Welcome to the Royal Dutch Shell 2021 Q1 results announcement Q&A session. Today's session will be recorded. People dialed in, if you have a question, please press star one. If you wish to be removed from the queue, please press star two. I would like to introduce Mrs. Jessica Uhl and Mr. Wael Sawan. Welcome everyone to the live Q&A on Shell's Q1 2021 results. This quarter's performance is a result of the strength of our portfolio and how well-positioned we are for the economic recovery. Starting from today, we will bring different business directors to the quarterly live Q&A to give you an opportunity to hear directly from our business leaders. Today I'm joined by Wael Sawan, our Upstream Director. With that, let's move to questions. Please, could we have just one or two so that everyone has the opportunity to ask a question. Operator? Thank you. We will now begin the question and answer session. People dialed in, if you have a question, please press star one. If you wish to be removed from the queue, please press star two. We will now take our first question from Oswald Clint from Bernstein. Please go ahead. Thank you very much, Jessica and Wael. A question for both of you, please. Really helped by all the new data this morning. Jessica, on refining and chemicals, it looks like, or do we need to get your indicative margin back up closer to the $5 per barrel level to really eradicate the losses you're still seeing in refining? It doesn't look like you can do too much in OpEx, and I wouldn't mind if you commented on any material RINs impact that you're suffering. On chemicals, could you describe really the margin strength you're seeing? Would you characterize it as demand led across your products and businesses, or is it a function of the Texas freeze and some of the steam cracker maintenance that you're seeing? My second question really for Wael, it was a cold quarter. It's turning out to be cold again, potentially this quarter. I'm looking at European upstream business. You used to be able to pump that, really get some seasonal volumes up 2 Bcf/d, 3 Bcf/d. You're currently only doing 1.7 here in the first quarter. I know Groningen has curtailed quite a bit over the last couple of years. Could you talk about your seasonal flexibility in your European gas basin to capture cold spells, please? Thank you. Great. Oswald, thanks for the questions. I will start with the first and then hand over to Wael. In terms of the margin environment and the impact on the bottom line, indeed, we saw improvements in our margins in the first quarter, certainly from the fourth quarter of last year. They're still at relatively historic lows for the sector, and that's clearly having an impact on our bottom line. Getting back more towards the kind of normal steady state, which is a couple of years ago, three or four times what we're currently seeing today, and that will have a material impact on our bottom line. In terms of the chemical margins story, it's a story of the strength of the intermediates, primarily, where we saw styrene monomer going up to over $1,100 a ton during the quarter. That was for a short period of time. It then came back down to more normal levels, but that certainly helped the chemical business, as did some other intermediate sectors as well. That is a function of demand and some strengthening in the economy, certainly in Asia is driving that. I'd also say that the strong chemical results were also a function of actions we were taking within the business to drive sustainable increased margins for that business. We've retooled our kit in terms of its capacity to use different feedstocks and to produce different products, and we're also seeking new customers and new markets. That contributed some $100 million-$200 million of increased margin that we experienced in the quarter outside of what was happening from a macro perspective. Wael? Thanks, Jessica. Also thank you for the question. Indeed, we do have the flexibility to be able to ramp up. Actually, you see it in the seasonal ramp up, for example, going from this quarter to what we're guiding around next quarter. NAM alone, our Netherlands asset, could swing in the equivalent on a barrel of oil equivalent basis around 150,000 barrels a day. That swing we use. Of course, we also supplement it with LNG imports. We try to use our multiple different supply points to be able to make sure that we fulfill those demands. I wouldn't say there are massive differences from where we were in the past. I think it's just a function of where the markets are. We respond to those market realities as they emerge. Thank you. Next question. Okay. Very clear. Thank you. Thank you. We'll move to our next question from Christyan Malek from JP Morgan. Please go ahead. Hi, Jessica and Wael. Thank you for taking my questions. I have two, please. First of all, just around the capital frame, the scope for delivery of below $65 billion net debt threshold. How do you see that accelerated at prevailing macro levels? In other words, what extent could a macro mark-to-market, including gas refining, accelerate timing of reaching the $65 billion net debt threshold? Once reached, can you just sort of remind us what determines where cash return will outturn within the guided 20%-30% of cash flow, including working capital range? The second question, Wael, it's great to have you on. In your recent energy transition strategy day, it was said that the planned capital investment of $8 billion in the upstream business in the near term is well below the investment level required to offset the natural decline in production of your oil and gas reservoirs, and will not sustain current levels of production. That concerns me only because having, back to my first question, you low your net debt. We're all looking forward to cash return. Should we be surprised or concerned that we could see a major hike in upstream CapEx over the next few years? What you've guided to is essentially the level that we should incorporate, and therefore the free cash flow that you're ultimately going to generate is truly free, so to speak. Thank you. Thank you, Christyan, I'll start with the first question, then hand to Wael for the second. In terms of our delivery against our ambition, our target to get to $65 billion of net debt, great progress in the quarter. As you see, net debt down by some $4 billion. That being driven by the strength of delivery of our portfolio, of our operations, with working cash flow from operations, excluding working capital of some $12.7 billion with a very mixed macro. We had strong Brent prices. Of course, as just mentioned earlier, the refining margins higher than the fourth quarter. Still quite low. The marketing business from a volume perspective also not as strong as we've had, certainly on a steady state