Adamant: Hardest metal

ChevronTexaco Seen Taking Charge on Unit

Sat June 21, 2003 10:35 AM ET
By Joseph Giannone

NEW YORK (Reuters) - ChevronTexaco Corp. CVX.N will put dozens of oil and gas properties on the block as merger-related restrictions on asset sales expire this fall.

At the same time, a comprehensive business review by the company is expected to trigger a massive write-off in its overseas refining and marketing businesses.

Oct. 9 marks the two-year anniversary of the combination of Chevron Corp. and Texaco Inc. -- and the starting point for sweeping changes by the second-largest U.S. energy company. In August the company will unveil plans to divest assets and boost returns from exploration and production.

Some analysts say the company also may announce changes to its international refining and marketing business, comprised of its CalTex business in Asia and Africa and Texaco's assets in Europe. Changes may include the shutting down or sale of some assets.

Those assets have deteriorated in value since the merger, analysts said, and could result in a write-down of as much as $3 to $5 billion as early as this year.

"These assets are severely over-capitalized and of a quality and of a competitive nature that leaves something to be desired," said analyst Mark Gilman of First Albany, who has a "sell" rating on ChevronTexaco shares.

A spokesman said the company won't comment on its plans until its investor meeting in August, although ChevronTexaco executives have said sales would be on par with the $1 billion to $2 billion in assets sold annually before the merger.

Because ChevronTexaco used pooling of interests accounting for the merger, it has not been allowed to sell significant assets. At the same time, rivals have shed properties in North America and the North Sea, freeing cash for reinvestment in more promising regions, such as Southeast Asia, Africa and Russia.

Now, with those restrictions soon to expire, analysts said, the company will announce plans to shed properties in the United States, Canada, the North Sea and the Gulf of Mexico. Even in emerging hot spots like Indonesia, ChevronTexaco may divest some mature fields.

ChevronTexaco might also pull the plug on holdings in Colombia, Venezuela, Argentina and Brazil, where the company may lack sufficient scale.

This year the company has announced minor sales, including the disposal of 100 North American properties. ChevronTexaco also announced the sale of its stakes in a Papua New Guinea venture and a refinery in El Paso, Texas.

"It looks like the company may bite the bullet and take some write-downs," John Herold analyst Lou Gagliardi said. "They're being forced to take a hard look at their overweight exposure in the Far East."

That means even CalTex, formed by the two companies in 1936, is at risk. The division has 10 refineries and service stations in 60 countries across Asia, the Middle East and Africa, but many of its markets suffer from a glut of refining capacity and sluggish demand growth.

So, as painful as these steps may be, the company needs to convince investors it is taking all necessary steps to boost financial performance, analysts said.

"If the changes are seen as half-hearted, or not doing enough to reposition the company and boost profitability, the market will be disappointed," Herold's Gagliardi said.

ChevronTexaco seen taking big charge on Asian unit

Fri June 20, 2003 04:26 PM ET
By Joseph Giannone

NEW YORK, June 20 (Reuters) - ChevronTexaco Corp. CVX.N will put dozens of oil and gas properties on the block as merger-related restrictions on asset sales expire this fall.

At the same time, a comprehensive business review by the company is expected to trigger a massive write-off in its overseas refining and marketing businesses.

Oct. 9 marks the two-year anniversary of the combination of Chevron Corp. and Texaco Inc. -- and the starting point for sweeping changes by the second-largest U.S. energy company. In August the company will unveil plans to divest assets and boost returns from exploration and production.

Some analysts say the company also may announce changes to its international refining and marketing business, comprised of its CalTex business in Asia and Africa and Texaco's assets in Europe. Changes may include the shutting down or sale of some assets.

Those assets have deteriorated in value since the merger, analysts said, and could result in a write-down of as much as $3 to $5 billion as early as this year.

"These assets are severely over-capitalized and of a quality and of a competitive nature that leaves something to be desired," said analyst Mark Gilman of First Albany, who has a "sell" rating on ChevronTexaco shares.

A spokesman said the company won't comment on its plans until its investor meeting in August, although ChevronTexaco executives have said sales would be on par with the $1 billion to $2 billion in assets sold annually before the merger.

Because ChevronTexaco used pooling of interests accounting for the merger, it has not been allowed to sell significant assets. At the same time, rivals have shed properties in North America and the North Sea, freeing cash for reinvestment in more promising regions, such as Southeast Asia, Africa and Russia.

Now, with those restrictions soon to expire, analysts said, the company will announce plans to shed properties in the United States, Canada, the North Sea and the Gulf of Mexico. Even in emerging hot spots like Indonesia, ChevronTexaco may divest some mature fields.

ChevronTexaco might also pull the plug on holdings in Colombia, Venezuela, Argentina and Brazil, where the company may lack sufficient scale.

This year the company has announced minor sales, including the disposal of 100 North American properties. ChevronTexaco also announced the sale of its stakes in a Papua New Guinea venture and a refinery in El Paso, Texas.

