And the heavy oil plot thickens....
Another comment from the annual meeting was on Arco, Conoco, and Oranogo (Orinoco?). As I look for possible links between Texaco and Conoco, I couldn't find any projects they were working on together. Then I found this:
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Thursday June 18, 9:11 pm Eastern Time
DuPont's Conoco sale fires up rivals' war chests
By Paul Thomasch
NEW YORK, June 18 (Reuters) - For U.S. energy companies stricken by low oil prices and fading profits, DuPont Co.'s (DD - news) decision last month to put Conoco up for sale has come as one of the few bright moments in an otherwise dismal year.
Salivating at the prospect of taking over a rival with annual sales of $22 billion, executives are already gearing up for an initial public offering (IPO) of 20 percent of Conoco later this year.
The offering should set the value of Conoco at between $20 billion and $25 billion, according to analysts.
''Conoco has always been known as a well-run company, and one with a good track record of finding oil,'' says Fadel Gheit of Fahnestock & Co. ''All of the big integrated oil companies are going to be interested...it should be a feeding frenzy.''
In the event, DuPont Chief Executive Charles Holliday has said the IPO will be followed by a complete divestiture of Conoco as soon as practical.
Though Conoco could come through the sale as a stand-alone company, most are betting it won't. Oil firms have been caught up in a whirlwind of acquisitions in recent years, and while analysts
say the deals so far have been comparatively small and bloodless skirmishes, executives are now thought ready to raise the stakes.
''We need to see who fires the first shot in the war,'' Gheit says.
Battle plans may already be in place at Mobil Corp. (MOB - news), after the oil major came up short in a bid for Conoco in the early 1980's. Indeed, Mobil Chairman Lucio Noto has spoken openly of his interest in acquiring at least part of the company. ''There are some places where we and Conoco fit very nicely,'' Noto says.
Specifically, Noto says Mobil would be interested in Conoco's oil operations in the North Sea, and possibly some of its U.S. refining and marketing assets.
Conoco ranks ninth in worldwide oil production by U.S. concerns, with control over some 2.65 billion barrels of oil and gas reserves. Along with its North Sea operations, which include stakes in massive Heidrun and Statfjord fields, Conoco is involved in upstream activities in
Nigeria, Russia, Indonesia, and the Gulf of Mexico.
The Houston-based company also has taken a lead position in Venezuela. Besides its exploration projects, Conoco will begin heavy crude production from its Petrozuata development in September. Officials say the $2.7 billion project will eventually turn out 120,000 barrels a day of heavy oil, which will be converted into higher-quality crude for export.
In addition to Mobil, a handful of other leading oil companies, including Exxon Corp.(XON - news), Atlantic Richfield Co.(ARC - news), Chevron Corp.(CHV - news), and Texaco Inc.(TX - news), are taking a long hard look at Conoco, analysts say.
But exactly what shape Conoco will take after the sale remains to be seen.
While Conoco has the capacity to process almost 800,000 barrels a day of crude worldwide, and sells the gasoline at 5,000 U.S. retail stations, few companies are keen to broaden their exposure to the fierce cycles of refining and marketing.
Indeed, most of the consolidation over recent years has been in the downstream sector - notably the recent combination of the U.S. assets of Royal Dutch/Shell Group (RD.AS), Texaco, and Saudi Aramco - and analysts say that Conoco's refining and marketing assets could wind up
back on the block for sale.
If so, either Valero Energy Corp (VLO - news). or Tosco Corp (TOS - news). could come calling. Both companies have proven to be starved for acquisitions, buying a series of refineries in past few years for cents on the dollar.
Petroleos de Venezuela, the state-owned oil company of Venezuela, is also thought to be a potential suitor. PDVSA has been clear about its intent to expand its U.S. refining presence, building on the one million bpd it already controls.
Roger Diwan, an analyst with Petroleum Finance Co., argues that PDVSA may also be keen to get its hands on Conoco's upstream assets, particularly in the Middle East. Conoco controls the
lion's share of Dubai's 285,000 bpd of crude production, used as a benchmark for international sour crude prices.
By taking over the Dubai production, Diwan says that PDVSA would gain short-haul access to Asia, while also shoring up some control over worldwide sour crude prices.
Still, others say that Conoco is more than PDVSA could handle.
''They have a lot of ventures right now. I just don't think they would go after Conoco,'' says Tony Szabo, an analyst at Houston-based oil consultants Stone Bond. ''They can do much better deals, much more focused deals.''
By contrast, U.S. companies rarely see a better chance to make an acquisition, analysts claim.
This is a ''once-in-a-lifetime opportunity,'' says Fahnestock's Gheit. ''It's going to be a case of a wounded shark attacked by the healthy ones.''
DuPont's stock ended Thursday up 1-3/16 at 76 in composite New York Stock Exchange trading. |