basis. Again, a mixed macro. Very strong cash generation, which drove that net debt reduction. Very pleased, and I think that can accelerate improving the balance sheet at a pace, certainly faster than we anticipated last year. In terms of the pace of the recovery we're seeing in prices and margins. We don't have a specific timeline in mind in terms of achieving that $65 billion. We want to do it sooner rather than later, but we want to absolutely achieve it, and we want to achieve it in a way that's sustainable. It's not something we just kind of touch and move away from, but where we actually structurally are in a better place, and that is expected to be sustained as we look forward. In terms of the 20%-30%, we think that's a good range. Of course, it's going to be driven by the actual circumstances. The strength of performance when we reach the $65 billion in our outlook will influence where we land in that 20%-30% range. I hope we're in a very healthy position and we can have a healthy start to that next step in our capital frame program. The last thing I'll say before I hand over to Wael is that we're looking to take each step with respect to our capital allocation in a disciplined and measured way. The first priority in that next step is shareholder distributions. That is our first priority in terms of shareholder distributions. That's how we've structured it. We'll then look to increase capital and continue to strengthen the balance sheet. Each of these pieces will be done in a measured way. We're not going to kind of swing from one place to another. I think that measured approach will be important for us in the coming quarters. Wael? Thanks, Jessica, and Christyan, thank you for the question. I think, let me just step back for a second. The fundamental role of the upstream pillar within our strategy is to deliver that free cash flow for the group, both to be able to fund the shareholder distributions, but also to be able to fund some of the growth ambitions we have in our growth pillar. The way we are positioning ourselves is to be able to have anywhere between $7 billion-$9 billion of capital through the cycle. We want to make sure that we are not under-investing or over-investing. We're trying to be steady in the way we are, and disciplined in the way we are allocating capital. What we try to also indicate is that our value over volume strategy means that not every single barrel is equal. We want to try to focus on the most attractive barrels in our portfolio, and you see us making the moves, including, for example, some of the divestments we announced in the past quarter to really focus our barrels on the ones that we feel are differentiated and are our core positions. As we look forward over the coming months and years, we anticipate that our capital will continue to be within that range of $7 billion-$9 billion, and that we will make choices to high-grade portfolio opportunities, new CapEx, or new growth opportunities by staying within that $7 billion-$9 billion. We've also, of course, guided that any incremental step up in capital after we get to the $65 billion net debt, 50% of that will go first and foremost to the growth pillar. It's important that that frame will continue to be applicable as we go forward. Great. Thank you. Next question, please. Thank you. We now move to our next question from Lydia Rainforth from Barclays. Please go ahead. Thanks, good afternoon, both. Two questions, if I could. The first one, Jessica, in the remarks from the video, you talked about the virtual power plant that you've bought over the course of the quarter. Can you just work through how that actually works in practice and the additions that it might make towards cash longer term, and how that actually makes the profitability? Secondly, Wael, on the cost side, if I look at the cost per barrel in the upstream, they don't really seem to have changed very much, looking at the disclosure. Is that a fair characterization or was it just something in the quarter that meant that this is probably the level that we should be looking at going forward? Thanks. Great. Thanks, Lydia. I'll start with the first question again, and then hand over to Wael. The Next Kraftwerke purchase of the business in Germany, part of our power business and building out that portfolio. Really interesting opportunity for us and an interesting business model. You don't hear a lot about these virtual power plants. What is it trying to do? As we are building out the renewable power infrastructure, part of that is distributed power, people having solar panels on their homes or small scale wind, in some circumstances. That individual power source may be more or less needed during different points of the day, and you may have other customers outside who don't have access, don't have those same assets at their own home, who are also interested in renewable power source as well. The concept is how do you drive the right level of efficiency, create markets where that renewable power, when it's available, can be made available to the customers that want it? That requires coordination. That requires technology. That requires innovation from a business model perspective to match demand with supply. It's an interesting new concept that's being developed within the power sector. Again, using existing assets and trying to drive as much value from those assets as is possible. It's a good example of when we are electrifying the energy system, how these new technologies will need to be developed, and these new flows of energy will need to be developed, in order to make the most use of the assets that are put onto the grid. As I said, match customers with supply. That's the concept, and we're looking forward to driving good returns with this concept as part of our overall power strategy. Wael? Yeah, thanks, Jessica. Lydia, thank you for the question. I think it's important when we look at the unit operating costs to look at the underlying operating expenses. Indeed, the headlines are relatively flat. For example, if you look to Q1 of 2020, that's partly because they are loaded with things like Reshape provisions and the like, which is our restructuring. If you take the underlying cost, we have gone down by around 10% over the past year, we are on a glide path to achieving roughly 20%-30% reduction in our cost structures by 2025 when compared to 2019. Some of that cost reduction has indeed happened over the past year. We see more potential, of course, as we restructure the organization at the moment, which is what we're going through at the moment. We already see significant costs coming out. We look to continue to, for example, leverage digital opportunities where we continue to leverage some of our contracting options to be able to bring those costs down. We're also, of course, seeing