THE WALL STREET JOURNAL

By ANDREW PEAPLE

Bump in the road, or grinding halt? Royal Dutch Shell is confident its $4.1 billion fourth-quarter earnings will prove the former despite falling 13% below expectations, which it blamed on poor performance in its refining business. That obscured an encouraging improvement in the oil major’s return on capital. But investors hoping this will soon translate into higher dividends may now have to wait a bit longer.

Shell’s return on capital improved to 11.5% in 2010 from 8.5% the year before, boosted by a 5% rise in oil and gas production and cost cuts on target at $2 billion. Key gas projects in Qatar should help keep production stable and cash flow heading upwards this year, despite delays to its drilling plans in Alaska and the Gulf of Mexico.

That general trend should soothe concerns about the poor refining result, which Shell put down to maintenance costs, narrowing margins and exchange-rate movements. Still, the refining slippage has likely delayed Shell from returning more cash to investors. Shell forecasts operating cash flow of $36 billion to $43 billion by 2012, on a forecast oil price range of $60 to $80 per barrel, well above net capital expenditure expected at $25 billion to $30 billion annually out to 2014. That implies plenty of scope to grow the dividend.

Caution is the watchword for now, however. Operating cash flow of $27.4 billion in 2010 was still 24% short of Shell’s 2012 target. Shell has already announced the dividend will be flat for the first quarter of 2011: It will likely wait until later in the year, when sales progress from its Qatar LNG projects and the path of oil prices is clearer, before considering any increase, which may now have to wait until 2012.

With production output also likely to be flat on-year, 2011 is shaping up as a solid-but-unspectacular year for Shell. The small premium the stock trades at compared with its European peers—11.1 times forecast 2011 earnings—may not widen much further.

Write to Andrew Peaple at andrew.peaple@dowjones.com

WSJ ARTICLE

By Wendell Roelf

CAPE TOWN (Reuters) – Royal Dutch Shell is facing opposition to its plans to seek shale gas in South Africa’s semi-desert Karoo region, as farmers fear methods used to extract it will contaminate water and harm the environment.

The outcome of whether Shell is allowed to proceed could affect prospects for other oil and gas companies in the Karoo, which may hold substantial deposits of gas in shale.

This gas can now be exploited due to new techniques and could bring a much needed fresh source of energy to Africa’s largest economy, which is heavily reliant on coal.

Petrochemicals group Sasol, Anglo American, Falcon Oil and Gas, and Bundu Gas and Oil Exploration, are among those eyeing shale gas in the region.

Public concern focuses on the extraction method known as hydraulic fracturing or fracking, in which drillers blast millions of litres of water, sand and chemicals at high pressure in underground rock formations to create cracks for gas and oil to escape easier.

“We are very concerned about the environmental impact, especially because fracking is not regulated in South Africa,” Derek Light, a lawyer representing a number of Karoo land owners and interested parties told Reuters on Thursday.

He said farmers were worried about the sensitivity of the underground water systems upon which the Karoo is totally dependent, should contamination occur.

According to findings from a U.S. Congressional probe released on Monday, several energy companies there may have violated environmental rules by injecting diesel into the ground without permits as part of the controversial drilling technique.

“We’ve got some serious concerns about fracking, it is as yet an unproven technology with unacceptable risks for fresh water abstraction and pollution,” said Mark Botha, head of conservation at environmental group WWF South Africa.

Oil major Shell, which has held public consultations as part of its environmental impact assessment, said in January it had applied to Petroleum Agency South Africa for exploration rights in the Karoo.

“Fracking is the best method to extract gas that is trapped in shale,” Phaldie Kalam, vice president communications for Shell Africa told Reuters.

He said Shell noted the public’s concerns and would incorporate that into an environmental management plan currently under design, the final version to be handed in by end-April.

Minister of Mineral Resources Susan Shabangu on Tuesday placed an indefinite moratorium on the processing of all new exploration and production rights in the Karoo, although this would not affect those applications already in the pipeline.

© Thomson Reuters 2011 All rights reserved

SOURCE ARTICLE

platts

London (Platts)–3Feb2011/759 am EST/1259 GMT

Shell has abandoned plans for exploration drilling offshore Alaska in 2011 after continued delays with securing the necessary permits, the company’s CEO Peter Voser said Thursday.

–Richard Swann, richard_swann@platts.com

SOURCE ARTICLE

PRESS ASSOCIATION

3 FEBRUARY 2011

Royal Dutch Shell’s profits haul of £11.5 billion for 2010 has failed to win over the City after a disappointing fourth quarter performance.

Shares in the Anglo-Dutch giant slumped 3%, or 73.5p to 2177.5p, after tough downstream trading left earnings in the final three months of 2010 short of the 4.7 billion US dollars (£2.9 billion) anticipated in the City.

