If you think flip-flops are just footwear for the seaside, then you have to read the latest oil reserve press release from Royal Dutch/Shell, represented by two stocks, Royal Dutch
In January, Shell reduced its proved reserves by 3.9 billion barrels, or roughly 20%. In February, the company "disclosed" where adjustments were being made. Yesterday, the company removed another 250 million barrels of oil equivalent from its 2002 year-end proved reserves -- raising the total reduction to a mind boggling 4.15 billion barrels.
So, after the latest flip-flop, what does the company say? "All reserves and financial figures included in this release should be regarded as preliminary." So, before the annual report is published (late) in May and the shareholder meeting is held (also late) on June 28, the door is open for reserves to be re-re-categorized.
These many gyrations are making alternatives ranging from giant ChevronTexaco
A precursor to today's bad news was the ousting on March 3 of CEO Sir Philip Watts and Walter van de Vijver, chief executive of Shell Exploration and Production. It is amusing that troubled U.S. natural gas and pipeline operator El Paso
Might there be sharks swimming along Shell's seashore? Look to the press release: "Shell is also subject to related ongoing legal actions in the U.S. As a result, Shell's management must balance its public statements on this subject against the risk of prejudice in any subsequent legal action." This sounds like, "We would love to be candid but, given our predicament, we are better off saying what we know, not what we think." Leave it to Shell to make lawyers look good.
The big picture
It would appear that Shell has failed to replace 100% of its production for the past three years. Interestingly, the impact of that combined with reserve reclassifications does not appear to have shaken investors. In fact, despite trading for a relatively modest 12 times earnings, Royal Dutch is up 17% over the last 52 weeks.
By comparison, ExxonMobil
Fool contributor W.D. Crotty dislikes the sound of flip-flops banging against people's heels. Yuck! He does like and own ExxonMobil and ChevronTexaco. It must be something about those tied-together names.