"Oil's Well" At Royal Dutch Shell

Published in Company Comment on 26 July 2012

Growth strategy delivers, despite oil and gas price drops.

Royal Dutch Shell (LSE: RDSB) can influence the volume of oil and gas it finds and refines. It can even control refining margins. But one thing it can't do is control the price of oil and gas, which is determined by market forces.

This morning, the UK's largest integrated oil company posted a drop in second-quarter earnings from $8bn to $6bn. The company said profits have fallen with energy prices but its growth strategy is delivering to the bottom line.

The company added: "Our industry continues to see significant energy price volatility as a result of economic and political developments. Shell is implementing a long-term, consistent strategy against this volatile backdrop. Our plans for organic capital investment of around $32 billion in 2012 and medium-term financial and production growth are on track."

Royal Dutch Shell went on to say: "Shell has continuous improvement programmes in place to increase operational uptime and performance and to control costs. The new projects we've built in recent years are driving growth in the company today, and our investment decisions should drive oil and gas production for decades to come, with more than 20 key upstream projects under construction today."

The company also had some comforting news for income investors. It said: "Our profits pay for Shell's dividends and substantial investments in new projects, to ensure affordable and reliable energy supplies for our customers, adding value for our shareholders."

The company distributed $2.8bn worth of dividends in the first quarter, and investors can expect more of the same in the second quarter. Royal Dutch Shell said it will lift its second-quarter payout by 2.4% compared to last year. The news puts the company on course for a full-year dividend payout of 105p, which equates to a prospective yield of 4.8% at today's share price of 2,185p.

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> David says if you want to go well… you have to go Shell. He owns shares in Royal Dutch Shell.

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