Shell chief financial officer resigns, company further downgrades estimates of reserves

LONDON (AP) _ The chief financial officer of the Royal Dutch/Shell Group of Cos. stepped down Monday as the company further downgraded estimates of its oil and gas reserves. <br><br>Shell said it believed

Monday, April 19th 2004, 12:00 am

By: News On 6

LONDON (AP) _ The chief financial officer of the Royal Dutch/Shell Group of Cos. stepped down Monday as the company further downgraded estimates of its oil and gas reserves.

Shell said it believed its fresh statement should close the controversy over reserves, which a senior executive conceded had been a ``major embarrassment'' for the company.

Judith Boynton, who will remain a Shell employee but left her post as chief financial officer, is the latest in a string of executive casualties prompted by the affair.

Releasing a summary of an internal audit of the estimates, Shell announced what it said was a near-final estimate that 4.85 billion barrels were downgraded from ``proven,'' or 700 million barrels more than its previous estimate.

Shell, the world's third-largest public oil company in terms of market capitalization, said in January that it was downgrading 3.9 billion barrels in reserves, or about 20 percent of its total holdings. A March announcement brought the total downgraded to 4.15 billion barrels.

The disclosures caused a shareholder uproar that has led to the resignations of Shell's former chairman, Sir Philip Watts, and its head of exploration and production, Walter van de Vijver.

Lord Oxburgh, chairman of Shell Transport and Trading Co. PLC, the British component of the Anglo-Dutch group, expressed ``profound regrets and apologies'' for the reserves fiasco.

He told a press conference that the affair had been a ``major embarrassment.''

``The story that has unfolded is not one of which anyone can be proud,'' Oxburgh said. ``Our procedures for booking reserves were seriously flawed. There are explanations, but there can be no excuses.''

On April 8, Shell announced that Frank Coopman had been replaced as chief financial officer of its exploration and production division.

Boynton, formerly the chief financial officer of Polaroid, joined Shell in June 2001. She also gave up her post as group managing director, but she will remain with Shell as an adviser at least until June, Shell said.

Group controller Tim Morrison will take over as acting chief financial officer, Shell said.

Shares in Shell Transport & Trading Co. fell 1.2 percent to $7.02 Monday on the London Stock Exchange.

The company said an internal audit aided by the Ryder Scott consulting group had so far reviewed 90 percent of Shell's oil and gas reserves.

Reserves constitute an oil company's most valuable asset, and any reclassification of them into less certain categories is a major concern for investors. The U.S. Securities and Exchange Commission is conducting a formal investigation into Shell's accounting for its reserves.

Shell also said it would restate its financial results for 2000 through 2003, lowering earnings by an average of slightly more than $100 million, less than 1 percent, for each year.

``The report ... and the reserves recategorization review draw a line under the uncertainties that have surrounded the status of our reserves since January 9,'' chairman Jeroen van der Veer said in a statement. ``The controls we now have in place will be rigorously enforced and will be subject to far greater levels of scrutiny within Shell.''

``Despite the difficulties of recent months Shell is a sound and profitable business,'' he added. ``We are making the changes to our reserves practices to ensure that that remains the case.''

Shell said it accepted all the findings of an outside review _ done by the New York-based Davis, Polk and Wardwell law firm with a group of former and current Shell workers _ of its managers' conduct.

It said American authorities had asked it to release only a summary of the lawyers' report, not the full text.

The report said a pattern of aggressive, or inflated, booking of assets had continued in part because of inadequate controls.

It said internal reserves auditing had been the responsibility of a single, part-time former Shell employee who had no power to enforce compliance with the company's rules and those of the SEC.

Based on the report, Shell said none of the executives currently on its committee of managing directors ``bore material responsibility'' for the reserves trouble.

The company's statement said Boynton's responsibility may have exceeded her authority. It noted that until recently, none of the chief financial officers of Shell business units reported to her.