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DATE

Thursday, July 30, 2026 at 9:30 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer - Wael Sawan
• Chief Financial Officer - Sinead Gorman

TAKEAWAYS

• Adjusted Earnings -- $9.8 billion for the quarter, supported by strong operational performance and optimization within the Integrated Gas segment.
• Cash Flow from Operations -- Over $21 billion, reflecting high refinery utilization and effective portfolio management despite disruptions in the Middle East.
• Free Cash Flow -- Approximately $17 billion during the quarter, providing the capital for debt reduction and shareholder distributions.
• Net Debt -- $42 billion, or $12 billion when excluding lease liabilities, as the company continues to focus on strengthening its balance sheet.
• Shareholder Distributions -- $3 billion in new share buybacks announced for completion by October 2026, maintaining the target payout ratio of 40% to 50% through the cycle.
• 2026 Cash CapEx Guidance -- $24 billion to $26 billion, which includes approximately $4 billion allocated for the ARC Resources acquisition.
• Structural Cost Reductions -- $700 million delivered during the first half of 2026 toward a total multiyear target of $5 billion to $7 billion.
• Portfolio High-Grading -- Nearly $6 billion in savings achieved since 2022 through strategic asset sales and organizational simplification.
• Production Growth Outlook -- 4% annual growth projected through 2030 compared with 2025 levels, an increase from the previous 1% projection following the ARC Resources deal.
• Refinery Utilization -- 102% record rate achieved during the quarter as assets shifted production toward middle distillates like jet fuel.
• Integrated Gas Performance -- Strong global portfolio results helped offset lost LNG volumes from Qatar caused by shipping disruptions in the Middle East.
• LNG Canada JV -- Reached full capacity in the second quarter, having delivered more than 100 cargoes since its first shipment one year ago.
• Upstream Production -- Record production levels achieved in Brazil, driven by optimization efforts and the completion of turnarounds ahead of schedule.
• ARC Resources Financial Impact -- Expected to add approximately $1.5 billion in annual absolute free cash flow once the transaction is finalized.
• Chemicals Free Cash Flow -- Positive contribution reported for the first time in over five years, reflecting structural cost reductions and record performance at the Pennsylvania Petrochemicals Complex.
• Divestment Progress -- Recent transactions include the sale of the Jiffy Lube network in the U.S., Sprng Energy in India, and mobility sites in South Africa.
• Low-Carbon Returns -- Management expects returns on the $15 billion capital employed in the low-carbon segment to exceed 10% by 2030.
• Inflation Impact -- 5% to 6% inflation noted across the system, partially mitigated by the company's scale and existing framework agreements.
• Exchange Offers -- Approximately $6.3 billion in unregistered notes were accepted for exchange into new registered notes on July 9, 2026.
• Trading ROACE -- Trading and Supply activities delivered returns at the top end of the typical 2% to 4% range due to high market volatility.

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RISKS

• Gorman stated, "when you take out some 25 million tonnes or more out of the market with what's occurred with the Strait... it does make for a tightness coming in the next quarter or so," highlighting risks from regional hostilities.
• Sawan noted that a second train at Pearl GTL was "damaged" and repairs are expected to be completed by the end of the first quarter of 2027, impacting near-term capacity.

SUMMARY

Shell plc (SHEL +2.46%) reported adjusted earnings of $9.8 billion and cash flow from operations exceeding $21 billion for the second quarter. Management focused on portfolio high-grading, completing several divestments while progressing with the acquisition of ARC Resources to drive long-term production growth. The company maintained its capital expenditure guidance and confirmed its commitment to a 40% to 50% through-the-cycle payout ratio through dividends and a newly announced $3 billion share buyback program. Operational performance remained high, with record refinery utilization and record production in Brazil helping to mitigate logistical challenges in the Middle East.

• CEO Sawan highlighted the strategic impact of the pending ARC Resources acquisition, stating it lifts "expected production growth to 2030 from around 1% a year to some 4% compared with 2025."
• CFO Gorman indicated that the Chemicals segment reached a turning point, noting the quarterly result "represents the best we have seen in over 5 years" due to cost management and improved operating capability.
• The company reported that European gas storage levels are currently at approximately 50%, significantly below expectations, which may lead to market tightness in the third quarter.
• CEO Sawan characterized the company's integrated model as a structural strength, noting it allows Shell to optimize assets and market exposures from "well to wheel."
• Management is expanding natural gas operations in South America, recently signing contracts for the Loran gas field in Venezuela to leverage existing infrastructure in Trinidad and Tobago.
• The company is prioritizing its "trading-back" business model for low-carbon investments, with CEO Sawan noting that capital currently sitting unproductively in projects like Holland Hydrogen I will start showing returns in 2027.

INDUSTRY GLOSSARY

• Integrated Gas: A business segment involving the exploration, production, and marketing of natural gas and liquefied natural gas.
• Upstream: The division of the oil and gas industry concerned with the exploration and extraction of crude oil and natural gas.
• FID: Final Investment Decision, the point at which a company's board of directors formally approves the capital for a project's development.
• ROACE: Return on Average Capital Employed, a financial ratio that measures a company's profitability and the efficiency with which its capital is used.
• Middle Distillates: Refined petroleum products including diesel, heating oil, and jet fuel.
• AECO: The benchmark price for natural gas in Alberta, Canada.
• OT: Operational Technology, the hardware and software used to monitor and control industrial equipment and processes.

Full Conference Call Transcript

Operator: Welcome to Shell's Second Quarter 2026 Financial Results Announcement. Shell's CEO, Wael Sawan; and CFO, Sinead Gorman, will present the results, then host a Q&A session. [Operator Instructions] We will now begin the presentation.

Wael Sawan: Welcome, everyone, and thank you for joining. Today, Sinead and I will present Shell's Second Quarter 2026 results. In Q2, Shell delivered very strong results, driven by strong operational performance across our businesses. That performance reflects our relentless focus on execution, which enabled us to provide the critical energy our customers needed when it mattered. In Integrated Gas, strong performance across our global portfolio helped to offset some of the lost LNG volumes from Qatar. Take our LNG Canada joint venture, for example. This is a greenfield project that shipped its first cargo just a year ago, and it has already delivered more than 100 cargoes and achieved full capacity this quarter.

