Royal Dutch Shell, Europe’s biggest oil company, is due to report second quarter results on Thursday before markets open in Europe.

WHAT TO WATCH FOR: Shell won’t earn quite as large a net profit as it did in the second quarter of 2011, due to lower oil prices and fewer asset sales, but it will still make billions of dollars. The company’s investors will remain focused on Shell’s gradual progress in growing production and increasing cash-flow.

Shell has invested heavily in new projects throughout the downturn and is aiming to grow production to 4 million barrels of oil or equivalents by 2018. Production in the first quarter of 2012 was 3.55 million barrels per day, but that won’t be repeated, as a major facility was closed for part of the second quarter for maintenance. Analysts are looking for production of around 3.18 million per day.

Oil prices were around $90 per barrel this quarter, down about 46 percent from this time last year.

One bright spot in Shell’s earnings will be a recovery in the company’s refining margins. Although “downstream” activities such as refining and chemicals sales aren’t the main driver of Shell’s profits, they contribute significantly: around $1.3 billion this quarter, from $1.1 billion a year ago, according to Charles Stanley analyst Tony Shepard.

“At an $80/barrel oil price, Shell can fund its capital investment program and grow the dividend,” Shepard wrote. He rates shares an Accumulate, saying they trade at a discount to peers.

WHY IT MATTERS: Shell is one of the largest companies in the world, first on the Forbes 500 list this year. It was less profitable in 2011 than U.S. rival ExxonMobil, but had greater sales.

WHAT’S EXPECTED: Analysts surveyed by FactSet expect net income of $6.66 billion — stripping out one-time effects — on sales of $102.5 billion

LAST YEAR’S QUARTER: Second quarter earnings were $6.55 excluding one-time effects, on sales of $121.3 billion.