The Scotsman: Shell merger plan as profits hit £2.4bn: Owners of energy giant to join up after investor criticism: “However, Shell today revealed it was reviewing a further 900 million barrels of oil and gas reserves following an extensive audit, raising fears of a further possible downgrade.” (ShellNews.net)
28 Oct 04
EMBATTLED oil major Royal Dutch/Shell today said the two holding companies that currently own the group would come together as it posted bumper third-quarter profits of £2.4 billion.
The merger follows pressure from some investors who criticised the existing, dual-headed structure for lacking accountability and contributing to the reserves scandal that rocked the oil giant earlier this year.
The Anglo-Dutch group - whose shares jumped 6.3 per cent in brisk morning trade - said third-quarter net profit on a current cost-of-supply basis was £2.4bn - equivalent to more than £1 million an hour. The figure was 70 per cent up on a year earlier and slightly ahead of market forecasts.
On Tuesday, rival BP announced record third-quarter profits of £2.14bn as it too cashed in on soaring energy prices.
Shell, the world’s third-largest oil group, is currently 60 per cent owned by the Royal Dutch Petroleum Company and 40 per cent by the London-based Shell Transport and Trading Company. It said directors would now be based at a single head office in The Hague, in the Netherlands, while chief executive Jeroen van der Veer would be given extra powers in an effort to speed up reform.
The overhaul will result in more than 200 management jobs transferred across the North Sea, representing seven per cent of the 3000 staff who currently work at the London offices.
Shell pledged to review its corporate structure and governance after shocking the market in January with news that its oil and gas reserves had been overbooked by 20 per cent.
The ensuing crisis saw the departure of three senior executives, including chairman Sir Philip Watts, and led to regulators imposing fines of almost £83m on Shell.
The company recently announced plans to invest billions of pounds over the next two years to boost its reserves and production, as it tries to move on from the reserves debacle. It also said it planned to dispose of between £5.6bn and £6.7bn of non-core businesses and would look at "focused acquisitions" to create value.
However, Shell today revealed it was reviewing a further 900 million barrels of oil and gas reserves following an extensive audit, raising fears of a further possible downgrade.
Today’s restructuring proposals are likely to be welcomed by investors, some of whom have said publicly that they believe the make-up of the group was partly to blame for the reserves crisis. Some analysts believe the old structure also prevented Shell from making bold strategic decisions, such as the giant takeover deals executed by BP and Exxon Mobil in recent years.
The new entity, which will be known as Royal Dutch Shell plc, will have its main stock market listing in London. Shell said the plans had the unanimous backing of the board and would bring greater simplicity, efficiency and accountability.
Mr van der Veer said: "
There is much to be done to deliver our strategy and priorities but I believe these proposals will help propel this group forward and they provide the necessary platform for me and my executive team to deliver improved performance and results across our businesses."