In Upstream, our continued focus on performance also unlocked additional production this quarter. We continue to optimize and deliver turnarounds ahead of schedule, enabling performance such as in Brazil, where we delivered another quarter of record production. Our Pennsylvania Petrochemicals Complex also delivered its best performance to date, and our refineries achieved a record 102% utilization in a high-margin period. Our refineries have responded to what the market needs, shifting production towards middle distillates like jet fuel, capturing more value from our assets. These kinds of value-based decisions make a difference at a time when global energy flows are under pressure. And behind them sits an important structural strength: Shell's integrated model.

The connectivity across our value chains creates the opportunities to optimize assets, product flows and market exposures from well to wheel. And as we remain responsive to the fast-changing conditions, we also have kept a clear focus on delivering our strategy and commitments. Structural cost reductions are progressing well, with $700 million delivered so far in 2026. Savings that are driven by changing the way we work across our organization, including operational efficiencies and a leaner fit-for-purpose corporate center, and the high grading of our portfolio has now delivered savings of close to $6 billion since 2022. We also continue to access long-term growth and strengthen our portfolio.

Our acquisition of ARC Resources has won overwhelming support from ARC's shareholders, and we're now awaiting final regulatory approval. The ARC deal accelerates our strategy by sustaining material liquids production and growing our Integrated Gas business, lifting our expected production growth to 2030 from around 1% a year to some 4% compared with 2025. We have also signed contracts to operate the offshore Loran gas field in Venezuela. And in Namibia, we continued to create optionality, having drilled our most promising exploration well to date.

At the same time, in Upstream, we have agreed to sell our nonoperated working interest in Na Kika in the Gulf of America, an asset that secured attractive value as it nears the end of its life. Taken together, this is high grading in action, releasing value from assets where we are no longer the natural owner and reinvesting it in the next generation of competitively positioned supply. We also recently announced the divestment of Sprng Energy in India, high-grading our power portfolio. And in Marketing, we completed the divestment of the U.S. Jiffy Lube network and announced the divestment of our South African mobility sites as part of repositioning the portfolio around our key markets.

So while performing through today's volatility, we maintained discipline and kept up the momentum on our strategic delivery. And with that, let me hand over to Sinead, who will provide more details on our Q2 financial performance.

Sinead Gorman: Thank you, Wael. In Q2, we delivered a very strong set of results. Adjusted earnings for the quarter were $9.8 billion, and we generated over $21 billion of cash flow from operations despite the ongoing disruptions in the Middle East. Strong operational performance across our segments provided the foundation for our delivery this quarter. In addition to this, LNG trading and optimization was able to capture significant additional value compared with last quarter. And I was especially pleased to see the Chemicals results this quarter with a positive free cash flow contribution.

The hard work the team is putting into the transformation is starting to pay off, and combined with a more favorable margin environment this quarter's results represents the best we have seen in over 5 years, but there is much more to do. Now turning to our financial framework. Our cash CapEx outlook of $24 billion to $26 billion for 2026 is unchanged. This includes some $4 billion for the ARC Resources acquisition and associated cash CapEx. In Q2, we reduced net debt to some $42 billion, or $12 billion excluding leases. And today, we have announced $3 billion of share buybacks, which we expect to complete by our Q3 results announcement in October.

In addition to this new program, we will also complete the portion of the previous buyback program that was halted due to regulatory restrictions associated with the ARC transaction. In summary, this quarter, we performed extremely well despite continued disruptions, we made significant progress across the portfolio, and we further strengthened our balance sheet whilst remaining focused on growing long-term value. And with that, let me hand back to Wael to close.

Wael Sawan: Thanks, Sinead. This was a very strong set of results. The macro was supportive, but what these results show more than anything is that Shell delivers through volatility. We continue to drive performance, discipline and simplification throughout the organization as we deliver more value with less emissions. And we are confidently progressing our strategy at pace as we continue to build a more focused, more resilient and higher return company. Thank you.

Operator: [Operator Instructions]

Wael Sawan: Thank you for joining us today. We hope that after watching this presentation, you've seen how Shell delivered a very strong set of results through the strength of our portfolio and the quality of our execution. Now Sinead and I will be answering your questions. So please, could we have just 1 or 2 questions each so that everyone has the opportunity. And with that, could we take the first question, please, Jake.

Operator: Our first caller is Biraj Borkhataria from RBC.

Biraj Borkhataria: The first one is just on the distribution front. And going back to your comments in Q1, you cut the buyback -- yes, trimmed the buyback, let's say, the argument you made was you wanted to be agile and tactical. And I guess, just a view on the value of the buyback in terms of your share price. At the same time, you have a payout ratio and that calculus on the return on the buyback is not really embedded in a 40% to 50% payout ratio. So as we look forward, obviously, the impact of the war is maybe more pronounced than you thought at the time.

But it looks like your run rate on distributions will be well below the 40% if you continue at this rate. So just trying to understand how you're thinking about squaring those 2 things off, the payout ratio, which you've committed to and then the return on investment of the buyback. And then the second question is just on the low carbon front. I'm noticing the capital employed is obviously steadily reducing. You've announced a few more sales. You've targeted at improving returns in that business. Could you say what proportion of that $15 billion capital employed you have on the books is generating acceptable returns at this point? And I'm thinking beyond the trading that goes into that segment.

Wael Sawan: Okay. Sinead, do you want to start with the first one? Maybe I'll go to the second one after that.

Sinead Gorman: Happy to. And thanks, Biraj, for the questions. Indeed, so first and foremost, I think it's fair to say that we have both the ability and a commitment to deliver 40% to 50% through the cycle. And we've been very clear on that throughout. This is definitely not about affordability in any sense. You talked about last quarter specifically and what did we do last quarter? So I wouldn't say we trimmed, I'd say we rebalanced. So as we discussed at the time, we rebalanced between both the buyback and the dividends. So we increased the dividends at the time when we moved the buyback to $3 billion. So that allowed us to stay within that payout ratio.

