TheStarOnline: Shell fined US$120 million "Rebuilding credibility'' and "regaining trust'' are now the company's key priorities, it said in its annual report.” (ShellNews.net)

29 July 04

LONDON (AP) - The Royal Dutch/Shell Group of Cos. said Thursday it has agreed to pay a penalty of US$120 million to the U.S. authorities over the company's misstatement of its oil and gas reserves.

Shell announced the fine as it reported a 54 percent increase in quarterly net income that reflected high global oil prices. Net income for the three months to June 30 was US$4 billion, compared with US$2.6 billion in the same period a year ago.

Shell said it had agreed in principle to pay a US$120 million civil penalty to resolve the pending inquiry by the U.S. Securities and Exchange Commission into the reserves downgrading.

As part of the agreement, "Shell will consent, without admitting or denying the SEC's findings or conclusions, to an administrative order finding that Shell violated, and requiring Shell to cease and desist from future violations of, the anti-fraud, reporting, record-keeping and internal control provisions of the U.S. Federal securities laws and related SEC rules.''

The company said it had also agreed to pay a 17 million pound (US$31.1 million) fine to resolve an inquiry by Britain's Financial Services Authority into the issue.

The Anglo-Dutch company stunned shareholders in January when it downgraded 20 percent, or 3.9 billion barrels, of its reserves from "proven'' to less certain categories.

Three other downgrades followed, for a total reduction in reserves of 23 percent, or 4.47 billion barrels, from previously reported levels.

Reserves are an oil company's most valuable asset, and any reduction in their estimated size is a serious concern for investors.

In the confusion that followed, Shell dismissed several top executives and delayed by two months the release of its annual report.

"Rebuilding credibility'' and "regaining trust'' are now the company's key priorities, it said in its annual report.

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