A June 2000 internal presentation by Royal Dutch/Shell Group planners apparently warned about overly optimistic proven and probable oil and gas reserves, according to a report in Thursday’s Wall Street Journal.
The Journal, whose reporters said they had reviewed some of the material, cited the presentation as part of a group of company documents that have been turned over to Securities and Exchange Commission (SEC) investigators. The SEC launched a formal probe of Shell’s reserve revisions in February, and has since launched a formal investigation of El Paso Corp.’s reserve revisions as well (see Daily GPI, Feb. 20; March 29).
The title page of the presentation is said to refer to Shell’s exploration and production “executive committee,” but the Journal said it was not clear who drafted the presentation. It apparently “paints a picture of a deeply troubled exploration-and-production unit,” during a time when now-ousted Chairman Sir Philip Watts and other executives “were publicly painting a rosy picture of the operation’s recent performance and potential.” Watts had led the upstream unit from 1997 to 2001.
“In particular, the presentation warned Shell might be unable to meet its closely followed growth targets for oil and gas production,” the Journal wrote. “But it wasn’t until September 2001, shortly after Sir Philip took Shell’s top job and [Walter] van de Vijver succeeded him as head of Shell’s upstream arm, that the company told investors and analysts it was significantly reducing those targets.”
Under the heading “The Bad News,” Shell analysts were said to warn about running “the risk of initiating an over-promise, under-delivery cycle.” In a page titled “Exploration: Overstated Delivery?” the company’s analysts “wrote that internal estimates for initial oil production at a number of projects are ‘very optimistic and unrelated to historical performances.’ The presentation went on to cite a number of new projects with ‘possibly overstated value promises.'”
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