14 DEBT AND LEASE ARRANGEMENTS
DEBT
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Debt |
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$ million |
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Dec 31, 2017 |
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Dec 31, 2016 |
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Debt (excluding finance lease liabilities) |
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Finance lease liabilities |
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Total |
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Debt (excluding finance lease liabilities) |
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Finance lease liabilities |
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Total |
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Short-term debt |
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1,211 |
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— |
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1,211 |
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1,787 |
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— |
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1,787 |
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Long-term debt due within 1 year |
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9,500 |
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1,084 |
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10,584 |
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6,574 |
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1,123 |
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7,697 |
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Current debt |
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10,711 |
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1,084 |
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11,795 |
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8,361 |
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1,123 |
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9,484 |
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Non-current debt |
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59,430 |
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14,440 |
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73,870 |
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69,256 |
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13,736 |
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82,992 |
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Total |
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70,141 |
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15,524 |
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85,665 |
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77,617 |
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14,859 |
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92,476 |
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Net debt |
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$ million |
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Current debt |
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Non-current debt |
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Cash and cash equivalents (see Note 13) |
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Net debt |
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At January 1, 2017 |
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(9,484 |
) |
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(82,992 |
) |
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19,130 |
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(73,346 |
) |
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Cash flow |
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11,942 |
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(113 |
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535 |
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12,364 |
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Finance lease additions |
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(56 |
) |
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(1,772 |
) |
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— |
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(1,828 |
) |
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Other movements |
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(13,717 |
) |
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13,749 |
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— |
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32 |
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Currency translation differences and foreign exchange gains/(losses) |
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(480 |
) |
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(2,742 |
) |
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647 |
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(2,575 |
) |
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At December 31, 2017 |
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(11,795 |
) |
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(73,870 |
) |
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20,312 |
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(65,353 |
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At January 1, 2016 |
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(5,530 |
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(52,849 |
) |
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31,752 |
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(26,627 |
) |
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Additions on acquisition of BG |
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(1,544 |
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(19,690 |
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6,803 |
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(14,431 |
) |
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Cash flow |
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5,092 |
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(16,166 |
) |
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(17,922 |
) |
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(28,996 |
) |
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Finance lease additions |
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(147 |
) |
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(2,581 |
) |
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— |
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(2,728 |
) |
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Other movements |
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(7,438 |
) |
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6,687 |
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— |
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(751 |
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Currency translation differences and foreign exchange gains/(losses) |
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83 |
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1,607 |
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(1,503 |
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187 |
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At December 31, 2016 |
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(9,484 |
) |
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(82,992 |
) |
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19,130 |
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(73,346 |
) |
Management’s financial strategy is to manage Shell’s assets and liabilities with the aim that, across the business cycle, “cash in” at least equals “cash out” while maintaining a strong balance sheet.
Gearing, defined as net debt (total debt less cash and cash equivalents) as a percentage of total capital (net debt plus total equity), is a key measure of Shell’s capital structure. Across the business cycle, management aims to manage gearing within a range of 0-30%. At December 31, 2017, gearing was 24.8% (2016: 28.0%).
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Gearing |
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$ million, except where indicated |
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Dec 31, 2017 |
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Dec 31, 2016 |
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Net debt |
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65,353 |
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73,346 |
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Total equity |
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197,812 |
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188,511 |
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Total capital |
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263,165 |
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261,857 |
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Gearing |
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24.8 |
% |
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28.0 |
% |
Management’s priorities for applying Shell’s cash are the servicing and reduction of debt commitments, payment of dividends, followed by a balance of capital investment and share buybacks. Management’s policy is to grow the dollar dividend through time, in line with its view of Shell’s underlying earnings and cash flow.
Shell has access to international debt capital markets via two commercial paper (CP) programmes, a Euro medium-term note (EMTN) programme and a US universal shelf (US shelf) registration. Issuances under the CP programmes are supported by a committed credit facility and cash.
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Borrowing facilities and amounts undrawn |
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$ million |
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Facility |
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Amount undrawn |
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Dec 31, 2017 |
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Dec 31, 2016 |
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Dec 31, 2017 |
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Dec 31, 2016 |
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CP programmes |
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20,000 |
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20,000 |
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19,659 |
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18,982 |
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EMTN programme |
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unlimited |
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unlimited |
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N/A |
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N/A |
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US shelf registration |
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unlimited |
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unlimited |
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N/A |
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N/A |
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Committed credit facility |
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8,500 |
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7,480 |
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8,500 |
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7,480 |
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Under the CP programmes, Shell can issue debt of up to $10 billion with maturities not exceeding 270 days and $10 billion with maturities not exceeding 397 days. The EMTN programme is updated each year, most recently in August 2017. No debt was issued under this programme in 2017 (2016: $4,510 million issued). The US shelf registration provides Shell with the flexibility to issue debt securities, ordinary shares, preferred shares and warrants. The registration is updated every three years and was last updated in December 2017. No debt was issued under this registration in 2017 (2016: $12,000 million issued). The committed credit facility is available at pre-agreed margins and expires in 2020. The terms and availability are not conditional on Shell’s financial ratios or its financial credit ratings.
In addition, other subsidiaries have access to undrawn short-term bank facilities totalling $3,409 million at December 31, 2017 (2016: $3,835 million).
Interest rate swaps have been entered into against certain fixed rate debt affecting the effective interest rate on these balances (see Note 19).