some cost removal as we divest assets, and we're trying to make sure to manage our overhead structures in line with some of those divestments to make sure that our unit operating costs move closer towards the $7 a barrel that we are targeting. If I could just share maybe one example is in our shales business, which actually was slightly ahead of the Shell-wide restructuring effort. There, what we have seen over the past year is a 30% reduction in the overall costs. That has already started to feed straight into the bottom line. You can see it, for example, in the Permian where we've now had three quarters in a row of positive free cash flow. We're seeing these examples, and now we're trying to expand it across the organization, not just in upstream, but much more broadly across the organization. Thank you. Holly, next question, please. We will now move to our next question from Michele Della Vigna from Goldman Sachs. Please go ahead. Thank you very much. Jessica, two questions for you, if I may. When you started the buyback the last time around, you had a gearing target. You started the buyback when you thought you had line of sight for reaching that gearing. I was wondering, would you use a similar framework this time around with the $65 billion of net debt in mind, or would you want to actually reach it before you would start the buyback? My second question really is about your cash flow in the quarter, which was exceptionally strong and which really outperformed the EBITDA, the earnings. I was wondering if perhaps you could lay out some of the moving parts there that really drove such a strong cash flow, and how much of that you think can continue in the coming quarters versus what was quite unique to Q1. Thank you. Great. Thank you, Michele. On the first question, with respect to the $65 billion target that we're seeking to deliver on, we're looking to absolutely achieve it and to achieve it comfortably. To be at or below $65 billion before we start the share buyback program. We want to be well-positioned for change and different potential outcomes so that strengthened balance sheet is sustained as we move forward with our capital allocation program. As you see from the cash generation in this quarter, I think we're well-placed to move towards that sooner rather than later. In terms of the strength of the cash flow, I'd start by saying that I think this quarter reflects the quality of cash flows we've been generating for the last few years, frankly. It is the outcome of strategic choices we've made, portfolio choices we've made, and the quality of our operations across the company. The cash flow's coming from each of the businesses, you can see that. It's not just one part of the business that's outperforming, but really strong cash generation from upstream, integrated gas, chemicals, and oil products. There is some macro help in there, which we've referenced earlier in the conversation. Certainly, on the upstream side, the return to above $60 has helped. Integrated Gas, there's been some help, but it's a bit of a mix because JCC minus 3 was at some $40, $44. We're not seeing the full effect in terms of the macro positive impact on IG yet, and yet we're still generating significant cash from that business. Marketing, very resilient earnings and cash generation in a very mixed macro, where the volumes are down, the margins are softer than they were in the fourth quarter, but yet we're still generating very strong earnings and cash flow. I think first and foremost, our cash generation is a reflection of the strength of our company, our assets, our people, driving those financial outcomes. That being said, there were a couple of favorable elements to our cash generation this quarter. We did have some inflow from our derivatives of some $600 million in the quarter. That helped. We had a little bit lighter cash tax payments in the quarter as well. Of course, we have the COSA effect. If you take those things into consideration in terms of those providing some benefit in the quarter, I'd say in this macro, the steady state cash flow from operations is somewhere from $10 billion-$11 billion. I think, again, very strong outcome, no matter how you look at it, particularly given that I think there's going to be more upside potential, particularly in our oil products business, as the margins hopefully return, as the economy strengthens. As Wael said, we're doing great with the upstream business. Integrated gas, there's still opportunity in terms of further macroeconomic improvements, generating even further cash. It was relatively light from a trading contribution perspective this quarter. Again, that's further upside for us on these cash generation numbers. Hopefully, that's helpful. I think I answered both. Clearly, yeah. Thank you. Thanks. Holly, next question, please. We move to our next question from Jon Rigby from UBS. Please go ahead. Thank you. Hi, Jessica. Hi, Wael. Couple questions. The first is just on integrated gas. There was a long period of time where you made a consistently high number that was probably, on the whole, better than people expected, and is about harking back. You were sort of the smartest guys in the room in this thing, and yet the last three quarters, two of which I think by common consent have had some unusual conditions in them. You've actually reported quite poor trading results. I just wanted to understand, is that just unfortunate? Is there increased competition? Are your competitors getting smarter? Is there a structural issue starting to emerge in that business? Because it has been a differentiating business for you for quite some time. I just wonder whether there's any sort of diagnosis you can give us on that and some reassurance that things will normalize. The second question is just to go back to the points that you made about the buyback and the trajectory towards it. I don't expect you to sort of fill in the gaps, but I think the points that you make are right, is that although cash flow was very strong in the quarter, there's actually quite some weak spots in it as well, certainly from a macro perspective. As we stand here right now, you'd probably guess that 2Q macro is going to be better, not worse. Obviously, there's some moving parts around working capital, et cetera, that you could expect. On a previous call, one of your peers, a peer CFO, said that management within the organization are very incentivized around working capital. It would seem to me that a reasonable person could make a projection over 2Q and come to a point where working capital could easily be the balancing point between whether you hit 65 or not. I think common consent would say that one of the issues on your shares is the free cash flow yield is not being represented to the market because your dividend yield or your