We're very pragmatic on this and not dogmatic at all. We are dogmatic about the 40% to 50% through the cycle. But in terms of how we split it, we make that decision quarter-by-quarter, and we look through the quarter. We're not fixated every quarter on that. We're looking at where do we see the macro going to, what do we see in terms of how we can apply, and the funds, the extra free cash flow we have, whether that's to buybacks, whether that's to CapEx or whether that's to the balance sheet each quarter, and we take that decision. You've seen some of the quarters, we've been higher than that, above the 50% as well.

So I would say we come back to the fact that it is sacrificing a value decision, but the 40% to 50% is the commitment that we have.

Wael Sawan: Thanks, Sinead. Biraj, to the second question, been very pleased with the momentum we have to be able to continue to work on the $45 billion of underperforming capital employed. You touched on a portion of that, which sits in low carbon. I wouldn't divorce, by the way, the trading from the assets. A lot of our low-carbon business models are going to be trading back models. So what you see us doing is divesting assets that don't fit into a trading back capability and making sure that we are gearing all of our activities towards actually that trading back business model.

Remember, some of that capital today is sitting unproductively because we are still building up, take CCS, for example, take Holland Hydrogen I in Rotterdam. So this is capital that will start to show a return likely in 2027 onwards. As I've said in the past, we will expect a return on that part of the business to be north of 10% before the end of the decade. And that's what we are working on over the coming years. Again, good progress. There's multiple different levers we're pulling, but we have some way to go. Thanks for the question, Biraj.

Operator: Our next caller is Josh Stone from UBS.

Joshua Eliot Stone: I wanted to ask about LNG. Very strong results from Integrated Gas this quarter, clearly quite a few moving parts, but also quite a few moving parts from the outlook for LNG. So curious as to what -- how you're thinking if you're thinking differently about the outlook for LNG prices. There was a strong consensus around a glut appearing, but perhaps that's not fair anymore. So curious any comments on LNG. And then related to that, or specifically to your business, are you seeing any change in customer behavior for LNG and Integrated Gas in terms of perhaps customers wanting to sign up to portfolio gas rather than contracting single assets?

So if there's any early change in behavior, would be interesting.

Wael Sawan: Thanks, Josh. I'll touch a bit on the behaviors, and I don't know if you want to give a perspective, Sinead, on the outlook. Early days, Josh, I think everyone is trying to sort of rewire themselves to the new realities. Qatar will continue to be, of course, a critical part of the overall LNG mix, with 20% of the volumes coming from there. We have not necessarily seen a lot of short-term action as a response of this other than in the spot markets. In the term markets, you continue to see the balance of new U.S. supplies coming into the market, potentially new announcements on FIDs elsewhere.

People, of course, anticipating what might happen with LNG Canada Phase 2. All of that means that the market will continue to be well supplied. If I look now long term before coming -- before leaving Sinead to sort of cover the short to medium term, we continue to have very strong conviction, as you saw in our LNG outlook in the future of LNG.

We're talking about 65% growth in that market between now and 2050, underpinned by this continued belief that gas will be a stabilizing force in the energy system because of its flexibility, its reliability, the security that it has and the ability to be able to have the adjacencies with the likes of renewables, but also as a substitute to coal or for that matter, heavy fuel oil when it comes to the marine sector. And so the underpinnings are strong. Short-term disruptions, of course, we look to manage through our trading organization. But longer term, we continue to have very deep conviction in that. But the outlook, Sinead?

Sinead Gorman: Yes. I think you're talking about the market generically. And of course, when you take out some 25 million tonnes or more out of the market with what's occurred with the Strait, what we've seen of what was considered to be a bit more length was expected within certainly this year, you've taken that out. So that balance has changed. What are we seeing at the moment?

We're seeing, of course, where pricing is going to is it's allowing actually some of the volumes to be redirected from where they've been going to, which is Asia, back into Europe, which is much needed as we very much know, because coming into this winter where you've got European volumes are -- sorry, European storage volumes are very limited and actually much below where we would have expected closer to the 50%. We're actually seeing that requirement very strongly here. That redirection is happening, but it does make for a tightness coming in the next quarter or so.

Wael Sawan: Thank you, Sinead. Josh, thank you for the questions.

Operator: Our next caller is Fergus Neve from Rothschild & Co Redburn.

Fergus Neve: Two questions, please. So it was positive to see the recent success of the exploration well in Namibia. I wondered if you could comment briefly on the early differences and similarities between this discovery and the previously written off Graff and Jonker wells that makes this discovery more promising, as you mentioned in your opening remarks. And then secondly, just on the Chemicals result, which was strong this quarter, very positive to see that. Could you just comment on the relative split of this improvement between the self-help work you've been doing since the Singapore divestment and also the margin environment that we saw in the quarter?

Wael Sawan: Thanks for that, Fergus. I'll take the first question and ask Sinead to address the second one. On the exploration well, we were indeed pleased with the result of that well. Again, early days. But what I would say is the biggest difference is in both the reservoir and the fluid characteristics. It was one of the best permeabilities, porosities that we had seen in the block, and it's opened up a new horizon for us to explore. We're now looking to expedite 2 appraisal wells to end of this year to be able to allow us to derisk some more volumes and see whether we have enough for an attractive profitable development.

So more to come, I suspect, in 2027. Sinead?

Sinead Gorman: Thanks, Fergus, for the question. Indeed, great to see Chemicals. The results they showed, the team is doing an amazing job here. And of course, there's 3 things that we're always looking at. We're looking at, as you say, the margins, then we're looking at the ability to actually be competitive and control our costs, and the ability to run the assets really well. Margins, you know as well as I do, how strong those have been this quarter. And of course, those helped significantly. But what the weighting is much more towards the fact of the cost takeout that we've managed and the operating capability of the assets.

So what the team did very, very well was to be able to actually ensure that those assets were up and running. So in Pennsylvania at Monaca, they managed to ensure that it actually hit record performance as well. That allows us just to be able to push the product through and be able to actually take advantage of what is very strong margins as well, which gives us confidence as we go through, of course, and what will happen on quarter-on-quarter. Margins will change, but it has to be supplemented by that cost and that operational performance. So well done to the team. Thanks, Fergus.

