Cool City reponse to Shell plans

INVESTORS gave a cool response to Shell's updated growth strategy, saying they wanted to see more evidence of how the oil giant would increase profits over the next few years.

The shares rallied to 460p, up 8p, having earlier slipped 5 1/2p to 446 1/2p as Shell said it would loosen its targeted return on capital from 14% to between the 13% to 15% range. Some analysts took this as a sign that Shell may be more committed to major acquisitions than in the past, although others said it appeared to be hedging its bets.

In a presentation to London institutions, the company also confirmed that it aimed to increase production by 3% a year until 2005. Shell revealed in September that it had cut this target from 5% and there had been concerns in the market that it would lower it further. It said that priority would be given to generating acceptable returns from $7bn (£4.8bn) of assets that were underperforming. Those not turned round would be sold.

The strategy presentation, which will be repeated in New York, is seen as crucial to the reputation of new chief executive Phil Watts, who has had a bumpy start in the post. The shares have fallen 30% in six months, leaving the company in danger of being replaced by BP as the world's second-biggest oil company. Shell, which has won accolades for its success in slicing $5bn from its costs since 1998, said further reductions would add £500m a year to pre-tax profit over the next two years.