dividend payout is so low. What I'm trying to get is a measure, a metric or sort of an acknowledgment that some of the achievement of that 65 is within your own control, and how incentivized you are to hit that number. Fairly clearly, I think it would add value to the business if you were in the market buying back stock. Thanks. Great. Thank you, Jon. Two important questions. Starting with Integrated Gas, the business continues to perform overall very strongly. While in the last couple of years, there have been a number of quarters where we have achieved, as you said, some exceptional results. I've tried to be clear in those quarters to note that these were relatively exceptional quarters. That capability and that capacity for those exceptional quarters still exists within our business and within our company. That's a function of the capability of our trading and optimization organization, as well as the quality of our assets. However, in this quarter, that didn't come true. Certain quarters that has been true, and I think it's more true on average than not. In this quarter, that didn't happen. I don't see anything structurally to be concerned with. There's a bit of an operational mix set of effects in terms of where cargoes are sourced and what kind of flexibility is on offer and the market conditions. There were some spikes in the quarter in terms of pricing, but very few trades going on around that pricing. It wasn't a kind of long, sustained opportunity set or an opportunity set where many participants were able to play. I think it's a market circumstance. There's a bit of portfolio and operational considerations as well. The fundamentals of the business, I believe, continue to be very strong. What is perceived as a somewhat weak quarter, we're still generating over $3 billion of cash, excluding working capital, and over $2 billion of cash with working capital in what is still a somewhat softer macro, particularly from a JCC3 perspective. I think still very respectable results from the integrated gas business, and a lot of strength in the fundamentals of that business that I think we'll continue to benefit from. Important to continue to focus on the fundamentals of the company and the cash generation that we saw in the first quarter continues the trend that we've achieved over the last four years, which is the highest cash flow from operations generation of anyone in the sector. If you look at 2020 in total, it was 50% higher than the next closest peer. The substance, the fundamentals of the company continue to be very strong and continue to demonstrate that strength in our cash flow generation numbers. Working capital, I'm not concerned with at all. The number is relatively high this quarter. We are one of the largest traders in the world. We are one of the largest companies in our sector. That quantum is consistent with the company that we are. Importantly, we manage working capital very carefully. We demand high returns on the use of working capital, so those are good value accretive decisions. Managing working capital can be a tricky business for a company. You either might look for financing and someone to finance your receivables. That's usually more expensive financing than using debt. If you try and trim your inventory or your volume, you may be trading off opportunities in the market. To do that for one quarter to look good or to manage a number down hasn't been a priority for us. We stick with the fundamentals and working capital sorts itself out. I believe that will continue to be true, and I'd like to use working capital primarily from a value-oriented perspective, which is how we currently run it. I think the substance of this company and the level of cash generation will allow us to sustainably achieve the $65 billion at the right moment in time, and then we can act from that position. Thank you, Jon. Next question, Holly. We'll now move to our next question from Martijn Rats from Morgan Stanley. Please go ahead. Yeah. Hi. Hello. I've got two questions, if I may. Jessica, I think this is probably for you. I wanted to ask about the Raízen IPO. About a month ago or so, there were some headlines suggesting that that might be in the cards, and I think there's been some Reuters, Bloomberg coverage saying that a number of banks have been sort of tapped, so to say. That process seems to be ongoing, and I was wondering if you could say a few words about it. Is that something that Shell is driving, or is it just your JV partner, Cosan, who's sort of driving this? Could Shell stake be diluted or not at all? Also, if this is successful, could this be sort of a template then for other sort of types of assets that Shell might own? The second one is probably for Wael, just a fairly straightforward question about the Permian. Look, we've seen a very strong rebound in the Permian rig count. Frankly, to be honest, the Permian rig count is rising like it's 2016. The exception there is the majors, including Shell, have barely added any rigs. I think Shell is operating three rigs or so, as far as I can see. I was wondering what thinking is about the Permian and activity levels. Great. Thank you, Martijn. Let me start with Raízen and then hand to Wael on the Permian. I'll start, first of all, that Raízen is an important partnership for us. It's been a very successful partnership with Cosan, our partners in the venture in Brazil, making us a leader in terms of ethanol fuel production globally. In terms of the presence in the value chain, it's been very important to us, particularly given our strategy going forward with respect to low carbon fuels. It's been very successful financially as well. We're very pleased with the nature of the partnership and the performance of Raízen over the last number of years, probably about 10 years now. We've made an important acquisition through Raízen, which expands our production. We remain very committed to that partnership and to that entity. Our partners often are looking at different ways of financing the entity, and some of that may make it out into the news. What I'd want to communicate is that the Raízen venture is successful. We're expanding it. We see it playing an important part in our portfolio going forward. We want to leverage that not only in Brazil, but more widely in terms of our low carbon fuel approach. No interest in terms of any material change in our participation in that business. With that, I'll hand to Wael. Thank you, Jessica. Martijn, thanks for the question. I think inevitably you are seeing an uptick in the activity at the moment in the Permian and beyond. If I compare the number of major projects across the oil and gas industry right now, we're getting closer to 25 FIDs this year versus 10 last year. Having said all that, 25 is still half of what it was pre-COVID, and