News.com.au: Shell cuts earnings $285m
By Bruce Stanley in London
May 31, 2004
ROYAL Dutch/Shell Group has reduced its annual earnings by $US203 million ($285 
million).
This was revealed in an annual report delayed by two months due to the scandal 
arising from the company's downgrading of its oil and gas reserves. Yet even as 
it sought to restore its battered reputation, Shell suffered another blow when a 
US refinery said it had supplied Shell stations in the US state of Florida with 
petrol that contained potentially damaging amounts of sulphur.
Shell's revised net income for 2003 was $US12.50 billion compared to the 
original net income figure of $US12.70 billion that it announced in February, 
before the full extent of its reserves problems emerged.
The company's restated earnings were 27 per cent higher than the $US9.72 billion 
in restated net income for 2002. Shell had earlier reported its 2002 net income 
as $US9.42 billion.
Restated sales totalled $US268.9 billion, up from $US222.8 billion in restated 
sales for the previous year. By comparison, Shell's original sales figures in 
February were $US269 billion for 2003 versus $US223 billion for 2002. Shell also 
restated its results for 2001.
The catalyst for these embarrassing revisions was four separate 
reclassifications of its oil and gas reserves, the most recent of which Shell 
announced last Monday.
The Anglo-Dutch company first stunned shareholders in January when it downgraded 
20 per cent, or 3.9 billion barrels, of its reserves from "proven" to less 
certain categories. Three other downgrades followed, for a total reduction in 
reserves of 23 per cent, or 4.47 billion barrels, from previously reported 
levels.
Reserves are an oil company's most valuable asset, and any reduction in their 
estimated size is a serious concern for investors.
In the confusion that followed, Shell dismissed several top executives and 
delayed by two months the release of its annual report. "Rebuilding credibility" 
and "regaining trust" are now the company's key priorities, it says in its 
annual report.
Shell seeks in its annual report to reassure shareholders that its core 
businesses – exploration and production, and refining and marketing – are in 
good shape and that it is pursuing several new projects that augured well for 
the future.
"Shell remains a sound and profitable business, and I firmly believe that we 
have real strengths on which to grow our business, and rebuild our reputation," 
its chairman, Jeroen van der Veer says.
But in another setback, a refinery in Houston has asked the Shell gas stations 
that it supplies to stop selling regular and mid-grade petrol that was shipped 
through the Port of Tampa or Broward County's Port Everglades. Motiva 
Enterprises said the fuel might contain too much sulphur, which would not affect 
engine performance but could cause faulty gas gauge readings.
The news came ahead of the Memorial Day weekend, which marks the traditional 
start of the peak northern summer driving season in the United States.
Shell said none of the senior executives ousted after the furore over oil 
reserves would receive annual bonuses for 2003.
The company's annual report showed that former chairman Sir Philip Watts 
received his annual salary of £865,000 ($2.2 million) last year. But the Shell 
remuneration committee decided Watts should miss out on an annual bonus – 
typically worth the same as his yearly pay. It also said he was not entitled to 
50 per cent of stock options granted in 2001 as the company had not met 
performance targets.
Shell's failure to outperform rivals such as BP and ChevronTexaco also meant 
Watt missed out on shares worth £1.7 million under the group's incentive plan.
The reduction in Shell's reserves led to the resignations of Watts, head of 
exploration and production Walter van de Vijver, and finance chief Judith 
Boynton.
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.
The company has said it is continuing negotiations with the US Securities and 
Exchange Commission, which has been investigating its restatements. It is also 
being pursued by European regulators and may face lawsuits from investors.
Today's annual reports showed that Van de Vijver was paid £842,000 last year, 
but he received no bonus for his work in 2003. Boynton was paid her annual 
salary of £382,000.
The annual reports did not carry details of possible severance payments to the 
ousted executives. A company spokesman said talks with the individuals were 
continuing.
Shell also said that none of the present management team, including new chairman 
Jeroen van der Veer, would receive annual bonuses for 2003.
Shares in Shell Transport & Trading, the group's British arm, fell 1.1 per cent 
to close at 394.25 pence on the London Stock Exchange. 
The Associated Press
http://finance.news.com.au/common/story_page/0,4057,9700400%255E14324,00.html