This article has been adapted from our sister site across the pond, Fool U.K.

Imagine a company reporting a better than four-fold rise in fourth-quarter earnings, growing from $1.2 billion last year to $5.7 billion today (on a current cost basis).

Would you expect the share price to fall on the news? Well, that's what happened to Royal Dutch Shell (NYSE: RDS-B) on Thursday, when it released fourth-quarter and full-year results for 2010.

The boost in profits is due mainly to the rising price of oil, which is back above the $100 a barrel mark. But impressive though those profit figures might seem, they didn't quite match up to forecasts.

The effects of lower refining margins and increases in taxes took the shine off things a bit, and the market was disappointed, marking the share price down more than 3% at the time of writing.

You just can't please some people.

Not good enough
Excluding non-operational income and some exceptional items, underlying Q4 earnings came in at $4.1 billion, which is far short of the $4.7 billion that analysts had been expecting.

Full-year earnings were reported at $18.6 billion, which is almost double the full-year figure for 2009 of $9.8 billion. Cash flow is looking strong, too. Excluding working capital movements, operating cash flow for the full year tipped the scales at $33.3 billion, firmly up from last year's $23.8 billion. And for the quarter, we saw cash flow of $6.2 billion, compared to $4.4bn a year ago.

Basic earnings per share (again on a current cost basis) for the final quarter came in at $0.93, up massively from $0.19 the year before, and there's a fourth-quarter dividend of $0.42 per share to be paid. Shell expects to maintain the same level of payout for the first quarter of 2011.

True, the comparison of this quarter with last year does make this year look exceptionally good, but it must be remembered that the fourth quarter of 2009 saw Shell hit by significant refining losses. There have been a lot of restructuring and cost-saving measures put in place since then, including the disposal of some low-margin refining facilities.

New developments
Shell has seen a number of major projects start to bear fruit during the year, with significant new production coming on line in places like Qatar and Brazil. These contributed to a 5% rise in oil and gas production, and a 5% increase for the whole year. A good number of new discoveries were made during the year, too.

New projects include developments in Nigeria, where Shell expects to see significant contributions to both oil and gas production.

Shell's competitor BP (NYSE: BP), which also reported full year results this week, is expecting to see production fall in 2011 after the Gulf of Mexico disaster forced it to offload a lot of assets. In contrast, Shell says it is still on track to meet its forecast growth in production of 11% between 2009 and 2012.

The long-term picture is sounding pretty healthy, with chief executive Peter Voser saying of the company's plans, that "These are ambitious targets, but we are on track."

The investment picture
So what does Shell look like as an investment?

Even if 2010's failure to match expectations is extrapolated, and next year's profit comes in a little lower than current forecasts, we're still probably looking at a dividend of better than 4.5% from shares on a P/E of under 10. There aren't many that can boast that.

Of course, with oil prices and political developments being far from certain -- not least given the crisis of government in Egypt -- this is a business in which the players have to bow to forces outside of their control.

That adds some not insignificant risk. But I reckon Shell shares are still a bargain, and they'd not go amiss in any long-term portfolio.

More from Fool U.K.'s Alan Oscroft:

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