Shell misses forecast but raises dividend

London: Royal Dutch Shell Plc reported a big drop in fourth-quarter next profits and missed analysts' forecasts, but the oil major eased investor fears about cashflows by raising its dividend while lifting planned investments.

The world's second-largest non-government controlled oil company by market capitalisation said fourth-quarter Current Cost of Supply (CCS) net profit fell 28 per cent to $4.79 billion (Dh17.58 billion).

However, the ramp up to record crude oil prices above $147 a barrel in July lifted full-year profits to $31.4 billion, a record for a European company and up from $27.6 billion in 2007.

CCS profits strip out unrealised gains or losses related to changes in the value of fuel inventories and is comparable to US firms' net profit figure.

Many investors buy or hold Shell for its dividends and some feared lower oil prices would put pressure on payouts. The company eased these fears by proposing a 5 per cent rise in its first quarter dividend for 2009 to $0.42 per share.

Shell's London-listed "A" shares traded down 0.39 per cent to 1,769 pence compared to a 0.59 fall in the DJ Stoxx European oil and gas sector index.

"I think the most important thing was that they increased (the expected first quarter 2009 dividend) by 5 per cent, which is a sign that management has confidence in the business going forward at the current oil price," Peter Heijen, analyst at Theodoor Gilissen said. Though many oil companies including US major ConocoPhillips have announced big capital investment cuts, Shell said it planned to expand its investments.

Organic capital expenditure, investment excluding asset sales and acquisitions, is expected to be $31 billion to $32 billion in 2009, compared to $30 billion in 2008, the company said.

Some investors feared the collapse in crude prices from a record above $147/bbl in July to around $42/bbl on Thursday, and big capital investment commitments might make it hard for Shell to meet its big dividend payments.

"These are good results, but we would have preferred to see capital expenditure a bit lower," Alexandre Weinberg, analyst at Petercam said.

Shell said production of oil and gas was essentially flat in the quarter compared with the same period in 2007 at 3.415 million barrels of oil equivalent per day. Shell's oil sands unit, which produces crude from bitumen-drenched soil, swung to a $30 million loss in the quarter, despite a 44 per cent increase in bitumen production, emphasising how the lower oil price has hit this high-cost business.

In recent years, Shell has invested heavily in capital and energy-intensive unconventional hydrocarbon sources such as Canada's oil sands.

Excluding one-off items and non-cash accounting charges, which amounted to a net gain of $897 million, the fourth quarter CCS result was $3.89 billion, below an average forecast of $4.1 billion from a Reuters poll of six analysts.