Wael Sawan: Thank you, Sinead. Thanks, Fergus.

Operator: Our next caller is Michele Della Vigna from Goldman Sachs.

Michele Della Vigna: Congratulations on the very strong results. As you know, there's been a lot of debate around reserve life in the sector. And it feels like FIDs are the biggest way to kind of sort that out and build reserve life for the future. It looks like you're making tremendous progress in a lot of areas. I was wondering specifically on Bonga Southwest and Zabazaba in Nigeria and on LNG Canada too in Canada, whether you could give us a bit of an update on when you expect those FIDs to take place.

Wael Sawan: Michele, thank you for the question. Allow me maybe for a moment to be able to sort of frame because I think there's multiple angles to the question that you asked. For the last few years, we've talked about performance discipline simplification with this value over volume focus. And I'm really proud of how far the organization has come over this period. And you can see it in the results. What we have been able to do is, in essence, to be able to strengthen and cement the foundations of our base free cash flow, which has been, if you look over the last few years, roughly $25 billion to $30 billion per year on a $70 real-term basis, right?

And we've also been able to extend that. That's been an area we've been very focused on. So extending that stable free cash flow. We have now fully derisked the 2030 period through multiple moves, and we've talked about them in the past. And we are well on our way towards the 2035 period and beyond. So that base, that strong foundation, is very much in place. Now to your point around additional growth, we are now starting to add layers of absolute free cash flow growth. ARC, of course, once it's completed, will add, as we reported last time, roughly $1.5 billion per year. That's additional.

LNG Canada Phase 2, provisionally, if we take an FID on that, we'll add the next layer in the 2030s. You asked when that's going to happen. It's likely to be before end of this year is what we are targeting along with the joint venture partners, subject, of course, to all the requisite approvals. And so those layers that we are adding are really shifting us from a free cash flow per share growth, which we have said is our North Star that is maybe more weighted towards the denominator, the buybacks to one that's more balanced with continued preference for buybacks and with continued absolute free cash flow growth in the numerator.

And that's the exciting story that we are trying to drive. There are multiple other projects which we are also pursuing. You touched on a couple of them. Bonga Southwest, we are hoping to be able to be in a position to FID in 2027. And Zabazaba, also around '27, '28. And so lots of good momentum going on, and these are the projects that will continue to add those layers above that base free cash flow that I talked about. Hopefully, that allows you to sort of get a bit of a sense of where our mind is on some of these things. Okay.

Operator: Our next caller is Doug Leggate from Wolfe Research.

Douglas George Blyth Leggate: Wael, I wonder if I could hit 2 things that appear to be taken on a little bit of a life of their own. One is disposals and the other is your cost-cutting target. The disposal momentum seems to have picked up here recently. And I wonder if you could just give us a refresh on what you think that visibility looks like as you monetize perhaps underperforming assets as you've done this last couple of announcements. And then my follow-up is on the $5 billion to $7 billion cost-cutting target. You're about halfway there, 3 years or 2 years early.

So I'm wondering if you could frame for us what the risk is that those numbers get reset and any kind of magnitude you could put around that.

Wael Sawan: Thank you for that, Doug. I mean -- I think you mean the opportunity to reset them rather than the risk, but I hear where you're going with it. Let me talk about that second point and maybe, Sinead, if you want to touch on the divestment. On the cost-cutting targets, I think, firstly, when I stood here 3 years ago and talked about $2 billion to $3 billion structural cost reduction, it was hard work. We had to sort of try to mobilize the organization and figure out how we can get that. The flywheel started to turn.

And we put the next target out there, the 5% to 7%, and indeed, really pleased how all of our business leaders and all of our functional leaders have really responded to the challenge. And the challenge, by the way, is not just a structural cost reduction challenge. It is a free cash flow enhancement challenge. That's what we're trying to drive. Improve reliability, improve availability, enhance business models, turn around underperforming businesses and become leaner, more focused as an organization. So that's been embraced. We are now halfway through that band that we talked about. I continue to be encouraged by what I see, Doug. There's more and more opportunities than maybe we had banked for.

And so my push to the team now is we need to be able to get to the top end of this range, and that's what we're working towards. But not only that, we need to keep thinking about what comes next. What are the other ideas? How do we leverage AI in a way that allows us to unlock more value? How do we challenge whether we are running the businesses in the most efficient way, not just against what the benchmarks of today are telling us, but what is going to be the next benchmark and how do we get ahead of the competition there?

So this is much more of a culture journey than just a numbers game. And if anything, I'm energized by what I see in the organization around it. Sinead?

Sinead Gorman: Thank you, Wael. And Doug, indeed, great question around our divestment program. And again, what I would say with respect to that is probably a couple of years ago, we talked to you about saying we want to be really good stewards of capital. We want to ensure that what we do is we reallocate capital. And that's what I would say we are doing across this company, whether it's around our distributions and back to shareholders or looking at where are we the rightful owners of certain assets or not. We're taking a lens asset by asset and making sure we look at can we extract the maximum value or should somebody else be doing that?

We're then taking those proceeds and of course, reallocating those. So what you saw us do this quarter was a number of divestments came through, some of them where they were noncore like Jiffy Lube, which whilst lubricants is an excellent business for us and very strong ROACEs for us in particular, Jiffy Lube was not at the top end of that. So we put it into somebody else's hands, and you see that coming in. Again, in the Downstream, you saw us take the tail of some of our mobility sites that's in South Africa. We've been doing that step by step, and you've heard us talk about Mexico before.

So that's just normal progress for us where we're coming out of some of those. And of course, what you saw us do in Upstream as well, liquids is key for us, but there are certain places where we look at can we get a fair price for the asset and who is the rightful owner? So when we look at that in the Gulf of America, we've got a great operator who will take control of it. It's towards end of life and it's a fair price that we get there as well. And then you look at our Renewables portfolio.

