The Scotsman: Shell Slips as Oil Reserves Downgraded Once More
By David Winning, City Staff, PA News
Oil giant Shell suffered further embarrassment today after downgrading its reserves for the second time in as many months.
The Anglo-Dutch group said a review of an oilfield in Norway had revealed stocks to be 250 million barrels lower than previously thought.
Senior executives described the shortfall as “disappointing and embarrassing”, coming in the wake of an announcement in January that it had overbooked stocks by 20%.
Shares fell 3% as the group said it was delaying publication of its annual report until June while an examination of all its global energy fields takes place.
Newly promoted chairman Jeroen van der Veer said the worldwide assessment was the only way “to get back confidence back” in the company.
About 40% of its reserves have been reviewed so far and the company aimed to complete the remaining fields by the end of next month, he said.
Mr Van der Veer said Shell was listening to the views of investors on possible changes to its corporate structure, which had been in place for more than 100 years.
Shell confirmed the Financial Services Authority had requested information regarding the circumstances about the reserves downgrade.
In addition, the actions of the company are being investigated by the Securities and Exchange Commission in the US, while Shell revealed Dutch regulators were looking into “potential insider trading”.
An internal investigation launched by Shell in the wake of the reserves downgrade is due to finish in the next few weeks.
This review has already claimed the scalps of chairman Sir Philip Watts and Walter van de Vijver, the chief executive of Shell’s exploration and production business.
The pair were forced to resign earlier this month after the board lost confidence in their leadership.
At a conference for media and investors today, Mr Van der Veer denied previously knowing the seriousness of the shortfall in reserves.
In response to media reports he had seen internal memos highlighting the deficit in stocks, he said: “The fact we are low in reserves....yes, that was known. Incorrect booking of 20% of our own reserves was unknown.”
The latest recategorisation was a “technical” change to meet guidelines laid down by the SEC and was not expected to affect “the amount, timing or cost of production from any of the fields”.
However, it was set to wipe 20 million US dollars (£11 million) from earnings, while the cost of writing off wells following the recategorisation in January was estimated at 10 million US dollars (£5.5 million).
Shell also announced that senior executives would not receive a performance-related bonus for 2003, and reserves bookings would not form part of future pay packages. They had previously constituted 5% to 15% of the total annual bonus awards.
With its annual meetings in the UK and the Netherlands being put back until June, Shell said it would give shareholders two interim dividends in May rather than make a full-year payment. A payment totalling 15.75p per share was expected.