market participants and the purchase consideration of CHF 54,000,000,000 dollars So under the accounting standards, fair value is calculated using forward price curves as at the day of completion for the 1st 2 years and then analyst macro forecast thereafter. So just a reminder, the oil price on 15th Feb was around $33 a barrel. Therefore, the forward curve was fairly low, and this did impact a lower fair value and therefore a higher goodwill. The profit and loss accounts going forward will include annually a $1,200,000,000 after tax depreciation charge for the purchase price premium. That's basically $100,000,000 a month, so we had a $200,000,000 impact Q1 of 2016. It will be $300,000,000 in quarters going forward. Let me now just move on to the XPG assets and their performance. We will, of course, talk about this somewhat in more detail at the Capital Markets Day we're having in London on the 7th June. However, it's great to see that the former BG asset growth really is coming through now in this quarter. The oil and gas production from these assets averaged around 800,000 barrels oil equivalent today in the Q1. That's 25% higher than a year ago and it's a third higher than the production that was in the public domain when we negotiated and announced the bid. The production in 2014 was 600,000 barrels a day. In the Q1 accounts for Shell, this year we booked only twothree of this amount, 522,000 barrels a day oil equivalent to be precise. And obviously, that reflects just 2 months of contribution. The growth actually comes from the ramp up of Queensland Gas in Australia and also 6th 7th non operated FPSOs in deepwater Brazil. BG's assets overall added around $200,000,000 to Shell's earnings in the quarter and approximately $800,000,000 of cash flow from ops. Still early days, but the synergies program is on track, but it's actually more than on track. And you will have seen some announcements recently to reduce our United Kingdom office presence. Based on the excellent progress that we made in the detailed integration planning, we are likely to see delivery of the synergy targets much earlier than planned and at a lower than expected implementation cost. So overall, great start with the integration and obviously, a lot more to come there. Before I close, a few words on spending. We continue to reduce capital spending and operating costs. We're reducing those costs across the board, redesign, postpone new options. Earlier this year, a few months ago, we provided capital investment guidance for 2016 as $33,000,000,000 potential to reduce that figure further because, of course, we have nicely got under the hood of the BG portfolio at that point. Now capital investment for 2016, this is in the actual results, is clearly trending towards $30,000,000,000 We look at detail at the BG portfolio. We continue to drive more capital efficiency in our own opportunity funnel. And in practice, we're taking costs out of projects and projects out of the funnel. The $30,000,000,000 figure, and just to be clear, in 2014, before acquisition, before we started either company working on reductions, the combined capital in 2014 was $47,000,000,000 So this $30,000,000,000 figure is 35% below that level. It includes and it actually includes well over $1,000,000,000 of noncash items for finance leases still to come this year, a couple of FPSOs in Brazil and stones in the Gulf of Mexico. On operating costs, similarly, the underlying operating costs are trending downwards to a run rate of around $40,000,000,000 by the end of the year. But during the year, we'll take a few one off costs most likely associated with the transaction, which is why we don't give a full year figure. That $40,000,000,000 compares again, go back to 2014, with something $52,000,000,000 $53,000,000,000 20% lower than the 2014 combined level. So in simple terms, we were saying all through last year, judge us on what we do, not what we say we're going to do. We're effectively taking $17,000,000,000 out of CapEx and $13,000,000,000 out of the OpEx, dollars 30,000,000,000 out of the spend between 2014 2016. And in very simple terms, we are expecting to absorb the entirety of BG's activity, OpEx and CapEx and keep the spend level in both cases at the same level it was for Shell alone in 2015. That's all a result of what I would humbly suggest is a world class integration process that has been running since July last year and has really hit the ground running both teams, BG and Shell. Okay. So just to summarize again then, integrated activities wellhead through the customer, 2 differentiators, downstream integrated gas, both delivering good results, underpinning the financial performance despite $30 oil and $2 Henry Hub. We're already seeing the positive effects from BG. We're very busy now combining the 2 companies, looking to add yet more value to shareholders. At the same time, we're continuing across the board reduction of costs and spending, lots of material opportunities out there in the debt cycle. Early days, very pleased with what we're seeing so far from the acquisition. So with that, let's take your questions. I sort of raised it earlier, but I do acknowledge for all of you out there, we have changed some of the reporting segmentation. This may be making some of the modeling quite difficult. Can I suggest that we don't cover those on the call and that we can follow-up with the IR team primarily? I'll do what I can to help, but it may be a distraction for the main points in the call. So also remind you, we have the Capital Markets Day in London on June 7 when hopefully everybody on the call will be able to join us. So please could we move to questions, just 1 or 2 each so that everybody has the opportunity. Operator, please could we poll for questions? Thanks. Thank you, sir. We will now begin the question and answer session. Our first question comes from Oswald Clint from Bernstein. Please go ahead. Your line is open. Thank you very much. Yes, Simon, thanks. Two questions. First one, just on the upstream business itself, you spoke about the reduction in the OpEx, which I can see. But obviously, on a country basis, we see here in the segmental that you're loss making in every geographical business this quarter for the first time. So OpEx has fallen, your uptime is good, reliability is good. Is there more you can do here to get this the upstream across these geographies back kind of into the black? Is that going to be sufficient for 2Q? Or maybe if you could just talk about further cost reduction across the geographies? And then second question, just on the CapEx kind of trending towards 30, I think I'm pretty sure investors are going to find that a little bit vague. So I'm wondering, does that mean it's you feel confident about 30? Could it will it be above that? Is there a chance it could fall below that? Just a bit more clarity around that CapEx number, please. Thank you. Sure. Thanks, Oswald. The primary driver of the upstream numbers is a $34 oil price plus the fact that even where we're producing gas, there is a linkage to the oil price with some lag in some cases. So that fundamentally is different. At today's oil price, dollars 45,000,000 when I last looked, would be roughly $1,000,000,000 better off across the board, which moves some of the regions back into place. The fundamental reaction, though, you're absolutely right, is cost. We've made clear to the organization some time ago, and we are seeing the bottom line results coming there. But thinking about costs, the combination of BG and the $40 world, it's fantastic opportunity to take costs out forever as long as you think about the cost, the price being low forever and ensuring that costs don't come back again when they go back up. So very strong focus on cost. And that will come through. It's difficult to do $1,000,000,000 in the quarter, but it is certainly progressing in the right direction and there's more to come. There will be asset sales. We'll see that. And we've been looking