Record profits as Shell closes out difficult year

3 February 2005

AMSTERDAM — Despite a disastrous 2004 in which it downgraded its oil and gas reserves several times, Anglo-Dutch energy company Royal Dutch/Shell reported on Thursday record net profits of USD 18.5 billion (EUR 14.9), an increase of 48 percent compared with 2003.

“2004 was a year of extremes, with the reserves re-categorisation on one hand and record net income and cash generation on the other. Our performance demonstrates our financial and operational resilience and the quality of our people and assets,” Shell boss Jeroen van der Veer said.

Analysts had anticipated profit of USD 17.9 billion compared with Shell’s stated 2003 profit of USD 12.5 billion. Supported by high oil prices and strong refining margins, the turnover of the Dutch-British energy giant rose last year to USD 265.2 billion last year compared with USD 198.36 in 2003.

But Shell also announced it was reducing its proven oil and gas reserves by another 1.4 billion barrels, bringing the combined total to 5.9 billion. The announcement came as a disappointment for shareholders, Radio 1 reported.

Shell was forced to reduce its reserves by 20 percent in January 2004 due to conditions laid down by the US Securities and Exchange Commission. The shock announcement was followed by several more downgrades and three directors were forced to resign, including company chairman Sir Philip Watts.

In what was a turbulent year for Shell, the company also decided to do away with its two-board structure and merge into one company, to be based in The Hague. The new structure is called Royal Dutch Shell and will have its primary stock market listing in London.

“We have taken the steps necessary to close out the reserves issue, made substantial improvements to our portfolio and are reshaping the organisation. The proposal to create Royal Dutch Shell plc reflects our commitment to regain our competitive strength,” Van der Veer said.

As Shell hopes to put the reserves scandal into the past, it also announced on Thursday USD 10 billion in dividends to shareholders in 2005 and a USD 3 to 5 billion buyback programme to be relaunched this year.

And it recorded net profit of USD 4.48 billion in the fourth quarter of last year compared with USD 1.92 billion reported in the same period in 2003. The net fourth quarter profit met with some analyst’s expectations.

Subject: Dutch news