THE WALL STREET JOURNAL: Royal Dutch/Shell Says Will Publish 03 Report May 28
DOW JONES NEWSWIRES
May 24, 2004 6:15 a.m.
Edited Press Release
LONDON -- Shell Transport and Trading and Royal Dutch Petroleum said Monday that the annual reports and accounts will be published on May 28 and submitted for approval at the Annual General Meetings on Jun. 28, 2004.
Jeroen van der Veer, Chairman of the Committee of Managing Directors of the Royal Dutch/Shell Group of Companies, said: "The external auditors have given unqualified audit opinions".
The annual reports and accounts will reflect a restatement of reserves data and related financial impact, and we have implemented a number of accounting policy changes. The company has also adopted a stricter application of some specific accounting standards.
"The aggregate effect of the reserves restatement, including the previously disclosed recategorisations and an adjustment with respect to royalties paid in cash in Canada, brought the total for 2002 to 4.47 billion barrels of oil equivalent", van der Veer said.
Discussions with the Division of Corporation Finance of the U.S. Securities and Exchange Commission (SEC), about Shell 's Form 20-F filings continue, in particular with regard to financial statements and unaudited supplementary oil and gas data.
The Group has implemented the following accounting policy changes with effect from 2003:
* The Group financial statements will be presented in accordance with U.S. Generally Accepted Accounting Principles (GAAP) with a reconciliation to statements presented under Netherlands GAAP. Prospectively the difference with regard to net income is that goodwill is amortised under Netherlands GAAP; whereas under U.S. GAAP goodwill is maintained at the acquisition value and then tested for impairment.
* All inventories will now be reported on a First-In-First-Out (FIFO) basis.
* Previously certain inventories in North America were reported on a Last-In-First-Out (LIFO) basis and disclosed in the notes to the financial statements. As a result the Group's accounting policy for inventories is on the same basis globally.
* The Group will be adopting International Financial Reporting Standards (IFRS) in 2005. Under IFRS, FIFO is the prescribed method for valuing inventories.
The finalisation of the financial statements also reflects a strict application of the financial accounting standard 'Financial Accounting and Reporting by Oil and Gas Producing Companies' (FAS19), and two additional impairments of long-lived assets, the company said.
In particular, amendments have been made to the unaudited results reported for 2003 in the earnings release on Feb. 5, 2004 and the 2002 and 2001 financial statements in the following areas:
* FAS19, section 31b: This relates to the capitalisation of costs for exploration wells related to unproved properties for which no firm plan for further exploratory drilling or development of the field exists, and for which proved reserves are not booked within 12 months after the date when the exploratory drilling is complete. The Group's previous practice was to keep such cost capitalised where the project was actively under development, though no further exploration drilling was underway or planned.
The strict interpretation of FAS19 adopted results in the expensing of exploration cost even though the project is moving towards final investment decision when proved reserves will be booked.
In the process of reviewing oil and gas properties in detail as to whether their carrying value was fully covered by future cash flows, two properties were identified, not related to the reserves restatement, which needed impairment at the end of 2003 as per FAS144 'Accounting for the Impairment or Disposal of Long Lived Assets', Shell said.
* FAS133 'Accounting for Derivative Instruments and Hedging Activities': This deals with certain contracts for the sale and delivery of own production natural gas from the North Sea that are now marked-to-market. Previously this was disclosed in the notes to the financial statements.
As a result of the later closing of the 2003 financial statements, certain post balance sheet events have been recognised in the 2003 results in line with normal accounting requirements.
There is no impact from the restatement on reported Group cash flows.
The annual reports will additionally reflect the following with respect to the unaudited oil and gas reserves data:
* For the years ended 1999 to 2002, proved reserves and production included royalties paid in cash on certain properties in Canada (consistent with practice for properties outside North America). These have now been removed from proved reserves (consistent with practice for properties in the United States), resulting in a reduction at Dec. 31, 2003, relative to earlier announcements, of 103 million barrels of oil equivalent (boe) and a reduction of production of 9 millio boe for the year 2003.
This change is specific to the Group and does not affect Shell Canada.
The aggregate effect on proved reserves of the reserves restatement is 4.47 billion boe, of which 4.35 billion boe was previously announced as reserves recategorisations. The remainder relates to adjustments for royalties paid in cash on certain Canadian properties described above. With a reserve replacement ratio for 2003 of 63%, proved reserves were 14.35 billion boe at Dec. 31, 2003, or 10.2 years of production (all excluding oil sands), the company said.