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SAN RAMON, Calif. -- ChevronTexaco Corp. outlined a sweeping plan to sell up to $6 billion in assets over the next few years including more than 500 convenience stores and gas stations in the United States and a Salt Lake City refinery.
The plan, unveiled at the San Ramon, Calif.-based oil giant's analyst meeting in New York, is designed to focus the company on its most profitable businesses after two years of disappointing earnings. The result will be a withdrawal from large swaths of the globe in certain industries. "We don't have to be everywhere," said David O'Reilly, ChevronTexaco's chief executive. "But where we are, we want to be big and compete effectively."
ChevronTexaco has been under pressure from Wall Street to rid itself of extraneous holdings. The company's financial performance trails competitors such as Exxon Mobil Corp. and BP Plc, according to a Bloomberg News report. O'Reilly has had his hands tied during ChevronTexaco's slide. His company had been prohibited from making major divestments for two years as a condition of the merger in 2001 between Chevron and Texaco. The second anniversary falls in October.
Earnings released Friday show that the company's profit in the second quarter quadrupled to $1.6 billion versus $407 million in same period a year ago. Revenue was $29.4 billion, up 16 percent from $25.3 billion in the second quarter 2002.
Worldwide, ChevronTexaco will divest 1,500 service stations and convenience stores. The divestments are intended to allow the refiner/marketer to focus its retail business on its core West Coast markets, according to O'Reilly. International service stations are also targets for divestiture. About 900 are expected to be sold in Asia and Africa, O'Reilly said. Nearly 24,000 service stations worldwide carry one of ChevronTexaco's brands. But the company actually owns only a fraction of those stations, with the rest belonging to independent parties. It's unclear how many of the stations will keep a ChevronTexaco brand name after being sold. The company's global brands are Chevron, Texaco and Caltex.
"The number of service stations being sold was kind of a surprise," said James Halloran, an energy analyst for National City Wealth Management, a financial services company in Cleveland that holds 1.24 million ChevronTexaco shares. "But I can understand it. It takes a lot of money and advertising to support a national program for gasoline."
Another area where O'Reilly wants to swing his ax is oil. He plans to sell 400 oil fields in North America, or one-third of his company's holdings on the continent. That total includes 100 oil fields that ChevronTexaco put up for sale in April. They included properties in California, Texas, Louisiana and Canada. In all, ChevronTexaco expects the field sales to reduce its oil production by 115,000 barrels a day. The company's global production averaged 2.2 million barrels per day in the second quarter.
ChevronTexaco's oil production is expected to drop slightly or remain flat over the next couple years because of the oil field sales, the report said.
O'Reilly was vague about some other parts of ChevronTexaco's plans such as its retail and refining businesses in Europe, Australia, the Middle East and nations along the South American Andes. He designated them as nonstrategic, with limited hope for investment and uncertain futures. Analysts, the report said, assumed that meant many properties in those areas would be put up for sale as well. The company included refineries in Salt Lake City and the Philippines on the nonstrategic list.
O'Reilly said his company will receive about $1 billion to $2 billion a year from its asset sales.
Assets on the Block
* 1,500 service stations globally (550 in the United States, 900 in Asia and Africa
* Refining and retail marketing interests in Europe, Australia, the Middle East and nations along the South American Andes Mountains
* 400 oil fields in North America (100 of those had already been put up for sale)
* Refineries in Salt Lake City and the Philippines.