Jeroen van der Veer, 57, a career-long employee with Royal Dutch/Shell Group, took over the third-largest major last week as president and chairman of the Committee of Managing Directors following the ouster of Sir Philip Watts. Also resigning was Walter van de Vijver, 48, CEO of Shell’s Exploration and Production Business, who was considered at one time to be Watts’ eventual successor.

Both Watts and van de Vijver had been bombarded by investors and financial analysts following the reclassification of 20% of Shell’s proved reserves in January (see NGI, Jan. 12). The reclassification launched a formal inquiry last month by the Securities and Exchange Commission (SEC) (see NGI, Feb. 23).

Amid all of the reshuffling by the company, van der Veer last week urged staff members to focus on their performance to help restore confidence in the London-based company.

“We have a great deal to do to deliver operational excellence in all of our business,” said van der Veer. In an email note to employees, he called Shell’s business strategy sound, but said it would require “rolling up our sleeves and focusing on our performance that we will restore confidence in the group and restore value to our shareholders.”

The encouraging news followed published rumors that Watts may have been warned well before January that Shell had massively overbooked its proved reserves. The Financial Times, based in London, reported that insiders indicated that upper management had information on the fields before the overbooking was announced in January.

Shell is cooperating with SEC’s audit and is conducting one of its own by an internal audit committee of Shell’s non-executive directors. The company’s audit should be completed within a few weeks, according to a spokesman.

Van der Veer, a Dutch national who joined Shell at age 23 with a mechanical engineering degree, has been a managing director of the company since 1997 and president since 2000. He joined the group in 1971 in refinery process design and held several positions in refining and marketing in the Netherlands, Curacao and the United Kingdom. He also was coordinator of Shell’s Sub-Saharan Africa business (1990-92) and a managing director of Shell Nederland (1992-95).

From 1995 to 1997, van der Veer was president and CEO of Shell Chemical Co. in the United States. He also is a member of the supervisory board of De Nederlandsche Bank and an advisory director to Unilever. He has a contract until July 2008, and has given up an early retirement option.

Another long-time Shell employee, Malcolm Brinded, was appointed a director and managing director of the company and will serve as vice chairman of the Committee of Managing Directors. Brinded will step down from the Board of Management of Royal Dutch Petroleum Co., and he offered himself for election by shareholders of the Shell Transport and Trading Co. plc at the forthcoming annual meeting.

Brinded, 50, has been a managing director since July 2002 after first joining the company in 1974. Brinded held various positions in the Netherlands, Brunei, Oman and the United Kingdom, and was general manager of Shell UK Exploration and Production in Aberdeen, Scotland between 1998-2001. He was Shell’s Country Chairman in the United Kingdom 1999-2002, and served as director of Planning, Environment and External Affairs at Shell International Ltd. 2001-02.

Van de Vijver’s duties as CEO will be assumed by Brinded, in addition to Brinded’s current responsibilities for the Gas and Power business.

Rob Routs, currently a member of the board of management of Royal Dutch Petroleum, will assume van der Veer’s responsibility for the Chemicals business in addition to his current responsibilities for the Oil Products business. Judith Boynton will continue as a managing director and as CFO. Shell also announced that Lord Oxburgh has been appointed interim non-executive chairman of the Shell Transport and Trading Co.

Peter Nicol, an ABN Amro analyst based in London, said Shell’s upstream team had been made a “scapegoat” for the reserves reclassification. He added that “van der Veer faces a lot of competing agendas.” He said Shell had “been in decline for 10 or 15 years,” and van der Veer is a “safe pair of hands” who could “heal the company and move it forward.”

Also in a research note, Merrill Lynch analyst Mark Ionnati said, “Senior management appears to have succumbed to significant pressure from shareholders.” The news is a “positive for the shares on a near-term trading basis, in our view. However, the merits of a more fundamentally based rally on an improving performance outlook versus industry peers remains to be seen.”

Ionnati added, “Importantly, we understand that … events were not inspired by any new news on the official investigation by the SEC on Shell’s overbooking of reserves.”

In another research note, J.J. Traynor of Deutsche Bank wrote that Shell’s “audit committee reviews risk management and accounts for the group, and may well have uncovered malpractice here, leading to their recommendation for management changes.” However, he also gave Watts some credit for bringing the company through some difficult times.

“Philip Watts was a controversial figure in the markets,” Traynor wrote. “But what he has left behind is a number of new [oil and natural gas] replacement provinces, which represent a fundamentally stronger portfolio than has existed in recent years.”

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