24-05-04

Shell downgraded the size of its proven oil and gas reserves 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 its reduced confirmed oil and gas holdings by 20 %, or 3.9 bn barrels, said that it was downgrading another 103 mm 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 bn 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 made the latest announcement ahead of the planned publication of its annual report, which 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 American accounting rules for all its accounts, rather than a combination of Dutch and American rules.
"We will spend many more months before we can say that it is all over," van der Veer said. The company said it was continuing negotiations with the US Securities and Exchange Commission, which has been investigating its restatements. It is also 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 furore over the inflated estimates has forced the resignation of a number of Shell executives, including former chairman Sir Philip Watts, former CFO Judith Boynton and van de Vijver.

Source: Kenai Peninsula Online