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. Last Updated: 07/27/2016

Shell Posts Top Profit in Europe

LONDON -- Strong oil prices drove Royal Dutch/Shell Group's fourth-quarter earnings 46 percent higher Thursday and helped the world's second-largest oil company to post the biggest 2002 profit in Europe.

As war looms in the oil-rich Middle East, top executives also sent reassuring signals about global fuel supplies.

"While we are by no means complacent, we feel that our own supply system and the structure of our supply contracts gives us the opportunity to respond very flexibly to what is likely to present itself," said Paul Skinner, Shell's head of refining and marketing.

Fourth-quarter net profit, adjusted to reflect the current cost of supply, grew to $2.78 billion from $1.91 billion a year earlier, in line with market forecasts. For the year, net profit dropped 23 percent from 2001's even higher level to $9.218 billion.

The results were accompanied by a strategy statement with targeted investment returns, extending some to 2004. Shell slipped outside its 13 percent to 15 percent underlying investment returns target last year, when returns on average capital employed at reference oil prices of $16 per barrel fell to 12.5 percent.

Chairman Phil Watts said in an interview that this was a "conscious decision" driven by the desire to make a series of acquisitions. The company said getting back into the targeted ROACE range by 2004 would be a "priority."

The company spent $16 billion on acquisitions in 2002, including acquired debt, and has suffered at the hands of investors in recent months from concerns that the strong crude oil prices that have delivered bumper profits for three years are about to dip sharply.

Crude oil stands close to 10-year highs, but analysts fear they will fall back after a decisive U.S.-led war against Iraq.

Watts sent out reassuring signals.

"The economic climate for our business remains uncertain and we expect continued volatility," he said. "I am confident, however, that the inherent strengths of our portfolio will be even more apparent in this environment."

But analysts said Shell was still beset by underlying problems, including a deterioration in its ability to replace reserves by finding new oil.