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To: Ahda who wrote (23758)	12/2/1998 9:32:00 PM
From: goldsnow	Read Replies (1) \| Respond to of 116759

Full story FOCUS - More mergers ahead for U.S. oil industry 08:12 p.m Dec 02, 1998 Eastern By David Brinkerhoff LOS ANGELES (Reuters) - Bigger may be better, but even really big is no longer good enough in the oil industry. After Exxon Corp. and Mobil Corp. agreed Tuesday to form the world's largest corporation, more companies could be forced to make combinations big enough to match the financial muscle and savings of the new oil giant, experts said Wednesday. The $77 billion deal follows British Petroleum Co. Plc's purchase of Amoco Corp. earlier this year, and creates yet another mega-company likely to pressure rivals into following suit as oil prices hit rock bottom. ''This is a trend that's going to continue for a number of years,'' said Cyrus Tahmassebi, an oil economist and president of Energy Trends Inc. in Bethesda, Md. With the Exxon-Mobil deal official, California's two biggest oil companies, Chevron Corp. and Atlantic Richfield Co (Arco), as well as White Plains, N.Y.-based Texaco Inc. remain as merger targets, experts said. Los Angeles-based Arco, a top gasoline retailer in California, has been a rumored acquisition target for months, although the company has pledged to remain independent, cutting staff and removing some top managers. Arco's strong presence on the West Coast could make it valuable as a refinery division of another company, and its growing overseas portfolio could be split off in an upstream deal, experts said. Some experts said California rival Chevron could make a play for Arco now that speculation of a Chevron-Mobil merger was dead. ''Chevron and Arco would be great,'' said Jennifer Gordon, oil analyst with BT Alex.Brown Inc. ''But they'd have to divest in California,'' where the two operate refineries and jockey for the market share. Chevron earlier this year formed a mergers-and-acquisition unit but has declined to comment on recent merger rumors. Arco also declined to comment. ''(The unit's) looking at ways to position us for growth or cost cutting,'' said Chevron spokeswoman Dawn Soper. ''We just don't comment on specifics,'' she said. Texaco, the nation's No. 4 oil firm, also is ripe for a deal, analysts said. The company on Wednesday announced a package of cost cuts for next year, including layoffs of 2,000 employees. ''That might lead you to believe Texaco is one of the (merger) candidates,'' Gordon said. Texaco already has formed refining and marketing alliances with in the United States with Shell Oil Co. and Saudi Aramco. Texaco also declined to comment. While its plans to link up with Shell in the European refining business have collapsed, speculation lingers that the two firms could merge fully. While U.S. oil firms have declined to comment on specific plans, experts said 12-year lows in the price of oil -- the lifeblood of earnings -- have forced companies to look at mergers to cut costs. Related companies, such as oil service firms Halliburton Co. and Schlumberger Ltd. also could combine in response to fewer equipment requests from big oil producers, experts said. ''The environment for consolidation will continue to exist with $11 a barrel oil,'' Gordon said. Occidental Petroleum Corp., and Unocal Corp. also have been the object of takeover speculation, but experts say Los Angeles-based Occidental was too highly invested in chemicals and Unocal too involved in the unstable Asian markets to earn serious interest. Conoco, also a top 10 oil firm, was sought by Mobil but is solidly independent after a successful spin-off from DuPont Co. last month. Despite the rash of mergers, the specter of a new Standard Oil Trust -- John D. Rockefeller's oil monopoly that was dissolved in 1911 -- is remote, experts said. With oil prices low and more independent companies than earlier this century, many deals are likely to win approval. ''Both in here and in Europe, mergers are looked at with much less suspicion than they used to,'' Tahmassebi said. Copyright 1998 Reuters Limited