Chevron, Texaco to Merge Into World's Fifth Largest Oil Company
No Gouging in the West After September 11th Attacks
Phillips Completes Buyout of Tosco
Equilon Looks to Build a New Mexico Pipeline
Village Mart Converts Lube Bays to a Casino

CHEVRON, TEXACO TO MERGE INTO WORLD'S FIFTH LARGEST OIL COMPANY

SAN FRANCISCO, CA. — After almost a year of working to get government approval, Chevron has received the go-ahead from both the FTC and the company’s stockholders to purchase Texaco Inc. for $46.3 billion, creating ChevronTexaco, the world’s fifth-largest oil company.

This move will dramatically change the branded supply situation in the West as Chevron has announced they will sell off their refining and marketing assets as part of the deal. This sale will involve Equilon’s four refineries in the West and pipeline assets as well as supply to 9,000 Shell and Texaco branded stations.

Shell Oil Co. is expected to buy out Texaco’s holdings in the Equilon partnership in the West — as well as the Motiva and Equiva assets in the East. Involved in the sale would be six refineries in the United States as well as 14,000 gasoline stations.

Although negotiations are underway for the purchase, the refining and marketing assets will be placed into a trust this month if both parties are unable to agree on a sale price. This would allow the Chevron buyout to continue as planned.

"There will be a change with the supply of unbranded after the merger," noted Dave Reeves, head of North American Products for ChevronTexaco. "From Chevron’s perspective, we don’t supply unbranded today. Of course, with other refineries involved, we will participate until those assets are divested. We will ultimately not have an interest in the unbranded market. In the short term, supply is approximately the same, demand is approximately the same, and there’s a natural tendency to run refineries at their maximum level, so I don’t anticipate any shortages."

Reeves added that "We will always be in the market, at least marginally, buying product and bringing it to our distribution system. It can swing as much as 30,000 barrels per day. But we will continue in the spot market to serve our branded customers."

As part of the divestiture agreement, Chevron and Texaco will license the Texaco brand to Equilon and Motiva on an exclusive basis until June 30, 2003, and on a non-exclusive basis until June 30, 2006. This will give the new owner of the stations an opportunity to rebrand — however, the Texaco brand will remain the property of Chevron.

"The fate of the Texaco brand is unclear," said Reeves, "other than the brand will ultimately be owned by ChevronTexaco. We will license the Texaco brand to the joint venture. We have not decided after next year if we want to keep the Chevron brand or keep the Texaco brand."

"The new ChevronTexaco will bring together two great companies with long histories of success and innovation to tackle the new challenges we face in meeting the energy needs of our customers and partners, stated Texaco CEO Glenn Tilton, announcing the completion of the merger. "We…look forward to completing the merger and creating a great new energy company."

NO GOUGING IN WEST AFTER SEPTEMBER 11TH ATTACKS

LOS ANGELES, CA. — While some gasoline wholesalers and retailers posted huge price increases in the wake of the September 11th terrorist attacks, gasoline marketers in the West stayed the course and prevented any major customer panic.

On the day of the attacks, some gasoline racks in the West were closed as a precaution against any potential destruction. However, gasoline supplies were never at issue and the closed racks were opened within 24 hours.

In Hawaii, Tesoro Hawaii froze gasoline prices at its 33 company operated stations through the week of the tragedy to keep consumer confidence high.

At the other end of the spectrum, however, marketers in the Midwest and East raised their street prices several dollars per gallon for regular unleaded after the tragedy. One dealer, R and L Texaco in Oklahoma, said he hiked his price for regular unleaded to $5.00 per gallon after he was told it would be "unclear" when he would be able to receive his next shipment. A dealer in Topeka, Kansas said he raised his prices to $4.00, $5.00 and $6.00 for his three grades of gasoline "to slow demand from panicked motorists."

Most of the gasoline stations which raised their prices dramatically dropped them back down within 24 hours after being called "gougers" within their local communities.

PHILLIPS COMPLETES BUYOUT OF TOSCO

BARTLESVILLE, OK. — Phillips Petroleum Company has completed its acquisition of Tosco Corporation as of Sept. 17 after receiving regulatory clearance from the U.S. Federal Trade Commission. As expected, there were no requirements for either company to sell off any assets for the deal to go through.

