Royal Dutch Shell, the world's third largest oil and gas company, reported a $7.7 billion profit in the first quarter on Thursday, giving the company an 11 percent increase compared to the same period a year ago. 

The company, propelled by strong energy demand, made a total revenue of $119.9 billion in the first quarter, which was 9 percent more than the same period a year ago. The total oil and gas production was 3.552 million barrels per day, a 1 percent increase from the same period last year.

Shell's first quarter 2012 earnings increased from year-ago levels, through a combination of improved operating performance, increased upstream volumes and strong oil prices, chief executive Peter Voser said.

Earlier this week, Shell agreed to buy Cove Energy for $1.81 billion, a move that will help the company tap the gas reserves in East Africa. This acquisition will mark the entry of Shell into hydrocarbon-rich provinces in Mozambique and Kenya.

However, Shell has warned that oil prices can remain volatile in the coming months. The price of natural gas in the U.S. is expected to remain low, which will in turn affect the company's profit.

Oil prices have climbed after the U.S. and its European allies imposed tighter sanctions on Iran, which is the second-biggest producer in the Organization of the Petroleum Exporting Countries. Western countries have accused Iran of taking steps toward building a nuclear weapon. The country has denied the charge.

Responding to the West's tougher stance, Iran has stopped oil deliveries to some European countries and threatened to block the Strait of Hormuz, through which a fifth of the world's tanker-borne oil flows. In total, Iran exports around 2 million-2.5 million barrels of oil per day. The loss of this supply might add as much as $15 to oil prices.

Earlier this month, Iran's Oil Minister Rostam Qasemi said that the National Iranian Oil Company had stopped oil sales to Shell. Qasemi also said this company owed Iran one billion dollars for oil purchases.