* Shell profit up 42 pct to $5.3 bln
* Cashflow up slightly from previous quarter
* Oil and gas production up 2 pct(Adds detail)
By Ron Bousso
LONDON, April 26 (Reuters) - Royal Dutch Shell onThursday reported a 42 percent rise in first-quarter profit, itshighest in over three years, boosted by higher oil prices andproduction.
Expectations are high for Shell to continue to generatestrong profits and cash flow after the Anglo-Dutch company beatlarger rival Exxon Mobil on both fronts in 2017 thanksto cost cuts and higher efficiencies.
The world's top oil companies are expected to generate morecash in 2018 than at any other time this decade after threeyears of cuts, but boards remain cautious amid uncertainty overnear- and long-term prices.
"Shell's strong earnings this quarter were underpinned byhigher oil and gas prices, the continued growth and very goodperformance of our Integrated Gas business, and improvedprofitability in our Upstream business," Chief Executive OfficerBen van Beurden said in a statement.
Shell in the fourth quarter scrapped its scrip dividend in asign that it is confident of being able to maintain around $15billion in annual dividend payments without resorting toborrowing after a three-year oil price downturn.
It plans to buy back $25 billion of shares by 2020 in orderto offset the dilutive effect of the scrip and its $54 billionacquisition of BG Group.
It did not specify a time to start the program on Thursday.
After falling short of expectations in the previous quarter,Shell's cash flow from operations in the first three months of2018 recovered to $9.43 billion, which was still slightly weakerfrom $9.5 billion a year earlier.
Free cash flow was little changed from a year earlier at$5.178 billion.
Net income attributable to shareholders, based on a currentcost of supplies (CCS) and excluding identified items, rose to$5.322 billion, topping a company-provided analysts' consensusof $5.277 billion.
A year ago, net income was $3.754 billion.
Production grew by 2 percent to 3.839 million barrels of oilequivalent per day. Earnings for the segment almost tripled froma year earlier.
Income from the refining and marketing segment, known asdownstream, weakened due to lower refining margins and plantavailability.
Gearing, the ratio between debt and Shell's marketcapitalisation was slightly lower from the end of 2018 at 24.7percent by the end of March.
Brent crude oil prices in recent months have risen to $75per barrel, their highest since late 2014.
Prices averaged around $67 a barrel in the first quarter, upnearly 25 percent from a year earlier.
(Reporting by Ron Bousso; editing by Jane Merriman)
