Shell Flags EY Breach, Says It Will Amend Financial Filings In US, UK

Oil giant Shell (SHEL) announced on Wednesday that it will need to refile its financial statements in the U.S. and U.K. after its auditor, Ernst & Young, was found to have violated mandatory rotation rules intended to preserve auditor independence.

Despite the news, Shell’s stock was up nearly 1% in pre-market trade. However, retail sentiment on Stocktwits dipped to ‘neutral’ territory from ‘bullish’ a day ago as chatter also tempered to ‘high’ levels from ‘extremely high’. 

Due to the breach, Shell said that Ernst & Young’s (EY) audit opinion for those two years can no longer be fully relied upon under U.S. law. It plans to amend its SEC filings for those years. 

The company stated that EY has replaced the audit partner and issued updated opinions, which remain “unqualified,” indicating that there are no major issues with the reported numbers. 

The update comes after the Big Four accounting firm was fined £325,000 ($445,000) in April by the U.K.’s Financial Reporting Council (FRC) for auditing listed company Stirling Water Seafield Finance for more than 10 years without publicly retendering for the contract.

The FRC is reviewing the new case and may decide to launch a formal investigation, according to a Financial Times report.

EY acknowledged the error, said it had taken corrective action, and emphasized that no financial results need to be revised.

The auditor made $66 million from Shell-related work in 2024, according to the company’s annual report. Despite the breach, Shell hasn’t said if it will drop EY, though shareholders will vote on whether to reappoint the firm at next year’s annual meeting. Before the incident, Shell stated that it plans to retain EY for another decade.

Piper Sandler also raised its price target on Shell to $83 from $80 on Wednesday, while maintaining an ‘Overweight’ rating on the stock as per TheFly. Analyst Ryan Todd said the upward revision was part of a broader update to the firm’s second-quarter estimates for integrated oil companies, reflecting recent movements in commodity prices, refining margins, and minor adjustments to operating assumptions.

For Shell specifically, Piper increased its Q2 earnings per share and earnings before interest, taxes, depreciation, and amortization (EBITDA) projections by 14% and 10%, respectively, citing higher assumed crude oil prices as the primary driver. The company is scheduled to report its Q2 earnings on July 31, after the bell. 

Shell’s stock has gained over 13% this year but fallen more than 2% over the past 12 months. 

(Exchange rate: £1 = $1.37)

For updates and corrections, email newsroom[at]stocktwits[dot]com.

Read also: Tesla’s China-Made EV Sales Break 8-Month Losing Streak In June: Stock Rises Pre-Market