New York Times: Shell to buy back $2 billion in stock

By HEATHER TIMMONS

April 30, 2004

LONDON — The Royal Dutch/Shell Group said on Thursday that it would buy back $2 billion of its shares this year, the latest sign that the company is trying to placate shareholders after months of criticism.

Shell has been under fire since it unexpectedly cut its proven reserves estimates by 20 percent in January and is being investigated by regulators including the Securities and Exchange Commission, the Department of Justice and Britain's market regulator, the Financial Services Authority.

Thursday's announcement came as the company reported a 16 percent drop in net income for the first quarter, to $4.43 billion. If a gain for asset sales is subtracted from last year's first-quarter earnings and adjustments are made for the cost of supplies, Shell's net income rose 9 percent this quarter.

The company said it would increase capital expenditures this year by $700 million to search for new oil and gas deposits.

Shell has made some significant changes in recent months, including asking its top two executives and its chief financial officer to leave. But just six weeks ago, as it announced more reserves cuts, Shell executives insisted buybacks were not on the agenda, even though shareholders and analysts wanted them.

Shell's new chairman, Jeroen van der Veer, said in mid-March that buybacks were "priority No. 4," behind dividends, investments and acquisitions.

Van der Veer acknowledged the change in direction in a telephone interview Thursday. "We have always felt buybacks were not our top priority," he said.

But the first-quarter results showed strong cash flow, and oil price forecasts are positive, he said.

"You have to look at the shareholders," he added, and balance their desires against financial management and allocation of capital for business opportunities.

http://www.chron.com/cs/CDA/ssistory.mpl/business/energy/2540754