Shell disappointed markets with weak refining and downstream results on Thursday, as an oil price-fueled rebound in its fourth-quarter profit failed to meet expectations.
Shell's mixed results lagged stronger earnings from Chevron and Exxon Mobil, but nevertheless outpaced rival BP, which is still struggling to put the costs of the Gulf of Mexico oil spill behind it.
Shares in the Anglo-Dutch oil major fell 3 percent, with analysts saying they had expected more and expressing concern over continued weakness in Shell's refining business, where several major facilities were down for long periods.
Chief Financial Officer Simon Henry said a major unit of Europe's largest refinery in the Netherlands remained shut and would not restart until at least the end of February, which would have an impact on first-quarter results.
Shell blamed weak refining margins, volatile downstream marketing margins as a result of rising oil prices and pressure on natural gas prices in some regions for the patchy results.
There is no immediate sign that things are going to improve in refining, where Shell is trying to sell several plants, while some analysts are concerned by the company's focus on gas given price weakness and oversupply forecasts.
"Refining conditions...do remain overall very difficult," Shell CFO Henry said, while Arbuthnot analyst Dougie Youngson warned of increased pressure if oil prices remained at around $100 a barrel for long.
Benchmark U.S. crude prices averaged about $85 per barrel in the fourth quarter, up from $76 in the fourth quarter of 2009, but have since risen to above $100.
"The global market continues to see weak demand and pricing for oil products," Youngson said in a note. Shell said oil product sales rose 5 percent year-on-year.
Shell's earnings on a current cost of supplies (CCS) basis, jumped to $5.7 billion from $1.2 billion a year ago when it suffered heavy refining losses, although analysts said this was still less than expected.
Excluding non-operating and one-off items, Shell's fourth- quarter result was $4.1 billion, short of a forecast for $4.85 billion, according to a Reuters poll.
However, analysts welcomed Shell's announcement of a $0.42 dividend for the quarter and the fact it expected to maintain that level for the first quarter of 2011.
Planned capital investment of $25-$27 billion for 2011 was also well received, with Bernstein analyst Oswald Clint saying capex appeared under control as on a net basis it would only be slightly higher than in 2010.
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