Chevron Unocal Merger Agreement

Chevron surprised some oil industry observers by aggressively following Unocal at a time when oil prices were close to record highs. Officials at San Ramon, California, argued that they paid a fair price for energy installations in a sparkling market for mergers and acquisitions. It is now up to Chevron to integrate the business and find ways to increase Unocal`s well-known oil and gas reserves in order to obtain a good return on its investments. Unocal`s Board of Directors recommends that Unocal shareholders accept Chevron`s merger agreement as amended at a special meeting on August 10. Chevron stated that it completed the merger process on August 10, just over four months after the initial offer was submitted. The company was forced to increase its previous offer in order to counter the competing Chinese offer. CNOOC abandoned its $18.5 billion offer in early August in the face of a violent political backlash in the United States over access to oil facilities. At that time, CNOOC s the pursuit of Unocal Chevron had forced to soften its offer. Many energy economists say the acquisition will have little impact on consumers. Oil prices are set by the international market, not by individual companies. And Unocal has not had gas stations for some time, so a merger will not give Chevron more electricity to raise the price of gasoline. The rival deal has worried many observers in the United States – worried about giving a self-grown oil producer to a Chinese competitor, especially at a time when crude oil prices are falling at record highs.

Since Chevron and Unocal first announced the deal, the price of oil has risen by $12 per barrel in April. At the end of the merger, Unocal`s long-time shareholders said they were happy to remain in U.S. hands. According to a preliminary count, just over three-quarters of Unocal`s shares were voted for Chevron`s offer of approximately $US 66.21 per share. The merger was supposed to end late yesterday. In announcing the merger, Chevron Chairman Dave O`Reilly said the acquisition was a good strategic solution for the company. Unocal`s main areas of intervention are the Asia-Pacific region, the Caspian Sea and the Gulf of the United States in Mexico. The acquisition will increase Chevron`s production capacity to 2.8m barrels of oil equivalent per day and increase its reserve position by more than 15%. “This merger offers current and long-term investment value,” he said.

Chevron expects annual savings through operational synergies and reduced business expenses by approximately $325 million. Chevron Chairman and Chief Executive David O`Reilly said in an interview yesterday that he was following Unocal because the deal “provides good value to our shareholders.” He said he had offered for Unocal when no other Western oil company was ready, because the unocal global assets remain tied to Chevron`s assets. “We have more synergies in terms of duplication than any other company. It makes us more valuable,” he said. Still, Chevron is paying a lot for that boost, analysts say. Chevron must now focus on absorbing Unocal`s U.S. and overseas operations. But the offer from CNOOC, which is partly owned by the Chinese government, has caused an outcry in Congress, where politicians see rising oil thirst as a threat.

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