Analysis And Questions On Royal Dutch Shell Oil Accounting Essay


Royal Dutch Shell Oil Company article is followed by three separate questions which are analysed in this study as report style. The analysis that are evaluated via Shell's multinational marketing strategy and performance within the particular period of time between 1999-2003, and this is followed by the case study analysis which contains the researcher comments of the issues surrounding "misstatement of reserves" and indicates how these issues impacted the international public image of the company. A discussion of shell's marketing strategies, which the company intends to implement and the effectiveness of those actions. In addition to evaluating the analysis, this study provides some potential strategies that can be applied to solve or give a better understanding for the questions in this case.

Royal Dutch Shell (Shell) is operating in such fields which are exploration and production of oil and gas, electricity and marketing of natural gas and transportation and shipping the oil products and chemicals. The company is also integrated with renewable sources of energy as well as hydrogen and wind and solar. The company has a comprehensive operation which is implementing around the world in more than 100 countries. Headquarter of the company is in the Netherlands, The Hague and employs approximately 102,000 people. The company's record of revenues $458,361 million in the year ended financially, December 2008 (FY2008), and an increase of 28.8% over the year ended financially, December 2007 (FY2007). The company's operating profit was an increase of 1.1% over 2007 which is $50,989 million in the 2008. The company had a net profit of $26,277 million in the 2008, a decline of 16.1% comparing to 2007.

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The company sold its business of European expandable polystyrene and solid polystyrene to NOVA Chemicals Corporation in 2000 which let the company to take new investment (Cousins, 2001).Shell Hydrogen associated in Germany with Fuel Cell Engines and they successfully developed a prototype gasoline reformer and tested it to produce hydrogen for fuel cell activations of cars in the same year. Furthermore the shell's strategy aimed acquiring a 25% interest in the Inam licence open sea by Azerbaijan which reinforced its position gas and Caspian oil sectors. In 2000 Shell also increased its stockholding to 55% at Sakhalin Energy in a successfully made asset exchange deal. Moreover Shell acquired Fletcher Challenge Energy in New Zealand and also acquired its assets in Brunei in 2000. Additionally in 2000, a 50:50 manufacturing joint venture of Basell and BASF was built in Singapore. The substantial strategy of the production has a plant of Basell in Singapore that is the biggest facility of SMPO (styrene monomer and propylene oxide) in Asia which had a production capacity per year 550,000 tons of SM and 250,000 tonnes per year of PO. The company had further strategies in 2000 via wind turbines (two megawatt capacity each) that are planned to develop with consortium members off the coast of Blyth, Northumberland UK. A joint-venture in participation started to actuate a heat and a power station biomass-filled of fuel and combined in Sweden, by same year. Later in 2000, Shell, in partnership with the Commerce One, a supplier of the global businesses to the business solutions of E-trade, plans announced to develop a market of Internet for the supply in oil, the gas, and the industry of chemicals. By same year, the company deprived its shares in NOLCHEM in Nigeria, which was a company downward of sale functioning in the whole of Nigeria. In 2000, Shell sold its solid polystyrene and extensible polystyrene businesses with the chemicals of NOVA in Europe. In the same year, the company's production of gas and oil began by Breutus TLP (tension leg platform) which is owned completely by Shell in Green Canyon Block 158 in open sea of the Gulf of Mexico. Moreover in 2000, the company was awarded with two main gas fired power projects in the Power Plant station of Afam close to left Harcourt. The company was awarded with two of three key ventures in Saudi Arabia as an element of the investment plan due to values chain of Saudi Arabia gas, comprising exploration and the production, the production of electricity, desalination, and the projects of chemicals. Shell's successfully made strategies brought the company acquiring more businesses. The announcement was made by Shell according to the acquisition of Enterprise Oil which cost $5 billion. In the Us, the Pennzoil-Quaker State Company acquired by the group and Texaco's attention in the Equilon and Motiva joint ventures in 2002. The company moved with 100% of a joint-venture in participation with RWE-DEA, by same year in Germany. More in 2002, the company carried out the construction of the petrochemical products of $4.3 billion Nanhai complexes in southernmost China; and carried out news unit of olefin and alcohols to the factory of Geismar in Louisiana. Shell utilized its well thought strategies as the company increased its hearth on alternative sources of energy in 2003. With General Motors it entered an association to make vehicles of hydrogen fuel cells. The company kept adding values to its business by taking the good actions in their strategy and taking the good strategies ( By same year, the group sold its interest (14.8%) in Ruhrgas, an important German distributor of gas, to E.ON for approximately $1.7 billion; and also acquired 110 networks with the detail in Hungary and Czech République from group of TotalFinaElf. Furthermore in 2003 the company left with the first Shell marked station hydrogen in Iceland; and via its joint-venture in Japanese participation, open the first liquid hydrogen station in Tokyo. The company also went into the European wind power market by acquiring a share of 40% of the park of wind of Muela of in Spain in 2003.