very closely at some of the more difficult areas, should we say, of costs such as the North Sea and therefore working hard in that. As we go forward, you are going to see some new production coming on in places like Gorgon, all of that and integrated gas, of course, and then the in Kazakhstan and in Stones in the deepwater. And we will see the BGE synergies kicking in, although quite a lot of that in the 1st year is on lower level of exploration. So all of those things contribute in our own small way. The biggest short term factor is clearly the oil price. Trending towards 30, what does it mean? Well, firstly, we genuinely only have now 10 weeks under the hood in BG and looking at the actual CapEx program. Before that, we did have 6 constructive months where we were limited in what we could share for legal reasons, but extremely constructive process during integration, so or the planning for integration. So we do have a reasonable view about what some of the choices are. The actual CapEx in quarter 1 was $6,500,000,000 That's rounded up to include the January spend in BG. So multiply that by 4, you come up with another less than 30. If you look at the 12 month number, it's slightly above 30 if you include BG. So we're heading directly for $30,000,000,000 and we're making basically decisions as we go along at the margin, I would expect we'll hit 30,000,000,000 or below as we go through for the total for the year because that's what the trend is telling us. And we're finalizing that really over the next month or so ahead of the Capital Markets Day. It's there is an issue around rig commitments and the potentially idle rigs and what we choose to do with them has some noise impact. It could appear in OpEx. It could appear in FX. It could appear in CapEx, which is why I'm slightly reluctant to commit to a very specific number. But it will be 30 or thereabouts, I think, 90% already committed. So hopefully, that helps Oswald with that longish answer, but I think it's a question that quite a lot of people will be looking to hear the answer to. Thank you very much. We can move to the next question, please. Our next question comes from Lydia Rainforth from Barclays. Please go ahead. Your line is Two questions, if I could. The first one was and I come back to focus on the OpEx side. If I look at the chart that you show, they moved from $15,000,000,000 to $16,000,000,000 and seems to imply about $8,000,000,000 reduction, which is clearly more than the $3,000,000,000 standalone guidance for Shell cost reductions on the $2,000,000,000 synergies. Is that the right way of looking at it that you're actually doing more on the cost savings than you might expected coming through? And that partly links to the second question of, are you able to give what you think is now the cash flow breakeven to cover CapEx and dividends in terms of an oil price, either be it for this year or next year? Thanks. The reduction between $15,000,000,000 and $16,000,000 that we're seeing effectively and you're using a rule of that, not necessarily $8,000,000,000 because we're trending towards a run rate of $40,000,000 So we might end up with slightly more than $40,000,000 in the year because of one off items in the 1st part of the year. But broadly speaking, it's 47 down to a run rate of 40 in the year. And yes, we are seeing more opportunity than we'd originally expected. We previously stated $38,000,000 for Shell and add on a bit for BG, which is not necessarily all being accounted for on the same basis. But all told, all integrated, we should be at a run rate of 40 by the end of the year. And this is coming from a variety of places. But one big help is synergies basically emerging much more quickly than we had originally sort of planned for or expected. And that's both on the exploration side, which we've been working at now for 6 to 8 months, but also on the OpEx side where it's clear we can absorb in quite a lot of areas, whether it's at the corporate function level or in 1 or 2 countries, the activities with no added no increase net increase in staff or cost. And so that has been a big driver. Plus, I think, momentum we talked last year about, lots of not small, but for you as observers, probably not that material, dollars 100,000,000 here, a few $100,000,000 there. Quite a few ongoing initiatives, which are continuing. They took cost out last year and taking more out this year. So it's aggregation of the contributions from many people, the 90,000 development sites in Shell and not just something that Ben or I are exhorting people to do. There should be further room as we go forward as well. And I expect, obviously, with the oil price being where it is, that's very much the direction we will have. Does that cover everything, Lydia? Yes. Okay. Next question. The next question comes from Christopher Kuplent from Bank of America Merrill Lynch. Please go ahead. Your line is open. Yes. Hi, thanks. Good afternoon. Simon, just two quick ones. I just wanted to check, I think you've now got almost $70,000,000,000 under your definition of financial net debt. The free cash flow obviously is still €70,000,000,000 number is causing alarm clocks sorry, alarm bells as well to ring. And secondly, just wanted to get my hand around again the €40,000,000,000 OpEx, whether you could give us a bit more detail where that OpEx actually sits, what you include in there, how much you would define as structural costs that are not coming back should the oil price recover into the next 3 years? Or indeed, how much of those savings are purely pricing and cyclical? Okay. I'll try on the second one. So the first one is a really important point, dollars 69,000,000,000 of net debt. Yes, it is something that I might lose sleep about, but not just yet, 26.1 percent gearing. Free cash flow negative in the 1st quarter, impacts the free cash flow. And $34,000,000,000 there that impacts the free cash flow. And $34,000,000,000 the $34 oil price didn't help either. So going forward, in the short term, at $45 with the current level of spend, the gearing and the net debt is likely to go up before it goes down. What brings even at $45 So what brings it down? It's the continued reduction in OpEx. It's the continued reduction in investment level. And importantly, it's the coming on stream of new projects. And none of these are easy fixes. So I'm confident, very confident that the right things are being done. What we need to do is do them at pace and ensure that we are delivering sooner rather than later, which is why it's great to see the PG synergies coming in as we do. The gearing figure of 26.1 percent is a couple of percentage points higher than previous Advise and is driven entirely by the treatment of the leases as financial leases rather than operating leases. And this has no impact or little impact on the credit rating because the rating agencies look through that. But it does mean that any statements made around gearing, you have to sort of add 2 percentage points onto any previous statement of expectation. And that figure will also be impacted going forward by new FPSOs as well, of course. So a manageable situation, but not one that has any easy fixes, but I think all the right things are being done. The credit rating agencies taken a close look and Moody's brought most of the industry down. We came down to AA with Moody's. S and P. We're at an A plus rating at the moment, and that is still with a negative outlook. So we are looking at effectively our future performance benchmarks against those metrics as a key performance parameter for the management. So both debt reduction and increased cash flow generation are required to get those metrics back into the right place. Now the $40,000,000,000 OpEx, is the high level breakdown. It's half and half upstream, downstream. So $1,000,000,000 is only the downstream. The $20,000,000,000 Upstream is split twothree, onethree between Upstream and IG. That's after allocating everything to the businesses. So roundabout $10,000,000,000 