Reuters: Shell to pay $353 million in overbooking settlement: + $80 million US settlement offer: total cost of fines and settlements: $700 million

Wed Apr 11, 2007 11:52 AM BST
By Mark Potter

LONDON (Reuters) – Royal Dutch Shell agreed to pay $352.6 million to non-U.S. investors on Wednesday as it seeks to put behind it the reserves overbooking scandal that rocked the oil giant in 2004.

The second-largest Western oil company by market value also said it would offer $80 million to settle claims from U.S. investors.

Shell shocked investors in 2004 by slashing its proven oil and gas reserves by 20 percent in a scandal that cost three top executives their jobs, sparked a probe by U.S. regulators and sent its shares plunging.

If the two deals are ratified, they would take the total amount paid out by Shell in fines and compensation to investors as a result of the overbooking to almost $700 million.

Shell said in a statement that “without admitting any wrongdoing” it had agreed to pay $352.6 million, plus $6.25 million in administrative costs, to settle claims from non-U.S. investors.

The investors include Dutch pension funds ABP and PGGM as well as organizations representing individual investors, such as Dutch group Vereniging van Effectenbezitters.

ABP and PGGM welcomed the settlement.

“In our view, the settlement amount offered by Shell is reasonable in light of other settlements reached in other securities class actions,” ABP chief legal counsel Rene Maatman said in a statement on behalf of both pension funds.

“The shareholders will be entitled to an amount which is equal to approximately 10-to-13 percent of their estimated damages,” he said. “According to expert reports, this percentage exceeds the average percentages achieved in securities class actions that are comparable to the Shell case.”

The agreement with non-U.S. investors depends on the Amsterdam Court of Appeals declaring the settlement binding for all of the shareholders it covers, Shell said in a statement.

U.S. OFFER

Shell legal director Beat Hess also told a news conference that the firm planned to offer U.S. investors an $80 million settlement — the last outstanding claim against Shell in relation to the overbooking scandal.

In addition, Shell said it was asking the U.S. Securities and Exchange Commission to distribute to shareholders the $120 million it paid in 2004 to resolve the regulator’s investigation into the overbooking.

On top of a $90 million settlement with employee investors in 2005, a 17 million pound ($34 million) fine from Britain’s Financial Services Authority and a handful of smaller deals, this would take the total cost of the overbooking to Shell in terms of fines and legal settlements to almost $700 million.

Teather & Greenwood analyst Peter Hitchens said the settlement was not material for a company of Shell’s size and that few investors would have wanted punitive damages given the company’s solid performance under new management.

Shell’s shares, which dropped over 10 percent to trade below 13 pounds on news of the overbooking scandal in January 2004, have recovered strongly, helped by firmer oil prices.

At 1100 GMT, they were up 0.8 percent at 17.01 pounds, valuing the business at about 109 billion pounds.

(Additional reporting by Jurjen van de Pol and Harro ten Wolde in Amsterdam)

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