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    Shell to Pay $120 Million Penalty

    Company dismisses several top executives and delays release of annual report.

    LONDON -- The Royal Dutch/Shell Group will pay a $120 million penalty to U.S. authorities for the company's misstatement of its oil and gas reserves, reported the Associated Press.

    Shell announced the fine Thursday, as it reported a 54 percent increase in quarterly net income that reflected high global oil prices. Net income for the three months to June 30 was $4 billion, compared with $2.6 billion in the same period a year ago.

    The Anglo-Dutch company stunned shareholders in January when it downgraded 20 percent, or 3.9 billion barrels, of its reserves from "proven" to less certain categories. Three other downgrades followed, for a total reduction in reserves of 23 percent, or 4.47 billion barrels, from previously reported levels.

    Reserves are an oil company's most valuable asset, and any reduction in their estimated size is a serious concern for investors.

    In the confusion that followed, Shell dismissed several top executives and delayed by two months the release of its annual report. "Rebuilding credibility" and "regaining trust" are now the company's key priorities, it said in its annual report.

    Shell said it had agreed in principle to pay a $120 million civil penalty to resolve the pending inquiry by the U.S. Securities and Exchange Commission into the reserves downgrading.

    As part of the agreement, "Shell will consent, without admitting or denying the SEC's findings or conclusions, to an administrative order finding that Shell violated, and requiring Shell to cease and desist from future violations of, the anti-fraud, reporting, record-keeping and internal control provisions of the U.S. Federal securities laws and related SEC rules."

    Shell has also agreed with the SEC to spend an additional $5 million to develop a "comprehensive internal compliance program."

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