We've talked before about where do we have capabilities versus others and hence, the exit from Sprng in India as well. That allows us to take those funds and look at how do we reallocate it. And you've seen us reallocate into many areas in Upstream like Ursa in the past in Brazil, but particularly ARC is the one. Now we can't always time correctly the point at which we get a great acquisition that really fits us and divestments. But of course, when we did the deal for ARC, we knew that this divestment program was coming, and you can see that it more than offsets in terms of the cash coming through.

So that capital reallocation program is in full swing. There's much more to come on it as well as we continue to hold ourselves to account at a very high bar. And of course, it leads to a ROACE increase over time as well. Thanks, Doug.

Wael Sawan: Thank you, Sinead. Thank you, Doug.

Operator: Our next caller is Kim Fustier from HSBC.

Kim Fustier: I just wanted to ask about the really remarkable operational performance in the Downstream, notably the 102% refinery utilization. I do take [ on board to get ] the range of guidance for 3Q, but maybe more conceptually, how much of this high refinery utilization rate is sustainable? I mean, how long can you continue to operate above 100%, just thinking about maintenance cycles, et cetera? And my second question is on the ARC deal. I see that it's now scheduled to close in the third quarter, subject to remaining regulatory approval. Could you maybe give us an update on the Investment Canada approval?

Wael Sawan: You want to start with the second question, straight forward?

Sinead Gorman: Yes, happy to. Really short one on this one, Kim. Indeed, we were really thrilled with the answer that came through in terms of the shareholder vote. It was overwhelming in terms of support. We've said it is in Q3. That very much depends on the last approval, which, as you say, is Investment Canada Act. We are investing heavily in Canada, and we believe that, that will be something that comes through quite readily with good discussion with the relevant authority. We can't comment on when that would be. That will be down to their timing, but we're working it very hard at the moment.

Wael Sawan: Thanks, Sinead. Kim, the operational performance of Refining has been excellent. But I have to shout out all the businesses. I mean, we have been talking about performance for a very, very long time. And I hope you see now the consistency in the delivery across all the businesses. And when you have an Integrated Gas, for example, Qatari volumes out and you're still getting roughly the same LNG output, it just speaks to the rigor with which the organization is pursuing that performance drive. On Refining, team's done a super job. And there's a few things. Firstly, turnarounds, in particular, safety-related turnarounds, we always pause and do what we need to do.

So this is in no way changing turnaround time frames other than if it is not safety critical. And then, of course, we look at the market. I'd say the biggest difference we have seen came over the last year or so. In many people's minds, trading conceptually is traders sitting behind the desk and trying to sort of guess where the market is going. Our trading and optimization is fundamental to Shell and our business model. It is interwoven into every single one of our value chains. And where it is not, we are pushing it further and further. Which is why Andrew Smith, who heads up Trading and Supply, sits on my Executive Committee.

So to give you a small example, at Norco in the U.S., we have moved into a model where the traders are tied at the hip with the operators, finding the right feedstock to be able to source given the dynamics in the market at the moment. And then the products traders finding what's the best placement and reading all the price signals to be able to then manage how much do we push into jet fuel versus -- or at the expense of diesel and gasoline, and how do we optimize for value.

And so much more of what we see at the moment is that the run rate is being determined by commercial factors driven by our trading organization in partnership with the asset. We are rolling that model out in every single one of our refineries and have tested it and really been pleased with what we see. And so I do continue to believe we are able to deliver performance sustainably. And of course, it will vary quarter-by-quarter depending on where we are on the turnarounds, maintenance schedules. But I have high confidence in our ability to sustain and continue to improve on what we see. Thanks for the questions, Kim.

Operator: Our next caller is Nash Cui from Barclays.

Naisheng Cui: I have 2, please. The first one is on trading. Just want to follow up because we have seen significant volatility in commodity prices in July. I think earlier, Sinead also mentioned the potential LNG tightness in Q3. I wonder how should we think about trading performance in Q3, please? And then my next question is on CapEx. How confident are we in maintaining the CapEx guidance this year, please? Especially given the disruption in the Middle East. We have heard companies talking about higher cost for -- higher cost to get the rigs FPSO. I wonder what are you seeing in the market right now?

Wael Sawan: Nash, thank you for that. I'm going to take the first question on Trading and Supply and then maybe, Sinead, if you want to address CapEx. So firstly, indeed, we have seen that volatility play through in the past quarter. But if I step back for a second, Nash, if you'll have heard me over the last 15 quarters when I've had the privilege to be in these calls, what you'll have heard me say every single quarter is that volatility and uncertainty is what we see in the next quarter. We fundamentally believe that the energy system is inherently becoming more volatile.

So rather than worrying about the direction of the volatility, what we are focused on is the things we can control, improving the performance of our assets so that our trading and optimization organization has the molecules. We're driving hard to be able to make sure that the portfolio, the diversity of supply points and the health of the portfolio is one we would like. And of course, continuing to maintain a strong balance sheet to be able to take advantage of opportunities. And so our Trading and Supply. As a company, we are built to be able to handle volatility.

I would argue we are the name: if somebody believes in volatility in the energy system, Shell is the name to go after. I'd also argue that we are the name to be able to be the downside price protection in the energy sector, given our Downstream footprint and given our ability to be able to unlock value even in downside volatility. And that's the business model we have built. And so as we look to the coming quarters, what I can tell you is the 2% to 4% ROACE that Trading and Supply is able to deliver continues to hold. And as you would expect, we are at the top end of that range given the current volatility.

And if the volatility continues into the third quarter, we expect to continue to be in a healthy part of that range. We don't, of course, guide on particular numbers quarter for quarter and the traders will have to depend on where the market is. But we continue to see that this trading capability, one that others are trying to build, is a truly differentiating feature in our business case. Sinead?

Sinead Gorman: And the one add I would have there, Wael, is for Q3, the biggest thing we can do is ensure that the operational performance is strong, that gives the volumes to the trading team to be able to maximize value, whether there's volatility or not, but I agree on the volatility. With respect, actually, you asked, Nash, around our CapEx and are we confident in terms of maintaining the guidance. If you remember, we had a $20 billion to $22 billion per year guidance. And when we did the ARC transaction, we increased that to $24 billion to $26 billion.