I suspect if one looks at the numbers around the number of rigs, while we've seen a big step up over the past few months, it still is well below where we had seen in pre-COVID, in terms of the Permian specifically. I think you have a number of different dynamics at play, Martijn, at the moment, including, for example, players who are trying to bring production to be able to against their hedges. You have the multinationals, as you rightly said, have been very, very clear around value over volume. At least in Shell, we are very focused on making sure that we can sustain healthy organic free cash flow coming out of the Permian. We do have some 3- 6 rigs on any day because of our NOV share as well. We continue to be very measured in our approach, because our number one priority continues to be making sure that we get to the net debt levels, and that applies to all of our CapEx across Upstream. We are really focused on the highest value opportunities that allow us the value creation in the short term. Who knows where the Permian is going to go over the coming months. I think the noise across the patch right now is enhanced discipline. We see that in our NOV, in our non-operated ventures, so with our other partners. We see a much more disciplined approach to it. I hope that continues because I think that's going to be a key part of beginning to see the value coming out of shales for the industry. Thank you. Holly, next question, please. We'll now move to our next question from Biraj Borkhataria from RBC. Please go ahead. Hi. Thanks for taking my question. Two, please. The first one's on your transition strategy. Because you're incorporating Scope 3, thinking about the business mix, you sell four times more oil than you produce in gas. I think the ratio is two- three times. Just thinking about as you build out your low-carbon business, is there any reason why that ratio between off takes versus equity electrons can't be higher than that four times? Because when I think about your 2030 electricity target, and how much generation you might need, there's obviously a ton of capital flowing towards low-carbon generation, and there's likely to be a more capital light way of getting to your targets. I just wanted to get your thoughts on ratio of that. The second question, just to follow up on the Permian. Wael, you mentioned free cash flow generation for three quarters in a row. Obviously, that's on a relatively low rig count. Could you confirm whether you would have generated free cash flow if you assumed the amount of rigs required to hold volume flat or do your current production reflect that? Thank you. Great. Thank you, Biraj. Just to mix things up, I'm going to ask Wael to go first. Sure. Thanks, Jessica. Biraj, thank you for the question. I think it's important to say that this is not the first time we have free cash flow generation from the Permian. Before the COVID macro realities, we were already running free cash flow positive for a number of quarters in the Permian. Of course, it's always a stance. We're trying to make sure that we are both managing the sustainability of that cash flow potential through managing the production, while at the same time trying to make sure that we invest sufficiently to be able to keep that plateau going. I would say that we have not typically ventured too far away from the 5-10 rigs. We would be in a space where we are able to continue to generate organic free cash flow, albeit a smaller amount, if we were to try to fully sustain. Let me make a point. Over the last 12 months, we have seen a small dip in our Permian production, roughly 20,000 barrels a day or so, and that has been driven indeed by some of the cash preservation measures that we took in 2020. We now feel that on the investment basis we have going forward, we can at least sustain and choose when to step up further production in the coming months. As I said earlier, we're being very cautious around when we do that, and we're also just trying to keep an eye on the overall supply chain and make sure that we are positioned to benefit from the supply chain opportunities in the market now that may not be there in two, three years' time if further inflationary pressure kicks in. That dance is what we're trying to manage at the moment. Jessica. Great. Biraj, back to your first question, and hopefully, I'm understanding the essence of the question, and if not, you can let me know or let the team know. I think the way you were framing it in terms of how we run Shell today and the business model that we deploy, which is that we sell more than we produce, speaks to how we create value today, how we are able to leverage our integrated value chain to some extent, but also through trading and supply, find further ways to optimize, whether it be inputs into our refining and chemical assets or the outputs, and importantly, the end products that we sell. We do that today in our oil and gas business around the world. When we think about the energy transition and we think about power, we have that same model in mind. That's part of what we've been conveying in terms of our power strategy, that we don't necessarily need to build and hold and maintain capital in the generation assets in order for us to achieve our ambitions in terms of the amount of electricity that we look to sell over the coming decades. A good example of how this can work in practice that I've given is our asset here in the Netherlands, Blauwwind, where we have some 750 MW total generation. We went into that at, say, 40% equity level. We have sold that down to 20% equity level, and we have financed it. Yet we have access to 50% of the megawatts that are being generated from that asset, even though we have a much lower equity percentage. Then through financing, the capital employed that we actually have is some $60 million-$70 million. It's a great example of how we can get access to megawatts without necessarily owning the entire asset and part of how we're going to look to be rigorous in how we deploy capital and hopefully maximizing the value we achieve from the capital we deployed. Some of that will go into the assets. We don't believe all of it needs to go into the assets for us to achieve the level of power sales that we intend to achieve in the coming decades. Thank you, Biraj. Next question. We'll move to our next question from Christopher Kuplent from Bank of America. Please go ahead. Thank you. Good afternoon. Jessica, a question for you. We've seen a number of peers issue more and more hybrid bonds over the years. Just wondered how you look at the capital markets, your cost of debt, and why Shell wouldn't consider doing something similar? Maybe a question for both of you. In your new disclosure, and thanks for that, I think it's very welcome. What would you highlight as the