is what you might think of as corporate type costs, finance, IT, real estate, HR, etcetera. The reductions that we've talked about are coming across the board. Many are linked directly to reductions in the number of people by changing the way we do things or changing where we do the work, different relationship with, for example, suppliers, not just from unit rates, but fundamentally changing the way we deal with standardized design, different way of handling IT, etcetera. So it's not something we started 3 months ago. It's something that we started 3 to 5 years ago depending on the area we're looking at. Therefore, we're pretty confident most of what we're doing will stay active if the oil price does recover at some point in the future. Clearly, at the margin where we're in the 3rd party services are big supply to us, that there is exposure if Bill Bright comes back. But to be honest, a lot of the savings that we've seen so far have been in, for example, areas like drilling. It's been better performance as much as it has been lower unit rates or it's been in areas of activity such as the North Sea, where reducing cost is not a nice to have, it's an imperative, all facilities will be closed in. And therefore, some very significant changes in the way of doing things that will not be reversed in the event coal prices go back up. So we're quite pleased with what we've been seeing so far, and let's see how much further there is to go. Many thanks, Chris. Hopefully, again, both questions quite relevant to most of the audience. Next question, please. Our next question comes from John Rigby from UBS. Please go ahead. Your line is open. Thank you. Hello, Simon. Two questions. Could I just ask a question on LNG? I think you said that there's about a $200,000,000 contribution from BG. So can you confirm that or discuss a little more about what you're seeing in terms of sort of optimizing cargoes? Are you able to see the kind of trading and optimization earnings that BG was able to generate? And is that starting to spread into the Shell business as well, the bigger Shell business? And maybe some color around that would be really useful. And secondly, just on Chemicals, obviously, Marmite coming back, but I think you referenced book them down. Is it fair to say Chemicals is under earning against where you'd expect it to be all things equal? And maybe are you able to sort of calculate or indicate what you think the delta might be if everything was running rather more smoothly? Thanks. Thanks, John. Well, you're right on Chemicals. We'll take that first, it's $200,000,000 $300,000,000 it will come. Moerdijk came back. But essentially, the ethylene cracker in Bouygues has been down, should come back in the middle of the year, plus or minus the end of Q2. But you are talking a few $100,000,000 if you like left on the table compared to everything running smoothly. LNG optimization, now still a bit early days. I don't want to say too much of the commercial sensitivity here, but I think we're seeing just as much flexibility and optimization in the Shell portfolio as there is in the BG portfolio. But it's a great opportunity to learn from both sides how to optimize not just in the short term but medium- and the long term. And then in very simple terms, Shell's traditional approach was supply driven and BG's traditional approach was market driven, start with market, work backwards to supply and vice versa. So as the 2 meet in the middle, I mean, you may be aware that CPhil, who used to run the GEMS business for BG, is now running basically same business but twice the size for Shell plus BG. Having Steve there plus the guys he was on our portfolio is indeed identifying further opportunities. But certainly, in the short term, interesting, the optimization is just as positive from the Shell portfolio at BG. Although one has to say, at this particular point in time, neither of them is as lucrative as they have been in the past. But it's a great point for the future or opportunity for the future. I'd just say there's an opportunity to note, we've now got 2 volumes in for LNG, which are in the effectively the share of equity production, which is about 7,000,000 tonnes in the quarter. So you're looking at over 30,000,000 tonnes on an annualized basis. And we've also shown the Shell share of effectively the sales because in BG's portfolio and increasingly in Shell's portfolio, we're lifting other people's production and selling it. So our share of sales is actually 12,000,000 tonnes in the quarter. And therefore, fully annualized, you're talking around 50,000,000 tonnes or 20% of the world market in terms of Shell Equity Molecules. So it gives you a feel of the scale and the opportunity. Your next question comes from Biraj Borkhataria from RBC. Please go ahead. Your line is open. Hi, Simon. Thanks for taking my question. I had a couple. The first one in looking at Upstream Americas or North America now as stated, CapEx was down quite sharply Q on Q by about $1,000,000,000 I was wondering if you could talk about the unconventionals business specifically and kind of post the departure of management there and how that fits into your overall portfolio as well as how much capital that business will get for 2016 and going forward? And the second question was more of a clarification really. I noticed the Oceania gas realizations were particularly weak in the quarter versus the run rate. And I was wondering if you could give a bit more color on what's going on there. Sure. Thanks, Biraj. The unconventional business in North America and Argentina together is getting about $2,000,000,000 of capital allocation this year. That's quite a lockdown on previous years. And we're getting a lot more for it as it happens because they keep coming in ahead of target. About 70% of the wells are coming in with 1,000 barrel a day initial production or better. And we're seeing costs continue to be down sort of 20%, 30% like for like year on year. But the majority of the activity still remains exploration and appraisal. We've rarely, if at all, pulled the trigger on major developments for obvious reasons. Dollars 2 gas and $34 oil is not the time to be doing major development. So it's a bit in a holding pattern. Strategically, we're in a good place. We've got now in terms of resource potential, we're talking up to 12,000,000,000 barrels of oil equivalent resource potential across Canada, United States and Argentina. Around 3 quarter or 70 percent or so of that is gas. And we have the balance sheet value is just under $15,000,000,000 So you've got massive resource just over $1 a barrel. I think over time, this is going to be great value to develop. But in the short and the medium term, it will be on a pretty much a care and maintain capital allocation. The Oceania gas realization and ultimately this is driven in part because what you see is a netback. So it's a netback both in Queensland and in Western Australia. And therefore, the realization a netback to the LNG price, it's linked almost directly to the LNG price. Once you've deducted effectively the way Queensland gas has been structured with tolling agreements and pipeline tolling, once you've deducted the cost of taking the gas from the wellhead, liquefying it and getting it to market, that has basically driven down the average realized agent price. All of the price upside gets shown in the upstream rather than the midstream in practice, but that's just the nature of the BG setup in Queensland, but it's also not dissimilar in Western Australia, at least in terms of the realizations that we would recognize. Okay. Many thanks. Next question, please. Your next question comes from Irene Himona from SG. Please go ahead. Your line is open. Thank you. Hello, Simon. My first question is on volumes, if I may. You highlighted the contribution of BG2 Q1 production and LNG. Are you able to provide some guidance on the new group's production in full year 2016 and 2017 given all the moving parts of the