The following tables compare contractual cash flows for debt excluding finance lease liabilities at December 31, with the carrying amount in the Consolidated Balance Sheet. Contractual amounts reflect the effects of changes in foreign exchange rates; differences from carrying amounts reflect the effects of discounting, premiums and, where hedge accounting is applied, fair value adjustments. Interest is estimated assuming interest rates applicable to variable rate debt remain constant and there is no change in aggregate principal amounts of debt other than repayment at scheduled maturity, as reflected in the table.
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2017 |
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$ million |
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Contractual payments |
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Between |
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Between |
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Between |
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Between |
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Difference |
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Less than |
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1 and 2 |
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2 and 3 |
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3 and 4 |
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4 and 5 |
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5 years |
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from carrying |
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Carrying |
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1 year |
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years |
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years |
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years |
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years |
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and later |
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Total |
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amount |
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amount |
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Commercial paper |
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341 |
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— |
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— |
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— |
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— |
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— |
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341 |
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5 |
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346 |
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Bonds |
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8,989 |
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8,306 |
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5,900 |
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5,047 |
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4,620 |
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35,037 |
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67,899 |
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131 |
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68,030 |
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Bank and other borrowings |
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1,321 |
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43 |
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127 |
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56 |
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180 |
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36 |
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1,763 |
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2 |
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1,765 |
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Total (excluding interest) |
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10,651 |
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8,349 |
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6,027 |
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5,103 |
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4,800 |
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35,073 |
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70,003 |
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138 |
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70,141 |
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Interest |
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1,957 |
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1,688 |
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1,457 |
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1,328 |
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1,221 |
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15,293 |
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22,944 |
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2016 |
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$ million |
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Contractual payments |
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Between |
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Between |
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Between |
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Between |
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Difference |
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Less than |
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1 and 2 |
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2 and 3 |
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3 and 4 |
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4 and 5 |
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5 years |
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from carrying |
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Carrying |
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1 year |
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years |
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years |
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years |
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years |
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and later |
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Total |
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amount |
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amount |
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Commercial paper |
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1,018 |
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— |
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— |
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— |
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— |
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— |
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1,018 |
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(6) |
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1,012 |
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Bonds |
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5,943 |
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8,483 |
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7,964 |
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5,900 |
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4,902 |
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39,566 |
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72,758 |
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321 |
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73,079 |
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Bank and other borrowings |
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1,363 |
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595 |
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358 |
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302 |
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213 |
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572 |
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3,403 |
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123 |
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3,526 |
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Total (excluding interest) |
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8,324 |
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9,078 |
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8,322 |
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6,202 |
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5,115 |
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40,138 |
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77,179 |
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438 |
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77,617 |
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Interest |
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2,236 |
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2,051 |
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1,790 |
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1,557 |
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1,423 |
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23,230 |
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32,287 |
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The fair value of debt excluding finance lease liabilities at December 31, 2017, was $74,650 million (2016: $80,408 million), mainly determined from the prices quoted for those securities.
LEASE ARRANGEMENTS
Finance lease liabilities mainly relate to contracts in Upstream and Integrated Gas for floating production, storage and offloading units, subsea equipment and power generation. Finance lease liabilities are secured on the leased assets. Operating lease contracts are, in Upstream and Integrated Gas, principally for drilling and ancillary equipment, service vessels, LNG vessels and land and buildings; in Downstream, principally for tankers, storage capacity and retail sites; and in Corporate, principally for land and buildings.
The future minimum lease payments for finance and operating leases and the present value of future minimum finance lease payments at December 31, by payment date are as follows:
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2017 |
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$ million |
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Finance leases |
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Operating leases |
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Future minimum lease payments |
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Interest |
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Present value of future minimum lease payments |
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Future minimum lease payments [A] |
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Less than 1 year |
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2,274 |
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1,190 |
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1,084 |
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4,793 |
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Between 1 and 5 years |
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8,246 |
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3,887 |
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4,359 |
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12,961 |
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5 years and later |
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15,043 |
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4,962 |
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10,081 |
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5,715 |
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Total |
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25,563 |
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10,039 |
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15,524 |
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23,469 |
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[A] Including $5,660 million in respect of drilling and ancillary equipment (see Note 8).
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2016 |
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$ million |
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Finance leases |
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Operating leases |
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Future minimum lease payments |
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Interest |
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Present value of future minimum lease payments |
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Future minimum lease payments [A] |
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Less than 1 year |
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2,193 |
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1,070 |
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1,123 |
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4,805 |
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Between 1 and 5 years |
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7,727 |
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3,265 |
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4,462 |
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13,979 |
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5 years and later |
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14,305 |
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5,031 |
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9,274 |
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7,214 |
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Total |
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24,225 |
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9,366 |
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14,859 |
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25,998 |
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[A] Including $6,926 million in respect of drilling and ancillary equipment (see Note 8).
Future minimum lease payments at December 31, 2017, are stated before deduction of amounts expected to be received under non-cancellable sub-leases of $336 million (2016: $418 million) in respect of finance leases and $300 million (2016: $252 million) in respect of operating leases.
Operating lease expense in 2017 was $4,822 million (2016: $5,063 million; 2015: $4,751 million).
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FINANCIAL STATEMENTS AND SUPPLEMENTS SHELL ANNUAL REPORT AND FORM 20-F 2017 |
1 |
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