Royal Dutch/Shell Group said yesterday that it would pay a total of about $151 million in fines to authorities in the United States and Britain for overstating its oil and gas reserves.
Shell, which also yesterday reported that second-quarter profit rose 54 percent, to $4 billion, has been struggling to cope with the fallout from the overstatement since it was disclosed by the company in January.
Since then, the Shell chairman, Philip Watts, has stepped down, as has the chief executive of exploration and production, Walter van de Vijver. Regulators and prosecutors in the United States and Europe opened investigations and the company's shares -- traded on exchanges around the world -- have fallen.
Shell, the world's third-largest publicly traded oil company, said it agreed to pay $120 million to settle an investigation by the U.S. Securities and Exchange Commission and a fine of about $31 million to resolve a probe by Britain's Financial Services Authority. That is the largest penalty for market abuse that the authority has levied, said FSA spokesman Rob McIvor.
"I see this as a hopeful step in dealing with the reserves issue," Shell Chairman Jeroen van der Veer said at a news conference in London.
U.S. and British regulators found that Shell violated securities laws in both countries but the company plans to pay the fines without admitting or denying their findings or conclusions, according to the company's statement. Its settlement with the SEC includes an agreement to spend additional $5 million to develop a "comprehensive internal compliance program," the company said.
Shell, based in London and The Hague, has cut its proven reserve estimates by a total of 4.47 billion barrels, or 23 percent. Reserves are a key asset of oil and gas companies.
A Shell spokesman said the company has taken a number of steps to prevent false reports of reserves from occurring in the future, including creating new guidelines and oversight within the company.
According to Shell, the company remains under investigation by European regulators and the U.S. attorney in Manhattan, which often handles securities law cases against large publicly traded companies. A spokeswoman for the U.S. attorney's office declined to comment.
Fadel Gheit, an analyst with Oppenheimer & Co. in New York, said that markets remain uncertain about ongoing investigations of the company. "Once the dust settles, the stock is going to appreciate," Gheit said. But he added, "People do not know what else is there."
Shell said that the agreements with both the SEC and Financial Services Authority were "in principle." The statement said the agreement with SEC staff is subject to final approval by the SEC.
John Heine, a spokesman for the SEC, would not comment on Shell, saying that the staff was not allowed to confirm or deny the existence of an investigation.
McIvor, the spokesman for the Financial Services Authority, confirmed the British fine and said details of the company's violations would be released soon. He said the focus of the investigation was on rules governing the timely disclosure of information.
Bill Lerach, a lawyer who represents two large institutional shareholders in the company, said the SEC should hold accountable past and present Shell executives responsible for overstating oil and gas reserves. Lerach has filed a lawsuit in state court in New Jersey seeking to force company executives to pay for the cost of the investigations and fines.
"It was their unlawful conduct that got the corporation implicated in this situation," Lerach said.
In addition to Shell, several other major oil companies have been reporting higher income as global oil prices rise. Exxon Mobil Corp. of Irving, Tex., the world's second-largest publicly traded oil company, yesterday reported that it earned $5.79 billion in the second quarter, up 39 percent from $4.17 billion in the same quarter a year earlier.