Shell has become the latest energy giant to underwhelm the markets despite reporting healthy profits growth. Although the company posted a 26% rise in second-quarter earnings, its shares dipped slightly.

In its first financial declaration since merging its management structure, Shell recorded profits of $4.6 billion for the second quarter of 2005, representing a 26% improvement on the previous year. The Anglo-Dutch oil and gas company also beat production forecasts by processing 3.526 million barrels of oil equivalent per day (boepd) in the quarter, which was ahead of the expected output of 3.49 million boepd.

However, despite the higher than expected output and a healthy profits gain that was in line with its main competitors, the city was unimpressed as shares in the energy outfit actually fell by 1.6% on the news.

With high oil prices driving high profits, industry analysts and investors had expected even larger earnings. Meanwhile, Shell’s recent admission that development costs at its Sakhalin-2 project in Russia have doubled also deflated investor confidence.