The reason for that was to cover not only the cash component of the transaction, but also to cover the ongoing CapEx for the rest of the year to ensure we maximize that value from ARC. So our range is $24 billion to $26 billion. We are confident in our ability to be able to deliver within that range, and we continue to maintain that range at the moment. We absolutely see inflation in the system, which is what you're referring to at the moment. That varies per category.

But overall, we're seeing it around that 5% to 6%, but we're able to offset much of that given our scale and those framework agreements we have, but also because we have locked in many things because we saw some of this coming as well. So we have confidence in the ability to do that. You asked specifically about rigs. That's less of a problem for us at the moment because we had locked those in, in advance, but we do see indeed what you're seeing of much more pressure in the system around those, as prices are high at the moment.

Wael Sawan: In particular, those deepwater rigs. Thank you, Sinead.

Operator: Our next caller is Matt Lofting from JPMorgan.

Matthew Lofting: My congratulations on strong performance in far from normalized conditions. I'd like to ask you first about Integrated Gas, very strong numbers in the second quarter despite the impact of the Qatari assets. I wondered if you could just expand on the extent to which in conditions you're seeing a degree of natural hedge almost within the business insofar as the downtime or lost volume in the Middle East being mitigated by the rest of the portfolio and perhaps stronger margins as a result that you're able to extract through the rest of that portfolio, particularly the third-party component. And then second, you mentioned earlier the strength of operational performance across the business in the second quarter, very evident.

I wanted to ask you specifically about Brazil. I think you highlighted record production in the second quarter. We've seen several strong data points from that hub over the course of the last couple of years. Are your expectations of the midterm oil production that can be extracted from Brazil seeing some upward support?

Wael Sawan: Matt, thank you for that. I'll take the second question and Sinead, leave you to the first. I mean I think on Brazil, Matt, specifically, of course, we have an enviable position there, roughly 10% of the overall production in Brazil. The old adage of big fields get bigger, of course, applies in the context of the Tupi fields, the Iracema fields, the Mero fields.

And so what continues to happen is that Petrobras, a great operator, continues to look at ways to be able to optimize the facilities and how they do water management, for example, how they are able to shift across their many wells to optimize production and to be able to take advantage of the opportunity right now given where commodity prices are. I don't want to make predictions as to the future, but what I can say is we continue to be very encouraged by what we see in the subsurface and importantly, in the way that Petrobras runs these assets, and we continue to hope we can contribute to support them in doing that.

Sinead Gorman: Thank you, Wael. And in terms of the Integrated Gas portfolio, they had an exceptional quarter, I absolutely agree. Given the challenges that they had as well, not only the volatility, but also the fact that they had lost those volumes from the Middle East, a couple of things that played in. Whilst the loss in Qatar had its impact, and it definitely did, the focus was for us in order to be able to manage across the portfolio, as you say. So whether you call it a natural hedge or not, it was a portfolio management approach.

So what we saw was, particularly in Nigeria, we saw more volumes coming out of Nigeria, also from Trinidad, but also as Wael mentioned in the video as well earlier on today, specifically around Canada. So we saw LNG Canada come into its own. We're now more than 100 cargoes out from that facility. So what we saw, whilst we were really struggling, having lost the Middle East volumes, we were able to compensate from elsewhere. On top of that, what the team did really well was almost record volumes from third party. So indeed, they went out into the market.

They looked at where they could cover and in some cases, buying back some of our own cargoes that we had sold to them to be able to distribute elsewhere, i.e., taking from those customers who weren't as impacted by the Middle East and being able to push them to those who were. That allowed a significant busy compensation from what occurred in Qatar. And beyond that, some price risk management as well, which was very thoughtfully done, given the volatility and the absolute moves we saw throughout the quarter.

Wael Sawan: But it's been a tough struggle, lots of headwinds with credit to the team, how they've been able to manage it. Thank you for the questions, Matt.

Operator: Our next caller is Mark Wilson from Jefferies.

Mark Wilson: There's been a lot of ground covered so far. So let me ask regarding the Middle East assets, yes, obviously, Qatar, but also Pearl GTL. If a normalized shipping environment comes, could you remind us on the time to get those 2 facilities back to their expected capacities, please?

Wael Sawan: Yes. Thanks, Mark. Let me separate 3 different assets. So you have Pearl GTL Train 1, same asset, but second train, Pearl GTL Train 2, and then Qatar LNG, which is the other asset that we have in Qatar. The LNG assets are typically easier to start up and to start the shipping out, of course, subject to terminal capacity, subject to storage, subject to shipping availability and the like. The biggest thing we're watching out there for is just access and safe passage through the Straits.

Similarly, on one of the trains at Pearl GTL, so Train 2 -- Train 1, where it would actually take in a matter of weeks to be able to get the facility back up and running. That's a facility that hasn't been impacted by the activities by the hostilities in the region. And so within weeks, we could start up that facility. The one that has been damaged, that second train, we expect the repairs, which are now progressing to be completed and for that facility to be ready to go, again, subject to our ability to export by end of the first quarter of next year.

So by end of Q1 2027 is when we could expect that facility to be back online, subject to the conditions allowing us to ship out. Hopefully, that gives you a broad sense. Thank you for the question, Mark.

Operator: Our next caller is Henry Tarr from Berenberg.

Henry Tarr: I had 2. One was just on Venezuela. I think you're looking to push ahead with the Dragon project. I just -- any update there would be great. And then also how you're thinking about managing exposure to Venezuela? And then secondly, clearly, so far in July, it appears as though the Downstream environment continues to be extremely strong. Is that the case that you're seeing that roll through for your refining and chems businesses so far through July?

Wael Sawan: Let me start with the first one, Sinead, if you want to touch on the second one. We continue to be pleased with the progress we are making in Venezuela. You touched, Henry, on Dragon, which is one, of course, that we had been working on until the OFAC license was paused and then it has been again, of course, approved again. So we've continued work. We hope to be able to move towards an FID decision at some point in 2027, all going well. We've also recently, of course, been granted the license for Loran Phase 1. That's a 1.7 Tcf opportunity that also could potentially tie back into the Trinidad and Tobago LNG facility, Atlantic LNG.

