By Steve Goldstein, MarketWatch
LONDON (MarketWatch) -- Royal Dutch Shell on Tuesday outlined a future where the oil giant is swimming in cash, as it sees cash flow from operations climbing by over 80% in 2012 if oil prices stay at current levels.
Royal Dutch Shell /quotes/comstock/23s!e:rdsa (UK:RDSA 1,755, -29.00, -1.63%) /quotes/comstock/13*!rds.a/quotes/nls/rds.a (RDS.A 55.42, -0.56, -1.00%) made the prediction as part of its strategy day, as it also released its annual report.
The Hague-based oil producer expects production to climb 11% from 2009 levels to 3.5 million barrels of oil equivalent a day in 2012.
The Future of Oil
Chief Executive of Royal Dutch Shell, Peter Voser talks about what kind of a future oil based energy can have in an environmentally conscious world.
Shell, which plans to pay a 42-cents-a-share dividend in the first quarter, said cash flow from operations will rise by around 50% to 2012 if oil prices trade around $60 a barrel, and by 80% if oil prices trade around $80 a barrel, which is roughly where they traded on Tuesday.
It's going to slim down by cutting 2,000 staff positions by the end of 2011, and selling $1 billion to $3 billion worth of assets each year. Like many in the industry, it's looking to pare its exposure to refining, with a plan to sell 15% of refining capacity and 35% of retail markets.
"Although oil companies have been cushioned from the recession by OPEC's action on quotas and oil prices, Shell has been disadvantaged recently, due to our higher exposure to refining and natural gas, where margins are hard-wired to the economy," said CEO Peter Voser.
"We are moving into a delivery window across the next five years, and beyond that, we have a tremendous opportunity set for the 2015-2020 timeframe," he added. "We will put the emphasis on financial performance - cash generation and returns."
The 2009 annual report also included compensation, including the generous handout to Linda Cook, who left as head of the gas and power business that's no longer a separate division.
Cook received a $7.6 million severance, as well as a performance bonus of $1.54 million.
Voser's total compensation was $4.39 million, exploration chief Malcolm Brinded earned $3.69 million and CFO Simon Henry earned $1.49 million in 2009.
Shell's A-class of shares rose 1.1% in London on Tuesday. Shell traded at 9.69 times estimated 2010 earnings, according to FactSet, above the 9.02 that BP /quotes/comstock/23s!a:bp. (UK:BP. 405.95, -7.50, -1.81%) trades on.
Steve Goldstein is MarketWatch's London bureau chief.
