THE NEW YORK TIMES: Royal Dutch/Shell to Unify: “Separately on Thursday, the group also released third quarter results that were overshadowed by the admission that it was once again reviewing the equivalent of "approximately 900m" barrels of oil reserves following an extensive audit.” (ShellNews.net)
By Gordon Smith
Published: October 28, 2004
Royal Dutch/Shell, the Anglo-Dutch oil group, on Thursday announced the boldest restructuring in its 97-year history in a move that will combine the separate Dutch and English groups into a single entity.
The new group, to be called Royal Dutch Shell, will be incorporated in the UK and headquartered and tax resident in the Netherlands with a single board, chairman and chief executive.
Separately on Thursday, the group also released third quarter results that were overshadowed by the admission that it was once again reviewing the equivalent of "approximately 900m" barrels of oil reserves following an extensive audit.
It said the results of the review and final figures would be released early next year.
The streamlining of the group structure comes after a difficult year in which Shell was forced to restate more than a fifth of its reserves, which resulted in law suits from investors in the UK, the Netherlands and the US. The group was also forced to pay fines totalling more that $150m to the market regulators in the UK and the US.
The new ownership structure will reflect the split of the previous two companies with Royal Dutch shareholders owning 60 per cent of the share capital and Shell Transport & Trading shareholders owning the remaining 40 per cent.
Under the new structure Shell will have two groups of shares with identical voting and economic rights but in order to preserve the current tax treatment of dividends for all shareholders Royal Dutch shareholders will recieve A shares and Shell Transport & Trading shareholders wii get B shares.
The company will also move away from the current system of paying a full-year and interim dividend to one of paying quarterly dividends in euros.
The shares in the new company will be listed in London and are expected to debut in May after both companies' AGMs have agreed the changes.
Commenting on the changes Jeroen van der Veer, who will become the first chief executive of the new group, said: "I believe these proposals will help propel this group forward."
Shareholders have blamed the dual structure, which involved a supervisory board overseeing the activities of the two separate operating companies, for the group's poor performance compared to its rivals.
Analysts welcomed the changes which they felt would make Shell more competitive and would give it the ability to be more acquisitive.
Andrew Archer, an analyst at Commerzbank, said: "The UK listing is the difference. It gives the company a new acquisition currency. When it had a dual listing it was more difficult for it to launch shares to buy a company. With unified paper it can do many more things."
Tony Shepherd at Croesus said: "It's amazing the old structure lasted so long. It was a barrier to operating efficiently and holding directors accountable."
Aad Jacobs, the current chairman of Royal Dutch will chair the new group. Malcom Brinded will remain responsible for the key exploration and production business.
In its quarterly results Shell said net income more than doubled in the third quarter to $5.4bn, helped by record oil prices, compared to $2.7bn the previous year.
CCS earnings, which are estimated on the current cost of supplies, for the three months were $4.4bn, at the top end of expectations of between $3.6bn and $4.4bn.
Investors welcomed the restructuring announcement and shares in both groups rose. By late morning Shell Transport & Trading shares gained 6.1 per cent at 449¾ in London, and in Amsterdam shares in Royal Dutch added 3.8 per cent at €43.89.