puzzle? And then secondly, going back to the €40,000,000,000 I mean effectively you're talking about faster near term OpEx reductions as I understand it. How does that relate to the €3,500,000,000 synergies from BG by 2018? I mean, is it the same number happening earlier? Are you able to raise that? And is there anything you can say at this stage on the question of value synergies over and above that number, which I understand had to be strictly sort of audited? Thanks, Irene. Volumes, I mean, if we had 3 months of PG rather than 2 months, we'd have been about 3,950,000 barrels oil equivalent today, so quite a step up. As we go forward, I cannot give you guidance simply because it literally is not on my radar screen, the production, because we're spending all the time on cash. What are we spending? What are we earning? And where are the priorities? So production, to be brutally honest, apart from needing to be safe and reliable is an outcome. It will obviously be impacted not just by divestments, but also new projects coming on stream as well. So I do think, I mean, fundamentally at the moment, we're putting together the asset level detail, the maintenance and the underlying spend programs, and we are aiming to put together a much firmer and clearer collective unified plan by the back end of this year. So during this year, quite a lot of what we say remains a little bit provisional, although it will be accurate. And the targets for the individuals will be set in the back end of this year. So I can't give further guidance on the volumes. The $40,000,000,000 how does it relate to the $3,500,000,000 Well, the $3,500,000,000 by 2018 was, if you recall, dollars 1,500,000,000 of exploration and $2,000,000,000 of OpEx. And the $1,500,000,000 of exploration is something that we will almost certainly deliver early quite early. I don't know if we'll actually get there this year, but we'll get probably close this year. Of the $2,000,000,000 of OpEx, it's a bit hard work, but actually we're finding we're doing that much more quickly. I can't say because again, I don't actually have the exact figures, but a lot more than I originally expected. So when we did the prospectus, it will be delivered this year. And it will also cost us less. We had said in the prospectus that 1 point $2,000,000,000 would be the total expected one off cost of the acquisition. It should be lower than that. And we will also most likely try and ensure that, that cost is incurred all in 2016 and doesn't spill over into 2017. So those are the moving parts. Are we in a position to raise the number? Clearly, there are indications that there are opportunities from what I've just said. I think it's something we'd probably revisit in a month or so's time for Capital Markets Day. But at the moment, the focus is on achieving the synergies, not necessarily extending them, and we're seeing some great progress. The same is true of value synergies. What we are seeing is a combination of factors. We need to understand not only the numbers in the BG plans, but also the psychology behind them, how optimistic or conservative are they And how are they comparing with what's actually being delivered? The actual asset performance is extremely good against the original DG plans to date, I must say. And therefore, that might actually throw up. Yes, there are some value synergies that we can bank earlier rather than later. We're definitely seeing lower costs in 1 or 2 areas, crucially, in both Brazil and Australia. And that is helpful indeed because they are, by the definition, the 2 most valuable assets in the portfolio. And so, so far so good, but I can't be more specific than that. Thanks, Ira. Next question, please. Next question comes from Martin Ratz from Morgan Stanley. Please go ahead. Your line is open. Yes. Hi, good afternoon. I wanted to ask you 2 things. So, I listened to part of the media call this morning. And in there, you sort of invoked sort of invoked the spirit of Mario Draghi by saying, we will do whatever it takes to balance our financial framework over the cycle. And I was wondering if you could elaborate on that. It sounded like you potentially had something specific in mind. And also how far does the balance sheet gearing need to rise before sort of whatever it takes sort of really kicks in? The second question I wanted to ask is with regards to operating cash flow in the quarter. Even taking into account low oil prices, the €4,600,000,000 ex working capital looks a little light. And I was wondering if some of the one off costs related to the acquisition, some of the sort of $1,200,000,000 figure that you also just mentioned might already have been in there whilst not taken as a specific sorry, as an identified item? Okay. Thanks, Martin. Yes, what I actually said this morning was in response to a question. So what's your breakeven price in cash terms? And so far this afternoon, you've all been kind enough not to ask the same question because you probably would have got the same answer. We don't have one with the answer because I would paraphrase Mario Draghi, we will do whatever it takes to balance the cash flow through the cycle because actually there isn't an alternative if you want to quote somebody else. Importantly, it's through the cycle. So the aim is not to achieve any given breakeven point in any given year. So I also quoted going backwards, the previous 12 months is 61. To 12 months of 2015. Breakeven was 55 or around 70 excluding divestment. But clearly, that needs to come down a little bit if we are to stay in business. And therefore, we will do whatever it takes. And that means reduce OpEx, reduce investment further, ensure that we deliver projects, keep them up and running, maximize the margins and divest assets. The biggest short term factor will remain the oil price. The second biggest is, in practice, divestments. So that's one we can't control, the other we can't. But after that, it's investments in OpEx. We've already talked about that. So you can see we're doing whatever it takes in those areas. How far does gearing need go before in that situation? We're in that now. We already knew we would be post PG, but the credit rating metrics I referred to earlier, the actual numbers today would not necessarily mechanically support the ratings that we currently carry. We need to improve the ratings. And that it's clearly stated by the rating agencies. So we need to start to reduce the debt. It's simple. That's priority number 1. We are in that situation now. $4,600,000,000 of working capital, looks a little weak was the premise. Yes, perhaps. Yes, it's got some one offs and it's got, for example, the same duty in paying for the deal, the present $300,000,000 or so to George Osborne. In terms of the cost of the deal. But that's less than $500,000,000 in total in the quarter in cash terms. And there are there's always a few one offs. But by and large, the big factor was the working capital and the cost of sales adjustment, which ultimately, some of those are one offs and some of those will reverse over time. I can't recall whether I mentioned it earlier, but there is a trading inventory. It's basically a contango effect as well. So that is reversible. The payment to the Iranians for the crude lifting a few years ago is not reversible, but it is one off. So those things will play through, and it's always difficult to look at 1 quarter alone for CFFO. Let's see how that goes going forward. Okay. Next question please. Next question comes from Thomas Adolff from Credit Suisse. Please go ahead. Your line is Two questions as well, please. First one on CapEx, and I guess there's no such thing as an apples to apples comparison when we look at the reported CapEx guidance amongst the super majors. If we look at the €30,000,000,000 or so that you talk about, is that the right balance for short term cash and returns and the longer term health of the business? I'm kind of asking this question based on obviously today's cost environment