Shell Restates and Reshuffles -- Once Again

At long last, it appears that the Shell game may soon be over.

For the third time this year, Royal Dutch/Shell SC has revised both its proved reserves and its senior management team. After a detailed external review, the world's third-largest supermajor on Monday announced that it has -- once again -- reduced the amount of oil equivalent it expects to commercially extract from the ground. In addition, the company has replaced its CFO with a 22-year Shell veteran who most recently served as the company's controller.

By now, Shell has slashed its proved reserves -- a key measure of the company's health -- by a total of 4.35 billion barrels of oil equivalent, or 22%. It has also announced plans to restate its 2002 annual report, further reduce 2003 proved reserves by 500 million barrels and lower its reserve replacement ratio to just 60%. Meanwhile, it has now trimmed four leaders -- most recently CFO Judy Boynton -- from its senior management team.

"Shell has put in place a new regime for reserves accounting and compliance, monitored by external consultants," said Aad Jacobs and Lord Oxburgh, co-chairmen of Royal Dutch/Shell, on Monday. "We believe that, following the actions we have announced, Shell will be able to re-engage with its stakeholders and re-establish confidence in our behavior as a business and employer."

Shares of both Royal Dutch and Shell -- hammered on the first revision in January -- barely reacted to the latest news. Royal Dutch slipped 26 cents to $49.74, while Shell dropped 25 cents to $42.63.

The reserve adjustments, while significant, will have little impact on the company's financial results. Following the planned restatements, Shell's earnings will be reduced by $100 million annually -- or less than 1% -- for each of the past four years.