THE WALL STREET JOURNAL/DOW JONES NEWSWIRES: NEWS SNAP: Shell To Revamp Into One Co, Warns On Reserves: “While investors appeared to greet the news warmly, the company also issued another warning on its precarious hydrocarbon reserves - its fifth this year - saying it may have to writedown a further 900 million barrels based on estimated reserves of 14.35 billion barrels.” (ShellNews.net)
By MICHAEL WANG
Of DOW JONES NEWSWIRES
October 28, 2004
LONDON -- Royal Dutch/Shell Group (RD, SC) Thursday unveiled sweeping changes to its corporate structure, which went further than market expectations.
The oil giant said it will eliminate its twin-headed corporate and board structure in favor of a single entity, to be called Royal Dutch Shell PLC, whose primary listing would be in London, but would be headquartered in The Hague. The consolidation is expected to take place around the second quarter of 2005.
While investors appeared to greet the news warmly, the company also issued another warning on its precarious hydrocarbon reserves - its fifth this year - saying it may have to writedown a further 900 million barrels based on estimated reserves of 14.35 billion barrels.
This potentially represents another 6.2% decline in reserves, possibly raising the downgrade to about 30% since January. A Shell official cautioned the 900 million-barrel number is preliminary as it is based on another review of just over half of the company's reserves, and so could be revised later.
"I am of course disappointed that the more rigorous review and audit process we have put in place has identified potential proved reserves reductions," said Jeroen van der Veer, who has shifted from being Shell 's chairman to its first chief executive as a result of a management reshuffle effective Thursday.
The company declined to identify where geographically the fresh reserves shortfalls have been found.
The alarming news failed to dent the company's shares in London. Around 0910 GMT, Shell Transport & Trading PLC (SC) was up 6.3% at 450 pence, making it the fastest riser on the blue-chip FTSE-100.
The world's third-biggest oil company by market capitalization also said Thursday that earnings for the third quarter rose 70% from a year ago, thanks to a leap in the prices it received for its crude oil and natural gas, and a strong contribution from its refining activities.
Profit in the three months to Sept. 30 jumped to $4.41 billion from $2.59 billion a year earlier, exceeding analysts' expectations. The figure is measured on an adjusted current cost of supplies basis - Shell 's preferred yardstick - which strips out the fluctuating value of its hydrocarbon inventories. It isn't compatible with U.S. Generally Accepted Accounting Principles.
On a net basis, earnings more than doubled to $5.4 billion from $2.45 billion in the third quarter of 2003.
Shell benefited principally from record crude oil prices in the third-quarter period, which saw the value of oil and gas sales rise 39% and 7% respectively from the year-earlier period. But production inched lower by 1.6% averaging 3.61 million barrels of oil equivalent a day, underlining the company's difficulty in raising output to capture more of the spike in hydrocarbon prices.
Shell predicted that for the year, production would average between 3.7 million boe/d and 3.8 million boe/d. It has forecast that this figure will decline in 2005.
Income at the company's biggest money-spinning division, Exploration and Production, rose just 18% to $2.41 billion in the third quarter, as tax hikes and a $183 million charge in mark-to-market losses on U.K. gas contracts ate into gains handed to it by the oil-price bonanza.
Shell's refining and marketing division, called Oil Products, enjoyed another strong quarter as refining margins remained strong in light of big demand for gasoline and middle distillate fuel products. Marketing earnings eased as margins thinned and volumes fell as a result of Shell's widening sale of retail networks.
Oil Products income soared 77% to $1.56 billion from $880 million a year earlier.
Shell's smaller Chemicals and Gas and Power divisions also posted huge profit increases during the quarter, buttressing the overall result.
Company Web site: http://www.shell
-By Michael Wang, Dow Jones Newswires, +44-20-7842-9386; firstname.lastname@example.org