Royal Dutch/Shell Group said a change in inventory accounting principles increased net income in the first quarter by $226 million to $4.7 billion. It had previously reported net income of $4.43 billion. Shell also updated its quarterly production figures, and said it was publishing the information to give investors “further clarity.” The second quarter results are scheduled to be announced July 29.

Shell also has appointed Citigroup and N.M Rothschild as financial advisers to the board’s Steering Committee, which is reviewing the company’s structure and governance. Shell said the review would include a “possible simplification of the management structures of the boards and the Group; improvements to decision-making processes and accountability; and enhancing effective leadership for the Group as a whole.”

Membership of the Steering Committee is drawn from the boards of the two parent companies, the Royal Dutch Petroleum Co. and The Shell Transport and Trading Co. plc, and it is assisted by a working group of senior Shell executives and external legal advisers.

“The selection of financial advisers enables the Steering Committee to deepen its analysis of key options,” Shell said in a statement. It plans to publish results of the review in November 2004 so it can present resolutions to shareholders by the time of the next annual general meeting in April 2005.

In related news, Standard & Poor’s Ratings Services (S&P) has removed its long-term ratings on the company and its subsidiaries, where they had been placed in January following the reserves revision announcement.

“We view Shell’s key current weaknesses — exploration performance along with related governance and internal control issues; increasing upstream investment spending; and shareholder litigation risks — as counterbalanced at the ‘AA+’ level by the expectation that Shell will maintain its strengths in other areas,” said analyst Emmanuel Dubois-Pelerin. “These include the group’s very conservative financial profile and policies; very strong and (outside the U.S.) consistently very profitable global downstream operations; and broad portfolio of upstream assets with competitive, though increasing, development and production costs.”

S&P now “expects that Shell’s proved-reserve bookings will significantly exceed production during 2004-2005 (including the rebooking of some of the volumes recategorized as non-proved in early 2004), as several major projects — already sanctioned Kashagan in Kazakhstan and Ormen Lange in Norway, and potentially Gorgon in Australia — come to fruition.”

S&P “views positively the actions Shell has already taken in order to address the governance weaknesses identified…but remains concerned by, notably, a relative lack of transparency regarding the dual-ownership review process and the scope of reforms to be implemented. Given the extent of the identified weaknesses, the needed improvements in Shell’s internal controls, oversight process, and management culture will take time to be fully implemented and will require ongoing monitoring.

“The ratings on Shell could be lowered, should the group fail to effectively correct its weaknesses in corporate governance and internal controls and to raise proved-reserve bookings significantly above full replacement during the next two years,” added Dubois-Pelerin.

©Copyright 2004 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.