The Scotsman: Shell Quitting London - and Downgrading Reserves Further: “Mr van der Veer told investors he was “disappointed” further potential reductions in oil and gas reserves had been identified. Auditors have assessed more than half of the 14.35 billion barrels of oil equivalent that Shell reported as its reserves at the end of 2003. In a statement, Shell said: “Preliminary reports from the field and audit teams suggest that reductions to ... reserves are likely to be appropriate.” (ShellNews.net)
By David Winning, City Staff, PA News
28 Oct 04
Oil giant Shell today unveiled its most far-reaching overhaul in 100 years with a pledge to create a unified company based in the Netherlands.
Shell is proposing to ditch its twin board structure and relocate UK-based executives to The Hague as part of moves to prevent a repeat of its reserves crisis earlier this year.
But in an echo of its earlier troubles, Shell said a further downgrade of its reserves was “likely” after auditors questioned the status of 900 million barrels of oil and gas stocks.
Analysts said the creation of Royal Dutch Shell plc as a single company was at the top end of expectations – a point reflected by a 6% gain in the oil group’s shares today.
Sentiment was also boosted by net income more than doubling to 5.4 billion US dollars (£2.95 billion) in the third quarter, which Investec analyst Bruce Evers said was “very, very good”.
Pressure on Shell to merge its Dutch and UK parent companies mounted in the wake of the shock 20% downgrade in its reserves in January and three further re-categorisations.
A number of investors blamed a lack of corporate transparency and accountability for the crisis, which claimed the scalps of three senior executives and led to regulators in the US and UK imposing fines totalling £82.7 million on Shell.
Royal Dutch Petroleum, with its headquarters in The Hague, currently owns 60% of the assets with the remainder controlled by London-based Shell Transport.
Chief executive Jeroen van der Veer said today’s proposals had the full backing of the board and would bring greater simplicity, efficiency and accountability.
More than 200 management jobs will be transferred across the North Sea, representing 7% of the 3,000 staff who currently work at its London headquarters.
However, Shell said its global downstream and trading businesses would remain in the UK.
Chairman Aad Jacobs said: “Our proposals will not satisfy everyone in every respect but we firmly believe that we have come up with the best solution possible.”
Shell said half of its non-executive directors would be replaced by 2008 in an effort to introduce new blood to the company, while dividends would now be paid quarterly.
Shareholders are due to vote on the proposals in April and the merger of the boards is scheduled to take place in May.
Mr van der Veer told investors he was “disappointed” further potential reductions in oil and gas reserves had been identified.
Auditors have assessed more than half of the 14.35 billion barrels of oil equivalent that Shell reported as its reserves at the end of 2003.
In a statement, Shell said: “Preliminary reports from the field and audit teams suggest that reductions to ... reserves are likely to be appropriate.”
The reserves update took some of the gloss off its third-quarter profits performance, which reflected sky-high oil prices and higher margins.
Earnings from exploration and production – the unit at the centre of the reserves crisis – were 18% higher than a year ago and were achieved despite the impact of hurricanes in the Gulf of Mexico.