The New York Times: Shell Chairman Resigns Over Reserves Shock
Published: March 3, 2004
LONDON, March 3 (Reuters) - Royal Dutch/Shell Group sacked its two top executives on Wednesday, responding to pressure from angry shareholders in the wake of shock news in January that they had overestimated oil and gas reserves.
Chairman Phil Watts and the head of the company's core oil and gas division, Walter van de Vijver, will leave with immediate effect, the Anglo-Dutch oil giant said.
"The resignations were tendered by the executive directors promptly on receipt of the indication of the board's wishes," a company spokeswoman said later.
As recently as February 5, when he unveiled annual results, Watts had insisted he would not resign.
But investors called for his head, and continued shareholder pressure appeared to have persuaded the boards of Royal Dutch and Shell Transport & Trading to act. The companies hold 60 and 40 percent of the group respectively.
Watts will be replaced by Jeroen van der Veer, head of chemicals.
Florian van Laar, a fund manager with Eureffect, said: "This is great news because Watts was the man who was behind the reserves warning. Van der Veer has a good name and standing and this means Shell is trying to clean the slate and start afresh."
Many analysts had believed the worst of the pressure on Watts had passed, and few had expected him to go before his scheduled retirement date in June 2005. Some had seen Van de Vijver as his successor, rather than a likely fellow casualty.
Shares in the group closed up by between one and two percent. They tumbled in the aftermath of Shell's 20 percent cut to its proved reserves on January 9 which knocked the 170 year-old firm's reserve life back from about 14 years to 11.
Jeroen van der Veer is to take over Watts's role as Chairman of the Committee of Managing Directors, while gas and power chief Malcolm Brinded takes over from Van der Vijver. Chief Financial Officer Judy Boynton, who has also drawn some investor criticism, stays in place.
Brinded, a Royal Dutch executive, will swap to the Shell Transport board to even up representation on the all-powerful, but now smaller, Committee of Managing Directors, to two from each holding company.
Golf enthusiast Van der Veer is a mechanical engineer and economist by training. Colleagues say the bespectacled 56 year-old makes up for a low-profile personality with a reputation as a safe pair of hands.
Watts was in charge of the oil and gas division from 1996 until he took over as chairman in 2001, covering the bulk of the period in which Shell's over-optimistic reserves bookings were made. Van de Vijver had been his successor at the division.
One of the fields that Shell booked as proven in 1997 but which is now off its proven books is the Gorgon gas field offshore Australia. At the results news conference in February, the two men referred to its booking, and the failure to unbook it in subsequent years, as an "embarrassing mistake."
As well as further highlighting the need to heed shareholders, the crisis has also prompted calls for changes to Shell's unwieldy corporate and management structure.
"It adds another element to the growing concept of shareholder empowerment and potentially opens up a much greater reward in terms of a restructuring of the corporate structure at Shell," Steve Russell, head of research at Ruffer Investment Management, said.
Analysts said they were still waiting to see if there was more bad news on the horizon. They may not have to wait long.
On February 19, the U.S. Securities and Exchange Commission (SEC) cranked up the pressure on the world's third-largest oil company with the launch of a formal probe into the cut.
Formal status gives SEC investigators the power to subpoena evidence and witnesses. That evidence could be used in court if the SEC later files a lawsuit.
Ratings agencies Standard & Poor's and Moody's have also said they may downgrade the company's treasured top-rated debt.