Royal Dutch/Shell plans to end almost a century of tradition by merging its British and Dutch holding companies as it aims to restore investor confidence shaken by an oil reserves scandal.

The world’s third-biggest oil group said it planned to overhaul its corporate governance structures, but also surprised investors by warning that it anticipated a further cut of its proved reserves.
The oil giant is struggling to win back investors’ trust after admitting it had overstated its proven reserves by 23 per cent, and that senior executives were aware of problems long before they were made public.
The merger announcement came as the group unveiled a 70-per cent rise in third quarter earnings, helped by surging oil prices and strong refining margins.
“The main surprise was the announcement of the new structure, which wasn’t expected to be made until next month,” said the Dutch broker, FBS Bankiers.
“We had expected the legal and fiscal obstacles to be so great as to prevent this step from being taken.”
The Anglo-Dutch group said it would move to a more traditional single-board structure with a single chairman and a single chief executive, scrapping its current dual-board arrangements based in Britain and the Netherlands.
“The boards ...  have unanimously agreed to propose to their shareholders the unification of the Royal Dutch/Shell Group of Companies under a single parent company, Royal Dutch Shell plc,” a statement said.  “Real reforms in management and governance structure are also planned.”
The single listed holding company will be incorporated in Britain, but headquartered and pay taxes in the Netherlands.
At present, Royal Dutch Petroleum holds 60 per cent of the group and Shell Transport and Trading, the British arm, 40 per cent.
The group’s structure dates back to 1907 from the merger of Royal Dutch, formed in the Netherlands to develop oilfields in Asia, and Shell, which began life as a small family shop in London, selling sea shells before growing into an import-export business shipping oil to the Far East.
2.6 billion dollars during the same period a year earlier.

However, the oil giant also said it would likely have to further cut oil and gas reserves by 900 million barrels of oil equivalent following an audit.

“The fact Shell will further cut reserves is disappointing but not entirely unexpected,” FBS Bankiers said.

Shell, which was previously seen as a conservative company, saw its reputation left in tatters after admitting in January it had overstated its proven reserves, which it has since cut by a total of 4.47 billion barrels.

Some investors had blamed the reserves crisis on what they saw as Shell’s complicated structure.

US and British regulators launched separate inquiries after Shell admitted the reserves miscalculation and fined the group 150 million dollars in total.

Three top Shell executives, including former chairman Philip Watts, were ousted. Watts was replaced by Jeroen van der Veer, the president of Royal Dutch, who on Thursday was announced as chief executive of the new company.

“I am honoured to be the first chief executive of Royal Dutch Shell,” van der Veer said.

“There is much to be done to deliver our strategy and priorities but I believe that these proposals will help propel this group forward and they provide the necessary platform for me and my executive team to deliver improved performance and results across all our businesses.”

Royal Dutch and Shell Transport shareholders will be asked to approve the moves at their April 22 annual general meetings next year.