and it's clearly a further cost reduction to come outside of shale. The second question on the Lower forty eight, obviously Marvin left. The Lower forty eight is now part of Andy's portfolio again. I think back in November, you said we're going to try to run it independently. And I think when I spoke to Marvin, he said I haven't quite figured it out whether it's the XTO type management or whether it's the BP type management, which is truly independent. Have you figured it out yet? Thank you. Thanks, Thomas. I still have words with Marvin. On CapEx, is that $1,000,000,000 the right number in the current price environment? Well, probably not because look where we're coming from. We saw $47,000,000,000 2 years ago, so massive reductions. But even of what we spent today, some of that was committed in an oil price environment a lot higher than today. So the unit rate of completing projects, think of Gorgon, Prelude, Stones, etcetera, catching on to that massive, players, gallium, those costs reflect the higher oil price environment, not today's oil price environment. So the stay in business and maybe invest a little bit for the health of long term health of the business is probably lower than 30. Percent at today's unit rate, the cost that we would expect to see. Not again, no specifics. It's just less than $30,000,000 is what I would say. Could be several $1,000,000,000 less. On the lower 48, there certainly are 2 models out there, sort of the reverse integration into an XTO type model or the UBI internally that could be conceived in practice, the team running the onshore shale business today is the same team that was reporting to Marvin that they just now report to Andy. What they have done is take huge amounts of cost out on the assets in drilling. And to the extent they're able to do in the aggregation and other facilities, What they and we are working on is basically the above asset costs and how we deal with that will determine the answer to your question. It is coming down. It's coming down across the board, part of the $40,000,000,000 It's not yet decided the specific answer to your question or whether there's a hybrid version. What I would like to think is if lower levels of above affect cost is feasible for the shale business, then it should be feasible everywhere else in shale. So let's use that as a pilot to identify where we can go further faster elsewhere. So both of those are in progress at the moment. I think Andy will be with us on the Capital Markets Day. And I know he was in the U. S. Last week, so good question to ask him. Next question, please. Next question comes from Alastair Syme from Citi. Please go ahead. Your line is open. Thanks. Hi, Simon. Two quick questions. 1 on OpEx. You gave the 2014 reference pro form a. Can you give the 2015 by any chance? And secondly, appreciate the integrated gas and upstream from an accounting standpoint, but does that distinction imply wholly internally? I know Martin and Andy are running the businesses, but are people allocated to these different businesses distinctly? On the latter, yes. I mean, they are being basically run as separate businesses. We had although we reported externally in IG segment, which is basically the same assets previously, the reporting lines were not unified, to say that. Martin is now directly accountable for activities such as Trinidad and Peru and all of the trading that is done through Steve Hill in Singapore. That's effectively how that works. On the OpEx, 2015 pro form a, it was basically interpolate between the 2, somewhere around 46, give or take. The reason I'm not slightly more specific is there are some differences in sort of definitions and accounting treatment. So it's close enough straight line between the 52, 53 in 2014 and the 40 by the end of 2016. Unfortunately, I don't need to quite extrapolate that rate of improvement, but hopefully, there's some improvement to come thereafter as well. Next question, please. Your next question comes from Lucas Herman from Deutsche Bank. Please go ahead. Your line is open. Simon, hi. Thanks for the time. And by the way, thanks for the added disclosure, which is useful even though it will require a lot more spreadsheeting. Look, 3 brief questions if I might. Firstly, hard choices given where you're at. Do you want to say anything around the Pennsylvania cracker timing, if at all? Secondly, just on cash flow, deferred tax and other provisions, and this is not the deferred tax adjustment you had been making quarterly, but the deferred tax negative that's been running through your cash flow statement. Can you talk through that in a little more detail? I mean the number has become increasingly large and just sits there as a big negative with no real explanation. And thirdly, if I might, the operating cash flow in the upstream business, which has clearly sunk over the course of the last 4 years, can you give us any indication through last year or into this year, what proportion of that comes from the deepwater, not the collapse, but the absolute today? What proportion is the deepwater that you suggest to us will deliver $15,000,000,000 to $20,000,000,000 of operating cash flow back end of this decade? And what proportion is the traditional up stream engines business? That's it, Simon. Thanks, Herman. And apologies for the call. You can call me Lucas. We have the same problem, by the way. The hard choices, there are 3 or 4 big projects. And the first on the list is, in fact, the one that you relate to, the chemicals in Pennsylvania. The others being Lake Charles, Gulf Coast, LNG Canada, British Columbia and Vito, deepwater Gulf of Mexico. So they're the sort of the big four greenfield over which we could take a final investment decision in the next, well, less than 12 months. It's highly unlikely that more than, I would say, 2, maybe only 1 that will actually go ahead in that time frame. And basically, it's a choice of whether what's the best way of retaining or maximizing value from that set of opportunities. The chemicals plant is probably the first one because of the timing of certain commitments that are already in place. It's an excellent project. It's got a diverse set of market exposures and risks associated with it, therefore provides quite some portfolio resilience relative to the rest of the opportunities, not just the big ones, but small ones as well. We've had quite a lot of discussion, not yet pulled the trigger on it one way or the other. And certainly, it's not a free option, of course, that there are costs of keeping the option open. So not a decision yet, but it actually is looking if it were not a $40 world, it would be probably a very easy decision. It's a very strong and robust project. Deferred tax and other provisions, I will try not to go into too much detail here. We just added a $6,000,000,000 liability as a result of the PPA calculation called effectively the tax benefit of the step up in fair market value of an asset has to be added back in and that increases the deferred tax liability by $6,000,000,000 Elsewhere, we have deferred tax assets as a result of making loss in countries such as the U. S. And the U. K. And we have deferred tax liabilities such as benefiting from capital allowances in countries such as the U. K. And elsewhere. So there's quite a complicated set of moving parts behind this. The biggest issue for us and for analysts is, are these tax assets recoverable, which by definition is still on the balance sheet, they are seen to be, the deferred tax liabilities will play out over time as the earnings come through from the assets which they're associated, which the step up of $6,000,000,000 that I just mentioned is virtually all in Brazil. Therefore, you can envisage as you see Brazil produce and perform that you will see the liability reduced. And deepwater production, I'm just looking, is around 400,000 barrels a day at the moment, which basically is a combination of Brazil, U. S. And Nigeria. As we have started up with the Shell