Company News: Chevron raises its offer for Unocal about 5%

July 25, 2005
Chevron Corp. raised its offer for Unocal Corp. to $63.01/share of Unocal, up from its previous $60/share offer in a complicated deal that is 40% cash and 60% Chevron stock

Chevron Corp. raised its offer for Unocal Corp. to $63.01/share of Unocal, up from its previous $60/share offer in a complicated deal that is 40% cash and 60% Chevron stock.

In other recent company news:

• Royal Dutch Petroleum Co. and Shell Transport & Trading Co. were merged into a single parent company, Royal Dutch Shell PLC, and its stock began trading July 20.

• Pacific Energy Partners LP (PEP), Long Beach, Calif., agreed to buy five products terminals and a products pipeline with storage in the Rocky Mountains from Valero LP, San Antonio, for $455 million.


The revised offer puts the value of the Chevron offer at about $17 billion, excluding the assumption of Unocal’s net debt. The latest offer is estimated to be about 5% more than Chevron’s original offer (OGJ, Apr. 11, 2005, p. 27).

If successful, the transaction would involve the largest union of US oil and gas companies since Conoco Corp. and Phillips Petroleum Co. merged in a $15 billion transaction in late 2002 (OGJ Online, Aug. 30, 2002).

The Unocal board recommends that Unocal shareholders accept the Chevron merger agreement, as amended, at an Aug. 10 special meeting.

Chevron’s revised offer still is lower than a $67/share offer for Unocal from CNOOC Ltd. (OGJ, June 27, 2005, p. 25). Excluding the assumption of Unocal’s net debt and a $500 million break-up fee to rival Chevron, CNOOC’s offer totals about $18.5 billion.The value of both offers varies with stock prices and with the value of Unocal’s net debt, which is declining as Unocal experiences strong cash flow and completes the sale of its Canadian exploration and production assets, a Unocal spokesman said.

Shell unification

Shareholders approved the unification formally combining the former Royal Dutch/Shell Group’s British and Dutch parent companies under a single board and a single executive (OGJ Online, Oct. 28, 2004). Investors had said the old structure hindered transparency and financial accountability.

Criticism escalated after Royal Dutch/Shell announced a series of reductions in its proved reserves estimates. The company reclassified reserves five times in a little over a year (OGJ Online, Feb. 4, 2005).

PEP’s acquisition

PEP’s transaction, subject to regulatory approvals, is expected to close within 90 days, PEP said July 5.

Valero must divest the assets under an order from the US Federal Trade Commission related to its acquisition of Kaneb Services LLC and Kaneb Pipe Line Partners LP, Dallas, in a $2.3 billion cash-stock deal (OGJ Online, Nov. 1, 2004). PEP is acquiring two products, blendstocks, and crude oil terminals near San Francisco. The Martinez terminal and the Richmond terminal have 4.1 million bbl of combined storage capacity.

In the East, PEP is acquiring Valero’s North Philadelphia, South Philadelphia, and Paulsboro, NJ, terminals, which have a combined storage capacity of 3.2 million bbl. In the Rocky Mountains, PEP is acquiring the 550-mile West Pipeline system extending from Casper, Wyo., east to Rapid City, SD, and south to Colorado Springs, Colo. The system includes truck terminals and combined storage capacity of 1.7 million bbl.