The Scotsman: Further revelations from Shell leave oil giant looking fragile
DEPUTY CITY EDITOR
ROYAL Dutch/Shell sunk a little deeper into the black stuff yesterday as it wiped close to another 500 million barrels from its reserves. Investors have been bracing themselves for the worst since the oil major shrugged off its "dull but safe" reputation in spectacular fashion ten weeks ago when it admitted overstating its proven oil and gas reserves by 20 per cent.
Shell’s crisis is worsening - it also postponed the publication of its annual report and shelved its annual meeting until the summer. Shareholders eager to grill executives now have to wait until 28 June. They will take little comfort in the fact that none of the executives will pick up their bonus this year.
Shell has roped in consultancy Ryder Scott to go through its portfolio of proven reserves with a fine-toothed comb. With six weeks to go and 40 per cent of the books still to assess, the results don’t look good. Investors shouldn’t bet against more of these nasty surprises.
The initial overstatement figure of 3.9 billion barrels, largely down to generous
Heads must carry on rolling. But who will wield the axe is open to question.
Assessments of operations in Australia and Nigeria, widened to 4.1 billion yesterday. In addition, Shell’s operations in Norway have been added to the black list as it emerged that 220 million barrels it had expected to book for the Ormen Lange field had vanished up the fjords because the "proven" reserves did not meet the US Securities and Exchange Commission strict rules.
Jeroen van der Veer, charged with clearing up this mess after replacing Sir Philip Watts, will have trouble in drawing a line under the scandal if investors keep getting a drip-drip of more bad news. It is a wonder that Shell shares fell by only 3 per cent in London yesterday.
Meanwhile, the watchdogs are circling. America’s SEC has promised an investigation and the Financial Services Authority will surely follow suit on this side of Atlantic.
Rumours of a criminal inquiry by the US Justice Department have a lot of credence and an investigation into potential insider trading by the Dutch Autoriteit Financiele Markten makes it a full set.
What is fast becoming clear is that Shell, famous for its inward-looking method of doing business and collegiate style of promoting from within, needs a troubleshooting outsider to take the reins and restore confidence inside and outside the organisation.
The City had far more confidence in Cable & Wireless when Richard Lapthorne joined as chairman and the relief of investors was palpable when Sir Peter Burt put down his golf clubs to keep a close eye on Charles Allen at ITV.
Heads must carry on rolling. But who will wield the axe is open to question. And who would want to take on the task is the toughest conundrum of all.