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Shell Closes Book on 2004 Reserves Scandal as Claims Deadline Passes

By Fred Pals – Nov 5, 2010 8:06 AM GMT+0000

Royal Dutch Shell Plc, Europe’s largest oil company, will finally be able to turn the page of its reserves scandal when a deadline for investors to make claims passes today.

Non-U.S. investors have until today to be part of the $352.6 million settlement, made after the company restated reserves in 2004. Shell, whose shares are trading near a two- year high, slashed its proven oil and gas reserve estimates in January 2004, leading to fines, investor lawsuits and the departure of the company’s top three executives. The Anglo-Dutch joint venture Royal Dutch/Shell Group was unified in 2005 as a single Hague-based company, Royal Dutch Shell Plc.

Jeroen van der Veer, who became chief executive officer in 2004, turned his focus to raising production investing in oil sands reserves in Canada, the Sakhalin project in Russia and a gas-to-liquids plant in Qatar. Those projects are now helping to meet Shell’s target of an 11 percent increase in production by 2012 to 3.5 million barrels of oil equivalent a day.

“If Shell hadn’t closed the book already, they can do it now,” Paul Coenen, head of legal affairs at the investor lobby group VEB that helped process the claims, said in an interview yesterday.

The company’s class-A shares, traded in London, on Nov. 2 reached the highest level in over two years at 2,100 pence and have risen about 13 percent since the unification of the company was completed in July 2005. The shares gained as much as 0.4 percent to 2,097 pence in London today.

“Shell looks like a good choice and now seems to be within the horizon of investors that look at the growth,” Gudmund Halle Isfeldt, an Oslo-based analyst at DnB NOR Markets, said in an interview yesterday. “The cash flow is increasing, there’s good momentum as they seem to be delivering on many different areas at the moment.” He rates the stock a “buy.”

‘Delivery Window’

Current Chief Executive Officer Peter Voser, who took over last year, said Oct. 28 Shell is in a “delivery window” for growth after expanding an oil sands venture and taking final investment decisions on deepwater projects in the Gulf of Mexico and Brazil. The company last month posted earnings that beat analyst estimates for the third straight quarter.

The settlement compensates shareholders who bought Shell shares on any stock exchange outside the U.S. from April 8, 1999, through March 18, 2004, according to the Shell Reserves Compensation Foundation, set up to administer the reparation. The settlement involves institutional investors and shareholder associations in nine European nations. The company agreed in 2007 to pay the final settlement to European and other non-U.S. investors.

Shell had already settled with the U.S. Securities and Exchanges Commission, or SEC, for $120 million as well as paying $89.5 million in a class-action suit. The sum for non-U.S. investors includes $12.5 million to be distributed equally to all shareholders who submit a valid claim, regardless of the number of shares held, according to a statement from the Shell Reserves Compensation Foundation in May last year.

Shell declined to comment when contacted by phone yesterday.

To contact the reporter on this story: Fred Pals in Amsterdam at fpals@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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