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Gold/Mining/Energy : XON - Exxon Corp. -- Ignore unavailable to you. Want to Upgrade?

To: Jamuck who wrote (210)	11/27/1998 8:02:00 AM
From: Terry Lyon	Read Replies (1) \| Respond to of 242

Here's Reuters analysis: Friday November 27, 4:43 am Eastern Time Focus-Merged Exxon-Mobil would dominate Asia By Azlin Ahmad SINGAPORE, Nov 27 (Reuters) - A merger between Exxon (NYSE:XON - news) and Mobil (NYSE:MOB - news) would create a company with good synergy in Asia that would dominate the regional oil industry, analysts said on Friday. They said few Asian assets would likely need to be sold off following the merger, as apart from Singapore and Japan, the Asian businesses of the two were quite separate. Sources in New York said on Wednesday that Exxon, the world's largest energy company, was in talks to acquire Mobil. A Financial Times report said the companies plan a news conference in New York early next week. ''I think they're a very good fit in the Asia Pacific because the areas of overlap are very small,'' said James Brown, regional energy analyst at Merrill Lynch. Mobil has refining assets in Australia and New Zealand, where Exxon has none. But Exxon has a refinery in Thailand and in Malaysia, where Mobil has no refining presence. In Singapore, Mobil and Exxon own two of the country's four refineries, with 300,000 barrel per day (bpd) and 220,000 bpd, capacity, respectively. While the merger could lead to some rationalisation which would potentially downsize these refineries or reduce throughput rates, analysts drew the line at a shutdown of any one of the refineries. ''The chance of a shutdown in Singapore is zero, it's just not going to happen,'' Brown said. ''But they could be operated in sympathy with each other in terms of output.'' In Japan, the area of overlap was a little more significant, as both have stakes in Tonen Corp . Tonen in turn owns 50 percent of Kygnus Sekiyu KK, and both companies have refineries in Japan. Although the merger would ultimately result in rationalisation in Japan, it would be a very gradual process, simply because overall industry rationalisation in Japan has been painfully slow, analysts said. They said closure of some retail stations in Japan was inevitable, but that it would take time, although some analysts said the merger could accelerate the much-needed shake-up of the Japanese petroleum industry. Another area that may be rationalised after the merger is India, where Mobil has a lube oil joint venture with Indian Oil Corp (IOC), while Exxon has a lube oil joint venture with Hindustan Petroleum CORP . ''Commercially I find it difficult to see the one merged company pursuing the two separate joint ventures, so there may be some rationalisation there,'' Brown said. ''But in the grand scheme of things, it's tiny,'' he said. In the upstream sector, although both Mobil and Exxon have stakes in countries such as Australia, Indonesia, most are in different areas. Exxon has a 50 percent share in Indonesia's Natuna gas field where Mobil has 26 percent. But Exxon has a limited position in Indonesia other than that, while Mobil has a stake in the Arun liquified natural gas (LNG) field, said to be the world's largest LNG facility. Exxon also has a big foreign equity in Malaysia's upstream sector, where Mobil has almost no presence. Analysts said it was difficult to estimate how much Exxon and Mobil would save in Asia with the merger, but globally, they saw reductions of 15-20 percent in fixed operating costs and fixed overheads. Given the size of Mobil and Exxon, this could mean $2 to $3 billion, said Michael Balladon, vice president at A.T Kearney for Asia oil and gas business. ''Companies are doing it to adjust to the new $12 oil price, and that applies to the Asia Pacific as well. Mobil and Exxon are multibillion (dollar) Asian oil companies.''