Phillips 66 Company now owns 10 U.S. refineries with a combined capacity of 1.7 million barrels per day, along with a 75,000 BPD refinery in Ireland as well as approximately 12,400 service stations across the United States. These assets make Phillips the second largest refiner (behind ExxonMobil) and the third largest gasoline retailer in North America in terms of gallons sold.

Phillips will also own the right to the Phillips 66, 76, Kendall and Circle K brands. According to the company, they will continue to market under all four brands as they make decisions about the best way to move forward in the future.

The new company’s refining headquarters will be located in Linden, NJ., with marketing headquarters based in Tempe, AZ., at the former Tosco Marketing headquarters. Research and development as well as much of the company’s support staff will be based at Phillips’ corporate headquarters in Bartlesville, OK.

"We have combined two strong complementary companies into a significant refining and marketing competitor in the United States," said Jim Mulva, Phillips’ chairman and chief executive officer, announcing the close of the deal. "Moving forward, our focus will be on integrating and developing synergies in our refining, marketing and transportation business, and further growing our worldwide exploration and production position.’’

Effective with the close of the transaction, as previously announced, Michael Panatier is chief operating officer of Phillips’ refining, marketing and transportation business, Phillips 66 Company.

"We remain committed to both companies’ customers, dealers and distributors, and will work to integrate our assets as seamlessly as possible," said Panatier. "In the days and months ahead, we’ll focus our attention on integrating the two businesses. Looking ahead, we intend to use our intellectual capital to become a more efficient and cost-effective refiner, rationalize our marketing operations, and optimize our supply chain."

Tom O’Malley, the former chairman and chief executive officer of Tosco, is serving as vice chairman and a member of the Board of Directors of Phillips Petroleum Company, a position he will keep through the end of the year.

O’Malley said that "This completes the transformation of Tosco from a small, single-refinery company into a part of a major international oil corporation."

"I am confident that we will realize efficiencies through this transaction. In fact, we expect to achieve or exceed synergies of $250 million in 2002,’’ said Mulva. "At this point, we don’t know what the final effect will be on the combined workforce. As with any major change, a close look is being taken at how things are done today and how they might be done more efficiently in the future."

EQUILON LOOKS TO BUILD A NEW MEXICO PIPELINE

HOUSTON, TX. — Equilon Pipeline Company is continuing its efforts to build a New Mexico Products Pipeline.

The proposed New Mexico Products Pipeline, will originate in the Odessa, Texas area and transport gasoline and other petroleum products to Albuquerque, Santa Fe, and the Four Corners areas. The project will utilize 406 miles of existing pipeline through New Mexico.

"Our goal is to provide the neighboring communities with access to our plans, information on the safety features of this project, and our progress as we move forward with a pipeline system that will provide New Mexicans increased access to competitively priced Gulf Coast fuels," said Chuck Moseman, Equilon project director.

"We’re eager to keep our existing and future pipeline neighbors informed about the project," Moseman added.

VILLAGE MART CONVERTS LUBE BAYS TO A CASINO

BILLINGS HEIGHTS, MT. — The Village Mart service station and convenience store is changing over its lube bays to a new business it expects to be more profitable: a casino.

The Village Mart is remodeling the bays into the casino, called Hilltop Station, which incorporates a food court and a bar to serve beer and wine as well as the casino which will include 20 slot machines.

The company will continue to operate the service station, carwash, and c-store already on the property.

Dick Skewis, who owns the Village Mart at 523 Hilltop Road, told local reporters that he was initially turned down by the Billings City Council because the business is within 600 feet of an elementary school. He asked the Council to reconsider and they granted the application to build the casino.

The renovations are expected to be complete by the end of Summer.

Skewis also asked the Council to add a casino to Dick’s 24th Street Conoco at 2404 Broadwater Ave., a site he also owns, but was denied permission to convert that site as well.

Originally published in the October 2001 issue of O&A Marketing News.
Copyright 2001 by KAL Publications Inc.