Shell Oil Discloses Overstated Reserves
Shell Oil Discloses Overstated Reserves On January 9, 2004 Royal Dutch Shell, one of the largest publicly traded oil concerns, disclosed that it erroneously overstated its proven oil and natural gas reserves by 20 percent, the equivalent of 3.9 billion barrels of oil. The oil portion of the revision represents $67.5 billion (assuming moderate price of $25 per barrel) in potential future revenue (Shell 1). Sir Philip Watt, Shell CEO since 2001, was not available to the press or shareholders to defend the announcement. Before his appointment as CEO, Watt previously led the exploration division of Shell for the period of the overbooked reserves. ... The supply, or reserves, of oil are the heart of oil and gas companies. The reserves represent what the company can take from the ground in the future. Companies must source reserves equivalent to what they produce each year to maintain value.