Sunday, May 9, 1999 Published at 13:33 GMT 14:33 UK
Business: The Company File
Oil merger rumours
Partners since 63 years: Chevron and Texaco jointly own Caltex
The oil industry is abuzz with rumours that the next mega merger is in the offing.
US oil giant Chevron is said to be in talks with Texaco on what would be effectively a $37bn take-over.
The two companies are close partners since more than 60 years, jointly owning Caltex Corp., which operates 13 petroleum refineries and 8,500 service stations in the Asia Pacific region, Africa and the Middle East.
When the rumours first surfaced late on Friday, they prompted a sharp rise in the price of Texaco shares, up $4.81 to $67. Chevron's stock, however, fell $3.06 to $94.75.
While Chevron refused to comment on the reports, Texaco spokesman Andy Norman said the talk on the markets was "just speculation and rumour".
However, such a deal would only be the latest in a long list of oil industry mergers during recent months.
Pooling the black gold
The wave of oil industry mergers was triggered by last year's slump in oil prices, which sank to a 25 year-low, dropping below $10 per barrel.
This squeezed the margins and profits of oil companies. To drive down costs, improve market share and gain benefits from economies of scale, firms were forced to either merge or buy up one another.
The price pressure has receded somewhat during recent weeks. A barrel of Brent crude oil now costs just over $16, as a result of production cuts agreed by oil-producing countries.
Nonetheless, companies that have not merged are afraid that they could lose out against their bigger but streamlined rivals.
Texaco's 24,628 employees last year generated revenues of $31.7bn and a net income of $578m.
The company is exploring new oil fields in the deepwater Gulf of Mexico, Latin America and West Africa. Its core production areas include the United States, the North Sea of the UK, the Middle East, and the Pacific Rim.
Chevron is the larger of the two, with 34,000 employees, revenues of $40bn and a record net income last year of $3.25bn.
The company pumps oil in the United States, Angola, Nigeria, Canada, the North Sea, Australia, Indonesia, Kazakhstan, Venezuela, China and Papua New Guinea. Major exploration areas include the above, as well as Alaska and Azerbaijan.
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