- The Washington Times - Wednesday, March 3, 2004

LONDON (AP) — Philip Watts, the beleaguered chairman of Royal Dutch/Shell Group of Cos., has resigned in the wake of a shareholders’ revolt over the company’s overstatement of its oil and gas reserves.

In a surprise announcement, Shell spokeswoman Bianca Ruakere said yesterday that Mr. Watts’ decision to leave was reached “by mutual consent.” She refused to comment on whether his departure was connected to Shell’s recent revelation that it has fewer reserves than it had been reporting.

Mr. Watts will be replaced by Jeroen van der Veer, the president of Royal Dutch Petroleum, Shell said in a statement.

The head of Shell’s exploration and production business, Walter van de Vijver, also has stepped down, underscoring the importance of the reserves issue. Shell said he has been replaced by Malcolm Brinded, the new managing director of the Shell Transport and Trading Co. PLC — the British component of the Shell group.

Some shareholders had called for Mr. Watts to resign after Shell announced on Jan. 9 that it was reclassifying 20 percent of its proved reserves to less certain, unproved categories.

That announcement prompt-ed the U.S. Securities and Exchange Commission (SEC) to begin a formal probe into the overstatement.

An SEC official in Washington said last month that a formal investigation means regulators have reason to think that laws might have been violated but added that the SEC has not reached any conclusions.

Shell spokesman Andy Corrigan said in February that he thought the SEC’s decision to hold a formal inquiry was “fairly standard” and emphasized that it was not a criminal investigation.

Shell would cooperate fully with the SEC, he said.

Mr. Watts had antagonized shareholders for what they saw as his maladroit handling of the reserves issue. Some analysts saw him as quick to highlight positive developments, such as Shell’s massive project for producing liquefied natural gas on Russia’s Sakhalin Island, but slow and uncommunicative about less favorable news.

Many observers thought Mr. Watts, 58, had weathered the initial onslaught of investor anger and thought he would continue in his job until his retirement, said Keith Morris, an analyst at BNP Paribas.

However, investors kept up the pressure, and Mr. Watts finally appeared to give in to their demands that he step down.

“The reserves thing really was the nail in the coffin,” said Jason Kenney of ING Financial Markets in Edinburgh, Scotland.

Mr. Kenney said it was too early to judge whether Shell’s operations would improve under its new chairman, Mr. van der Veer.

“The only optimism is that now there’s an opportunity to chop out all the deadwood and get a fresh mind-set,” he said.

Shares in Shell Transport & Trading Co. PLC bounced 1.9 percent higher to $7.01 on the London Stock Exchange.

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