By the OGJ Online Staff
HOUSTON, Nov. 19 -- ChevronTexaco Corp. has set higher financial and operational targets for the merged company.
Chairman and CEO David O'Reilly told security analysts Monday that recurring synergies would be $1.8 billion/year by March 2003 and reaffirmed the company's original synergy target of $1.2 billion to be achieved within 6 to 9 months of the October 2001 merger.
He said synergies will be up across the board with the biggest increase expected in the downstream sector. "Our thinking about downstream has advanced so that even without overlap we've found considerably more synergies by integrating on a global basis businesses that were previously operated regionally.
"We've also established aggressive goals for improving our return on capital employed," he said. "Return on capital employed is projected to grow by 2% to 3% in the 2003 to 2004 timeframe, with greater improvement projected in the years beyond."
O'Reilly said that oil and gas production would grow 2.5-3%/year over the next 5 years. Production is projected to grow 1% in 2002, in part due to expected Organization of Petroleum Exporting Countries output constraints. The company will focus short term on enhancing the performance of its upstream assets and will grow long term as a number of major development projects come on stream.
O'Reilly said workforce reductions are expected to be 4,500 worldwide, or 500 more than projected in the October 2000 merger announcement. At that time, the combined workforce of Chevron, Texaco, and Caltex Corp. was 57,000 employees worldwide.
He said ChevronTexaco's recent decision to invest $2.5 billion in Dynegy Inc., as that company plans a merger with Enron Corp., reflected ChevronTexaco's strategy to increase investment in the growing energy convergence marketplace. "Our participation offers a combination of significant upside potential and terms that will protect our investment," he said. "And, we have full confidence in Dynegy's disciplined management approach to complete the merger and to build a new company into an industry leader." ChevronTexaco has about 26% of Dynegy.