The Guardian: Crisis deepens at Shell
Friday March 19, 2004
Annual meeting postponed as a further 500m barrels of oil are reclassified
Dutch investigate share trades
Shell was plunged into new crisis yesterday as it was forced to delay publication of its audited financial results and said it was unsure of how much oil it had in its reserves.
The revelation saw more than £1.5bn wiped off its stock market value at one stage as it said a further 500m barrels must be reclassified and its annual meeting would be postponed.
It is the second time this year that the Anglo-Dutch energy group, which controls 1,100 British petrol stations and nearly a quarter of North Sea production, has admitted to "losing" millions of barrels of oil.
In January it said it had overbooked reserves by 20% in locations such as Nigeria, news which shocked investors and led to the dismissal of chairman Sir Philip Watts two weeks ago.
Shell said a review of its Ormen Lange gas field in Norway had revealed stocks to be 150m barrels lower than previously thought, and it was investigating all of its reserves worldwide. That review would take six weeks to complete.
Shell also revealed that it is being investigated by Dutch authorities over possible insider dealing following sharp movements in its share price, the latest in a series of inquiries following January's statement.
The US securities and exchange commission is already examining the company while shareholders in America are taking legal action and the US justice department is reported to have opened a criminal investigation.
The new shortfalls have led the company to delay until late May its annual report, due out today, and to postpone its annual meeting with from April to June 28, an unprecedented situation for one of Britain's top 100 companies.
Jeroen van der Veer, who replaced Sir Philip as chairman, yesterday called an unexpected briefing for media and City analysts to try to restore some confidence in the business.
"This is a company with world class assets. We are financially healthy ... but I realise there is a big dent in our reputation," he said.
He was forced to defend himself against US newspaper reports that he had known for at least two years that Shell had a problem with the figures it had submitted to local financial regulators.
Mr van der Veer said he had not been aware Shell had 20% less proven oil reserves than previously declared but did know the company had potential problems with SEC requirements.
His new exploration and production director, Malcolm Brinded, described the latest reserves downgrade, which he oversaw, as "disappointing and embarrassing".
It follows January's statement saying Shell had 3.9bn less oil reserves - 20% of its total - than previously reported to regulators.
The SEC and the Amsterdam stock exchange are investigating who knew what and when.
Fadel Gheit, oil analyst with Fahnestock & Co brokerage in New York, said the Shell briefing had left more questions open than answered.
"It's become another day, another crisis with Shell. There are only so many surprises that investors will take and yet management [of the company] still seem in denial."
Shareholders' biggest fear is that Shell will come back with further reductions in the size of its oil reserves base. The latest review which unearthed overbooking of assets in Norway is a more intensive version of an an earlier one and is still only 60% complete.
Mr Brinded said he was personally confident there would be no more shocks but it would be prudent not to say that on behalf of the group.
The company admitted it was having to retrain hundreds of people worldwide to understand the New York financial regulations better so that the problems did not recur. Shell shares ended the day down 11p at 361p.