and being outside on BG. BG was running is approaching now 200,000 barrels a day effectively in Brazil. So you're seeing over 500,000 barrels a day. It's highly price sensitive almost by definition. All of those areas have excellent exposure to higher oil prices. But at $34 that was a contributor to the negative. So it's probably the most price sensitive element within the upstream business. And therefore and it's also the piece that's growing. So it's the big driver of the future, but it's not helping today. Okay. I think that's probably as much as I can say on that. Probably something we'll need to follow-up as we do the Capital Markets Day. Next question, please. Our next question comes from Anushka Badriya from TPH. Please go ahead. Your line is open. Good afternoon, Simon. Couple of questions from me as well, please. And just if we take the cash flow from ops ex working capital and post interest, it seems like about $4,000,000,000 So if you take a full quarter of BG, it feels like more like $4,500,000,000 or $18,000,000,000 annualized. Is that a good basis to estimate cash flow off for this year using your sensitivities? Or are there any other kind of incremental factors, incremental cash flow that we should think of for the remainder of this year? And the second one on taxes, following on from your last point. You have seen a substantial increase in your deferred tax asset and also your unrecognized tax losses. I'm just wondering with BG coming into the business, is there an opportunity to accelerate the use of these tax losses with some of the kind of BG's key profit centers such as Brazil and Australia? Thanks, Kai. The simple answer on the second one is yes. But I can't go into too much further detail about that. We need to be both clear about the best way of doing it and making sure that it's agreed with the relevant authorities. But bringing together effectively income generating assets and tax losses in a given country is an opportunity in at least 2 or 3 countries aren't aware of. The cash flow estimate for the year, will 4x Q1 suffice? Well, yes and no. It's not and any one off factors, minor quarter one factors get multiplied by 4, positive or negative. So it's not the best way to look at it. Maybe look at the 4 quarters going backwards, which were actually at an average of $48 cash flow 23 dollars and add a bit for BG is just as good as going 4x Q1. But that in itself is not to be taken as a projection. It's just a little help with modeling because there is always noise in the cash flow statement. And remember that as we go forward, if oil prices do continue to rise, as they did in April, we will increase working capital and therefore, there will be a working capital outflow. At the end of the day, we work on the levers that we can such as inventory level and OpEx and then the actual number to an extent, will be an outcome. Many thanks. Move on to the next question, please. Our next question comes from Guy Baber from Simmons. Please go ahead. Your line is open. Thank you very much for taking my question. Simon, a couple from me. But you referenced the improved reliability in the upstream. Is there any way you can elaborate on that comment or perhaps quantify the extent to which reliability in the upstream is improving your production performance? And I'm curious in an environment where you're attempting to reduce spending and take out costs and there's a focus on integration, is there a risk that you may begin to lose some of those reliability improvements and how do you mitigate that? And then secondly, in balancing the cash inflows and outflows, you mentioned spending, costs and divestments. You did not mention the script dividend. So just wanted to get latest thoughts and comments around the extension of that scrip program into 2017 or beyond and just what your most recent thoughts are around that program? Thanks. Good points. And the reliability year on year, our production performance was about 110,000 barrels a day better than it was a year ago just as a result of better reliability and availability. Big drivers there in the U. K. And Malaysia, but also the goal from 1 or 2 other countries. So that is a very material uptick. It is also coming off not the best of quarters a year ago. So that gives you some feel of the volume impact and of course the margin impact does vary. But it actually more than offset the decline, the underlying decline in the assets overall across the portfolio. And this is just better reliability. And in practice, one of the approaches coming out of the improved programs on maintenance is the timing and the scheduling of maintenance turnaround and looking at them in the same way in the upstream as we do in the downstream. A typical downstream turnaround period is 3 or 4 years. Typical period in the Upstream was a lot shorter than that in fact 1 year in many places. Every year, there'd be some turnaround for maintenance. So just taking best practice within the group and improving the way we do the work, working better with contractors, managing the logistics offshore, for example, making sure the parts are available when you need them. These are all hard yards, but when you're doing them and we're actually managing through a production excellence program in quite a different way across the asset base now driven by Andy. We've seen that really start to deliver to the bottom line. And this was one of our same time, if we are too indiscriminate, creates a risk, which is why precisely why we've not stood up before and not really standing up today either and saying we will take $5,000,000,000 out of cost. And what we have said is we have taken or we are taking not that it's a macho manner we will take $X,000,000,000 out because it's that type of statement that creates the risk and exposure when everybody tries to do the right thing even though they sort of have the concern about the risk you highlight. It is an ever present risk in our business. Safety comes first, always has done, always will do. Safety and reliability are very closely correlated. Script dividend. It's great question. What we have said is priority for cash flow, just a reminder, first of all, debt reduction, then dividend, then combination of investments and buybacks. The script is inherently linked to the buybacks. It's highly unlikely we would start buybacks before switching off the scrip, But it's also highly unlikely we'd switch off the scrip and cut the dividend. So we will and must reduce the debt first. We need and what I've stated before, just to be clear, is that we need to see the debt and the credit metrics returning to the point where they support the current ratings and a strong credit rating. The proxy for that was a 20% gearing. So we needed either to be at 20% or line of sight to 20% below. That figure is now probably low 20s because of the point I made earlier about finance leases. So we have to turn the debt around, take the gearing down. When we get to that point, we're clear line sight of how we're going to ensure that the metrics are in a robust place for a credit rating and are not going to slip backwards, then we move to the next set of priorities, which in the first instance would be almost certainly stopping the script. That is unlikely to happen this year looking at where the oil price is. And one of the big drivers will be where does the oil price go in terms of timing. But the oil price is not the long term driver. The sequence of events I've just stated and the logic will apply. It just may take longer if the oil price stays lower for much longer. But some recovery of oil price together with delivery of everything that I probably already talked about in terms of improving the cash flows and reducing the debt, should, within the next 2 to 3 years, lead to switching off the scrip. And at that point considering what we do at buybacks. But these things may be sequential. And therefore, we do need to see the gearing down in the low and still trending lower before we