The Times: Shell to take £180m charge: “The news is a further blow to the company's embattled shareholders”

By Andrew Ellson,

July 01, 2004  

Shell, the Anglo-Dutch oil company, has announced its exploration and production business will take a charge to earnings of about $330 million (£180 million) after tax in the second quarter of this year.

The charge relates to the unsuccessful drilling and seismic studies of several exploration wells in the North Sea and off the coast of Ireland. Shell acquired these exploration rights with the purchase of Enterprise Oil in 2002.

The charge would not have not have an impact on the company's proven reserves, Shell said in a statement.

The news is a further blow to the company's embattled shareholders, who watched as the value of Cairn Energy, a rival exploration company, soared 250 per cent after discovering oil in a number of sites purchased from Shell.

Ealier this year Shell's shareholders suffered a 16 per cent fall in the company's share price after it was forced to downgrade its proven oil reserves, a scandal that cost Sir Phillip Watts his job as chairman of the company.

In a statement today Shell defended the purchase of Enterprise Oils, saying synergies from the acquisition had already delivered savings worth $355 million and that Shell had benefited from bringing on stream Enterprise's projects in Brazil and the Gulf of Mexico.

Shell also announced the sale of its Midwest refined product pipeline system and storage assets in the United States for $530 million. Later this year Shell plans to complete the sale of its retail, commercial and marine businesses in Peru.

The company said it expected the combined financial effect of the asset sales and write-downs would be "broadly neutral" on net income for the year. In the last six months, Shell has raised more than $3.5 billion (£1.9 billion) from global divestments.

Shell's share price was down 0.5 per cent at 402.75p in afternoon trading.