The Guardian: Shell chairman ignores resignation calls
Thursday February 5, 2004
Shell's chairman today apologised for a drastic revision to oil reserves but swatted aside calls for his resignation as the oil giant reported annual profits of $11.7bn (£6bn).
The figure was Shell's third largest ever profit, but it was overshadowed by continuing anger at Sir Philip Watts, chairman, over last month's 20% change to the company's proven reserves. The downward revision prompted calls for Sir Philip to step down, but today he insisted he would see out the rest of his 18 months.
"No I will not resign," Sir Philip said. "I am determined to fix the reserves situation."
Last month's announcement on Shell's reserves outraged shareholders and knocked more than $15bn off its stock market value as investors contemplated less than 11 years of reserves at current output rates against more than 13 before the downgrade.
Sir Philip apologised for his much-criticised absence from a briefing after the reserves cut.
"It was a mistake, I'm sorry," he said, delivering a long introductory speech at a news conference without notes.
Despite its problems, Shell reported its third largest profit last year, despite a big drop in earnings in the fourth quarter of last year. For the last three months of 2003, profits fell by a third to $1.8bn, as restructuring charges from the closure of its Bakersfield refinery in California offset higher oil prices.
Sir Philip, who chairs the committee of managing directors of the Royal Dutch Shell group of Companies, said that the outlook for this year remained uncertain.
A joint statement, issued with the vice-chairman, Jeroen van der Veer, said: "We continue to operate in a volatile industry, where short-term performance is impacted significantly by supply/demand imbalances and commodity price movements."
The company added that it would look to strengthen its reserve booking controls following the furore over the lower level of proved stocks. The announcement was branded "shocking and unprecedented" by one US law firm.
Shell today acknowledged the degree of anger that had been created by last month's revision to its reserves.
"With respect to the reserves recategorisation announced earlier in 2004," a company statement said, "it is important to note that we identified the issue, disclosed it and are taking steps to address it.
"Although it does not fundamentally affect the volumes in place, we acknowledge and understand the concerns and disquiet the announcement of January 9 caused in the market."
Investors were enraged, not only by the disclosure but also by Sir Philip's absence from a conference call on January 9 in which Shell revealed that it was moving 3.9 billion barrels of oil and gas from proved reserves to a lower category.
The bad news was delivered by a team from Shell's investor relations team, and some investors considered Sir Philip's absence to be a show of "high arrogance".
While some have demanded his resignation, others are calling for a radical overhaul of the dual board structure that puts a committee of managing directors in charge of more than 100 separate operating companies around the world.