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THE WALL STREET JOURNAL: Shell Won’t Provide Data On Reserves With Its Results: ‘…concerns that the news, when it emerges, will be bad’

A WSJ NEWS ROUNDUP
January 30, 2008

Royal Dutch Shell PLC encountered concerns yesterday that the oil major had little luck adding new reserves last year after a report that it wouldn’t publish such figures with its annual results tomorrow.

Shell’s London-listed Class A shares edged down 0.6% to 1808 pence ($35.87), compared with a 1.35% rise in the Dow Jones Stoxx European oil-and-gas-sector index.

The Daily Telegraph reported earlier yesterday that Shell wouldn’t report its 2007 reserve-replacement ratio — the rate at which production is matched with new finds — when it releases its fourth-quarter results, as it has done in the past.

Reserves are a sensitive issue for Shell, which downgraded its reserves several times in 2004 and 2005, leading to a management shake-up, a share-price slump and fines by U.S. and U.K. regulators.

A Shell spokesman said the company announced with its third-quarter results in October that it would move to report its reserve-replacement ratio with its 20-F U.S. regulatory filing. This can be published between March and June, analysts said.

The Shell spokesman said the decision to delay reporting the reserve-replacement ratio was in line with the practice followed by U.S. rivals such as Exxon Mobil Corp. Analysts and investors noted, however, that London-based rival BP PLC still reports its reserve-replacement ratio with year-end results.

Recently published analysts’ previews for Shell’s results had noted that the ratio wouldn’t be reported tomorrow, though they had hoped for some guidance.

But analysts at Dresdner Kleinwort said in a research note on Monday that Shell wasn’t even planning to comment on reserves, which may have added to investor concerns that the news, when it emerges, will be bad. Analysts predict the replacement ratio will be low because of Shell’s loss of a controlling stake in the Sakhalin-2 project last year and failure to register any major finds last year.

“We understand Shell won’t comment on reserves in its [fourth-quarter results] essentially because the reserve replacement has been weak and made more complex by the impact” of Shell’s losing control of the Sakhalin-2 project last year, Dresdner Kleinwort said. “We regard this as regrettable,” the broker added.

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