The Miami Herald: 2 months later, Shell again alters its reserve count
BY BRUCE STANLEY
Posted on Fri, Mar. 19, 2004
Shell announces yet more oil-reserve cuts and delays release of its annual report to let independent auditors review its reserves.
LONDON - The Royal Dutch/Shell Group suffered another blow to its reputation Thursday when it announced additional cuts to its estimated reserves of oil and natural gas and suggested that more reductions might follow.
Shell downgraded 250 million barrels in reserves to other, less certain, categories.
At the same time, it decided not to book a separate batch of 220 million barrels that it had earlier considered worthy of classifying as reserves.
The company postponed the release of its annual report by about two months to give independent auditors enough time to complete a review of all of the company's reserves.
The reclassifications follow Shell's stunning announcement in January that it was downgrading 3.9 billion barrels in reserves -- or about 20 percent of its total holdings.
That disclosure caused a shareholder uproar that led to the resignation of Shell's former chairman, Sir Philip Watts, and its head of exploration and production.
''We have to make very sure we don't drop this ball again,'' new Chairman Jeroen van der Veer said. ``I do realize our reputation has been dented.''
Shares in Shell Transport & Trading, the group's British component, closed 2.9 percent lower Thursday, at 361 pence ($6.61), in London.
The company's U.S.-traded shares were off 60 cents, closing at $47.71, on the New York Stock Exchange.
The latest changes would increase the company's after-tax costs by about $20 million.
Shell said it also planned to write off $10 million worth of wells associated with its reclassified assets.
''Because of [Shell's] operational underperformance of the last six months and the farcical nature of the whole reserves issue, today really was a negative surprise,'' said Jason Kenney, of ING Financial Markets, in Edinburgh, Scotland.
Shell executives explained their decisions in a hastily arranged news conference. Managing Director Malcolm Brinded, striking an almost confessional tone with analysts and reporters, acknowledged that the announcement was ``a surprise and disappointment.''
Shell chose to reclassify 250 million barrels in oil and gas, mostly in northwestern Europe and Australasia, as a result of an independent review that has so far analyzed 40 percent of its total proved reserves.
Together with the much larger downgrade in January, Shell has now reclassified 4.15 billion in reserves that it had carried on its books.