In forty-eight hours, Shell's chairman Sir Philip Watts will deliver the most important presentation of his professional life. The reaction among the investment community could determine whether he survives or perishes. In short, will it be his nemesis or will he live to fight another day?
The company's 2003 results, due to be announced on Thursday, are, of course, of only limited interest in themselves. Rather, the eyes of the City and America's class-action lawyers will be on what Shell and its embattled chairman have to say about the company's reserves - the pool of recoverable oil and gas which represents the future value of the company.
Just under a month ago, Shell dropped a bombshell by cutting its proven reserves by 20 per cent or 3.9 billion barrels. The market's reaction was swift and brutal. Shell's shares fell 8 per cent, wiping £8bn from the value of the Anglo-Dutch company, and they have continued to slide since.
The fiasco was compounded by the fact that, on the day, Sir Philip was nowhere to be found, preferring to leave it to his director of investor relations to break the tumultuous news.
On Thursday, Sir Philip has the chance either to redeem himself or confirm the view of his critics that he really ought not to be running the world's second-biggest oil company.
The reserves shock has led investors to question not only Shell's record on exploration but its entire corporate being. Everything is now under the microscope, from its board structure and investor relations to its production record and financial ratios. As one leading shareholder commented yesterday: "Shell has some of the best assets of any company in the oil industry but they are not necessarily in the best hands. Had they been under BP's control, it would have done better.
"Shell has underperformed its peer group, it yields more than other oil companies and trades at a bigger discount. That tells you what the market thinks of its management. There is a credibility gap which the management has to close."
Sir Philip has had an uncomfortable relationship with the City from the moment he was anointed chairman in June 2001 - a surprise in itself because, under the principle of Buggins' turn, the job should have gone to a Dutchman.
Within months, he was forced to tear up Shell's production growth targets, having initially told investors he would do no such thing. He then promised that Shell would be cautious with shareholders' funds, only to embark on a very expensive shopping spree paying top dollar for assets here, there and everywhere, including Enterprise Oil. Shell also disposed of some acreage for peanuts, only to discover too late that it contained rather more black gold than it had realised (see story below).
So Shell and Sir Philip arrived at last month's devastating announcement with what might in the City be called form. It is still not clear exactly what prompted the reserves downgrade - regulatory intervention or a belated recognition on the company's part that the standards it was working to were insufficient - and Shell has failed to cast much light on the subject.
A vociferous - and invariably anonymous - group of shareholders now insists that nothing less than Sir Philip's scalp will do. But the wider consensus seems to be that Shell's problems run deeper than just one man. "We are not calling for his head but there is certainly an issue about needing to reform the structure of Shell," said one institutional investor. "Yes, Watts has taken the rap and he hasn't handled it particularly well. But if you took him out of the picture would there still be problems? The answer is probably yes.
"One of the key issues is that there are two holding companies and Watts sits in the middle as both chairman and chief executive. That creates a serious concern about how the company is controlled. One also wonders about the effectiveness of the non-executives. Normally if you are dissatisfied with the performance of the chief executive you can go to the chairman or the independent directors but in Shell's case that avenue is not really open to investors."
Another shareholder said: "There are issues with this company that go far beyond the results on Thursday. Even if Sir Philip is blamed for the whole reserves fiasco, something as major as this could not be down to just one man."
One of the recurring complaints among investors is not just about its performance but the way in which that performance is communicated to the City. In a small nod to the investors in this direction, Shell has agreed to bring forward Thursday's announcement from 10.00am to 7.30am "in line with market practice".
It has not stopped the company's general standard of investor relations from being lambasted. "The bigger issue for Shell is one of presentation. It needs to keep a firmer grip on the agenda," said one investor. "If you compare Shell's investor relations to those of Exxon or BP, who are best of the breed in the sector, then there is some deficiency."
To take just one example, Shell disclosed that about half of the over-booked reserves involved fields in Australia and Nigeria. But beyond that it gave no further clue. Only recently has it fully emerged that Shell was receiving financial incentives from the Nigerian Government to book reserves between 1990 and 1999. One large shareholder said it had certainly not been aware this was the practice at the time the reserves were being booked.
Sir Philip will be grilled about this, among other things, on Thursday and in the days which follow as he undertakes the usual road show. How much solace he can give remains to be seen. As one shareholder said plaintively yesterday: "Shell should not be Anglo-Dutch, but you can't go back to 1907 and rewrite history."Reuse content