Frightening revelations from ROYAL DUTCH/SHELL. Let's hope that the 3.9
B barrels is someone else's treasure! What these prospectors can do.

Malanding



    Shell Reduces Estimate of Reserves Again

By HEATHER TIMMONS

Published: March 19, 2004



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ONDON, March 18 - Royal Dutch/Shell
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Group made a second reduction to its proven reserves of oil and natural
gas on Thursday and said that it would postpone its annual report and
shareholder meeting by eight weeks or more, surprising investors.

The equivalent of 250 million barrels of oil are being reclassified, the
company said, because they do not comply with regulations of the
Securities and Exchange Commission in the United States.

An additional 220 million barrels that in February were expected to be
booked as reserves in a final tally for 2003 will not be included, the
company said. The disclosure comes on top of a Jan. 9 announcement that
reserves had been overstated by 20 percent, or the equivalent of 3.9
billion barrels

While the amount of Thursday's restatement was small in comparison, it
rattled investors, given the growing questions about the company's
credibility. Shares of Shell's two component companies fell sharply in
European trading before recovering a bit.

"Every time you turn around, there is another little surprise," said
Bruce Lanni, an analyst with A. G. Edwards. The latest revision is
particularly vexing, some analysts said, because in February, Jeroen van
der Veer, who has since been named chairman of Shell, said in a
conference call that the company was confident in the thoroughness of an
internal inquiry after the January restatement.

"We have left no stone unturned to make sure that this doesn't happen
again," Mr. van der Veer said in February.

Reserve estimates are an important indicator of an energy company's
worth and strength, and the surprise Jan. 9 announcement rattled investors.

After an internal investigation, Shell's chairman and the head of
exploration and production were asked to resign on March 3.

Company documents from two years ago obtained by The New York Times
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show that the two ousted executives, as well as some current top Shell
executives - including Mr. van der Veer and the chief financial officer,
Judith Boynton - were aware of a significant shortfall in reserves and
came up with an "external storyline'' and "investor relations script''
that minimized its significance.

The Securities and Exchange Commission, European regulators and the
Department of Justice are now investigating the company's disclosure.

On Thursday, Shell said that regulators in the Netherlands were
investigating possible insider trading. Shell also said in a statement
that a review of its reserve restatement was continuing and that further
departures from management were possible.

The latest revision to the oil and gas reserves come in part from the
company's Ormen Lange field in Norway, where Shell used seismic
technology to determine reserves, but did not back up the results with
other methods, as the S.E.C. demands. An outside audit of the company's
fields is only 40 percent complete, the company said, and more changes
to reserve levels could not be ruled out. As a result, Shell's annual
report, which was due to be released on Friday, will be delayed until
late May, while its shareholder meetings will be held on June 28.

Shell said the second reserve change was prompted by its external
auditor, Ryder Scott, which was hired in March and has checked just 40
percent of the company's fields.

"Here we are weeks later, and it transpires that we're less than halfway
through the review, and there are a quarter-million barrels that didn't
comply with S.E.C. requirements," said Issac Xenitides, an analyst with
Fitch Ratings.

Mr. van der Veer and Shell's new head of exploration and production,
Malcolm Brinded, held a news conference in London on Thursday afternoon
to explain the change. Shell's other group managing directors, Judy
Boynton and Rob Router, attended the conference but sat in the audience.

Many of the questions related to what top executives knew about Shell's
reserve problem before the January restatement.

Mr. van der Veer acknowledged that there were internal documents about
"exposures" regarding S.E.C. guidelines, but contended that they did not
represent incorrect bookings.

"The word 'exposure,' '' he said, did not mean the same thing as
incorrect booking of reserves. "Exposures are things that have to be
managed.''

He said that a March 9 article in The Times about the 2002 documents had
emphasized "two lines from the back" of a large document.


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