And so the team is currently developing that opportunity. Again, that's an opportunity which we think we can move pretty quickly on because it leverages existing infrastructure we are building in the Manatee development, which again will be starting up in the next 12 to 18 months. And so what you have is a nice cluster of developments, material developments that we hope to be able to bring to first -- to first gas in the coming couple of years. Sinead?

Sinead Gorman: Thank you. Indeed, with respect to what are we seeing in this next quarter in Q3, the things that we always look at, of course, are margins, then the volatility and the operational performance. So those are the 3. We've talked before about needing to make sure that, that operational performance plays through, Henry. And what we did have in Q2 was very few turnarounds, particularly in our Downstream business. They were very limited and those that did occur were very quickly done. You see a little bit more happening in Q3. So what are we seeing from a margins perspective specifically there?

We're seeing, of course, a positive margin environment for Refining in Q3, but the chemical spreads are beginning to soften. We do see that come through. And we're seeing, of course, less volatility, which means a little bit less coming in, in terms of our Downstream business from the trading angle of things as well. In particular as well, of course, from our lubricants business, it will be a little bit more challenging in this quarter because, of course, it's relying on some of the volumes coming through from Pearl, which we've just discussed, which we're not expecting to see come through in the near term.

So the team are having to manage very hard to find alternatives for that and doing so very successfully so far.

Wael Sawan: Thanks, Sinead. Henry, thank you for those questions.

Operator: Our next caller is James West from Melius Research.

James West: Two quick ones from me. One is on the -- with the ARC transaction probably closing soon, you've got your feedstock for Phase 1 of Canada LNG. Does that change your view on the FID of Phase 2 or the scope of Phase 2 and the timing there? And then secondarily, I believe you had a discovery offshore Egypt here in the last couple of days. And I'm wondering if you could give us any kind of early indications of that.

Wael Sawan: Yes. Thanks for those, James. I'll touch on both quickly. On Egypt, very early days. What the well has proven is that there's a working petroleum system there. But too early to call as to whether we can find a way to make this a commercial discovery and the follow-up implications. And so the team will be looking through that, but very early days. So nothing to sort of report there. On ARC, Sinead talked about where we are in the process on ARC. I would just sort of say Phase 1, we had already underwritten through our existing acreage from Groundbirch. So we were very comfortable. And we had some spillover also into Phase 2.

When we took the decision on the acquisition of ARC, we didn't even put Phase 2 into the base economics. That's upside if we end up taking that final investment decision. And so we will have enough gas to be able to underwrite a second phase if we so choose to take that FID and to be able to continue to create value through other ways as ARC themselves have been doing, creating a premium on AECO. And by leveraging our Trading and Supply organization, we hope to be able to match and improve on that as well going forward. But lots of good work there.

And upon completion of that transaction, we're really excited to welcome that ARC Resources family into Shell and really see what more we can do to unlock value and to really demonstrate to our shareholders. It's a big call we have made to be able to use, for example, paper for a good portion of this. We recognize that we need to be able to deliver returns on it. We have already -- we see line of sight to double-digit returns. But I do expect my teams to aspire to meet mid-double-digit returns if we can and really demonstrate the value that we can create whenever we choose to use paper. And so really exciting days ahead there.

Operator: Our next caller is Jason Gabelman from TD Cowen.

Jason Gabelman: You guys released your annual LNG presentation earlier, but you didn't have the typical webinar that you have with it. So I was wondering if I could just get your perspectives on the LNG outlook. And specifically, it looks like you're calling for perhaps a bit more of a balanced to oversupplied market into the early 2030s compared to a previous view that maybe the market should be balanced to undersupplied by then. So what has changed? And does that inform how you pace your investments in new LNG plants?

Wael Sawan: I'll say a couple of words, and then please, Sinead, add if you want to as well. Indeed, we did not this time, add a webinar, which we typically have done, and we actually delayed the issuance of the outlook because it was in the midst of the start of hostilities in the Middle East. And given how many people in the Middle East were involved in the preparation of this, we chose to pause and then just issue it without the webinar. But long story short, as I said earlier, the -- we reaffirmed long-term conviction about 2050 and the 65% growth.

I think the biggest thing that we also wanted to point to in the LNG outlook is just how incredibly resilient the LNG market has shown itself to be. Remember, at a time when some 20% of supplies were constrained because of the blockages in the Straits, customers continue to get LNG. And so that's a key piece of the overall puzzle. So we anticipate, as per the LNG outlook, around 180 million tonnes of new annual supply to be coming into the market by 2030, which, of course, continues to strengthen that market. But on the demand side, there's significant growth that we are seeing in multiple areas.

We're seeing it in areas like transportation, maybe more so than we had predicted a few years ago. And we continue to see the adjacency that it plays into the power and particular into renewables. The biggest growth we continue to see is in Southeast Asia, in particular, countries that already depend on gas -- indigenous gas, where they are starting to mature those fields, and they need to import and leverage the existing gas infrastructure that they have in their countries. And of course, Europe continues to be a big draw on LNG coming forward. So all of that continues to play up, Jason, in our views.

And no one can predict when the tightness is going to happen, but short-term disruptions are inevitable in any commodity market. The long-term outlook continues to be very, very solid. Is there anything, Sinead, that I missed?

Sinead Gorman: No. Thank you.

Wael Sawan: Good. All right. Thank you. Thanks for the question, Jason.

Operator: Our next caller is Christopher Kuplent from Bank of America.

Christopher Kuplent: Wael, I've got one question for you. Maybe you can give us a little bit of an insight into how busy your M&A team is these days. The ARC deal is about to close. Are you telling them, please don't show me any more ideas because I'm busy enough integrating ARC. Apologies, it's been a while that I've spent my time working for M&A bankers. So just a bit of color on how busy you are these days, considering how many deals you must be being shown at least. And then if I may, Sinead, 2 very quick ones. I'll dare ask you 2.

