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Unformatted text preview: l oil
companies. Spending more to get less Let's start with Royal Dutch Shell (RDS.B +2.06%, news). Production volumes fell 5% year-over-year in
the fourth quarter. Full-year production was down 3% from 2010. Shell told shareholders that it would reverse that downward trend and increase
production in the low single digits in 2012. What interests me is how much money Shell will invest in its attempt to reverse declining production.
Shell will increase its total capital investment to $32 billion to $33 billion in 2012 from $31.5 billion. The actual increase in the capital budget for
oil exploration, development and production will go to $24 billion in 2012 from $20 billion in 2011. That's a 20% increase. And what will Shell
and its investors get for those bucks? If recent history is any guide, not as much as they used to get. Shell's return on average capital employed in
2011 fell to 15.9%. A few years ago, when oil prices were much lower, return on average capital employed checked in above 20%. Shell has
had trouble increasing production in recent years, but the drop in return on a...
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