With an eye toward the future, Royal Dutch Shell plc hired more than 4,500 energy professionals and added 43,000 square kilometers (16,602 square miles) to its exploration portfolio last year to rejuvenate company resources. The Anglo-Dutch major also reported a 60% rise in profit in the last three months of 2007.

Shell management took some heat last week about a decision to withhold the company’s oil and natural gas reserves estimates until March. CEO Jeroen van der Veer explained during a conference call Thursday with energy analysts and the media that the decision was made in 3Q2007.

“We will make sure we have counted all our reserves,” he said, “and can explain at great detail what you may have hoped to hear today.”

Shell was burned four years ago in an oil and gas reserves scandal that upended its exploration and production unit and later forced the departure of CEO Philip Watts and several other executives (see NGI, Jan. 12, 2004). The news that Shell would not issue its reserves numbers with its 2007 year-end earnings sent ripples through the investment community last week; van der Veer said that was unintended.

“On the reserves replacement factor…the proved reserves will be published in March like many do in the industry,” he said. “With all of the commotion, we decided we would make a change. We like to do a good job, and we will defer this to March when we file our annual report.”

On Friday ExxonMobil Corp. also announced it would not issue its reserves numbers until March.

Van der Veer said pulling figures together was more difficult today.

“Projects all the time are getting bigger, more complex, and more sensitive in some areas,” he said. “Our strategy is to aim in the upstream for long-life projects so that we can start producing oil and gas for decades.” He noted that “reserves” has “very strict” Securities and Exchange Commission definitions. “‘Resources’ are our own figures. If we can develop the projects, then we can produce those resources.”

Last year, van der Veer said, “we embarked on a range of new projects, and of course, we can apply Shell technology…In the upstream side of the business, we are trying to create new long-term projects. We have a ‘big cat’ strategy, to go for the larger plays.” The discoveries were “quite some acreage to add in one year, and the results will be exploration of at least 1 billion barrels of equivalent resources,” which is not the same as “reserves,” he noted. “That 1 billion is where you expect one day you can produce it.”

In addition to building its portfolio, Shell in the past two years has hired about 10,000 new energy professionals, including about 4,500 in the past year, according to van der Veer. Unlike years past, when many of Shell’s new hires were fresh from college, today a lot of Shell’s hires are “mid-career executives,” he said. The company, he said, realized “ahead of many others” that it would need a lot of new petroleum experts as its workforce aged. Even though its employment ranks have swelled, van der Veer noted that Shell will continue to look for more employees to hire in the coming years.

Shell invested about $37 billion in its portfolio last year, which the CEO noted was more than the company’s 2007 net profit. Full-year net profit reached $31.3 billion, up 23% from $24.4 billion in 2006. However, van der Veer shot down criticism of the company’s high profits, which he said was misguided.

“In this business environment, we have very high oil and gas prices, but there are higher costs, especially in the upstream to construct our projects, so a lot of those costs have gone up a lot as well.” He said competition for resources has risen from national oil companies, which he said have “become stronger and more international, and this applies especially to the downstream. We have seen over the past year and we still expect to see this year, an environment of weaker margins tied to a weak dollar…”

“And we still get remarks, ‘why is your production going so slowly?’ So we are simply a very big industry,” van der Veer said. “If I look where we make those profits, that is mainly upstream, so it’s not at the pump.”

Shell’s 4Q2007 net income was $8.47 billion, up from $5.28 billion in 4Q2006. Revenue jumped in the final three months of 2007 to $107 billion from $75.5 billion, despite a decline in oil production.

In 4Q2007, total oil and gas production was 3.4 million boe/d, down 5.5% from 3.6 million boe/d in 4Q2006. Full-year 2007 production, including oilsands, was 3.315 billion boe/d, compared with 3.473 billion boe/d in 2006. Excluding the impact of divestments, contractual settlements and production sharing contracts, Shell’s 4Q2007 output increased by 1% from the same period of 2007, and full-year 2007 output dropped by 2% from 2006.

Shell’s gas production available for sale in the United States totaled 1,138 MMcf/d, up sequentially from 1,131 MMcf/d in 3Q2007 but down from 1,173 MMcf/d reported for 4Q2006. For the full year, Shell’s U.S. gas production for sale totaled 1,130 MMcf/d, slightly down from 1,163 MMcf/d in 2006. Some of the drop was attributed to asset sales; Shell completed the sale of its assets in the Barnett Shale and Wilcox trend.

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