ROYAL Dutch Shell yesterday announced an expansion plan aimed at ramping up oil production.
Unveiling a profits rise of 50 per cent to $28.6bn (£18.1bn) for 2011, the company said it would pump $30bn into new oil and gas projects this year.
The profits, which fell short of analyst estimates, compare with $24bn in 2011, when production fell and profits were mainly fuelled by higher prices.
Production averaged 3.215m barrels of oil equivalent per day in 2011, a three per cent drop on 2010.
Chief executive Peter Voser said that world global demand for oil was increasing but that volatility in the energy sector had been triggered by events such as the earthquake in Japan and the Arab Spring.
“In a world of volatility, volatile earnings are a fact of life. We stay focused on the longer term,” he said.
“We are balancing the payouts for investors and the investment needed for the company.”
Shell has been in the process of scaling back its refinery operations and Voser said that shift in the business was keeping to the timetable it had laid out.
The company said that in the final three months of 2011 net income was $6.5bn, up from $5.7bn for the comparative period the year before.
Shell’s downstream division swung to a quarterly loss of $278m after its refinery margins were hammered and sales of oil products dropped.
Voser said that the company’s dividend would be hiked in 2012, though at a lower level than some analysts had been expecting.
The company said it would add $0.01 to its first quarter dividend for 2012, to $0.43 per share.
Shell’s Class A shares shot down 2.3 per cent after the announcement, but settled to close down 0.15 per cent.
VOSER’S NEW STRATEGY
Shell surprised analysts yesterday by unveiling an aggressive growth strategy for the next six years.
The oil major said it plans to move back into production growth through 60 new projects containing a potential 20bn barrels of oil, turning around its downward output trend over the last ten years. The firm is targeting a 50 per cent rise in cashflow and a 25 per cent rise in gas and oil production by 2018.
To achieve this, Shell will splash out $30bn this year, up from $31.5bn a year ago, chiefly on exploration and extraction. And it will renew its focus on “tight oil” projects, which have the potential for higher margins than natural gas, which has fallen in price.
