LONDON, April 26 – Royal Dutch Shell beat forecasts with an 11 per cent rise in quarterly profit, as higher oil prices and a ramp-up of new projects outweighed the impact of lower US gas prices.

Europe’s largest oil company by market capitalisation said its current cost of supply (CCS) net income – an industry measure of profit – rose 11 per cent to US$7.66 billion (RM23.37 billion).

Shell’s London-listed A shares were up 2.9 per cent at 0746 GMT today, against a 1.6 per cent rise in a European oil and gas sector index.

Citigroup analysts said market forecasts for Shell’s future earnings would likely rise on the back of the results.

Shell raised its target for assets sales in 2012 to US$4 billion from US$2-US$3 billion, echoing an industry trend of companies trying to churn their portfolios more regularly.

By jettisoning mature assets earlier in their life cycle, companies hope to focus reserves on higher growth activities.

Nonetheless, some analysts believe Shell will struggle to make the returns it made on historic projects, in the future.

Production was up 1.4 per cent in the first quarter compared to the same period a year earlier at 3.55 million barrels of oil equivalent per day.

Brent crude prices averaged US$118.60 per barrel last quarter, up from US$105.43 a year before. US natural gas prices have fallen to near 10-year lows after an explosion of shale gas production sent supplies to near all time highs.

However, this was offset by strong prices in Asia for liquefied natural gas, due to Japan’s shut down of nuclear power plants in the wake of the Fukushima disaster.

Shell’s refining division produced a weaker underlying result despite some improvement in industry refining margins.

Chief executive Peter Voser said he expected weakness in the division to continue, and for low US natural gas prices to continue to eat into profit.

“In downstream and North American natural gas we see continued challenges for our industry,” he said.

Excluding one-offs, the result rose 16 per cent to US$7.27 billion, compared with a forecast for US$6.70 billion in a company poll of analysts.

US rival ConocoPhillips reported a 1 per cent drop in underlying earnings last week, due in part to weak US natural gas prices.

CCS earnings strip out unrealised gains or losses related to changes in the value of inventories, and as such are comparable with net income under US accounting rules. – Reuters