|
April 4, 2005
ChevronTexaco to Acquire Unocal for $16.4 Billion
By ANDREW ROSS SORKIN and CHRISTINE HAUSER
ChevronTexaco has agreed to acquire Unocal, one of the largest independent oil companies, in a stock and cash transaction valued at $16.4 billion, the two companies said today.
The takeover of Unocal, which is based in El Segundo, Calif., represents the biggest acquisition in the industry since the consolidation wave of the late 1990's, when Exxon bought Mobil for $80 billion and BP acquired Amoco for $48 billion.
ChevronTexaco, the second-largest American oil company, said the deal would significantly expand its reach worldwide, particularly in the Asia/Pacific Region and in the Gulf of Mexico, and would help it commercialize its undeveloped natural gas resource base, ChevronTexaco's chairman and chief executive, Dave O'Reilly, said in a statement.
ChevronTexaco won a bidding contest for Unocal that also included Eni of Italy and the state-owned Chinese oil company CNOOC.
L. Bruce Lanni, an oil industry analyst with A.G. Edwards, said the acquisition would put ChevronTexaco in better standing with their peers, namely BP, ExxonMobil and Royal Dutch/Shell. 'They did not have as large as an asset base in Asia or the deepwater Gulf of Mexico as their direct competitors,' he said. 'This puts them in a far more competitive position.' He predicted that the deal would be neutral or slightly dilutive to earnings in the near term. ChevronTexaco said the combined company would be the top oil and gas producer in Thailand and would have the second-largest interest in the oil producing operations of the Azerbaijan International Operating Company.
'It is an attractive transaction that provides value in both the near- and long-term,' Mr. O'Reilly said.
Under the terms of the deal, ChevronTexaco valued Unocal's shares at $62 apiece, based on Friday's closing prices. The company plans to exchange 75 percent stock and 25 percent cash for Unocal's outstanding common stock. It said that Unocal's shareholders could choose to receive either 1.03 ChevronTexaco share or $65 cash for each of their shares, but that the exchange would be subject to proration.
The deal represents a 3.7 percent discount from Unocal's closing price on Friday.
This afternoon, shares of Unocal were trading down $4.60, or 7.2 percent, to $59.75 on the New York Stock Exchange. Shares of Chevron Texaco fell $1.86, or 3.1 percent, to $57.45.
ChevronTexaco said it would also assume $1.6 billion in Unocal's debt.
The acquisition is subject to approval by Unocal's shareholders and regulatory agencies. In a conference call with analysts and investors today, Charles R. Williamson, Unocal's chairman and chief executive, and Mr. O'Reilly declined to describe how the companies reached their agreement, which came after months of speculation over who would end up buying Unocal, the eighth-largest oil company in the United States.
The interest generated by the sale comes at a time when global energy companies are flush with cash but short of fresh opportunities to develop new fields as many oil-rich areas of the world remain closed to foreign companies. At the same time, the world's 10 largest oil companies made over $100 billion in profit last year thanks to crude oil that averaged $41 a barrel in 2004. The boom is expected to grow this year. Crude oil for May delivery surged to a record high of $58.28 a barrel earlier today on the New York Mercantile Exchange and were lately trading up 25 cents, at $57.52 a barrel.
'We're not buying today's crude price,' Mr. O'Reilly said in the conference call. 'We're buying a company with long-term potential.'
Acquiring Unocal would give the buyer a portfolio of attractive fields in Azerbaijan, Bangladesh, Thailand and Indonesia, as well as in the Gulf of Mexico, which are all expected to start producing this year.
'I think the combination makes sense strategically in terms of assets, but also in terms of the resources that we would need to develop these large fields,' Mr. Williamson said in the conference call.
These projects, if successful, are expected to increase Unocal's production as much as 10 percent a year through 2010 - making it one of the industry's best performers. ChevronTexaco's reserves and production had been declining since 2002, according to filings with the Securities and Exchange Commission.
ChevronTexaco said in its statement that it expects oil-equivalent production from the combined portfolios during 2006 to average about 3 million barrels a day. Unocal's 1.75 billion barrels of oil-equivalent proved reserves would increase ChevronTexaco's reserve base as of the end of 2004 by about 15 percent, it said......'
|
