Shell Downgrades Oil Reserves Again

LONDON (AP) _ The Royal Dutch/Shell Group of Cos. downgraded the size of its proven oil and gas reserves Monday for the fourth time this year. <br/><br/>The company, which stunned shareholders in January

Monday, May 24th 2004, 9:53 am

By: News On 6

LONDON (AP) _ The Royal Dutch/Shell Group of Cos. downgraded the size of its proven oil and gas reserves Monday for the fourth time this year.

The company, which stunned shareholders in January when it announced its reduced confirmed oil and gas holdings by 20 percent, or 3.9 billion barrels, said that it was downgrading another 103 million barrels from ``proven'' to less certain categories.

It blamed the reduction on accounting changes involving ``royalties paid in cash in Canada.''

Combined with two other announcements since January, it brings the total of downgraded reserves to 4.47 billion barrels, the company said.

Reserves are an oil company's most valuable asset, and any reclassification into less certain categories is a serious concern for investors.

The market took the announcement in stride. Shell shares were up 0.5 percent at 292.75 pence ($5.21) in midafternoon trading in London.

Shell made the latest announcement ahead of the planned publication on Friday of its annual report.

``The annual reports and accounts will reflect a restatement of reserves data and related financial impact, and we have implemented a number of accounting policy changes,'' said Shell chairman Jeroen van der Veer.

The company said the restatement was part of its shift toward using stricter American accounting rules for all its accounts, rather than a combination of Dutch and American rules.

The company said it was continuing negotiations with the U.S. Securities and Exchange Commission, which has been investigating its restatements. It is also being investigated by European regulators and may face lawsuits from investors.

``We will spend many more months before we can say that it is all over,'' van der Veer said in a conference call with reporters and investment analysts.

But he said he hoped the publication of the report on Friday would be an ``important milestone'' in bringing an end to the affair.

Shell published an external investigator's report last month which revealed dishonesty at the highest levels of the company and showed that some bosses knew for almost two years the company had publicly overstated its reserves.

It released an e-mail in which Walter van de Vijver, then head of Shell's exploration and production division, wrote he was ``sick and tired about lying'' about the inflated estimates.

The furor over the inflated estimates has forced the resignation of a number of Shell executives, including former chairman Sir Philip Watts, former chief financial officer Judith Boynton and van de Vijver.