Royal Dutch Shell met expectations with a three per cent rise in current cost of supply (CCS) net profit for the fourth quarter, helped by high oil prices and strong refining margins.
Shell said in a statement yesterday that CCS profit, which excludes unrealised inventory gains, rose to £3 billion. Excluding a net gain of $34 million related to exceptional items, the figure was in line with an average forecast of $5.385 billion in a Reuters poll of 10 analysts.
"Clean" net income - which is after exceptionals and inventory gains and is the figure viewed by analysts as the best measure of an oil firm's underlying health - was up around 13 per cent compared with the same period last year.
However some analysts had hoped for better after larger rival Exxon Mobil reported better-than-expected fourth-quarter results and a record $36 billion annual profit earlier this week.
"The figures were fine, but didn't sparkle like Exxon's," said Brendan Wilders, an oil analyst at Oriel Securities.
In London, "A" shares in the world's third-biggest listed oil firm by market value fell 1.8 per cent to 1877 pence at 8.25 a.m., outpacing a 1.1 per cent fall in the DJ Stoxx European oil and gas sector index.
Production fell to 3.5 million barrels of oil equivalent per day (boepd) in the quarter from 3.84 million boepd in the same period of 2004, partly because hurricanes hit production in the Gulf of Mexico hard in the past two quarters.
Full-year CCS net profit for 2005 was $22.94 billion, a record for a UK-listed company, analysts said.
Shell said it expected to return $5 billion to shareholders by repurchasing stock in 2006, in line with last year's share repurchases.
The Anglo-Dutch firm's reserve-replacement ratio - the rate at which it matches the oil it pumps with new finds - was 60 to 70 per cent when measured by Securities and Exchange Commission rules, a Shell spokesman said.
Companies target a rate of at least 100 per cent to avoid depletion of their asset base and the suggestion their business is eroding.
Shell said it continued to target 100 per cent reserves replacement over the period 2004-2008 but that most proved reserves would be added in the latter part of the period.
Shell is under pressure from investors for its poor reserve-replacement rate. It achieved a rate less than 49 per cent in 2004 excluding divestments, or 19 per cent including divestments, the spokesman said.
Analysts believe this shows Shell will struggle to expand its upstream oil and gas production business in coming years.
Shell said it would pay a dividend of €0.23 per share for the fourth quarter.
"A higher dividend would have been nice," Jaap Barendregt at FBS Bankiers said.