have that discussion. Our next question comes from Rob West from Redburn. Please go ahead. Your line is open. Hi, Simon. I'm chomping at the bit to ask questions about your integrated gas split out, but I'll keep them high level and say the really nerdy detailed ones. My main question for you is why can't we have more disclosure specifically around the things we'd really want to know like the average realized LNG price or the cash contribution from Pearl, which is a very unique asset in that portfolio. Can you say what those are? Is there a reason why you specifically can't say what those are? And then my second question is just on the divestment targets. I think you mentioned $3,000,000,000 coming in from Shoah Shell, Shell Malaysia MLPs and Denmark. Can you tell us what is the annual cash generation from those assets? And how do you think about the annual cash flow you'd be willing to divest in that $30,000,000,000 divestment target? Thank you. Thanks, Rob. Disclosure, I appreciate the interest. Unfortunately, I would like to think we're probably as transparent as anybody of our scale and size. If we were a 2 asset company, then we maybe need to be a bit more disclose give more disclosure around key assets. Pearl remains one of the most valuable assets in the portfolio, if not the most valuable single asset. But it's also a confidential one in terms of the agreements between ourselves and the Qataris. So it's a very strong cash flow even in today's oil price environment because it's essentially it's not production sharing, it's a revenue sharing agreement. But it's been a great cash generator both shale and for the Qatari government. The average realized LNG price, I don't have a pushback reason why we're not giving it. So I'll take that one away and think about it. I just know for sure it will be actually quite difficult to calculate at the moment because we're still working on the systems. I did mention in the press conference this morning that the fact we even have these results at all is the result of an enormous amount of effort by 2 teams, primarily in Reading and here in The Hague to actually take 2 sets of accounts and bring them together. So point taken, we'll think about it. And $3,000,000,000 of asset, well, any asset we sell, we're selling the associated cash flow, and that's what's being valued by the purchaser. It's not easy to explain what you might think of in terms of modeling, but there's probably on average because we're selling quite a lot of assets, it's what we sell is probably cash flow, same return on the what we sell it at as the average cash flow on capital employed in service in the business. Capital employed in service in the business is probably not far short of $200,000,000,000 So yes, we lose cash flow, but it's not that major and it's probably not that different from the average in the portfolio once you look across. We are at the stage of relooking, I think, fundamentally at the cash flow generation characteristics of the assets we've acquired and how they play it, not just in terms of the next 6 months, but the longevity, the risk profile and which of those assets really form the part of the strategic intent, the long term portfolio that we're trying to create? And that is very much the sort of discussion that we'll address under the strategy discussion on the 7th June. I won't go any further on IG disclosure, but thanks for the question and the suggestion. Next question please. Next question comes from Jason Gammel from Jefferies. Please go ahead. Your line is open. Thanks very much, Simon. I just had a couple of questions around Motiva actually. First of all, I was hoping that you could address some of the factors that led you to decide to dissolve that joint venture. And then second, if I look at the assets that you have elected to retain, it would seem to indicate a preference for gasoline manufacturing capacity and light cracking capacity in preference over diesel manufacturing capacity and being able to crack the heavy barrel. Have I gotten that right? And then finally, I'll take a futile one here. Do you have an order of magnitude in the amount of cash that you think you might take out of the transaction? Thanks, James. I have to be careful here because some of this is still commercially sensitive and under negotiation as to how we finalize the deal. But why dissolve? The original joint venture was 1998 for 20 years. So there was I would call it a prenup, but there was an opportunity to look at do we want to continue? And do we still have the same sort of level of strategic alignment and belief that we can create more value together than we can apart? Now yes, we can create value together, but we said, well, if we do split the assets, is there a way in which we can allocate them where we're both more comfortable that we can manage the value chain? And that's ultimately how it ended up. And yes, we could have taken 1 or other set of assets, but at the end of the day, a negotiated deal is what people will accept. And a balancing payment is likely to be made, but it may be made in terms of taking on debt or otherwise. So you might not see cash actually flow. So the way the assets are structured, that balance payment per se is clearly going to be us not in the other direction. So likelihood is it will contribute to the divestment proceeds. It just may not show that way in accounting terms. And it is most likely that Motiva will move from being an equity associate, so it's something where we only see cash flows when dividends are paid out. It will move to a fully consolidated basis, but only half or just less than half as much. So there will be some changes as and when we conclude the deal. But first of all, we have to conclude it and we'll try and be as transparent and helpful as we can because it's a big piece of kit and the numbers are nontrivial and it will impact everything I said about OpEx and CapEx for example. Thank you. Next question. Our next question comes from Anikak from Exane BNP Paribas. Please go ahead. Your line is open. Thank you. Afternoon, Simon. Just two questions, please, if I can. One, you talk about the urgency of the debt and then obviously there's a big focus on simplifying that upstream portfolio, which if I sort of think about the buckets you laid out, deepwater, integrated gas, I think it might even be a bit light here, but there's at least about 1,000,000 barrels a day, which is in some way sort of non core. And I just wondered if there's a or at least why would you not consider a spin off for an IPO potentially if that sort of becomes the best option in terms of disposals and maybe even get the debt down that way? And then my second question, that €30,000,000,000 guidance, just in terms of can you just help me bring that number, capital invested, back to capital expenditures in terms of the cash flows? It seems as though it's sort of trending around €27,000,000,000 And I just wanted to get that cash flow equivalent number based on that guidance, please, if possible. Thanks, Henik. I may need to ask you to clarify the second question. The first one, the focus on simplifying the upstream, why not IPO, part of it or otherwise? Yes. Why not? Well, the primary reason is it's $45 oil. So what how attractive would it be in the market? But there are no primacy reasons why we wouldn't look at such a monetization rate if that were the best way to create value. It's not obvious that in today's market it would be, but the teams we have looking at monetizing assets are looking at a very wide range of assets that if we were to divest all of them, it would be considerably more than $30,000,000,000 coming in. But it's a variety of types of transaction, Motiva being one of them, for example, with Split. There are other transactions which could involve markets. We did actually create the MLP, the IPO in the U. S. So it should be clear that not only we're open to it in innovation and idea terms, but we are able to deliver such complicated deals