London Evening Standard: Shell slashes reserves again
24 May 2004
CRISIS-HIT Shell has been forced to cut the amount of oil and gas reserves on its books for the fourth time since the scandal rocking the energy giant broke earlier this year.
In yet another embarrassing blow, the Anglo-Dutch group today revealed a raft of accounting policy changes following talks with the US Securities and Exchange Commission.
Just over 100m barrels are being lopped off the proven reserves of Shell's Canadian business, taking the total amount re-categorised since January to 4.9bn.
Essentially, Shell has had to subtract an amount from its proven reserves in Canada to account for royalty payments to mineral rights holders in the country. It already adopts this practice in the US.
It insisted the change was purely technical and makes no difference to its cashflow, but the move will raise yet more questions about what else may come from the group as it battles to restore its credibility.
Brendan Wilders, analyst at Oriel Securities, said: 'I am assuming this is the final drawing of the line.'
Shell stunned the oil industry four months ago by revealing it had overstated its proven reserves by a fifth, prompting an investigation by both the Financial Services Authority* and the SEC, a slew of class action lawsuits in the US and the threat of criminal charges against the board.
Chairman Sir Philip Watts and his exploration chief Walter van de Vijver were ousted as a new man, Jeroen van der Veer, was brought in at the top to lead a frantic clean-up.
Last month, the extent of the cover-up was revealed by the publication of pages of acrimonious email exchanges between Watts and Van de Vijver over the reserves issue.
Van der Veer said today's restatement reflected a 'stricter adoption of some specific accounting standards' after ongoing talks between the group and the SEC about its financial statements.
Speculation of a £1m pay-off for Watts emerged over the weekend. He received £1.8m in 2002, including a base salary of £745,969.
Shell has already said none of the directors sitting on its committee of managing directors, its equivalent of a Plc board, will receive a bonus for 2003.
Shell's shares were up 1 1/2p at 393 1/2p after today's announcement.