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The Wall Street Journal: Shell Settles Investor Lawsuit

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This is more a legal story than an energy story, but it involves one of the world’s biggest energy companies, so it’s worth noting: Royal Dutch Shell said Wednesday it would pay $352.6 million to settle claims brought in the U.S. by European shareholders, who accused Shell of defrauding them by overstating its reserves.

The Netherlands-based oil giant also agreed to pay $47 million in attorneys’ fees to three American law firms that represented the European investors.

The agreement marks the first time that an all-European cast of players has leveraged U.S. courts to settle stock-fraud allegations, marking a further step in a gradual migration of U.S.-style civil-litigation methods to Europe.

April 11, 2007, 3:00 pm: Permalink | Trackback URL:


Memories fade about the impact and scope of the Shell reserves debacle.

In fact there were five successive downgrades covering a third of Shell’s total hydrocarbon reserves.

On 9 January 2004 in the first Reserves write-down, Royal Dutch/Shell announced that it was writing down its “proved” oil and gas reserves by 20% (or 3.9 billion barrels), from 19.5 billion barrels to 15.6 billion barrels.

On 18 March 2004, in the second reserves write-down, Shell announced that it was further cutting its proved oil and natural gas reserves for 2002 by an additional 250 million barrels. It also announced that the 2004 AGM would be delayed.

On 19 April 2004 Shell cut its reserves again. The third reduction brought Royal Dutch/Shell’s total reserves to 4.35 billion barrels — reducing the amount of reserves that the Company planned to book in 2003 by about a billion barrels. This was the same day that Shell lost its “AAA” credit rating.

The following day, Malcolm Brinded, the boss of Shell Exploration & Production, attempted to assure the financial markets that there would be no more bad news. He said the company had carried out a “painstaking and thorough” review which would “draw a line” under Shell’s difficulties. He was wrong.

24th May 2004 the fourth reserves write-down was announced by Shell which stated that it was downgrading another 103 million barrels of its proven reserves to other non-proven categories.

On 1 November 2004, Shell announced the fifth reserve write-down, reducing its estimate of 2003 reserves by 1.4 billion barrels, or 9.8 percent, to 12.95 billion. Its oil and gas holdings were at least a third lower than reported in 2002 after the company misled investors and failed to find new fields.

Mr Brinded is tipped to be the successor to the current CEO, Jeroen van der Veer, when he retires in 2009. His track record does not inspire confidence.

Posted by John Donovan
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Comment by John Donovan – April 12, 2007 at 10:49 am and its also non-profit sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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