Shell reduces oil reserves again, CFO quits

19 April 2004

AMSTERDAM — As Shell downgraded its oil reserves for the third time this year, the Anglo-Dutch energy company’s chief financial officer (CFO) resigned — the third executive to go in recent weeks due to the ongoing crisis.

While she was not accused of any wrongdoing, errors made in the booking of Shell’s oil reserves and the resulting shareholder criticism made the position of CFO Judy Boynton, 48, untenable.

The news came as Shell announced it was downgrading its oil reserves again. Gas and oil reserves for 2002 will now be a combined 4.35 billion barrels lower than previously thought. The latest downgrade accounted for 200,000 barrels.

Shell admitted in January that it had over-estimated its reserves by 3.9 billion barrels and reduced its reserves further by 250 million barrels in March.

Shell also downgraded its estimated by 500 million barrels for 2003, reducing its proven reserves top 14.5 billion barrels.

The overall impact on net profit would be just over USD 100 million for 2002 and about USD 130 million for 2003, the company said. There was little change in Shell’s stock price after the announcement.

Shell’s latest downgrade and Boynton’s resignation was announced in an internal probe into why Shell had inflated its reserves. The probe also revealed Shell had known about the problem since 2001.

The independent review blamed former chairman Sir Philip Watts and oil and gas chief Walter van de Vijver for the crisis. Both men resigned earlier this year. Current managing directors were cleared in the latest report.

But the investigations have led to doubts about the “integrity” of Shell documents. In one instance, Van de Vijver demanded in December 2003 the destruction of a document that declared Shell’s reserves needed to be downgraded.

Copies of the document were kept, however, and only Van der Vijver deleted the email with the report from his computer, Dutch public news service NOS reported.

But Shell chairman Jeroen van der Veer remains adamant, claiming that “despite the difficulties of recent months, Shell is a sound and profitable business”. He added that new controls had been put in place that would be “rigorously enforced”, BBC reported.

Shell is under investigation in the US by both the Securities & Exchange Commission and the Justice Department. Britain’s Financial Services Authority and the Netherlands’ market regulator AFM have also launched inquiries.

Shareholders have also brought a number of class action lawsuits in the US.

Subject: Dutch news