Shell reports record profits

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The Independent Online

Royal Dutch Shell today reported another profits record, after higher oil prices lifted its annual earnings to 25.36 billion US dollars (£12.94bn).

The figure, which is 21% higher than a year earlier, included a better-than-expected performance in the final three months of the year, when the company's earnings figure rose 11% to 6.01 billion US dollars (£3.06bn).

The recent fall in the price of oil means analysts are expecting the year ahead to be much tougher for Shell, particularly as it will be under increasing pressure to find new sources of oil.

While the fourth quarter was higher on a year earlier, the figure was still lower than the 6.95 billion reported in the previous three months, as oil prices have eased by about 30% since hitting 77 dollars in August.

Today's results mean Shell generated profits of almost £1.5 million an hour. But the weakening of the US dollar ensured the sterling conversion of today's figure is almost identical to last year, which was a British profits record.

With increased focus on production, Shell said fourth quarter output was 3.645 million barrels of oil equivalent a day, compared with 3.5 million a year ago and despite the impact of unusually low seasonal gas demand in northern Europe.

Production from Shell's Nigerian operations was 191,000 barrels down on a year ago, due to security concerns in the country's Western Delta.

The company's long-term production worries have been compounded by the loss of some of its interests in the Sakhalin-2 gas project to Russia's Gazprom.

Chief executive Jeroen van der Veer said the situation in Nigeria and the reduction of the Sakhalin stake meant the company expected "only modest production growth" to the end of the decade.

In 2007, the figure is likely to be between 3.3 and 3.5 million barrels of oil equivalent a day.

Shell said its future production efforts would see Shell look to invest in large stakes in major integrated projects, funded by the sale of assets. Net capital spending is expected to be about 22 to 23 billion US dollars in 2007, compared with 21 billion US dollars in 2006.

Mr van der Veer said: "We recognised some time ago that our industry was witnessing important changes. Today, I am pleased with our response. We look for competitive returns and take a long-term, global approach.