Shell profits held back by weak refining

Royal Dutch Shell (RDSa.L) said it was targeting aggressive growth in the coming years, with the startup of big new projects and higher investments in exploration set to drive a 50 percent rise in cashflow and a 25 percent rise in oil and gas production.

The bullish outlook came as Europe’s largest oil company by market capitalization unveiled weaker-than-forecast fourth quarter profits, after dismal industry-wide refining margins sent the crude processing division into a loss.

The company also announced a weaker rise in its dividend than some analysts expected, adding just 1 cent to its first quarter dividend for 2012, to $0.43 per share.

Hague-based Shell said it was eyeing a return to strong production growth in the coming years, after nearly a decade. Apart from a 5 percent rise in 2010, the group’s production has fallen every year since 2002.

"Oil & gas production should average some 4 million boe/d (barrels of oil equivalent per day) in 2017-18," the company said in a statement.

Production averaged 3.215 million boe/d in 2011, a 3 percent drop on 2010.

However, a big rise in crude prices outweighed this drop, and weak refining profits. Net profits for 2011 were $24.69 billion, up 37 percent on the year.

The company said its fourth quarter current cost of supply (CCS) net income was $6.46 billion, helped by one-off gains from the sale of assets.

Excluding one-offs, the result rose 18 percent to $4.85 billion, shy of an average forecast of $5.17 billion from a Reuters poll of nine analysts.

Brent crude prices averaged $109 per barrel last quarter, up from $88 a year before.

CCS earnings strip out unrealized gains or losses related to changes in the value of inventories, and as such are comparable with net income under U.S. accounting rules.