THE LONDON TIMES: Moody's threatens Shell with downgrade: “…after the oil giant last week axed its oil reserves by a further 10 per cent”: “The comments come four days after Standard & Poor’s cut Shell’s debt rating to AA from AA-plus, citing the oil company’s latest reserves downgrade.” (ShellNews.net) Posted 9 Feb 05

By Mike Verdin, Times Online

Moody’s has warned that it is close to following Standard & Poor’s, the rival rating agency, in downgrading its recommendation on Shell debt.

Moody’s said that while it was restating a rating of AA1 on Shell debt, with a negative outlook, there was little headroom for any further mishaps after the oil giant last week axed its oil reserves by a further 10 per cent.

The 1.4 billion barrel cut trimmed to 9.3 year, from 10.2 years, the life of Shell’s stocks, significantly shorter than the industry average.

Yet Shell replaced in finds only between 15 and 25 per cent of the oil it extracted, once the impact of asset disposals was accounted for, a figure which Moody’s blamed in part on "poor exploration results". BP today confirmed that it had discovered more oil last year than it extracted.

Moody’s added: "While the rating agency does not expect near-term answers to [Shell’s] longer term reserve and production issues, there is little room at its AA1 rating level for further material negative developments or slow erosion in petroleum reserve and production metrics."

However, the agency noted Shell’s strength in the liquefied natural gas market and said that a large part of the reserves downgraded over the past 13 months had a "reasonable likelihood" of being reclassified as proven.

The comments come four days after Standard & Poor’s cut Shell’s debt rating to AA from AA-plus, citing the oil company’s latest reserves downgrade.

Shell shares stood 1.75p lower at 482.75p in afternoon trade.