BBC NEWS: Shell fined over reserves scandal: “will pay a penalty of £17m to the FSA - the biggest fine ever imposed by the regulator - and a $120m (£65.7m) civil penalty in the US. (ShellNews.net)
The scandal rocked investor confidence
29 July 04
Oil giant Shell has agreed to pay more than £80m in penalties to settle inquiries by US and UK regulators into the firm's restatement of reserves. The firm slashed its reserves estimates by 20% in January, a move which cost three top executives their jobs.
News of the settlement came as the company unveiled second-quarter net income of $4bn (£2.2bn) boosted by high oil prices from last year's $2.6bn.
Shell added the review of its corporate structure was moving at a "good pace".
Investors were stunned in January when Shell revised its estimates of oil and gas reserves down by 20%.
Subsequent smaller downward revisions also ate into shareholder confidence.
The scandal surrounding the downgrades led to the departure of Shell's chairman Sir Philip Watts, oil and gas chief Walter van de Vijver and finance chief Judy Boynton.
The crisis led to the departure of chairman Sir Philip Watts
Shell announced it had reached an "agreement in principle" with both the UK's Financial Services Authority (FSA) and the US Securities and Exchange Commission (SEC) to resolve their inquires into the matter.
The firm will pay a penalty of £17m to the FSA - the biggest fine ever imposed by the regulator - and a $120m (£65.7m) civil penalty in the US.
In addition, Shell said it had undertaken to spend an extra $5m to develop a comprehensive internal compliance programme.
Following the controversy over reserves, investors called on Shell to simplify its twin board structure.
The Anglo-Dutch group presently has two boards: one oversees Royal Dutch Petroleum, which owns 60% of the group, while the other heads UK-based Shell Transport & Trading.
Shell is currently undertaking a review of its structure and governance, and investors had been hoping for details on how this was progressing.
However, the results statement said the review was "moving at a good pace" and reiterated that the firm would publish the review in November.
Shell's profits were lifted by the recent high oil prices, which have been boosted by worries over the situation in the Middle East and the crisis enveloping Russian oil giant Yukos.
"The tailwind in oil prices and good downstream performance has helped us to achieve sound financial results," said Shell chairman Jeroen van der Veer.
The firm said net profit adjusted for current cost of supply - which strips out changes in the value of Shell's oil and gas inventories - was $3.77bn, up 16% on a year ago.
However, analysts said the profit figures were at the bottom end of expectations.