Firstly, there has been a considerable lag in terms of cash tax payments versus the P&L in the first half. Do you expect any of that to persist or get recovered into the second half of 2027? And then maybe briefly again on the famous payout ratio. I hope you'll agree, see whether I'm putting words in your mouth that 40% in a very high absolute cash flow world is the countercyclical thing to do when it comes to the full year data when we have another 2 quarters under our belt.

Wael Sawan: Christopher, thank you for those questions. I'll start with the M&A one and then leave Sinead to address the others. I think the first thing I've been saying to the team is thank you for the terrific job that they have done on ARC Resources. We're not done yet. But I think the -- this was, as I've said in the past, a deal we had been looking at for a couple of years. And when the stars aligned, we really moved. So I was really proud with how they've moved on that. Then Christopher, maybe back to what I said earlier.

So I talked about how we had strengthened that free cash flow foundation, the base that we have, the $25 billion to $30 billion, and ARC having been sort of additive and potentially LNG Canada Phase 2 being additive. So I'm very comfortable with where we are on our growth trajectories at the moment. We are not constrained, but we will continue to be disciplined. We have always said we will be disciplined. We've always said we will hold ourselves to a high bar when it comes to M&A. And while, of course, we always look at multiple opportunities, what I can tell you is nothing at the moment that I have seen comes close to ARC Resources.

And so that high bar will continue to play in our minds, and we'll continue to see where the opportunities emerge. If I'm to diagnose where the market is at the moment, it's clearly more of a seller's market when it comes to oil. So very little in terms of opportunity space there. But there are pockets where it might be a buyer's market, and we've looked at those. But as I said, nothing that is meeting the threshold that ARC was at. And therefore, we continue to focus on what it is that we can do, and that's to grow the fundamental free cash flow through the levers we have. Sinead?

Sinead Gorman: Thank you. Wael, indeed, and 2 slightly different ones, as you say, Christopher. On the first one in terms of the lag in cash tax payments, nothing too much on this one. It really is just the timing of when the mismatch between when you actually earn it and then when you pay it and just the timing with the payment dates set by government. So nothing really within our own control. It really is driven by their side of things. You typically see it a little bit higher, of course, in Q1 and Q4 versus Q2 and Q3.

Of course, it shows up quite significantly when you're sitting on free cash flow this quarter of some $17 billion in 1 quarter. So that's where you see it start to pull out. And your point on payout ratio in terms of being countercyclical, you know I'm never going to guide on anything. But indeed, the 40% to 50% is what we said is definitely sacrosanct. And from our perspective, yes, we have high conviction in share buybacks, and we continue to do so. But we do focus on value. As you know, it's about value, not about affordability in this case. And you've seen the way we've acted in the past.

So we're always very confident in doing our buybacks when the time is right.

Wael Sawan: Thanks, Sinead.

Operator: Our final caller is from Maurizio Carulli from Quilter Cheviot.

Maurizio Carulli: Congratulations for the excellent results, first of all. I have 2 questions, if I may. One probably for Wael and the other one for Sinead. For Wael, is there a case for modifying in the future the design of facilities in riskier countries like in the Middle East, so that they become more protected from physical attacks and if hit, more resilient to an easier and quicker restart of operations? And for Sinead, Shell has been historically one of the best, if not probably the best company in terms of thoroughness of financial reporting.

And is there a case there for providing a bit more of detail within the financial reporting about your trading activities, particularly given that they are properly backed by assets, therefore, it's something more structural rather than what would be a trading activity of a financial institution?

Wael Sawan: Super, Maurizio, thank you. I'll take the first one. I loved how you approached the second one, congratulating and complimenting Sinead and then going after the jugular on trading. So I will leave her to address that one. On modifying facilities, difficult one, Maurizio. I think the reality is with the emerging technology these days, there is no foolproof full protection. The biggest thing we can do from a company perspective is to continue to indeed add whatever layers of security we can add.

And we need to continue to diversify the sources of supply in our portfolio because as we have seen, whether it's arteries getting clogged, whether it is countries involved in hostilities, there is no singular way to be able to totally sort of protect these assets. But we will continue to operate as we do in very close coordination with many of the countries in which we operate to be able to protect these assets to the best of our abilities. I'd say the second big piece that we are very focused on as a company is also cyber defense. Because physical is one approach. The cyber is the other one.

And we have some very, very focused efforts across the company to continue to keep up with the evolving cyber landscape and making sure that we protect our assets from an OT perspective where we can. And so that is the nature of the world we are in, and it goes back to my earlier point, we continue to see the energy system of the future being more volatile. And this is why we want to continue to be the name that can capture that upside volatility and that can protect to the downside, and that's what we can offer our shareholders. Sinead?

Sinead Gorman: Thank you, Maurizio. I always love a compliment, so thank you very much for that. I would say we often get told that our reporting is almost too thorough, that we give too much information that makes our annual report quite a tome to go through as well. But in all seriousness around it, we are trying to make sure that we give you as much transparency as possible or give our investors as much transparency so that they can understand fully the value of this company. What we do, of course, is for us, trading is actually much more around being able to optimize around the assets of the various businesses.

So it is not a segment in its own right. It is the other businesses that it pulls on for the volumes, et cetera. We allocate capital to those segments rather than specifically to trading as well, and that's why we report it in the manner we do. We're trying to give you a bit more information around that. We've told you as an example, that we've never lost money in any quarter in the last decade, as we said in our Capital Markets Day 2025.

And giving you that feel, as Wael talked about earlier, that in terms of that uplift to our ROACE of 2% to 4% in times like this where we've got a lot of volatility, trading does play out stronger and is able to utilize those volumes, and therefore, we're at the upper level of that 4%. We're looking to give you a bit more detail on our next Capital Markets event, which we're hoping will be at some point in the first half of 2027. So we'll go into a bit more detail then as well. But thanks for the question.

Wael Sawan: Thank you, Sinead. Thank you, Maurizio, and thank you for all your questions and for joining the call. In conclusion, we delivered a very strong set of financial results in the second quarter, supported by another quarter of strong operational performance across all the businesses. We remain focused on executing our strategy, on transforming our portfolio and on delivering on our key targets. We wish everyone a pleasant end of the week. And for those going on leave, a well-deserved rest. Thank you, everyone.