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Shell takes $330m charge on Enterprise

The Guardian: Shell takes $330m charge on Enterprise

“trying to restore shattered investor confidence”

David Gow

Friday July 2, 2004

Shell, the troubled oil and gas group, yesterday said it would take a second-quarter charge of $330m (£181.5m) after writing down exploration assets it acquired two years ago with Enterprise Oil.

But the group, which survived a sizeable shareholder revolt this week over a 23% cut in this year’s proven reserves – despite accusations of incompetence – balanced this with a further spate of disposals.

Shell, which is trying to restore shattered investor confidence after losing three senior executive directors over the reserves debacle, insisted that the package matched its new strategy. It said the combined effect of yesterday’s measures would be financially neutral over the year.

Shell said its proven reserves would be unaffected by the charge it was taking after unsuccessful drilling and geological studies in former Enterprise wells in the UK and Norwegian sectors of the North Sea and off Ireland.

After accusations it overpaid – at $5.2bn plus debt – for Enterprise, the group said cost savings had reached $355m by the end of 2003 against an expected $300m – and Enterprise assets had contributed some $3bn in cash from operations.

Shell’s US business sold its Midwest refined product pipeline system and storage assets for $530m after raising close to $500m last week from the disposal of similar assets in Texas and the Great Plains.

The group said it would sell large parts of its Peruvian operations, including its service station network, as part of the strategy of divesting businesses of more value to others.

After averaging annual disposals of $2bn, Shell last year raised $4bn and this year has captured a further $3.5bn, including yesterday’s divestments. Having made $4.25bn profits in the first quarter, it is also trying to win back investors with a $2bn share buyback programme financed by disposals.

It said its New Zealand arm had given the go-ahead for the development of the Pohokura gas field, in which it has a 48% holding and which is due to begin producing gas in mid-2006.

http://www.guardian.co.uk/business/story/0,3604,1252237,00.html

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