Shell cuts oil reserves for 4th time
LONDON — The Royal Dutch/Shell Group downgraded the size of its proven oil and gas reserves yesterday for the fourth time this year as the oil giant continued to stumble over a scandal that shocked the markets and forced the resignation of three top executives.
The company, which stunned shareholders in January when it announced it had reduced confirmed oil and gas holdings by 20 percent, or 3.9 billion barrels, said that it was downgrading an additional 103 million barrels from "proven" to less-certain categories.
Shell blamed the reduction on accounting changes involving "royalties paid in cash in Canada."
Combined with two other announcements since January, it brings the total of downgraded reserves to 4.47 billion barrels, the company said.
Reserves are an oil company's most valuable asset, and any reclassification into less-certain categories is a serious concern for investors.
The market took the announcement in stride. Shell shares closed up 0.38 percent in London. U.S.-traded shares of Royal Dutch Petroleum gained 76 cents to close at $49.10 on the New York Stock Exchange, where Shell Transport & Trading shares rose 82 cents to $43.10.
Shell made the latest announcement ahead of the planned publication Friday of its annual report. Chairman Jeroen van der Veer said he hoped the publication of the report would be an "important milestone" in bringing an end to the affair.
"The annual reports and accounts will reflect a restatement of reserves data and related financial impact, and we have implemented a number of accounting-policy changes," van der Veer said.
The company said the restatement was part of its shift toward using stricter U.S. accounting rules for all its accounts, rather than a combination of Dutch and U.S. rules.
"We will spend many more months before we can say that it is all over," van der Veer said in a conference call with reporters and investment analysts.
The company said it was continuing negotiations with the U.S. Securities and Exchange Commission, which has been investigating its restatements. It also is being investigated by European regulators and may face lawsuits from investors.
Shell published an external investigator's report last month, which revealed dishonesty at the highest levels of the company and showed that some bosses knew for almost two years the company had publicly overstated its reserves.
The company released an e-mail in which Walter van de Vijver, then head of Shell's exploration and production division, wrote he was "sick and tired about lying" about the inflated estimates.
The furor over the inflated estimates has forced the resignation of a number of Shell executives, including former Chairman Sir Philip Watts, former Chief Financial Officer Judith Boynton and van de Vijver.