London Evening Standard: Shell braced for investors anger

Steve Hawkes,

22 March 2004

FURIOUS major investors will today call for an unprecedented shake-up at scandal-hit Shell and push the company to abandon its century-old dual-listed corporate structure.  

The Association of British Insurers wants answers from the Anglo-Dutch giant after it stunned investors last week with a further downgrade to its sprawling reserves base.

It is leading a meeting with Lord Oxburgh, the non-executive director appointed head of Shell's UK-listed arm after Sir Philip Watts' resignation three weeks ago.

ABI members control up to a quarter of the shares in Shell's UK-listed arm, Shell Transport & Trading, and are stunned over the way the group has handled the crisis.

Shell's reputation has taken a battering ever since it alarmed the City two months ago by cutting 3.9bn barrels of its proven reserves off its books - some 20% of its total.

It faces an investigation by the US Securities and Exchange Commission and the US Justice Department as well as a Financial Services Authority* probe in Britain.

Over the weekend, Shell was forced to deny claims that co-auditor KPMG has refused to sign off the group's annual accounts because of poor information and mounting fears over the SEC's inquiry.

It also risks a backlash in one of its core operating areas, Nigeria, after laying out today the details of a sweeping cost-cutting programme for its division in the oil-rich country.

Shell said it was seeking a 'strategic transformation' in Nigeria to boost its oil output there to 1.5m barrels a day by 2006, an increase of 400,000. But it is likely the group will axe up to 30% of its workforce - 1,500 jobs - to bring production cuts down to $1.50 a barrel over the next two years.

Chris Finlayson, managing director of Shell Nigeria, said: 'In the current extremely tight budget environment, it is essential to reduce our operating costs to allow sufficient funds for profitable investments.'

Nigerian output accounts for 40% of its total. Reserves there made up 1.3bn of the 3.9bn barrels removed from its proven books in January.

The ABI welcomed Oxburgh's appointment as a non-executive chairman earlier this month as a sign Shell was finally learning to improve its corporate governance.

But they want new Plc chairman Jeroen van der Veer to continue pushing through reform and to slim down the decision-making body at the top of the business.

Shell is 60% owned by Royal Dutch, with the UK arm holding a 40% stake. Both companies have a board, with executives from both sitting on a committee of managing directors, now headed by van der Veer.

Shell said: 'We are listening to shareholders and will continue to do so through to our annual general meetings. When that is completed both boards will then decide what, if anything, should be done.'

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