area that you feel has been least understood, where you're trying to emphasize more of your communication, also looking to what looks like a new segmentation going forward? Thank you. Great. Thank you. Starting with your first question on hybrid, and perhaps just a warning to Wael. I'll say a couple things on disclosures, but also an opportunity for you to add as well. From a financing perspective for the group, I look to have the most efficient capital structure and to access the most efficient sources of capital. With debt, in particular, we've been able to secure incredibly competitive debt financing over the years. The nature of the debt that we have and the pricing that we have, I think is what we're looking for and has served us well. Hybrids can have a role in companies' capital structures. At this moment in time, I see it as more expensive financing and not necessarily a good tool for us to be using. There may be circumstances for other companies or at other moments in time where that may look like a reasonable option, but given the company that we are and how we're able to secure financing with our existing balance sheet and relationships, the need to move towards hybrid debt and more expensive financing hasn't seemed necessary or necessarily appropriate for us at this point in time. I'll leave it there. Oh, actually, I'm sorry. On the disclosures piece, maybe a couple quick things. Really excited about the new disclosures we're providing, and hopefully, you're finding them useful, everyone on the call. Please provide feedback to us because we are trying to provide the most useful and insightful disclosures that we can. I think there's a number of areas that I think are important. EBITDA, I think is a good number for us to be focusing on for the company and for each of the businesses. I think the peeling apart the FAS 69 piece and getting people to fully understand, particularly our integrated gas business and what's happening from a midstream perspective and further downstream in integrated gas. Expanding the disclosures on the marketing business and ensuring we get full value for what we're achieving in retail and lubricants and other parts of our marketing and commercial businesses. Those would be some of the ones off the top of my head I would quickly reference. Wael? Thank you, Jessica. What would you add? Chris, thanks for the question. Thanks to the many of you whom have provided feedback to us because this is a topic that we have tried to engage to make sure that we are providing what you need. Thank you for that. If I touch maybe on each of the businesses very quickly, I'd say in Upstream, an important part of disclosure is some of the realization around gas pricing. Typically, we used to give one gas price that combined Integrated Gas and Upstream. Of course, Integrated Gas has much more exposure to export volumes and the like, less so in an Upstream basis. We've tried to separate those two to be able to give you clarity and allow you to model accordingly. We've also tried to break down the production by region. That also gives you a sense of how we're moving against our strategy, how we're focusing on the core positions, the divestments in some of the assets that are no longer core in our portfolio, and you see the balance of oil and gas production swinging into those core countries. I think in integrated gas, a key disclosure has been the strong correlation to Brent and to JCC minus 3, and you'll see that coming through $1.2 billion for each on a $10 per barrel increase. Maybe finally, I think the one that in the downstream I'd pick up is the refining margin. That's a difficult one and a long formula, I'm sure, but I think hopefully gives you a sense of at least how we correlate against various markers. Thanks, Wael. Holly, next question. Move to our next question from Irene Himona from Societe Generale. Please go ahead. Thank you. Good afternoon. Two questions from me as well. Firstly, Jessica, you achieved your full year targeted asset disposals of $4 billion, and apologies if I missed this, but are you updating us today with new guidance for 2021 asset disposals, please? Secondly, Wael, on the upstream restructuring, is there a timetable for completing the restructuring and starting to implement the lean operating model? Is it already been implemented? I wasn't quite clear on whether it's yet to come or if it's happening already. I think you mentioned the $7 unit cost target. Why seven? Is that closer to the cost structure of the 9 core areas? What is the significance of that? Thank you. Irene, thanks for the questions. I'll start with the first in terms of the delivery on the divestment program. Clearly a good start to the year in the first quarter, achieving some $3.5 billion in proceeds from divestments. A number of assets looking to move out of the portfolio were accelerated. We're finding, I think in general, pretty supportive environment, and that playing through in terms of delivering on the divestment program, and importantly that they're the assets that were on the list in terms of how we're trying to upgrade the portfolio, some of what Wael was referring to earlier, and importantly, achieving good value on those disposals as well. Our target is to do some $4 billion on average per year. It can be a bit lumpy. We can do a bit more in one year, a bit less in the next, kind of through the cycle, if you will, to achieve the $4 billion. Obviously feel very good in terms of where we sit today. We're not going to upgrade or update the target at this point in time. The $4 billion per year on average is a good number. I hope to be above that this year. There's that potential, we're not going to upgrade the target and to think of it as an on average number per year. Thank you. Wael? Thank you, Jessica. Irene, thank you for the question. Let me start maybe with the last of the questions, why the $7 per barrel. I think importantly, what we try to do in every single one of our assets is to use the benchmarks that are available in the market to be able to see what is the true potential of that asset that we have. When we look at the aspired portfolio that we want to try to get to, and we look at the potential of that portfolio, we see it as being around $7 a barrel. It's very much based not on a generic number that we compare, but really asset specific and really understanding everything from supply chain ability to productivity of labor, and so on and so forth. That's how we get to that number. Every single asset, not only in upstream, by the way, across the organization, needs to know what its potential is. That's how Ben and Jessica, for example, will challenge me in the quarterly reviews around how are we doing against the potential of those assets. If I then move towards the upstream restructuring, I