Forbes: Royal Dutch/Shell Hurt By 'Credibility Issues': “…Royal Dutch/Shell Group announced that total capital investment for the Sakhalin II phase 2 project is now estimated at $20 billion, about double the figure given when the project was sanctioned in 2003.”: “Bear Stearns said, "The announcement raises additional concerns about the transparency and reliability of upstream projects and financial returns on future growth. In addition, we believe upside from current levels is limited by lack of oil and gas production growth, and management credibility issues.": Posted Sunday 17 July 2005

Bear Stearns maintained "underperform" ratings on Royal Dutch and Shell Transport & Trading. Bear Stearns' projected price range for Royal Dutch shares is $45 to $65 and sees a range of $42 to $58 for Shell shares.

The research firm noted that Royal Dutch/Shell Group announced that total capital investment for the Sakhalin II phase 2 project is now estimated at $20 billion, about double the figure given when the project was sanctioned in 2003. Higher costs were caused by rising raw material prices, service costs, foreign exchange effects, challenges on environmental issues, as well as miscalculations during the budgeting process.

Bear Stearns said, "However, cost pressures have been mounting in the industry for the last two years. We are surprised this was not recognized sooner." The firm also noted that Royal Dutch/Shell Group management is "reviewing other large projects to determine whether additional revisions in spending estimates are appropriate."

Bear Stearns said, "The announcement raises additional concerns about the transparency and reliability of upstream projects and financial returns on future growth. In addition, we believe upside from current levels is limited by lack of oil and gas production growth, and management credibility issues."

http://www.forbes.com/business/commerce/2005/07/15/royal-dutch-shell-0715markets09.html?partner=rss

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