Shell exec was ‘tired of lying’:CFO resigns over inflated statements on oil, gas reserves

Spokesman Review ^ | 04/20/2004 | Associated Press

[writer33]

LONDON -- A top executive of Royal Dutch/Shell Group of Cos. wrote in an e-mail that he was “sick and tired about lying” about the company's inflated oil and gas reserves estimates, an investigation commissioned by Shell reported Monday.

The investigation, whose findings Shell accepted in full, found that some bosses knew for almost two years the company had publicly overstated the size of its reserves. The shaken oil giant also announced that its chief financial officer had stepped down, the latest in a string of high-level casualties since Shell's announcement in January that its confirmed oil and gas holdings were much smaller than it had claimed.

The company said Monday that it had now downgraded a total of 4.35 billion barrels, or about 22 percent of its reserves, from “proven” to less certain categories. That is 200 million barrels more than its previous estimate.

Shell said in January that it was downgrading 3.9 billion barrels, or about 20 percent of its total holdings. A March announcement brought the total downgraded to 4.15 billion barrels.

The disclosures caused a shareholders' uproar and led to a string of resignations. Reserves are an oil company's most valuable asset, and any reclassification into less certain categories is a major concern for investors.

Walter van de Vijver complained about the estimates after he took over as chief of the division in June 2001, replacing Sir Philip Watts, who had been promoted to Shell chairman, the summary said.

The report said van de Vijver notified Shell's managing directors in February 2002 that the company's reserve classification rules did not match those of the U.S. Securities and Exchange Commission and that Shell might have overestimated its reserves by 2.3 billion barrels.

“I am becoming sick and tired about lying about the extent of our reserves issues and the downward revisions that need to be done because of far too aggressive/optimistic bookings,” van de Vijver wrote in a November 2003 e-mail to Watts, released in the summary.

Shell said Judith Boynton quit her post as group chief financial officer but will stay at the company as an adviser at least until June. Oxburgh said Boynton had not been guilty of any financial impropriety.

[writer33]

After reading, it doesn't seem as lying and scheming as the article made it sound. Once again, a reporter trying to push those headlines.

[usafsk]

Huh? Having read the actual Davis Polk Waddell report earlier today, I'd say you're wrong. Oil industry reserves are critical to valuing an oil company accurately. You need to know how much and of what quality there is, and how much it costs them to get it out. Boosting reserves is just as bad as stuffing sales channels or manipulating revenues. These people screwed their shareholders and violated several disclosure laws that protect investors. The story here is far worse than the headlines. It is also a drag on other oil company stocks, who are assumed guilty until proven innocent. Sometimes the crooks are really crooks.