and execute over a period of time. So that's very much on the agenda, but all of it is subject to what will the market take at any given point in time. And just on the second question, I'll try and answer and then see if it's correct. When I talk to $30,000,000,000 capital investment, that isn't all cash in any given year. The two main factors that differ are finance leases when we bring an FPSO on stream and exploration expenses, which actually pass through the CFFO and not through the capital the cash used in investing on the cash flow statement. So €30,000,000,000 of capital investment may well indeed translate to something this year around €27,000,000,000 of cash used in investing on the cash flow statement. So indeed there is a bit more a bit better free cash flow position than you might otherwise expect. And you can see some of that in Q1 where the capital investment was €8,100,000,000 but the cash flow in CapEx was somewhat less than that if you look at the cash flow statement. Does that cover your second question or was there a more specific point? No, no, that's in the year. That's perfect. Thank you. Great. Many thanks. Next question? Our next question comes from Tietz Burkhalter from ABN AMRO. Please go ahead. Your line is open. Yes. Good afternoon, Henry. Two questions on Integrated Gas and the BG contribution. Can you maybe tell what the BG contribution is in the Integrated Gas segment? And secondly, looking at especially the production costs in integrated gas, can you tell me why they're so much higher than they used to be? Is that only BG4 1.5 months? First question, about 200,000,000 dollars generated in IG from the BG assets, which would include the trading contribution as well. The production costs, I'm not sure I have a response for you, to be brutally honest. The production costs, if I were to think about it, would include Queensland, which by definition are relatively high compared to our average because many of our IG assets are associate companies and we don't show operating expense per se. They're accounted for in associates. So the operating cost is primarily in Pearl and then maybe 1 or 2 other operating assets, but it's not shown as high. Whereas Queensland Gas, a bit as I mentioned earlier, the upstream bears the cost of the effectively the tolling cost of running through the LNG and the midstream assets. So that may be one of the drivers. But there are non special factors in there? Yes, although they will persist. So if I'm right that it is in fact Queensland Gas, that will happen. It's also true by the way that Opel GTL had a big major shutdown that ran over the quarter end and the plant has just come back online in the last couple of days. So that major shutdown and also much lower production was also a factor at the back end of the Q1. Next question please. Your next question comes from Asit Sen from CLSA. Please go ahead. Your line is open. Good afternoon, Simon. Two questions, please. So first on Brazil and second on LNG. On Brazil, could you quantify production or current production or production in the quarter since it looks like 1 FPSO started there, particularly since Brazil is such an important part of the story, any color? And second on LNG, could you explain or help us understand the impact of Sabine Pass LNG exports on Shelf Financial since there is a fixed liquefaction charge. So ramp up is expected to be fairly substantial. So wondering if you could help us frame for us the potential impact on a broader Shell portfolio, please? Thanks, Hassett. On the Mine Pass, the you're right, it's fixed liquefaction on top of effectively, we put the gas in the Henry Hub and lift. We haven't really lifted much gas yet. It's still early stages and we've not been the lifter I believe. So the most of the volume I think in that first rate does come our way, but it's not yet had a major impact. And yes, we will need to ensure that we are able to sell the gas to cover the liquefaction costs. The good news is, in our view, that's the lowest cost LNG that is available from the North American content, including all the other projects that so far passed FID, which is a good place to be in. In fact, Henry Hubbell's lowest also makes it potentially attractive to take the gas over either to Latin America or to Europe. Brazil production, absolutely right, major factor. We're running around 200,000 barrels a day shell share at the moment in Brazil, of which our own sort of legacy is around about 30,000 barrels a day. So the BG contribution around 175,000 barrels a day. It is ramping up all the time. So we're seeing great well performance up to it will be 40,000 barrels a day on some of the wells if we open up completely. And that's one of the reasons that we're seeing lower costs than we'd originally envisaged. 2 further FPSOs to come on stream this year, so we should have 9 up and running by the end of the year. So we should just say a little bit more every quarter for quite some time to come. There are actually 16 FPSOs in progress, and I think the last one comes on in 2019. So, so far, so good. And the actual ongoing production, the decline rates in some of the wells, some of the reservoirs, very low. But still very early days to be talking about impact on resource and ultimate recovery. Many thanks. Next question. Our next question comes from Jason Kenney from Santander. Please go ahead. Your line is open. Hi, Simon, and thanks for your time with questions today. I just wanted to go back to cash flow as well. And here, I'm looking at the medium term sensitivity guidance, which I think in the past you have said would have been around $3,000,000,000 to 4,000,000,000 dollars for every $10 per barrel shift over the next couple of years, maybe moving towards $4,000,000,000 to 5,000,000,000 dollars 2018 onwards. Now I was looking at some of the consensus estimates when the Varo research guys pulled together the annual numbers and comparing that to the oil price estimates that we used to drive that consensus. And I mean, the average analyst there has got some sort of $7,000,000,000 shift for every $10 per barrel in the next few years, which is potentially over egging the cash flow. But I mean, is that a possibility or is it something I should be ignoring? A $7,000,000,000 I think you should ignore, Jason. The production that we see going forward needs some growth before we get to the $5,000,000,000 of earnings and cash flow for every $10 sensitivity this year is probably closer to 4 than 5 as we ramp up. But as I noted earlier, effectively, the new BG production is highly price sensitive. Most of it is directly price sensitive In Brazil, Australia, Kazakhstan, U. K, Trinidad, those are all the primary countries that we're adding. And of course, our own new production is in the Gulf in Australia, also in Kazakhstan. Therefore, basically, every barrel brings some kind of price exposure with it. So we are becoming certainly more price sensitive as we go forward, but it will be really 2017, 2018 before we hit the full $5,000,000,000 sensitivity. But we don't have any scenarios that I've seen where it goes above 5. Okay. I believe no more questions or that's the end of the call. We're at the end of the time. So what I'd like to do is say many thanks for your questions and for joining the call today, so everybody. Reiterate again, the Capital Markets Day, London, Tuesday, 7th June. Everybody on the call hopefully will be able to join us. I will be joined by Ben and by most of the executive team. Great chance for you to hear a bit more about strategy, intent, some of the opportunities, some of the challenges that we face. So very much look forward to talking with you all then. And between now and then, please feel free to connect with the IR team and help with your own modeling because I think it's in everybody's interest that we all understand this better quickly so that as we go into Q2 and Q3, we're all sort of working to the same expectations. So thank you very much. Have a great day.