Dissident Shell Oil shareholders Monday asked a Delaware court to set aside a $5.67-billion buy-out plan, alleging that new information about Shell reserves in the Gulf of Mexico makes the shares more valuable.
A spokesman for the dissidents said the group believes that Shell's Green Canyon reserves may approach 1 billion barrels, making it roughly equivalent to Alaska's enormous Prudhoe Bay reserves. Royal Dutch-Shell, Shell Oil's majority owner, says the reserves aren't that great.
The 2,300 dissident shareholders who own 2 million shares contend that the Green Canyon reserves increase the value of Shell stock by $10 a share. In February, Royal Dutch-Shell agreed to pay all remaining Shell Oil stockholders $60 a share to settle a class-action shareholder suit in Delaware Chancery Court. Monday was the deadline for filing objections to that settlement.
The motion to overturn that settlement, filed in the Delaware court Monday, is the latest legal volley in a 17-month effort by Royal Dutch-Shell to acquire the shares of Houston-based Shell Oil that it doesn't own. Since the buy-back was announced in January, 1984, Royal Dutch-Shell has increased its holdings from 69.4% to 94.6% of outstanding shares.
The shareholder motion contains an affidavit signed by Shell Oil employee Thomas Bickle, who said he attended a May 9 meeting during which the Green Canyon reserves were discussed. Bickle, a systems analyst, said he asked Greg Hullinger, a financial planner in Shell's exploration and production department, the size of Shell's Green Canyon reserves. According to Bickle, Hullinger replied: "In excess of a billion barrels." When Bickle asked how much of that was Shell's, Hullinger replied: "Most of it," according to Bickle.
The affidavit doesn't say where the meeting took place.
Royal Dutch-Shell said in a statement Monday that the claim about its Green Canyon reserves is "totally without foundation and completely irresponsible." It vowed to vigorously oppose the motion.
No Public Estimate
Shell Oil has never publicly estimated the size of its reserves in Green Canyon, where it began drilling in late 1983. Oil industry analysts said good estimates concerning the size of Green Canyon reserves aren't available because the region hasn't been sufficiently explored.
From its inception, the buy-back plan has been mired in controversy. Royal Dutch-Shell initially offered $55 a share, which it raised to $58 a share in April, 1984, "to encourage widespread acceptance."
Dissident shareholders, however, argued that even the $58 offer was too low, a view supported by Shell Oil's outside directors--board members with no link to the management--who said last March that Shell Oil shares were worth $75 each.