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In the table 1, Shell's overview shows that the company had increased its Net proceeds every year from 1999 to 2002 except the drop in 2001. The Gross profit shows the same graphic as well. But in operating profit we see that the company was successful on their new strategy and implementation. The net income does not seem to be very sufficient; the company must have had new strategies against the taxation policies with the government in 2002. The Net Income in 2002 is lower than the previous years which do not make sense for the stakeholders to prove them the investments of the company bring the expected revenues. As a general view of the company's Total Assets had increased every year except year 2001 but at the end of 2002 brings a good profile for Shell graphic.

One of UK's largest and the most respected company ruined its reputation which had been accumulated above one century. Shell admitted the first time that it had exaggerated oil reservations in January 2004. In a following report of 463 pages released in April 2004, the higher directors of Shell were pled on several occasions to have lied to the shareholders about the value of the gas and oil reservations of the group. The chairman who is JEROEN van der Veer was designated by the Shell's CMD (committee of managing directors), put crucial problems in the agenda reporting Shell's gas and oil reserves as early as 2002. The chief of exploration who is Walter van de Vijver indicated his concern specific to the CMD that not less than 2.3 billion gas and oil barrels could be more entirely aligned with dryness reigns in February 2004 (, 21 April 2004). The Shell was left along with just 14.5 billion barrels which is 10 years a reserve life time and is very low between the oil majors. The balance and the duration of disappointment by Sir Philip Watts, the former President and Walter van de Vijver combined with news another of cut of 500 million barrels of shown reservations, encouraged Standard & Poor's, the agency of estimate, to strip Shell of its reputation of solvency of triple A, lowering it to the AA plus.

Maintaining all its reputation for the wisdom of corporation was mined above a few months by the publicity of bursting surrounding its descent of its oil reservations, and finally ruined by the evidence of an external report published. The E-mails of incrimination indicate the combat bitter body-with-body between executive as signalling, and show how low they trusts each other - summary in a sentence devastator: Walter van de Vijver wrote "I am becoming sick and tired about lying about the extent of our reserves" the chief of exploration with the Chairman Sir Philip Watts.

The questions about the oil reservations, which could seem speculative to the academic scientists, that are crucial when were translated into share prices, which fell suddenly while they were descended; the with-top-optimists evaluations appeared to the shareholders as is completely. And while waiting for the investigations by SEC in Washington were relentless and undeniable.

The Royal Dutch/Shell Group had a huge damage on their multinational company reputation which let down the stakeholders trust and the future expectations. Shell lost some of its shareholders and more importantly lost its value. It also cost to the company to pay fines for their irresponsible act of lies. And most importantly it is very hard to win peoples trust over this 'lies' ever again. But it does not mean the company's image is shot to pieces. Clearly the superstructure of Shell must be open to make sure of that, it can effectively be directed by its boards, which responsible to the stakeholders. But it may be a tragedy if, in the process, Shell loses the most valid device of its company cultures, the capacity to adopt the long-term position.

Under the proposal of Thursday, the two relative groups, that the cuts controlled have bonds of A since 1907, will amalgamate and train the board of trustees in addition to new company, to be called Royal Dutch Shell plc (, 28 February 2010). One expects that the consolidation takes place in the second quarter in addition to 2005, with the new company to nominally base in cuts of goal of London his registered offices of medical examination and house of taxes in La Hague, the Netherlands. If the shareholders accept, they will take shares with the new company on a basis of for the other. Payments of the dividends will be shifted at a quarterly base of their current six-monthly frequency (, 28 February 2010). The chairman of Royal Dutch/Shell Group and broad of directors, and Jeroen van der Veer will continue as new CEO of the company. "This is the end of 60/40, we become one company with one share," Van der Veer said. "There is one set of directors, one CEO, one person who has to take full accountability" (, 28 February 2005).

