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ChevronTexaco to buy Unocal

Impact to Cook Inlet assets, employees not known if deal goes through

Posted: Tuesday, April 05, 2005

ChevronTexaco Corp. announced Monday it will acquire Unocal Corp., leaving some to question the future of Unocal's assets in Cook Inlet.

The acquisition is subject to approval by Unocal shareholders and certain regulatory agencies.

ChevronTexaco is acquiring the company in stock and cash transactions valued at approximately $18 billion, including net debt, according to a press release.

According to the Associated Press, ChevronTexaco will assume $1.6 billion in Unocal's debt and sell about $2 billion in assets.

The press release said Unocal's 1.75 billion barrels of oil-equivalent proven reserves would increase ChevronTexaco's reserve base as of the end of 2004 by 15 percent.

A spokesperson for ChevronTexaco, said some assets will be sold but declined to comment on which ones.

Unocal's Alaska assets may be part of the ones that will be sold. Companies that could be interested in Unocal's gas holdings in the region are Marathon Oil Co., Aurora Gas LLC and Forest Oil Corp. On the oil side of the industry, Forest Oil and XTO Energy could be suitors if the assets are sold.

Unocal Alaska had no comment on the future of its Alaska assets or on whether it was planning on downsizing employee numbers. They held a conference call for employees Monday but declined to allow the Clarion to listen or provide information on the nature of the call.

Unocal employs 300 Alaskans, 200 in the Kenai area. In 2003, the company spent $177 million in salaries and wages and with other businesses and $42 million in state taxes and royalties, according to company sources.

"Any time there's a consolidation like this, the body count goes down, not up," said Dudley Platt principal of DA Platt and Associates, a petroleum engineering consultant. "It's really going to get interesting in Cook Inlet now."

It is unclear whether there will be downsizing in the Alaska operations, he said.

Platt said when oil companies acquire other companies, it is often to increase its strategic position. Also, he said it gives companies new assets, both developed and undeveloped, instead of having to explore for oil and gas.

In ChevronTexaco's case, the acquisition will give them a strategic position in the Pacific Rim, he said.

"ChevronTexaco did not buy Unocal for its Alaska assets," he said.

Enstar Natural Gas Co., who has a contract to purchase gas from Unocal, said it has not heard about any changes or transfers in their contract.

In 2001, a contract between Unocal and Enstar was approved by the Regulatory Commission of Alaska, tying the price of gas Enstar purchases from Unocal to a 36-month trailing average of Henry Hub prices. The Henry Hub is a pricing index for gas in Louisiana. Since that time, Enstar gas prices have risen steadily.

Dan Dieckgraeff, manager of finance and rates for Enstar, said usually the contract follows the asset. If Unocal's Cook Inlet assets are sold, it is not certain their gas contract would follow it to the new owner — but it may. At this point, talk of Unocal's natural gas assets in the inlet being sold is only a rumor, he said.



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