Ratings agency Fitch downgrades Shell to 'AA plus'

21st April 2004, Comments 0 comments

PARIS, April 21 (AFP) - The international ratings agency Fitch downgraded the oil group Royal Dutch Shell Wednesday owing to management changes, possible financial penalties and further reserve adjustments.

PARIS, April 21 (AFP) - The international ratings agency Fitch downgraded the oil group Royal Dutch Shell Wednesday owing to management changes, possible financial penalties and further reserve adjustments.

Fitch downgraded Shell's senior unsecured rating to "AA plus" from "AAA" but revised the outlook to stable from negative, becoming the second agency to downgrade Shell after Sandard and Poor's on Monday.

"The downgrade is predicated on the cumulative occurrence of negative factors previously identified by Fitch - managerial instability and movement, the possibility of financial penalties, findings supporting shareholder litigation and further reserve adjustments," Fitch said in a statement.

"Management change may provide a suitable opportunity to refocus the business over the longer term, but the unprecedented wholesale senior management movement of the past three months is likely to be detrimental to the medium-term overall risk profile of the business," it added.

"While future senior management changes are now considered very unlikely, there remains the possibility that the ongoing SEC (US Securities and Exchange Commission) review will draw further relevant and actionable independent conclusions."

Shell was left reeling Tuesday by a rash of damning front-page headlines a day after the group cut its estimated proven energy reserves yet again and ousted a third top executive, chief financial officer Judy Boynton.

The group also published internal memos and emails showing that senior executives were aware the group was overstating the size of its recoverable energy reserves long before they told investors in January.

Fitch said Wednesday: "Material reserve adjustments have decreased the total reserve to production ration to around 10 years, considerably below the peer group average of around 13 years.

"The outlook is stable rather than negative because of uncertainties over the timing and magnitude of any litigation or penalties, and the expectation that the business will retain sufficient financial flexibility over the medium term."

On Monday, Standard and Poor's downgraded Shell to "AA plus" from "AAA" and maintained its negative outlook.

The oil company has now lost three top executives, with Boynton's stepping down following the departure of former chairman Phil Watts and the former head of exploration and production, Walter van de Vijver in early March.

© AFP

                                          Subject: French news

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