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Van der Veer said that the examination of the company of the reservations is still not complete, and it might have to go down from the evaluations by 900 more million barrels. Shell indicated that final figures on the possible deficit would be equipped with annual financial results at the beginning of 2005 (, 28 February 2005).

The company also revealed that Thursday that the Net income for the third quarter raised to $5.4 billion $2.45 billion, tie benefit of the prices to oil rise and chemicals. The sales increased by 35 percent to $89.5 billion as the announced company the force in very its larger companies (, 28 February 2005)

Acquisition of Duvernay Oil Corp

In july 2008, Shell presented a proposal by its subsidiary Shell completion had Canada for the acquisition of all of the outstanding shares of Duvernay Oil Corp (Duvernay). Acquisition is made in August 2008. Shell has a good image in tight gas activities of North America. Shell could reinforce its booklet by increased technology with the acquisition of Duvernay. The cultivated surface of Duvernay as well as the expertise of Shell operation and the possibilities of financing would build a good foundation for the coming growth.

Joint Venture in China

In June 2008, Shell agreed to sign an intent letter with CNPC China (National Petroleum Corporation) and QPI (Qatar Petroleum International) to formalize a joint venture in China. This association would provide petrochemical products manufacturing complex and an oil refinery in China. The three companies would carry out a common evaluation concerning the feasibility of the project suggested. The petrochemical complex and the integrated refinery with the state in addition to possibilities of art production would produce the fuels of refining and the products petrochemical. Shell would be held has interest 24.5% in the jointed company, PetroChina 51%, and QPI 24.5%. This project would reinforce the economic activities further from Shell in Qatar and China. They being the principal markets for the expansion for Shell, the company would profit with such collaborations that they present means of the growth.

Increasing Demand for Liquefied Natural Gas

One expects that the request of liquid fuels climbs up to 108 million barrels oil-equivalents per day by 2030, an increase of 30% from 2005. Global liquefied natural gas (LGN) demand is envisaged with more than triple in volume of 2005 to 2030, is led by the request on markets of North America, Europe, and of Asia Pacifique. Currently, Shell takes part in the projects of LGN in principal integrated projects, Pearl GTL and Qatargas 4 LGN in Qatar. The company also takes part in the projects of LNG in Australia. The hearth of the company on projects of LGN implies it is well placed to type occasions on the market growing in the whole world.

Acquisition of Cansolv Technologies

In December 2008, a provider of technologies made to counter air pollution that Shell Global Solutions International acquired 100% of the shares of Cansolv Technologies. An acquisition with Cansolv would increase the possibilities of Shell in the CO2 capture to explore more far technology and the solutions from carbon capture from post-combustion. In their turn this would help the company to reduce costs, and accelerates its development of technology to make carbon capture and commercially viable storage on the commercial back of the emissions of arrangements.

Royal Dutch Shell PLC ratings reflect the assessments of rating services of the company's business risk graphic as "excellent" as well as its financial risk graphic as "minimal" within the petroleum and its operations market. Shell is one of the largest private company integrated oil around the world, Shell's profile of the businesses is based on its large overall diversified exploration, production, and liquefied natural gas operations (LNG), as strong and the beneficial consistent of downstream operations. The relative weaknesses include the exposure to the strongly volatile and cyclic sectors of the products. The evaluation of the Shell financial risk profile is seen as minimal and will be evaluating regularly by the company, in additional with factorizing in the preserving policies of the funds admission of the company. And a consideration for that these policies became less preserving than before, while the expectation of the debt rises significantly in 2009-2010.

Finished recent years of Shell successfully came to be seen as a one of the more progressive companies in its sector. Since it was withdrawn from the Global Climate Coalition in 1998 (, february 2010), Shell tested hard to stigmatize itself as worrying, green company. Shell's portray is a good corporate citizen, as like a large multinational and oil company Royal-Dutch/Shell successfully implements its operations.