Oil major Royal Dutch/Shell Group plans to move to a unified corporate structure, ditching a century-old dual-ownership system blamed for contributing to a reserves overbooking scandal.
Shell shares surged on Thursday after the world's third-largest oil group announced the plan, which it said would improve accountability and efficiency.
"We shall move from the complex governance and corporate structure that people found difficult to understand," said Royal Dutch Chairman Aad Jacobs. "We have been listening hard to what the world had to say."
At 1344 GMT, Shell shares were up 3 percent at 436-1/2 pence in London and up 1.7 percent at 42.99 euros in Amsterdam.
The decision to formally merge the group's Dutch and British parent companies under a single board and chief executive follows pressure from investors who criticised the old structure for hindering transparency and lacking accountability.
Such criticism increased after Shell revealed in January that it had overbooked its oil and gas reserves by 20 percent, a disclosure which pummelled its shares and led to fines from regulators and senior sackings.
Analysts welcomed the announcement of the new structure, which was accompanied by a 70-percent surge in third-quarter profits due to soaring oil prices.
"This new management structure should lead to better accountability for shareholders, and should be the backdrop for more streamlined internal systems, and better performance," said J.J. Traynor, oil analyst at Deutsche Bank, who upgraded Shell to "buy" from "hold" after the announcement.
Traders said the particularly large jump in the company's UK-listed stock was partly because Shell's weighting in key indices would grow to reflect the full size of the company, forcing index-tracking funds to increase their holdings.
Shell said it was reviewing 900 million barrels of its 14.35 billion barrels of proved oil and gas reserves.
"We would have called the shares sharply lower this morning on the reserves news had it not been for the announcement of unification of the two holding companies into a single entity," Merrilll Lynch said in a research note.
The bank downgraded Shell to "neutral" from "buy".
Shell said the unified company, Royal Dutch Shell Plc, would have its primary listing in London but its headquarters in The Hague. It will have a secondary listing in Amsterdam and American Depository Receipts (ADRs) trading in New York.
Former chairman of the twin-headed group Jeroen van der Veer will be chief executive of the company while fellow Dutchman Jacobs, former chairman of the supervisory board of Royal Dutch, will be non-executive chairman.
Shell is currently 60 percent owned by the Royal Dutch Petroleum Company and 40 percent by the Shell Transport and Trading Company. Executives of the operating group are drawn from the boards of each holding company.
Some investors blamed a system whereby executives from one holding company were not accountable to the board of the other for the failure to communicate the reserves issue sooner.
The new company will pay quarterly dividends, with a system of "A" shares for Royal Dutch shareholders and identical "B" shares for Shell Transport and Trading stockholders avoiding any increase in tax burden.
Comments
Comments are closed.