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Chevron may sell oil fields { August 1 2003 } Original Source Link: (May no longer be active)
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2003/08/01/BU232572.DTLhttp://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2003/08/01/BU232572.DTL
Chevron may sell oil, gas fields
Giant likely to unload less-profitable assets to reduce its debt
Verne Kopytoff, Chronicle Staff Writer
Friday, August 1, 2003
©2003 San Francisco Chronicle | Feedback
ChevronTexaco will likely announce plans today to sell oil fields and other assets valued at up to $5 billion, according to analysts.
The sales would allow the San Ramon oil giant to reduce debt and focus more on its most profitable properties.
David O'Reilly, Chevron's chairman and chief executive, is expected to unveil the plan today at his company's annual analysts' meeting in New York. If so, it would fulfill the promises he made earlier this year about the firm unloading a sizable portion of its sprawling global portfolio of oil and natural gas fields.
"They basically need to fix their house," said Fadhil Gheit, an analyst for Fahnestock & Co. "There's no question that the company will sell huge chunks of assets."
ChevronTexaco has been criticized for poor performance during the past couple of years compared with its competitors. The firm's shares have fallen nearly 25 percent since the merger of Chevron and Texaco in late 2001.
Back then, they traded at $90. The stock closed Thursday at $72.11, up 31 cents.
In the first quarter, ChevronTexaco reported a profit of $1.9 billion on $31 billion in revenue. Analysts expect the company to have a profit of about $1.55 billion in the second quarter, according to Thomson First Call.
Those results will be released Friday.
Though profitable, ChevronTexaco's margins are relatively thin, according to analysts. Sales of marginally profitable and money-losing operations will provide a boost.
The company's return on capital, a key measure of profits, was 2.7 percent in 2002. Competitors such as Royal Dutch/Shell and Exxon Mobil were about 14 percent.
ChevronTexaco has been prohibited by federal regulators from making major divestments for two years as a condition of the merger between Chevron and Texaco in 2001. The second anniversary is in October.
Despite the ban on major asset sales, ChevronTexaco has been allowed to make some minor divestments. This year, it retreated from Papua New Guinea by selling its interest in offshore fields there for $96.6 million. It also agreed to sell its interest in an oil refinery in El Paso, Texas.
Other ChevronTexaco properties for sale include three offshore fields in the North Sea and 100 small oil properties in North America.
Gheit, the analyst, who owns ChevronTexaco shares, said that ChevronTexaco could announce the sale of major assets in the Gulf of Mexico on Friday. Many of the offshore fields there are mature, he said, meaning they're producing less because of their age.
Gheit, whose company doesn't do business with ChevronTexaco, said about half of all assets that are likely to be sold are in the United States. Other possibilities include minor operations in nations such as Bangladesh, Cambodia and Norway.
Stan Luckoski, a ChevronTexaco spokesman, declined comment.
Analysts also expect ChevronTexaco to write down the value of Caltex, its refining and service station arm in Asia, according to the Bloomberg News. Competition there is intense because of a glut of oil and gasoline in the market, leading to big losses for the company in 2002.
Earlier this month, ChevronTexaco unveiled a restructuring in its in global refining and marketing business. Five top leaders retired in the shakeup, which shifted responsibility from geographic divisions to divisions based on individual product lines such as refining and marketing.
Selling assets will allow ChevronTexaco to reduce debt. O'Reilly has made it one of his priorities.
At the end of the first quarter, ChevronTexaco's debt was $15.3 billion, down about $1 billion from the previous quarter.
E-mail Verne Kopytoff at vkopytoff@sfchronicle.com.
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