Royal Dutch Shell (NYSE:RDS-B) Increasing Oil Production

Tuesday, March 16th, 2010

Investors liked what they heard from Royal Dutch Shell (NYSE:RDS-B) concerning the need to contain costs while increasing profits, as Shell said they're increasing their new projects and looking to cut a number of jobs to contain costs.

Investors and shareholders liked what they heard and the share price responded positively as a result.

For their increase in production levels, Shell has a strategy in place to add to oil production by 11 percent over the next two years in comparison to 2009 levels. They are looking for production to reach 3.5 million barrels of oil a day by that time. That would be a big deal, as oil production has fallen for the last ten years for the company.

Shell also added a positive not that their exploration efforts in 2009 were the best they had in over 10 years as well, and the years ahead will reap the benefits of that success in increased oil production.

An additional 3.4 billion barrels were added to the proven reserves of Shell, and another 2.4 barrels of tight gas in Australia, North America and the Gulf of Mexico were added. In 2009 the company said gas production surged by over 60 percent for the year.

Officials from the company also said they are analyzing over 35 new projects which could have around 8 billion barrels of oil equivalent resources in them. Consequently, cash flows from operations are expected to grow by about 50 percent from 2009 to 2012, depending on the price of oil during that time.

Even with the positive news, Shell must continue to cut costs through laying off some workers, with another 2,000 scheduled to be released by the end of 2011. Much of that comes from their exposure to the natural gas and refining sectors, where margins are slim.

Combined with exploration costs and increased production, the company isn't able to keep as many people in operations which generate little, if any, revenue.

Other cost-cutting measures the company will undertake include cutting back on its retail markets by 35 percent and 15 percent of its refining capacity.

Article by Gary B

The views expressed are the subjective opinion of the article's author and not of

Tags: energy , oil production , oil refining , royal dutch shell

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