The pressure on the oil giant, which sparked a fall of 7.4p to 480.6p for rival BP, meant the FTSE 100 Index slipped 35.4 points to 5964.6 following a strong performance in recent days.

A version of this article will appear in print on February 4, 2011, in The International Herald Tribune.

By JULIA WERDIGIER

LONDON — Royal Dutch Shell said Thursday that its earnings had more than tripled in the fourth quarter because of higher oil and gas prices, and as investments in new projects started to pay off.

Profit at Europe’s biggest oil company rose to $6.79 billion in the last three months of 2010, compared with $1.96 billion in the same period a year earlier.

“We are making good progress against our targets, and there is more to come from Shell,” Peter Voser, Shell’s chief executive, said in a statement.

Excluding non-operating and one-off items the result was $4.1 billion, short of the $4.85 billion average estimate of analysts polled by Reuters. The shares were down 3 percent in early trading.

“Profits are somewhat shy of market estimates,” Richard Hunter, head of British equities at Hargreaves Lansdown in London, said. He added that the “setback is likely to be short-lived, however.”

Shell’s earnings follow a set of strong results from larger rivals such as Exxon Mobil, which reported its highest quarterly profit in more than two years. Earnings at BP, Shell’s closest rival, failed to meet analyst expectations, however, and the company announced the sale of assets that it said would make it a smaller and more agile company.

Unlike BP, which predicted its production would fall this year because of asset sales and the aftermath of the Gulf of Mexico rig explosion, Shell said it was confident of meeting its target of an 11 percent increase in oil and natural gas production from 2009 to 2012.

“These are ambitious targets, but we are on track,” said Mr. Voser, who managed to halt a drop in production last year with a large investment program. He also cut costs and sold less lucrative assets to improve profitability.

Shell started six key projects last year, including in Brazil and Qatar, where it started offshore gas production this year. Oil and natural gas production rose 5 percent to 3.3 million barrels of oil equivalent per day last year. The company invested $3 billion in exploration activities last year, about three times more than BP.

Mr. Voser said he expects total investments of as much as $27 billion this year, including $1.6 billion for a biofuels joint venture in Brazil with Cosan, a Brazilian company that harvests and processes sugar cane.

Shell said it would leave the dividend for the first quarter of this year unchanged at 42 cents a share.

SOURCE ARTICLE

The company is benefiting from rising oil prices, which are currently around $103 a barrel

Terry Macalister: Thursday 3 February 2011 08.23 GMT

A Shell petrol station in London. The company is benefiting from higher oil prices. Photograph: Ben Stansall/AFP/Getty Images

Shell stoked up the heated debate about the high cost of fuel on the forecourt today after reporting it made profits of nearly £1.6m an hour over the last three months.

The oil group never gives details of its British forecourt sales but it confirmed today that global profits from all sides of the business rocketed to $5.7bn (£3.5bn) in the last three months compared of 2010 with $1.2bn a year ago.

Full year profits reached $18.6bn – almost double the figure for 2009 – and chief executive, Peter Voser, boasted “there is more to come from Shell.”

Shares in Royal Dutch Shell fell by 3% in early trading, though, as City analysts had expected profits to be even higher in the last quarter.

The company is benefiting from rising oil prices which have moved up again since Shell’s financial year ended. Brent crude is now trading at over $103 a barrel due to the crisis in Egypt and increased demand.

These rises combined with tax increases imposed by the coalition government have sent the price of pump diesel to record levels and triggered a storm of complaints from the motoring lobby.

Shell makes the vast bulk of its profits on the “upstream” side of the business — producing oil and gas — rather than the “downstream” refining and petrol sales. The company usually claims to be making very little out of pump sales pointing out that around 70% of the price is made up of government duties.

The next rise in fuel duty is planned to come into effect on 1 April but the prime minister, David Cameron, is under increasing pressure to shelve the rise. The government has promised to reconsider and has indicated it is likely to back down in the face of an organised lobby from the a grass roots “fair fuel” campaign back by the AA and Road Haulage Association.

The Shell figures were boosted by a higher-than-expected 5% increase in oil and natural gas production over the last year. This included a strong contribution from Nigeria, where attacks on the oil company’s facilities have been reduced.

The company is planning to inject up to $27bn in new projects over the next 12 months, which Voser said would bring more rewards for shareholders.

“We are making good progress against our targets and there is more to come from Shell,” he said. The strong results are in line with big profit increases by the US firms, ExxonMobil and Chevron.

BP reported a massive downturn in annual profits on Tuesday but the figures were distorted by the payouts resulting from the Gulf of Mexico.

SOURCE ARTICLE

The Telegraph

Higher oil prices have helped doubled profits at Royal Dutch Shell this year, allowing it to steam ahead of rival energy giant BP.