think it's important to recognize it is fully in flow already. The lean operating model is only a portion of a much bigger change. The lean operating model has been in operation since the beginning of the year. We haven't waited for that, and we're seeing some real benefits already, looking at potentially up to 30% reduction, for example, in our Netherlands joint venture and similar reductions in Norway. We are really sort of running that model very differently. The restructuring is a lot more than just lean versus core. Firstly, we're in the midst of people appointments at the moment. By August of this year, a number of folks will have left Shell, and that is going to be the future organization moving forward. We're re-examining all of our workflows at the moment, how we do work, how we integrate and fully leverage the full strength of Shell, and how we really embed digital into the way we work to simplify the work and make sure that we are unlocking the full value that sits in those assets. It is a journey that indeed has started. Lean is functional already, but I would say that this is a journey of a few years with some important milestones coming in August. Another milestone I would say end of 2022, and then real ambitions to achieve the step change in performance over the next two-three years. Great. Thanks, Wael. Next question, please. We'll now take our next question from Roger Read from Wells Fargo. Please go ahead. Your line is open. Hey, thank you. Good morning. I guess good afternoon to you. Still morning over here in the U.S. Just to jump in, Jessica, on the $65 billion. It sounds like you're probably going to exceed reducing debt by more than the $65 billion target, and probably coming back around on one of the questions asked earlier about overall capital structure five years out, significantly less than $65 billion, or you think that's the right sort of net debt level to think about the company overall? I'm thinking, especially with the energy transition, potentially creates a little more uncertainty whether or not you'd want a lower debt level as we progress through that. Great. I was waiting for the next question, Roger, but I'll take this one. Oh, sorry. No, that's okay. Over here, we ask one, then we wait for you to answer and ask another. Okay, good. In terms of the $65 billion, that was always a way point. It wasn't kind of the destination. We would look to continue to reduce debt over time. We look at debt levels relative to the overall strengths of the balance sheet and the company, in particular, the relationship of debt levels to cash flow levels, would be one element as well as gearing and others. It is always relative to kind of other things that are happening. Given the company we are today and our current understanding, moving more towards something like $55 billion would be directionally, is what I would say based on the company we are today. It is a function of the cash we're generating as a company and the circumstances that we're operating in, which may mean it could be slightly higher or slightly lower. The other thing I would say is that the balance sheet gives us resiliency. It also gives us flexibility. You can also choose to just create a bit more flexibility and a bit even stronger balance sheet, depending on where you are in the cycle. That might be the most prudent and wise thing to do. Directionally, $65 billion was a milestone. We'll keep de-leveraging for the reasons you mentioned, but also to build inherent financial flexibility in the organization as well as to provide the right level of resiliency for the company. Okay. Good. My follow-up question on the energy transition and just sort of looking at some of the additional disclosures you put into the presentation here, I think specifically, slide 26. Integrated Gas and it shows destination pipeline, LNG and gas to liquids. I guess I've always thought of gas to liquids as a fairly energy-intensive process. As you think about the energy transition and moving things along, is that the type of project that ultimately doesn't score particularly well, or am I misinterpreting the overall process there? Thank you, Roger. Given that Wael used to run the GTL, I'll let you answer that question. Sure. Thank you, Jessica. Good morning, Roger. Thank you for the question. I think firstly, you're right to say that the carbon intensity of the GTL process is higher than, for example, the LNG one. Recently, we have announced that we are not going to go forward with more GTL projects in the portfolio. We will really focus on maximizing the value out of our existing portfolio of GTL projects, which is mainly Qatar, but also in Malaysia. That has multiple reasons, including just being very choiceful in the way we allocate capital. Also, of course, every single one of our investment decisions right now, as has been for a while, has a significant carbon intensity lens on it as well. Therefore, that's an element that we keep in mind. The fact that it is carbon intensive, we continue to look at opportunities as has, for example, the Pearl GTL team in Qatar, to be able to operate within envelopes that minimize the carbon intensity of those assets, and they've been making good progress. We continue, of course, to explore opportunities at the right time for example, carbon capture and sequestration, where possible and supported by partners. I think strategically don't expect new GTL projects, but indeed, we continue to make sure that we manage what we have at the moment. Good. One thing I would add. All right. Thank you. The emissions profile of a GTL product is actually quite good. When it's burned, it burns as a cleaner fuel. If you want to lower NOx and SOx emissions when the fuel is used, it's actually a preferred product. This is some of the dilemmas that can emerge through the energy transition. You can have a more intensive process, but the actual product, once it's used, can have more beneficial environmental attributes to it, which many of our customers appreciate. Next question, please. We'll now move to our next question from Lucas Herrmann from Exane. Please go ahead. Your line is open. Thanks very much. Jessica, Wael, thanks for the opportunity. It's great to see another strong quarter where the cash flow is excellent. If I look back over the last two years, your cash flow has tended to be, or your operating cash has tended to be 30% greater than your largest peer. You trade at broadly half that largest peer's value, and you also trade more lowly than most of your European peers. I appreciate that you're doing a lot in terms of the information you're providing us with and the strategy that you've adopted around the individual businesses, to my mind anyway. It seems sensible and very coherent. Is there a point at which you decide that what the market's