Royal Dutch/Shell Group unveiled another, bigger-than-expected, cut in oil reserves on Thursday but tempered the news by announcing record profits and plans for higher dividends and share buybacks. Surging oil prices and strong refining margins enabled Shell to report fourth-quarter profits of $5.127 billion on a current cost of supply basis, the measure preferred by analysts.

Full-year profits by this measure were $17.59 billion, or $18.54 billion on a historical-cost basis.

Analysts said both figures exceeded any profit ever recorded by a UK-listed company, which Tony Woodley, General Secretary of the Transport and General Workers Union, said argued for the introduction of a windfall tax to curb excessive profits in the oil sector.

Excluding one-off gains of $318 million, the fourth-quarter figure was in line with a Reuters poll of 12 analysts which forecast $4.826 billion.

News of the higher payouts to shareholders cheered investors but Shell's fifth reserves cut in just over a year weighed on the company's stock.

Despite the fall, analysts were pleased that Shell appeared to have adopted a more generous cash-distribution strategy.

It said it would pay dividends of at least $10 billion in 2005, up from $7.2 billion in 2004, and buy back shares worth $3 billion to $5 billion, compared with $1.7 billion in 2004.

Copyright Reuters, 2005