IE 11 is not supported. For an optimal experience visit our site on another browser.

Shell cuts oil reserves again

Royal Dutch/Shell cut its oil reserves for the fourth time this year on Monday as a booking scandal that has wiped more than a fifth from the oil giant's reserves rumbled on.
/ Source: Reuters

Royal Dutch/Shell cut its oil reserves for the fourth time this year on Monday as a booking scandal that has wiped more than a fifth from the oil giant's reserves rumbled on.

The world's third biggest oil firm said it was now slicing 4.47 billion barrels of oil equivalent from its 2002 reserves, up from a figure of 4.35 billion in April. The errors have shaken investor confidence and cost three top executives their jobs.

The Anglo-Dutch group said the latest restatement would have no impact on reported cash flows. Its shares held steady at 393-1/4 pence in London and 40.73 euros in Amsterdam.

"I am assuming this is the final drawing of the line under it (the restatement scandal). It is a marginal further increase, but I don't regard it as materially new news," said Brendan Wilders, analyst at Oriel Securities.

Shell shocked investors in January by slashing its proven oil and gas reserves by 20 percent. Further smaller reserves cuts, while not as dramatic as the first, have dealt further blows to shareholder confidence.

The scandal led to the ousting of Chairman Philip Watts, oil and gas chief Walter van de Vijver and Chief Financial Officer Judy Boynton, and has led to a probe by U.S. regulators.

Crispin Odey, who runs London-based hedge fund Odey Asset Management, remained sceptical on prospects for oil majors, despite soaring crude oil prices which have enabled companies such as BP and Shell to report bumper profits.

Odey said the Shell scandal had raised questions about reserves accounting throughout the whole industry.

"Institutions should be moving money out of Shell and other oil stocks and into oil commodities," said Odey.

Shell confirmed it would publish its annual report on Friday and added it would adopt internationally recognised reporting standards for its accounts in 2005.

The company has slowly won back some shareholder support by ousting top brass with new Chairman Jeroen van der Veer instigating a share buyback programme similar to that of rival BP.

"The share buyback demonstrates a commitment to shareholders that the previous management did not have," said Paul Mumford, fund manager at Cavendish Asset Management.