Royal Dutch Shell Plc (RDSa.L) and other big oil groups reported a jump in profits on Thursday, as high oil prices masked the impact of lower crude and gas production.
Investors have become increasingly worried in recent years about Western oil companies' falling output, reflecting the fact they are shut out of investing in the richest fields by countries such as Saudi Arabia and Russia.
Shell, which reported a 77 percent rise in net profit to $8.00 billion, is tackling the challenge by investing tens of billions in complex projects, mainly focused on converting natural gas reserves into liquefied natural gas or motor fuel.
Stripping out non-cash accounting gains and profits from asset sales, the Anglo-Dutch firm's underlying current cost of supply net income rose 56 percent, in line with forecasts but ahead of most rivals.
"Shell reported a solid set of results for 2Q," analysts at Bernstein said in a research note. "We believe Shell can deliver production growth & improving per barrel profitability."
Second-quarter underlying profits, denominated in dollars, rose 39 percent at Norway's Statoil (STL.OL) and 9 percent at Spain's Repsol (REP.MC), according to Reuters calculations.
BP (BP.L) reported a 13 percent rise in profits calculated on the same basis on Tuesday. Exxon Mobil (XOM.N) is predicted to report a 50 percent rise in net income later on Thursday.
However, all the companies reported lower production, reflecting a mixture of low gas demand and the fact that new field startups have often failed to match natural field decline.
Shell said oil and gas production fell 2 percent to 3.05 million barrels of oil equivalent per day (boepd) in the April-June period, due to field sales and a warm second quarter which hit European gas demand.
Excluding divestments, output rose 2 percent compared to the same period last year -- a sign that the company's large recent investment in new projects is beginning to show returns.
In the first half of the year, Shell started up three new projects, a Canadian oil sands venture and two gas plants in Qatar, in which it had invested $30 billion.
Tony Shepard, oil analyst at brokerage Charles Stanley, said these projects had above-average production lives, and could support a dividend increase next year.
Statoil said output fell 14 percent in the quarter to 1.69 million boepd, as it also suffered from weak gas demand and delays to drilling in the Gulf of Mexico due to the slow start in issuing permits after the end of a drilling moratorium announced in the wake of the BP oil spill.
Statoil also cut its output forecasts for the full year, adding to investors' long-held fears about it being able to realize its growth ambitions.
"We continue to believe that the mix of Statoil's portfolio, which is overly exposed to mature offshore fields, is not suitable to deliver sustainable organic production growth," Bernstein said.
Repsol said production fell 13 percent to 296,000 boepd following outages due to violence in Libya and delayed Gulf drilling. However, the company has made big finds in Brazil which could drive production higher in the medium term.
The companies also warned on rising costs. Statoil said its per barrel production costs rose 15 percent. Shell did not give a figure but the company's Chief Financial Officer, Simon Henry, said industry inflation was returning after a period where oil companies managed to squeeze suppliers.
Shell's London-listed "A" shares traded down 0.8 percent at 1112 GMT, in line with the STOXX Europe 600 Oil and Gas index .SXEP. Statoil's shares were up 0.6 percent and Repsol's were up 1.7 percent.