"It looks like the company may bite the bullet and take some write-downs," John Herold analyst Lou Gagliardi said. "They're being forced to take a hard look at their overweight exposure in the Far East."

That means even CalTex, formed by the two companies in 1936, is at risk. The division has 10 refineries and service stations in 60 countries across Asia, the Middle East and Africa, but many of its markets suffer from a glut of refining capacity and sluggish demand growth.

So, as painful as these steps may be, the company needs to convince investors it is taking all necessary steps to boost financial performance, analysts said.

"If the changes are seen as half-hearted, or not doing enough to reposition the company and boost profitability, the market will be disappointed," Herold's Gagliardi said.

Internet Interview - Garry Flanagan

Business News, 19-June-03
Written by Staff Reporters
Garry Flanagan
Name: Garry Flanagan
Title: Commercial Analysis Coordinator
Company: ChevronTexaco
Location: Houston Texas

A brief explanation of your company and where it sits in the corporate landscape: World's fourth largest publicly traded, integrated energy company (based on oil equivalent reserves and production).

It is the second largest in the US with operations in 180 countries.

Job last held in Perth and when you left it: Senior Project Engineer (ChevronTexaco Australia) until July 2002.

What is your current role: Coordination of project economic and shipping-logistical analysis as well as strategic planning and contract management for ChevronTexaco’s Liquefied Natural Gas business based in Houston.

What other roles do you play in your industry or local business community: I represent the company at energy conferences and regularly presented aspects of the industry to year 10 classes in Perth high schools as part of the Schools Information Program.

I have supported functions put on by the Australian American Chamber of Commerce, most notably the 2003 Australia Day Ball held in San Francisco. I also assist the company with cultural integration.

Explain how you got this particular job: ChevronTexaco encourages development opportunities for selected employees in international locations.

I expressed an interest in working overseas and was ‘loaned’ to our head office in San Francisco for three months last year. The International Gas Group wanted an experienced Engineering MBA to assist in some strategic planning work and from this I was fortunate enough to secure a longer-term assignment in Houston.

Outline your office culture: The company has recently been through a merger (Chevron and Texaco) and there is a lot of energy going into creating a new culture.

It is an exciting time for our company and working for a global company gives you the opportunity to work with people from all over the world.

My department has people from the US, Venezuela, Australia, the UK and Canada. We work a nine-day/80-hour fortnight and my hours are typically 7am – 6pm.

How much commuting do you do:

It is a 10-15 minute drive each way from my home in the West University district to our office in downtown Houston. Occasionally I will visit one of the other ChevronTexaco office locations in the Houston area.

Does your job involve travel, if so how much, where to and to what purpose: Mainly to San Francisco where our global headquarters is located and some international trips to places such as Japan and Canada.

How well did your work in Perth equip you for your current job: The main advantage is the international perspective I bring to the team and my involvement with our Australian gas business, such as the Gorgon gas development. The team is also impressed with my social coordinating skills. I have introduced a proud Aussie tradition to the team – the sundowner.

Can you see yourself returning to Perth, if so how long and under what circumstances: My current assignment may last anything from two to five years with the possibility of another international post such as Asia or Europe.

In the meantime, I am making the most of working in an overseas location with the ultimate aim of returning to Australia because this is where my home and allegiances are.

What is your email address: garrytflanagan@yahoo.com

p Do you want to nominate someone you know for the Internet Interview? If they are working interstate or offshore in an interesting job send us their email address and some details to editorial@wabusinessnews.com.au

World Oil Supply More Diverse; Non-Opec Production Increasing

(PRESSI.COM 06/10/2003) World oil supply is becoming more diverse and world oil production capacity comfortably exceeds world oil demand, said BP chief economist Peter Davies today.

"As a result, producers were able to meet the needs of oil consumers during the Iraq war and during unplanned supply disruptions in Venezuela and Nigeria. Consuming nations were not required to tap their emergency reserves. This is good news for those concerned about energy security, but it should not lead to complacency," Davies said at the launching of the BP Statistical Review of World Energy 2003.

OPEC, while using spare capacity of almost 4 million barrels a day to keep the market supplied during the war, cut its average daily output by 1.87 million barrels a day in response to weak global oil demand and a 1.45 million barrel-a-day increase in non-OPEC production. OPEC production has declined in three of the last four years.

"The story is one of supply momentum that looks set to continue," Davies said. "Russian oil production is up 25 per cent in three years and Russia has been joined by a new group of oil producing basins, across several continents and regions, that have begun to grow rapidly."

Production from Russia, the Caspian, the deepwater Atlantic Basin and Canada is up 3.3 million barrels a day (26.5 per cent) in three years and has the potential to increase another 5 million barrels a day by 2007.

