FINANCIAL TIMES: Shell's credit rating goes back under review: “Standard & Poor's yesterday put Royal Dutch/Shell's AA+ credit rating under "negative" review because it may have to restate its proved reserves yet again.”: “Concerns were also raised about whether Shell tried to bury the bad news on reserves yet again by announcing its restructuring at the same time. "The information was found on page three, line 15 in one of the longest paragraphs I have ever seen," said one London-based broker.” (ShellNews.net)

By James Boxell in London and Ian Bickerton in Amsterdam

Published: October 30 2004

Standard & Poor's yesterday put Royal Dutch/Shell's AA+ credit rating under "negative" review because it may have to restate its proved reserves yet again.

The credit-rating agency said: "This latest warning is the fifth such announcement about its reserves base this year. When Shell's ratings were last affirmed in July, S&P did not expect further significant adjustments to the reserves base."

Eric Tanguy, S&P oil analyst, said: "The creditwatch reflects the negative impact that another reserves restatement would have on the company's profile."

Equity analysts also warned that this week's historic decision by Royal Dutch/Shell to scrap its 97-year-old corporate structure would do little to help solve its problem of finding oil.

Bert Siebrand, of Bank Oyens & van Eeghen in the Netherlands, said: "Although we do not underestimate the impact of the unification measures, we do not see how it is going to boost production."

He complained that the company had provided "no specific operating details".

Concerns were also raised about whether Shell tried to bury the bad news on reserves yet again by announcing its restructuring at the same time. "The information was found on page three, line 15 in one of the longest paragraphs I have ever seen," said one London-based broker.

Jeroen van der Veer, new chief executive at the combined group, denied the charge. "We did not try to hide the story," he said. "We are hoping that bad news will now travel upwards fast. The only way we can get our reputation back is by being open." Shell was forced into the restructuring after it was found to have overbooked 23 per cent of its proved reserves this year.

The company had said the reserves issue was behind it but, on Thursday, Malcolm Brinded, head of exploration and production, admitted that it could be forced to unbook another 900m barrels after rechecking 8bn barrels of its 14.35bn proved reserves.

The company was planning to look again at its remaining reserves and analysts feared that the downward adjustment could end up greater than 1bn barrels and that Shell would not achieve its target of 100 per cent reserve replacement over the next five years.

Bert van Hoogenhuyze of Stroeve, the Dutch stockbroker, said: "After assurances in April about thorough reviews, this sounds like the excuses of school pupils being late for class."

Richard Rose, at Oriel Securities in London, said: "It is all very well having one board but this does not help you find more oil. The way to lift reserves and production is through more capital spending on exploration - although that has long lead times - or to go out and make acquisitions."

Mr Rose said the single corporate structure would make it possible for Shell to "do what BP has done in the past" by buying companies. But he said: "The question in the current oil price environment is what can they go out and buy?"

Shell has been linked to Total - although at one time most people thought the French group was a more likely predator for Shell - and BG Group, which could prove very expensive.

A more likely scenario could be incremental acquisitions of smaller independent oil groups in the $10bn (£5.46bn) price bracket.

While analysts were sceptical about how the new structure would help in the desperate search for oil, investors were more hopeful.

Eric Knight, who represents Knight Vinke, US asset manager, and Calpers, the large US pension fund that has a large Shell holding, said: "You now have a chief executive whose problem it is to develop reserves, rather than having all these individual fiefdoms competing against each other. In Shell, everything in the past has been done by committee."