AMSTERDAM (AP) -- Royal Dutch Shell PLC, Europe's largest company by market capitalization, reports fourth-quarter earnings before markets open Thursday.
Shell's net profit is likely to suffer by comparison with last year, when it booked around $1.6 billion in net gains after selling part of its stake in Australia's Woodside Petroleum.
It will benefit somewhat from oil prices at least 10 percent higher than the fourth quarter of 2010 — though about half of Shell's production is in the form of natural gas, and gas prices have declined. In addition, refining margins have worsened, especially in North America. Analysts have been cutting their estimates for Shell's earnings in recent weeks.
WHAT TO WATCH FOR: A dividend increase in 2012, which would be Shell's first in three years. Although Shell's bottom line may not be as robust in the fourth quarter of 2011 as it was in the same period a year earlier, the bigger picture is that its operational performance has been improving. A heavy investment program in the late 2000s is now bearing fruit and production is increasing. Analysts from Charles Stanley calculate Shell's cash flow may have been as much as $45 billion last year. After subtracting $27 billion for capital spending and another $10 billion in dividends, Shell should still have some extra cash lying around to either distribute to shareholders or spend on new investments.
WHY IT MATTERS: Shell is one of the largest integrated oil companies, behind ExxonMobil and vying with Brazil's Petrobras and China's PetroChina. Its performance affects not only investors, but also national economies, politics, and the environment.
WHAT'S EXPECTED: Analysts polled by FactSet expect Shell to earn $5.63 billion on revenue of $114.5 billion for the three months ended Dec. 31, 2011.
LAST YEAR'S QUARTER: In the same period in 2010, net profit was $6.79 billion, though it included one-time gains of $1.59 billion on asset sales. Revenues were $100.7 billion.
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