ChevronTexaco is acquiring Unocal in a stock and cash transaction valued at approximately $18 billion, including net debt.
The acquisition, which is subject to approvals by Unocal shareholders and certain regulatory agencies, will significantly enhance ChevronTexaco’s position as a leading global energy provider.
“Unocal is a unique independent with supermajor assets that are an excellent fit with our existing portfolio and our long-term strategies — to grow profitably in core upstream areas, build new legacy positions and commercialize our large undeveloped natural gas resource base,” ChevronTexaco Chairman and CEO Dave O’Reilly said. “It is an attractive transaction that provides value in both the near- and long-term.”
“Over the past several years Unocal has been highly successful in building a portfolio of major international and deepwater assets and prospects,” said Charles R. Williamson, Unocal Chairman and Chief Executive Officer. “The combination with ChevronTexaco will provide the financial and technical resources to maximize the potential of these assets and prospects.”
ChevronTexaco expects oil-equivalent production from the combined portfolios during 2006 to average about 3 million barrels per day. Unocal’s 1.75 billion barrels of oil-equivalent proved reserves would increase ChevronTexaco’s reserve base as of the end of 2004 by about 15 percent. The resultant weighting of natural gas reserves would increase by about 5 percentage points to roughly one-third of the oil-equivalent total. ChevronTexaco expects the transaction to be accretive to ChevronTexaco’s prospective production growth rate.
ChevronTexaco indicated the Unocal assets would provide an enhanced presence in several of the company’s core areas of operations, including:
O’Reilly said the company would target synergies in a number of operations and corporate functions by rationalizing duplicate activities and highgrading investment programs. The integration process will focus on combining the strengths of the two companies into a unified, high-performing enterprise. For example, ChevronTexaco’s proven expertise in project execution, particularly in the deep water, will help leverage the full value of Unocal’s major developments. There will also be opportunities to add value by adopting Unocal’s operating best practices in ChevronTexaco.
ChevronTexaco expects disposition of assets following the close of the transaction to result in proceeds of more than $2 billion. Annual savings from operational synergies and reduced corporate expenses are estimated by ChevronTexaco at more than $325 million before tax.
The acquisition consideration is structured as 75 percent stock and 25 percent cash, providing an overall value of approximately $62 per share based on the closing price of ChevronTexaco stock on April 1. Unocal shareholders may elect to receive either 1.03 shares of ChevronTexaco stock or $65 in cash for each share of Unocal stock; however, both of these elections will be subject to proration. In the aggregate, ChevronTexaco will issue approximately 210 million shares of ChevronTexaco stock and pay approximately $4.4 billion in cash. ChevronTexaco will also assume estimated net debt of $1.6 billion.
ChevronTexaco estimates the acquisition would be accretive on a cash flow per-share basis. Further, it will be broadly neutral to earnings per share after taking into account synergies and significant additional share repurchases. ChevronTexaco indicated plans for the repurchases, subject to board approval and consistent with liquidity, legal requirements, and maintaining the company’s AA credit rating. Over the past year, ChevronTexaco repurchased $2.8 billion of its common shares, as part of a $5 billion repurchase program.
Murdok | Breaking eBusiness News
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