really telling you is the structure of Shell today just doesn't work for it, and that actually, the value that you're leaving or the value that you're effectively taking away from shareholders by not reconsidering business structure is excessive relative to the potential, maybe over the long term? The adjacencies in your business and your business structure overall, offer to the broader group's ability to transition. In short, at what point do you decide that you've got to do more to have the value that sits in your business, or that I think many people believe sits in your business, recognized in your share price? Lucas, thank you for that really important question. Let me start by saying that I personally believe that we are undervalued in the market, and that the fundamentals of the company aren't being fully reflected in our equity value, in the markets. We have consistently delivered industry-leading cash flows, by business and in totality. We've got key differentiated strengths in our portfolio today, and frankly, I believe we've got the right strategy to ensure that we create value far in the future as well. Lucas, I think we've spent a lot of time over the last couple of years thinking about the energy transition, thinking about the future of energy and the role that we can play. Where we've landed is we have unique, differentiated capabilities that we think are needed, are necessary, and will make a difference in terms of providing real solutions, as soon as possible, but also creating differentiated value. Our presence throughout the energy value chain, the existing assets that we have, starting from the strength of the cash flow we generate in upstream to the strength of our LNG business from a midstream perspective and the strength of our chemicals business, which is coming through. As we reshape our refining assets for a low-carbon future, we can use existing assets and existing capabilities to provide the fuel that's needed in the future, leveraging over 100 years of expertise across that entire value chain. I think, Lucas, it's a story about continuing to demonstrate day in and day out, we've got the right strategy, we've got the right assets, we've got the right people, and you can see that in our financials. We'll provide more information, we'll provide more disclosure. We're going to push hard on transparency, and I think as these dots get connected better by society in terms of understanding what the energy transition will require, what we have to offer, our ability to manage these challenging complex issues and to redesign energy systems, are things that few companies can do that Shell is uniquely placed to do. I believe that we stay at it. We focus on the things that we can control, which is our strategy, which is our portfolio, which is our performance. I think these things will come right and will be reflected in our share price over time. Next question please. We will now move to our final question from James Hubbard from Deutsche Bank. Please go ahead. Yeah. Hi. Thank you. The number 2.5 million charge points by 2030 just catches my eye. I know you sell, as mentioned earlier, 4x the oil product of what you actually produce, but still, 2.5 million, that's like 25 times the target of your nearest peer that I'm aware of anyway. I look at the detail and then it says, including owned by customers and third parties. I guess I'm just wondering, does two and a half million charge points, does that have value in its own right? Like each charge point will make you money even if it's owned by customers, third parties, franchisee holders? Is it, following on from the question earlier, that's just part of your growth strategy. By having the outlet, you can sit in the middle and have this monster trading business in electrons the way that you have in oil at the moment. That's my first question. My second question is, again, just following on from the question just now about LNG and GTL. Your slide does kind of imply an LNG into GTL chain, and it kind of beggars belief that that's actually the plan. Did I read that wrong? Is there some project where you're thinking of feeding LNG into GTL? Thank you. Bye-bye. No. On the second point, apologies that the chart wasn't sufficiently clear on that point. No, it's gas into GTL. It is not LNG into GTL. Sorry for any confusion that may have caused. On the first question in terms of the ambition on the charge points, there are a lot of numbers that fly around with respect to charge points, and all companies are represented differently. There are different flavors. There are charge points that are Shell owned and operated at our sites. There are charge points that are owned and operated by Shell, not at our sites. There are charge points that our partners own, but perhaps maybe we operate. There's getting access to a network, a little bit like your bank card. You can use any, the American term is ATM, any cash distribution site. Your bank provides that interface for you. This 2.5 million touches on all of those different models. A couple of points, there's different value propositions with each of those models. The ones on our site will have their own proposition. Ubitricity, which we purchased in the quarter, that's going to give charging at light poles in cities, creating more infrastructure in dense urban areas and to allow people to charge cars, which is, I think, a really interesting and innovative solution for a growing need across the world. Each of those will have their own value proposition. As you said, though, in the middle of all of this, which is core to Shell's value creation today and how we conceive of our value creation in the future, is our trading and supply and how we match demand and supply, whether it be going back to the question at the beginning on the virtual power plants or how we work with these different charging stations. Those will be sources of demand. Those will be essentially short electron positions. We will have different long electron positions, and we use trading to optimize that. These charge points in different degrees will offer that platform as well in terms of us being able to maximize the value we can get associated with the electrons that flow through those charge points. Hopefully I've answered both of your questions, and I think that was our last question for today. I'm going to go ahead and close down and say thank you for your questions and for joining the call today. I hope this has given you insights into our performance in the first quarter in 2021. We will host our annual general meeting on May 18th, and we look forward to seeing you at our Upstream Strategy Day on May 25th. Have a great rest of the week, and please stay safe, everyone. This concludes the session. Thank you for your participation. You may now leave the call.