Royal Dutch/Shell proposes single company

Oil major Royal Dutch/Shell Group said it was merging its Dutch and British holding companies as it seeks to address failings that led to a shock downgrade in proven oil reserves.

The creation of a single board and chief executive follows pressure from some investors who criticised the old dual-headed structure for lacking transparency and accountability and contributing to Shell's reserves overbooking scandal.

The group revealed in January that it had overbooked its oil and gas reserves by 20%, a disclosure which pummelled its shares and led to fines from regulators and senior sackings.

Investors welcomed the announcement of the new structure, which was accompanied by a 70% surge in third-quarter profits due to soaring oil prices. However, some were also concerned by news that the world's third-biggest oil group was reviewing a further 900 million barrels of oil and gas reserves following an extensive audit.

Shell said the unified company, Royal Dutch Shell, would be incorporated in the UK and have its headquarters in the Netherlands. It will have its primary listing in London, with a secondary listing in Amsterdam and ADRs trading in New York.

Former Chairman of the twin-headed group Jeroen van der Veer will be chief executive of the company while Aad Jacobs, former chairman of the supervisory board of Royal Dutch, will be non-executive chairman. Shell is currently 60% owned by the Royal Dutch Petroleum Company and 40% by the Shell Transport and Trading Company.

At present, executives of the operating group are drawn from the boards of each holding company. Some investors blamed a system whereby executives drawn from one holding company were not accountable to the board of the other for the failure to communicate the reserves problem earlier.

Shell said the reserves debacle had created the impetus for change.

Some analysts believe the old structure also prevented Shell from making bold strategic decisions, such as the giant takeover deals executed by its top rivals BP and Exxon Mobil in recent years.

Shell also said today third-quarter net profit on a current cost of supply (CCS) basis was $4.407 billion, beating an average forecast of $4.23 billion in a Reuters poll of 15 analysts and up from $2.593 billion in the same period a year earlier.