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Gold/Mining/Energy : Big Dog's Boom Boom Room

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To: Dennis Roth who wrote (43264)	5/2/2005 10:55:59 AM
From: Elroy Jetson	Read Replies (2) of 206087

In buying Unocal, ChevronTexaco will eliminate one of their major competitors in the West Coast, their second most profitable market after Hawaii. And analysts wonder what the financial logic is. That makes me wonder about analysts. We believe investors are skeptical as to the strategic and financial logic of the Unocal transaction and have effectively put Chevron in a "penalty box" of sorts pending greater confidence that the deal makes sense. Part of the concern likely stems from broad macro concerns about a potentially slowing economy and the negative impact that could have on the oil sector. Even though it will mostly be using its elevated share price to acquire Unocal's elevated shares (the transaction is 75% stock/25% cash), investors nevertheless appear concerned that Chevron is implicitly assuming at least a $40/bbl (or higher) long-term WTI oil price if it is to generate attractive returns on capital from the acquisition. .

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