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Daily Telegraph: Shell slices still more off proven reserves

Daily Telegraph: Shell slices still more off proven reserves

 

By Christopher Hope (Filed: 25/05/2004)

 

Shell yesterday cut its oil and gas reserves for the fourth time in under five months and admitted it could not rule out further cuts.

                                                                     

The company also confirmed that it had not yet decided the final pay-offs for Sir Philip Watts and Walter van der Vijver, the former chairman and chief executive who resigned over the scandal.

 

Shell said it was cutting 4.47billion barrels of oil equivalent off its 2002 “proven”, or commercially exploitable, reserves figure.

 

The figure has risen steadily through the year, from the initial announcement in January that Shell was knocking 3.9billion barrels – some 20pc – off its total proven reserves figure. Two further adjustments were made, to 4.15billion in March and 4.35billion last month.

 

Shell yesterday said its proven reserves at the end of 2003 were likely to be 14.35billion barrels – down from 19.3billion at the end of 2002 – because of the recategorisation.

 

Malcolm Brinded, head of exploration and production, said he could not rule out further cuts. He said yesterday: “There has been a lot of hard work and it has been an exhaustive process. At the moment we are not planning to make any changes. But we have learned never to say never.”

 

Shell said the cut came about because of a decision to adopt “a stricter application of some specific accounting standards” and to report under both US and Dutch accounting standards. This led to a change in the way royalties paid to landowners in Canada are charged.

 

Shell was making the disclosures ahead of the delayed publication of the company’s annual report this Friday. Shell also said that its reserves replacement ratio – the rate at which it was replacing extracted hydrocarbons – was 63pc by the end of 2003, compared with BP’s equivalent of 109pc.

 

Shell scotched reports that the company was set to award Sir Philip, who was on a three-month contract at Shell, a pay-off of up to £1m.

 

Jeroen van der Veer, chairman, said he was relieved that the annual report will be published. But he warned that the company was not over its troubles. “It will be many more months before we can say ‘it is all over’. We are not there at all,” he said.

 

Shell’s shares closed up 1.5 at 393.5p. JJ Traynor, an analyst at Deutsche Bank, said this reclassification was not as dramatic as earlier announcements. He said: “It is a change in tax classification. This is not a case of ‘Oh my gosh’ – but it is a change in accounting style.”

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