Chevron-Texaco merger to tilt towards upstream activity

A merged Chevron-Texaco will be angled toward upstream exploration and production to take advantage of an expected long-term demand trend, the top executive of Chevron Corp said yesterday.

"Chevron-Texaco will be overweighted in the upstream and in the most of the right places - a supermajor where it counts," Chevron chairman and chief executive officer David O'Reilly told an audience of institutional investors at the annual Howard Weil Energy Conference.

O'Reilly, who engineered the pending merger between Chevron and smaller rival Texaco Inc, offered his vision of what will be the world's No 4 producing integrated energy company, which he will chair upon regulatory approval.

"The upstream will offer better growth and return than the downstream, over the past decade we've weighted our upstream portfolio to higher growth regions of the world," O'Reilly said, referring to Chevron operations in Asia, the Caspian Sea, West Africa and Latin America.

Fiscally cautious oil companies are spending their record cash flows from "$27 a barrel oil and $5 gas" on stock buybacks or to pay down debt incurred in the 1998 oil price crash, O'Reilly said.

And that means less money is being spent on the capital investments required to increase production to meet demand. "Barring a global recession, it looks like prices are going to stay higher and longer because there just isn't enough investment yet," O'Reilly said.

The completion of the merger is still pending approval from the U.S. Federal Trade Commission and California regulators, who have a keen interest in Chevron's strength in the isolated West Coast market. "I firmly believe we will win the necessary approval from regulators and stockholders," O'Reilly said.

gulf-news.com