China accounted for 68.5 per cent of the increase in global primary energy consumption in 2002 and has become a major energy consumer and importer. Consumption of coal, which accounts for 66 per cent of Chinese energy use, grew a massive 27.9 per cent. Oil consumption increased 5.8 per cent or 332,000 barrels a day, accounting for all of the world's oil consumption growth in 2002. China replaced Japan as the world's second largest oil consumer.

Natural gas is the world's preferred non-transport fuel. Outside the Former Soviet Union (FSU) gas consumption has grown 3.4 per cent a year over the past decade and its share of total energy consumption is now roughly equal to coal at 24 per cent.

US gas consumption grew 3.9 per cent in 2002 as North American gas production fell 1.8 per cent. Imported LNG is filling part of the gap. Producers are now considering options for delivering new sources of pipeline gas and LNG to this growing gas market.

Commercial (non-hydro) renewable energies are growing rapidly, but their contribution to total world electricity generation remains small (1.7 per cent in 2000 versus 1 per cent in 1990).

Oil - Brent oil prices averaged $25.19 a barrel in 2002, up slightly on the 2001 average price of $24.77 and well above the post-1986 annual average of $19.40. Prices during 2002 ranged from a low of around $18 per barrel in mid-January to peak just before the end of the year at $32.

Global oil consumption was broadly flat, increasing 290,000 barrels a day from 75.5 to 75.7 million barrels a day. All of the increase is attributable to China where oil consumption increased 5.8 per cent or 332,000 barrels a day.

Global oil production declined 415,000 barrels a day, or 0.7 per cent, from 74.4 million to 73.9 million barrels a day. OPEC daily oil production fell to 28.2 million barrels a day, a drop of 1.87 million barrels a day (6.4 per cent). The steep fall resulted from a number of unplanned disruptions and because some OPEC producers, primarily Saudi Arabia, curtailed production in response to weak demand and to a significant 1.45 million barrel per day increase in non-OPEC oil output. Large daily production increases occurred in Russia (640,000 barrels), Kazakhstan (150,000 barrels), Canada (170,000 barrels), Angola (160,000 barrels) and Brazil (160,000 barrels).

Gas - World consumption of natural gas increased in 2002 by a relatively strong 2.8 per cent on the strength of a 3.9 per cent increase in US consumption and a 7 per cent increase in non-OECD Asia Pacific consumption. Growth in natural gas consumption outpaced growth in world primary energy and its share of total energy consumption is now roughly equal to coal at 24 per cent.

Global natural gas production increased 1.4 per cent, from 2,493 billion cubic metres to 2,527 billion cubic metres. North America was the only region to experience a production decline, falling 1.8 per cent from 779 to 766 billion cubic metres. A price-driven drop in drilling activity explains some of the production decrease, but the maturity of US and Canadian gas producing basins was also a factor.

Coal, nuclear and hydroelectric - Coal was the fastest growing fuel in 2002 with coal consumption increasing 6.9 per cent in 2002 on the strength of an extraordinary reported increase in China of 27.9 per cent. Excluding China, world consumption increased just 0.6 per cent.

Consumption of nuclear power increased 1.5 per cent, with most of the increase coming in Asia. World consumption of hydroelectric power increased 1.3 per cent from 2001 but was still less than in 2000. Nuclear and hydroelectric power each account for about 6 per cent of total world energy consumption.

Note to Editors:

This is the 52nd edition of the BP Statistical Review of World Energy.

The BP Statistical Review of World Energy 2003 is published on the internet at www.bp.com/centres/energy where data can be viewed and downloaded.

Press copies of the Review are available from the BP press office (tel: 44 (0)20 7496 4076).

This material has been produced by Bp. It is delivered by Pressi.com in its original form.

Copyright © 2003 Pressi.com. Terms of use. Send feedback to Pressi.com. Privacy policy. 0.23.

ChevronTexaco sells gas tract interest

June 7, 2003, 4:06PM
Bloomberg Business News

ConocoPhillips bought 40 percent of a Venezuelan natural gas tract from ChevronTexaco, according to a prepared statement by ChevronTexaco last week.

ChevronTexaco, the second-largest U.S. oil company, retained 60 percent of Block 2 in Venezuela's offshore Deltana Platform tract, South America's largest natural gas reserve. The tract is between Venezuela and Trinidad and Tobago.

ChevronTexaco spokeswoman Monica Davila in Caracas would not disclose the terms of the purchase.

ChevronTexaco, which won development rights to Block 2 in February, said in April it planned to spend as much as $1 billion to develop the tract. Venezuela's state oil company, Petroleos de Venezuela, retained the right to acquire as much as 35 percent of the project, the statement said.

Venezuela is counting on natural gas from Deltana to reduce its dependence on revenues from oil exports. The Deltana Platform is divided into five blocks and comprises 27,000 square kilometers. Venezuela estimates the area holds up to 40 trillion cubic feet of natural gas.

Natural gas produced at Block 2 will be processed into liquefied natural gas and exported to the United States, the release said.

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