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Royal Dutch/Shell Restates Again

Annual report and shareholder meeting will be delayed; European regulators look into possible insider trading.
Stephen Taub, CFO.com | US
March 22, 2004

For the second time this year, Royal Dutch/Shell Group has revised downward its proven reserves of oil and natural gas.

The energy giant also announced that it would postpone filing its annual report and holding its shareholder meeting for at least eight weeks.

The company said it will reclassify 250 million barrels of oil because it "did not strictly follow SEC guidance." An additional 220 million barrels, which as of February were expected to be booked as reserves in a final tally for 2003, will also not be included.

These revisions follow the company's January 9 announcement that it overstated reserves by about 20 percent, or the equivalent of 3.9 billion barrels.

According to company documents from two years ago obtained by The New York Times, two Shell executives who have been fired, as well as current executives including chief financial officer Judith Boynton, were aware of a significant shortfall and came up with an "external storyline'' and "investor relations script'' that minimized its significance.

Thursday's Wall Street Journal reported that Royal Dutch/Shell Group's guidelines on accounting for natural-gas reserves were relaxed as early as the mid-1990s, which possibly played a role in Shell's overstatement of its holdings. The Securities and Exchange Commission, the Department of Justice, and European regulators are investigating the company's disclosure, added the Journal.

On Thursday, Shell announced that regulators in the Netherlands were investigating possible insider trading. Regulators started looking into possible insider trading at the company several weeks before the January 9 announcement, according to the Times, citing a person close to the investigation.




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