Royal Dutch Shell Evaluation of Oil Reserves — страница 4

expanded into transport and refinery businesses. In the sixties, as world oil output began to rise dramatically Shell was one of the leading oil companies supplying about one seventh of the world demand for oil In the 70s, just before the recession started, Shell made major oil and gas discoveries in the North Sea, just off the coast of Scotland. This discovery could not come any more on time, since at that time oil prices surged and more and more people turned to natural gas, which accounted to 15% of Europe’s energy demand at that time. With the lower oil prices in 90s, Shell concentrated on its core businesses - mainly oil, gas and chemicals. The group also started to look at sustainable energy solution and renewable energy sources (Howarth, 1997). Although, Shell for

long have been regarded as the single company, in fact throughout its history it remained to be a partnership and consisted until recently of two separate companies, had two board of directors, two CEOs as well as two separate listings on Amsterdam, London, New York and other stock exchanges. The corporate structure of RDS can be illustrated by Figure 1.3: (Source: RDS: F-20 Form, 2003) As was mentioned above, the complex structure of ownership that is represented in the figure existed in 2003 due to historical reasons. This structure, by no doubts did not add any clarity for the investors and in fact contributed to the ambiguous internal reporting system that existed in Shell until recently and that allowed group’s management to boost the numbers of proved reserves without

proper control. In order to build a more reliable corporate structure, RDS group took several steps, the latest of which was the unification of parental companies into single Royal Dutch Shell PLC. 1.2 Unification of Royal Dutch and Shell As it was mentioned the ambiguous corporate structure was one of the causes for the mis-presentation of oil reserves resulted in the later scandal. Therefore, already in the Royal Dutch Shell: Evaluation of Oil Reserve beginning of 2004 the boards of two parental companies announced that they are planning to revive the long planed unification of Royal Dutch Shell into one company. This was made in order to boost its corporate image and to regain investor’s confidence in RDS. On 28 October 2004, the Royal Dutch Boards and the Shell

Transport Board announced that they had unanimously agreed, in principle, to propose to their shareholders the unification of Royal Dutch and Shell Transport under a single parent company, Royal Dutch Shell. And than on 19 May 2005 the companies announced the final proposal for the unification. Among the reasons for unification as announced by companies’ management were increased clarity and simplicity of governance, management efficiency, increased accountability and flexibility in issuing equity and debt. Management proposed clearer and simpler governance structure. This will include one-tier directors board and a simplified senior management structure with a single non-executive Chairman, a single Chief Executive and clear lines of authority. Increased efficiency of

decision-making and management processes generally, including through the elimination of duplication and the centralization of functions. Clear lines of authority and accountability, with the Executive Committee reporting through the Chief Executive to a single board with a single non-executive Chairman was expected to improve the accountability of the board and management to all shareholders. A single publicly traded entity is expected to facilitate equity and debt issuances, including on an SEC-registered basis (RDS, 2005). After the unification, the former parental companies are to become subsidiaries. New company will be incorporated in UK and will have a head office in the Netherlands for tax purposes. As it concerns the shareholders, the shares of Royal Dutch and Shell will

be exchanged in proportions as shown in Table 1.3: Royal Dutch Share traded in Amsterdam 2 “A” Shares of RDS Royal Dutch Share traded in New York 1 “A” ADR of RDS Shell Ordinary Share 0.287333066 “B” Shares of RDS Shell ADR 0.861999198 “B” ADRs of RDS (Source: RDS, 2005) Although, there still will be two types of shares, the trading will become much clearer, since instead of 2 billion shares of Royal Dutch with a nominal value of 0.56 EUR and 9.6 billion shares of Shell with nominal value of 0.25GBP, both “A” and “B” will have nominal value of 0.07 EUR. Both kinds of shares will be traded on Euronext in Roman Kremer Amsterdam and in London. American depository receipts (ADRs) will include two shares and will