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Shell Beats Forecasts for First Quarter

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LONDON - Royal Dutch Shell Thursday raised the amount of asset sales it plans for this year as it posted consensus-beating adjusted profit for the first quarter due to high oil prices and a small increase in its production.

The results marked a return to form for Europe's largest energy firm, which disappointed investors with lacklustre numbers in the prior period. Shell's strategy of focusing on boosting output from its gas-to-liquids and oil-sands projects paid off modestly, even though some analysts are wary that such unconventional projects rely on high energy prices to cover the higher costs of unconventional production. 
 
"We are implementing our strategy by improving near-term performance, delivering a new wave of production growth and maturing the next generation of growth options for shareholders," said Chief Executive Peter Voser. 
 
The Anglo-Dutch company said the clean current cost of supplies, a keenly-watched figure that strips out gains or losses from inventories and other non-operating items, was $7.28 billion in the three months ended March 31, up 15.7 percent from $6.29 billion in the first quarter of 2011. This was above expectations of $6.75 billion in a Dow Jones Newswires poll of nine analysts. The adjusted figure is broadly comparable with net income under U.S. accounting rules. 
 
Shareholders also received a 2.4 percent increase in their first-quarter dividend from last year, the company said, with the payout rising to 43 cents per ordinary share. 
 
Shell shares rose in early trade Thursday, as investors cheered the news. At 0752 GMT, Shell B shares traded up 67 pence, or 3.1 percent, at 2,256 pence. 
 
The continued ramp-up of production from giant unconventional projects, like the Pearl gas-to-liquids plant in Qatar and Shell's Canadian oil sands upgrader, helped the company post a modest improvement in overall output. 
 
Total oil and gas production was 3.552 million barrels of oil equivalent per day, an increase of about 1.4 percent on the year, although it was some 7.5 percent higher than in the fourth quarter. Analysts were expecting production to decline 0.6 percent.
 
However, net profit for the quarter dropped 0.7 percent to $8.72 billion from $8.78 billion a year ago. Higher purchasing costs, which rose nearly 11 percent to $94.06 billion, took some of the shine off the bottom line. 
 
Group revenue was $123.77 billion, up 7.8 percent from $114.84 billion in the first quarter of 2011. 
 
Diluted earnings per share were $1.40, compared with $1.42 the previous year. 
 
Analysts hailed the result. 
 
"It's a good beat. It's 10 percent ahead of our estimate of clean net income," said Investec Securities' Stuart Joyner. He cautioned, however, that refining and marketing earnings, which dropped 32 percent from a year ago, were a cause for some concern. "Downstream is very weak. There is still a bit of risk for downstream for the full year," said Joyner. 

Copyright (c) 2012 Dow Jones & Company, Inc.

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