Royal Dutch Shell Analyst Meeting Review

By Eric Fox | March 14, 2011 AAA

Royal Dutch Shell (NYSE:RDS) used a recent analyst meeting to review the company's operational achievements for 2010 and its extensive upstream portfolio of oil and gas projects. The company also set an ambitious goal for production growth through 2014.

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2010 Summary
Royal Dutch Shell earned $20.1 billion in 2010, up 61% from 2009. Like many of its peers, the company earned most of these profits in the upstream segment. The company reported production of 3.314 million barrels of oil equivalent (BOE) per day in 2010, a 5% increase over 2009.

Royal Dutch Shell brought five upstream projects on line in 2010, including the Perdido development in the deepwater Gulf of Mexico. This development will eventually produce from three offshore oil and gas fields and ramp up to a peak capacity of 100,000 BOE per day. BP (NYSE:BP) and Chevron (NYSE:CVX) also have an ownership interest in the Perdido development.

Capital Expenditures
Royal Dutch Shell expects capital expenditures to range between $25 billion and $27 billion a year through 2014. This estimate is line with the company's previous guidance and reflects the large amounts of capital needed to develop oil and gas resources.

Production Growth

Royal Dutch Shell has twenty upstream projects currently under construction and estimates that these developments will add 800,000 BOE per day of production, helping the company reach its production goal of 3.5 million BOE per day by 2012. For 2014, Royal Dutch Shell has set a target production goal of 3.7 million BOE per day, representing 12% growth over 2010.

Exploration and Development
Royal Dutch Shell is on track to start up production from the Pearl Gas to Liquids (GTL) plant in 2011. This project is located in Qatar and at its peak will produce 360,000 BOE per day of gas to liquids products and natural gas liquids.

Royal Dutch Shell also plans to drill 25 exploration wells in 2011 across its entire portfolio, including wells in Brazil, China and North America. The company reported a recent success on an exploratory well located offshore Brunei, and plans further appraisal wells here.

Asia has become a popular location for companies to look for oil and gas reserves. In January 2011, Exxon Mobil (NYSE:XOM) announced that it would partner with the Malaysian National Oil Company to invest $3.2 billion in that country. In February 2011, BP agreed to pay $7.2 billion for a 30% stake in 23 separate oil and gas production sharing contracts held by Reliance Industries in India.

The Bottom Line
Royal Dutch Shell increased net income and production in 2010, and has built up a large set of oil and gas projects. The company will aggressively develop these properties over the next few years to meet its production growth goals. (For related reading, take a look at What Determines Oil Prices.)

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