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The Scotsman: Shell

The Scotsman: Shell

 

Posted 30 May 04

 

THE oil industry is still essentially run by geologists, so Shell’s executives will have a ready analogy for the periodic tremors the seismic upheaval of Shell’s 3.9 billion barrel reserves downgrade in January is still throwing out.

 

Last week’s 120 million barrel downgrade, Shell’s fourth this year, barely registered on the market’s Richter scale, however.

 

The cut pushed Shell’s total reduction in proven reserves to a new total of 4.47 billion barrels, and the company was forced to trim earnings between 2001-2003 by $402m. Shell Transport’s shares rose 2%.

 

After the kind of trauma Shell investors have already experienced this year, it seems a few hundred extra barrels lost are as nothing.

 

What really held up the share price though, was relief that Shell’s auditors, KPMG and PricewaterhouseCoopers, had decided to give the company’s annual report a clean bill of health, signalling a return to normality for the company accounts.

 

Last week’s reserves revision will not be the last, though. The US market regulator, the Securities and Exchange Commission (SEC), is still scrutinising the reserves auditing policies ahead of the company publishing a 20-F accounts statement for last year on June 30.

 

This investigation could throw up further anomalies that cut Shell’s reserves – a possibility made more likely by the revelation that Shell does not have uniform reserves accounting procedures across its operations.

 

It is, though, likely to be the last one that counts. Five months of intense analysis will have uncovered any serious discrepancies in Shell’s portfolio.

 

After the rigorous review its assets have been through over the last year, Shell’s reserves are more likely to move in a positive direction than most. 

 

http://business.scotsman.com/economy.cfm?id=614192004

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