By Rowena Mason 8:08AM GMT 03 Feb 2011

THE WALL STREET JOURNAL

FEBRUARY 3, 2011

By JAMES HERRON

LONDON—Royal Dutch Shell PLC Thursday posted a 48% rise in adjusted profit for the fourth quarter, but still missed analyst expectations due to lower refining margins, higher taxes and weaker trading results.

Shell Chief Executive Peter Voser said the company’s improved performance at the end of 2010 has laid the foundation for a strong 2011. The company benefited from rising oil and gas prices and a large increase in oil and gas output from a year earlier.

The Anglo-Dutch energy company said the clean current cost of supplies, a keenly watched figure that strips out gains or losses from inventories and other nonoperating items, was $4.11 billion in the three months ended Dec. 31, compared with $2.77 billion a year earlier.

This was well below expectations of $4.74 billion from a Dow Jones Newswires poll of nine analysts.

“Our earnings were impacted by weak refining margins, pressure on certain regional natural gas prices, and volatility in Downstream marketing margins as a result of rising oil prices,” said Mr. Voser.

Shell also said earnings were hurt by higher taxes and lower trading contributions. BP PLC , which missed earnings forecasts this week, reported similar negative impacts from trading and higher taxes.

Total oil and gas production for the period was 3.496 million barrels of oil equivalent a day, up 5% from a year earlier due to output from new projects. Analysts had expected a production rise of 1.3%.

Net profit for the quarter totaled $6.79 billion, more than triple the year-earlier $1.96 billion. Group revenues were $105.53 billion, up from $83.42 billion. Diluted earnings per share were $1.10, up from 32 cents.

Write to James Herron at james.herron@dowjones.com

SOURCE ARTICLE

By John Donovan

Apologies for the royaldutchshellplc.com website being down for over three hours today. This was due to “an event”, possibly a denial of service attack by an unknown party flooding the website with requests. Matters were not helped by confusion in our contact with technical support staff at the dedicated server hosting company in Dallas. More steps have been taken to hopefully minimize the impact of any future “events”.

BLOOMBERG

Royal Dutch Shell Plc may become Europe’s largest oil and gas producer as a $100 billion spending program starts to pay off and closest rival BP Plc scales back.

This year, Shell’s Pearl gas-to-liquids and Qatargas 4 liquefied natural gas developments in the Middle East are scheduled to come on stream, following investment of about $21 billion, the latest in a line of projects from Brazil to Canada that have reversed a seven-year decline in production. At the same time, BP forecasts output will drop 11 percent this year as it sells more assets to pay for the Gulf of Mexico oil spill.

“Within the major oil integrated group, Shell will grow the fastest in terms of underlying production and cash flow,” said Dimitri Willems, who helps manage about $1.4 billion at Kempen Capital Management in Amsterdam. “They are well on track to reach the projected growth targets.”

The Hague-based producer plans to spend more than $100 billion by 2014 and has been assessing more than 35 projects to maintain production growth until 2020. It expects output to rise by 11 percent to 3.5 million barrels of oil equivalent a day between 2009 and 2012. BP said yesterday output will average 3.4 million barrels a day this year.

Shell estimates cash flow will grow 80 percent in the three years to 2012 with oil averaging $80 a barrel.

“Finally, Shell is beginning to fire all cylinders,” said Jason Kenney, an analyst at ING Wholesale Banking in Edinburgh. “We haven’t seen Shell that cash generative for quite some time.”

BP, Exxon

Shell’s fourth-quarter earnings excluding one-time items and gains or losses from inventories are expected to rise to $4.8 billion from $2.8 billion a year earlier, according to a mean estimate of 12 analysts surveyed by Bloomberg.

BP yesterday posted adjusted profit of $4.4 billion, missing analysts’ expectations of $5 billion. Exxon Mobil Corp., the world’s largest company, this week reported its highest quarterly profit in more than two years of $9.25 billion.

Brent oil rose about 22 percent last year and averaged $80.33 a barrel. Shell shares rose almost 14 percent in the same time, outperforming a 0.5 gain in the 34-member Europe Stoxx 600 Oil & Gas Index.

Of 37 analysts who cover Shell, 28 recommend buying the shares, while eight have “hold’ ratings and one advises investors to sell the stock.

Shell’s exploration and production business will “produce quite a good set of figures,” said Colin Morton, who helps manage around $1.5 billion at Leeds, England-based Rensburg Fund Management Ltd.

Iraq Projects

Shell is continuing with project construction in Iraq and North America to maintain growth. It’s cooperating with OAO Gazprom, Russia’s state-owned natural gas monopoly, and PetroChina Co Ltd., leading European rivals in securing alliances with state-owned explorers, according to Sanford C. Bernstein & Co.

In October, Shell said it expected to book losses in the fourth quarter arising from disruptions in the Gulf of Mexico after the worst oil spill in U.S. history. Production from the region, which accounts for about a third of Shell’s total production in the Americas, will be 40,000 barrels less than previously expected this year.

To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net