Investors lifted Royal Dutch Shell plc by almost 5% in early trading on Wednesday, despite a 44% plunge in profits and 3% decline in production, in part on the better-than-expected gains in the integrated natural gas segment, the operator’s biggest global focus.

After stripping out almost $3 billion in one-time items related to dismal performance from overseas refineries, Shell beat Wall Street expectations by 51%. The gas segment earnings were strong, in part on physical gas trading gains in North America following the severe winter. Shell Energy North America is the second largest physical gas trader in North America; BP plc on Tuesday reported similar upside (see Daily GPI, April 29).

Shell investors weren’t expecting to hear any good news after CEO Ben van Beurden earlier this year warned on profits (see Daily GPI, March 13). The oil major last year launched a revamp of its onshore North American operations after taking close to $2.7 billion-plus in charges on the onshore business (see Daily GPI, Oct. 15, 2013; Aug. 2, 2013). Now it’s put the refining arm under scrutiny, CFO Simon Henry said during a conference call with investors.

Like other Euro-based producers, Shell’s profits are reported on a current cost of supplies (CCS). Profits based on CCS came in at $4.51 billion (71 cents/share), versus $8.18 billion ($1.26) in 1Q2013. Excluding the impairments, earnings declined 3% to $7.33 billion ($1.17/share) from $7.52 billion ($1.19). Shell had performed even more poorly in 4Q2013, when CCS earnings fell 71%.

The Americas segment earned $686 million in 1Q2014, the first positive quarter for the unit since 1Q2013.

“Compared with the first quarter 2013, upstream earnings excluding identified items were supported by stronger integrated gas results as well as higher gas realizations and gas trading results,” Henry told analysts. “This was offset by the impact of exploration well write-offs, and higher costs and depreciation. Downstream earnings excluding identified items were impacted by lower industry refining margins and trading results.”

Shell’s refining business is expected to have more troubles on weaker demand, while new refineries overseas are contributing to a “huge oversupply,” he said. Shell now is reviewing the operations to determine whether to “keep or divest.”

ConocoPhillips, a former integrated major, sold its refining arm to become the biggest independent in North America. Marathon Oil Corp. split the company to give investors more transparency in its exploration arm versus the downstream. Other operators have considered the same.

Cash flow from operating activities, boosted by the gas gains, climbed to $14 billion in the first quarter, versus $11.6 billion in 1Q2013 and $6 billion in the fourth quarter. Capital investments totaled $10.7 billion, including $2 billion related to the acquisition of Repsol SA’s liquefied natural gas (LNG) business.

Shell’s “long-term strategy is sound,” the CEO said. “Our first quarter 2014 results reflect more robust levels of profitability. However, as we saw in 2013, we are in an industry where high volatility remains, both in the macro-environment and in our quarterly results. The priorities I set out at the start of 2014 have not changed.”

Management is “determined to improve our competitiveness, and to adapt the company to respond to changes in the industry landscape, particularly in oil products and North America resources plays.” Many of the North American onshore business is under scrutiny, with asset sales underway or planned in the Appalachian Basin and Eagle Ford Shale. None of the U.S. offshore projects, nor LNG proposals, are on the table to sell.

Shell has three key priorities, “better financial performance, enhanced capital efficiency, including more selectivity on project choices and $15 billion of divestments in 2014-15, and continuing strong project delivery,” said van Beurden. “Our investment strategy is delivering where it matters — at the bottom line. ” Among other things, he pointed to new “profitable” production from the deepwater Gulf of Mexico, in Iraq and new LNG from its acquisition from Repsol. Shell is one of the top integrated gas providers in the world.

“We are making hard choices on Shell’s assets and options, to improve capital efficiency, in both upstream and downstream…The impairments we have announced in downstream reflect Shell’s updated views on the outlook for refining margins. There are substantial pressures on the industry from excess capacity, changing product demand, and new oil supplies from liquids-rich shales.” However, a 4% dividend increase “underscores our delivery in recent years, and our confidence in the future potential.”

Tudor, Pickering, Holt & Co. (TPH) analysts expected to see the “big beat” to the stock price after Shell was able to “reverse course” from prior quarterly disappointments. Shell’s adjusted net income was 39% higher than TPH estimates.