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Daily Telegraph: Shell pledges to buy back $2bn shares

Daily Telegraph: Shell pledges to buy back $2bn shares

 By Christopher Hope, Business Correspondent (Filed: 30/04/2004)

Shell, the embattled oil and gas giant, yesterday announced plans to buy back $2billion-worth of its shares and said that plans to reform its unwieldy corporate structure were progressing speedily.

Shell said that it would spend $2billion on its buyback programme between now and the end of the year, the first buybacks since December 2002.

Jeroen van der Veer, chairman of Shell’s committee of managing directors, said Shell could buy back more shares because of the high oil price.

The move echoes BP, which announced in March that it would buy $33billion-worth of shares if the oil price stayed above $30 over the next three years.

The news helped Shell shares to close up 6.25 at 393p – its highest since Shell announced in January it had overstated its proven reserves by more than 20pc, or 3.9billion barrels. The figure has since been revised twice and now stands at 4.85billion barrels.

Shell has pledged to reform its complicated dual-listed structure in the wake of the overstatement, which has so far cost the jobs of Shell’s chairman, head of exploration and production (E&P), and finance director.

Mr van der Veer insisted Shell was not dragging its feet over reform of its corporate structure. He said: “We are going as fast as possible but we need this to be a quality process.”

He was “very relieved” to be able to announce Shell’s first-quarter results, showing pre-tax profits down 12pc to $8billion on sales proceeds up 10pc at $76.2billion.

Shell’s overall production – 4.096m barrels per day – just out-stripped BP’s figure of 4.015m, announced earlier this week. Shell was able to maintain its position despite BP producing more oil in the quarter.

Shell hinted that it would be spending up to $2billion more in the upstream, mainly on E&P. Malcolm Brinded, head of E&P, admitted that a reserve replacement rate of 50pc to 60pc over the past five years was “unacceptable”.

He said: “This is not a competitively advantageous position that we are in.”

He was confident that for the next five years the rate would be above 100pc, helped by adding back most of the “lost” proven reserves.

Shell made 11 finds – including three “big cats” or discoveries of more than 100m barrels – in the first quarter, he said.

Shell also said that it would publish its annual report on May 28, two and half months late. The delayed annual meeting is set for June 28.

It also confirmed that a “cost increase is under review” at its Sakhalin gas project in Siberia. Some $3billion will be spent on the project this year.

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