AFX News Limited: Royal Dutch Shell ratings outlook kept at negative by Moody's: "It recalled that RDS recently announced that cost overruns on Phase 2 of the Sakhalin II liquefied natural gas project could potentially double the original total project costs to 20 bln usd through 2014.": Wednesday 20 July 2005

AMSTERDAM (AFX) - Moody's Investors Service said it kept a negative outlook on the Aa1 ratings of Royal Dutch Shell PLC following the oil company's creation of a holding company to unify its dual ownership structure.

The credit ratings agency said it 'is maintaining a negative outlook on RDS's Aa1 long-term rating as it continues to gauge RDS's upstream performance and the positioning of the Aa1 long-term rating relative to those of its strongest rated peer companies.'

This assessment will include the implications of rising capital costs on RDS's portfolio of large development projects in the near-to-medium term, its ability to show improved capital returns on these long-term investments, and its progress towards achieving the full reserve replacement and production growth that it is targeting in the 2005-2008 timeframe, Moody's said.

It recalled that RDS recently announced that cost overruns on Phase 2 of the Sakhalin II liquefied natural gas project could potentially double the original total project costs to 20 bln usd through 2014.

Moody's said it assigned RDS with an issuer rating of Aa1, as well as long-term ratings of Aa1 for the Euro Medium Term Note Programme and (P)Aa1 for the US Universal Shelf of RDS and Shell International Finance BV (SIF).

SIF is a wholly-owned financing vehicle that will act as a central fundraiser for RDS. Moody's also assigned Prime-1 ratings to RDS and SIF for commercial paper issued under their Global and US CP Programmes, it said.

Moody's is also affirming Aa1 (negative outlook) and Prime-1 ratings for the Euro Medium Term Note Programme and global and US commercial paper
programmes, respectively, of Shell Finance (UK) PLC and Shell Finance (Netherlands) BV.

'The affirmation reflects RDS's plan within the next few weeks, subject to trustee approval, to substitute its unconditional guarantee for the Group Holding Company guarantees on approximately 4.8 bln usd of long-term debt, ranking the debt pari passu with all other new senior unsecured debt of RDS,' the agency said.

The achievement of the unified shareholder structure and a single board, as well as the completion of RDS's review of virtually all of its reserves completed earlier in 2005, have addressed many of the governance and upstream control issues related to RDS's reserves restatements, Moody's said.

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