Reuters reported that Royal Dutch Shell was targeting aggressive growth in the coming years with the start up of big new projects and higher investments set to drive 50% rise in cashflow and 25% rise in oil and gas production.
However, weaker than expected results for the Q4 partly due to dismal industry wide refining margins and an anaemic dividend hike raised the question of whether Shell was simply running faster to stand still with investments offering ever dwindling returns.
Hague based Shell said that it was eyeing a return to strong production growth in the coming years after nearly a decade. Apart from a 5% rise in 2010, the group's production has fallen every year since 2002.
Oil & gas production should average some 4 million barrels of oil equivalent per day in 2017 to 2018. Production averaged 3.215 million barrels of oil equivalent per day in 2011, 3% drop on 2010. This growth will be generated by higher capital investment expenditure which will rise to USD 32 to USD 33 billion this year from USD 31.5 billion last year.
Analysts had previously predicted that CAPEX would fall as Shell completed the big new projects such as the pearl gas to liquids plant in Qatar which will push output higher.
The high capital being invested is one reason that Shell's return on capital employed failed to sparkle, at 15.9% compared to levels above 20% a few years back when oil prices were considerably lower. Similarly, in spite of a record average Brent crude price of USD 111 per barrel in 2011 the full year current cost of supply net income of USD 28.6 billion still lagged the earnings high Shell reported in 2008 of USD 31.4 billion.
Shell said that its Q4 CCS net income was USD 6.46 billion helped by one off gains from the sale of assets. Excluding one offs, the result rose 18% to USD 4.85 billion, shy of an average forecast of USD 5.17 billion from a Reuters poll of nine analysts.
The miss is despite the fact analysts had recently cut back their forecasts in the light of weak trading statements from Shell's rivals. 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 US accounting rules.
(Sourced from Reuters)
