London Evening Standard: Oil giant Shell faces bigger lawsuit
19 March 2004
AMERICAN lawyers stalking Shell with massive fraud claims are ready to extend their attack on the embattled oil major following its second reserves shock in just three months.
More than £1bn was wiped from Shell's stock market value yesterday after it was forced to downgrade nearly 500m barrels of 'proven' oil and gas on its books.
Multi-billion dollar class action lawsuits pending may now be extended to include thousands of new investors who have bought Shell stock since its first reclassification in January.
'We are watching the share price. It may be that the class period - the time over which Shell investors have lost money - gets extended,' said one source involved in legal proceedings.
Shell chairman Jeroen van der Veer, who replaced the ousted Sir Philip Watts two weeks ago, was forced to concede the group's reputation had suffered 'a big dent' over the fresh downgrade.
The fallout means the group now faces a fierce confrontation with leading UK institutional investors, already due to meet the group next week to discuss possible structural changes to the firm.
Yesterday's debacle has left many fund managers* seething. Peter Montagnon, head of investment affairs at the Association of British Insurers said: 'We view these developments with very considerable concern.'
It has emerged Shell's peers may be dragged into the row over how and when they book oil and gas discoveries that form the lifeblood of their business.
Regulators at the US Securities and Exchange Commission are poised to investigate the sector, beginning with the 40km-long Ormen Lange gas field off the coast of Norway.
Shell's concern at the status of Ormen Lange forced it to bring in external consultants Ryder Scott to review its reserves portfolio. At least 220m barrels of yesterday's cut relate to this field.
Its partners in the project include BP and Norway's Norsk Hydro. They have already booked most of their share of the Ormen Lange gas. Other investors in the project include Statoil and ExxonMobil.
All 15 competing class action claims filed on behalf of all Shell investors in US courts allege investment losses between 3 December 1999 and 9 January this year when the group revealed it had overstated oil and gas reserves by 3.9bn barrels or 20%.
The shares quickly fell to a three-year low of 348 3/4p on the back of the first cut. Yesterday, they fell 11p to 361p.
Lengthening the class action period would allow new investors to sue, including many hedge funds* thought to have bought into Shell looking to profit from its share price volatility.
The American lawyers are expecting more reserves revisions, prompting further share falls, given that Ryder Scott's review of Shell's proven reserves has looked at only 60% of its portfolio.