Shell Announces Settlement With Investors Over Reserve Restatement

by Ulrika Lomas, for LawAndTax-News.com, Brussels

12 April 2007

Oil giant Royal Dutch Shell plc on Wednesday announced a proposed settlement of claims outside the US related to the 2004 restatement of reserves.

At an analyst briefing in January 2004, Shell announced that it had conducted an extensive review of its world-wide reserve base, as a result of which it would be cutting its estimate by 3.9 billion barrels, or 20%. Given the size of the cuts announced at that time, analysts suggested that the overstatement was unlikely to have been accidental.

The oil firm later that year agreed to pay GBP17 million to the UK's Financial Services Authority, and $120 million to the US Securities and Exchange Commission, in addition to spending $5 million on the development and implementation of a "comprehensive internal compliance program".

On Wednesday, without admitting any wrongdoing, Shell agreed to pay $352.6 million, plus administrative costs, to non-US investors covered by the settlement.

The parties to the settlement agreement include certain institutional investors including ABP, PGGM, the Vereniging van Effectenbezitters (VEB) an organization representing individual shareholders in the Netherlands and similar organisations, and the Shell Reserves Compensation Foundation, a settlement foundation representing all shareholders covered by the settlement agreement.

The agreement depends on the Amsterdam Court of Appeals declaring the settlement binding for all of the shareholders that it covers, and is subject to agreed opt-out provisions.

Shell further announced that it intends to offer the same proportional settlement to investors in the US, provided the US court overseeing the case approves.

According to media reports yesterday, Shell's Legal Director, Beat Hess told a news conference that the US portion of the settlement will be in the region of $80 million.

Finally, Shell agreed as part of this settlement to request that the United States Securities and Exchange Commission distribute to shareholders the $120 million paid to it by Shell in 2004.

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