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Oil major Royal Dutch Shell reported on Thursday better-than-expected first-quarter profit as robust downstream results helped offset a steep decline in oil and gas production earnings.

The Anglo-Dutch company said profit for the first quarter on a current cost-of-supplies basis rose 14% to $4.76 billion from $4.16 billion in the last three months of 2014, and 7% compared to $4.47 billion a year earlier. Revenue dropped to $65.71 billion from $109.66 billion a year earlier. Profit rose despite the weaker sales due to lower costs and a one-off tax break by the UK government for North Sea oil producers.

Excluding identified items, or net income, the company earned $3.25 billion, almost the same as the previous quarter, but 56% lower than the $7.33-billion profit generated a year earlier. The annualized decline, however, was smaller than expected.

Shells Q1 results were buoyed by improved performance at the “downstream” division, or refining and trading, which generated CSS earnings excluding identified items of $2.65 billion, compared to $1.55 billion in Q4 2014 and $1.575 billion a year earlier. This helped offset a steep drop in “upstream” earnings, or oil and gas production profits, to $675 million from $1.73 billion in the previous three months and $5.71 billion a year earlier. Brent prices averaged $54 per barrel in the first quarter of 2015, half the level a year earlier.

“Our results reflect the strength of our integrated business activities, against a backdrop of lower oil prices,” said Chief Executive Officer Ben van Beurden. “We continue to reduce our operating costs and capital spending; and by deferring and reshaping new projects, we can achieve further efficiencies and savings in the global supply chain.”

Shell lowered its 2015 capital investment guidance by 6% to $33 billion for 2015 from $35 billion previously. It said upstream production slid 2% to 3.17 million barrels of oil equivalent a day, impacted by an expiration of a license in Abu Dhabi, disposals and security issues in Nigeria. The company added it expects a further 400 000-bpd drop in output in the second quarter compared to a year earlier due to varying reasons, including maintenance.

The oil major also maintained its dividend of $0.47 per share and said it continues with the sale of non-strategic assets, having already disposed of $2 billion worth of assets so far this year.

Shell announced earlier in April it had agreed to purchase smaller British competitor BG Group in a $70 billion deal. Chief Executive Ben van Beurden said on Thursday the proposed acquisition would accelerate Shells growth strategy in deep water and LNG and will help the oil major further optimize its asset base.

Royal Dutch Shell B shares closed 1.23% higher at GBX 2 094.5 on Thursday in London, marking a one-year drop of 16.88%.

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