Pure Resources at Risk?
Category: Economy & Business... Local... Oil & Gas...
Posted Monday, January 10, 2005 at 09:04 AM [GMT-6]

According to this article in today's Wall Street Journal, Royal Dutch/Shell could be eyeing the acquisition of competing oil and gas companies as a way to rebuild its financial and operating performance following last year's disastrous writedown of reserves and resulting management shakeup. One potential target: Unocal.

"Royal Dutch needs to do a deal. Their reserve profile and production profile are not competitive," says Fred Leuffer, an oil-equities analyst at Bear Stearns in New York. He holds an "underperform" rating on Shell's two parent companies. Shell wasn't an investment-banking client of Bear Stearns in the past 12 months, the bank said.

One possible fit: Unocal. The El Segundo, Calif., company saw its share price soar Thursday on reports that China National Offshore Oil, a state-controlled entity known as Cnooc, was considering a bid. With a market capitalization of about $12 billion, it has untapped gas reserves in Asia, already a strong market for Shell. A Unocal spokesman declined to comment.

If such a takeover comes to pass, it will have significant local implications. One of the largest employers among Midland independent oil and gas companies is Pure Resources, a wholly-owned subsidiary of Unocal. In its earlier life, Shell bailed out of the Permian Basin a long time ago, and it remains to be seen whether it would see any new value in keeping operations in this area, or if, like BP after taking over ARCO, it immediately downsizes the office to near zero and either ignores or sells the assets. At a minimum, such an acquisition could lead to a consolidation of the local office into the Houston area, where both Pure and Shell have headquarters.

This is all speculation, of course, but, unfortunately, recent history shows that it doesn't take a prophet to predict these things. Ironically, if a takeover occurs, having the Chinese National Oil Company as a parent could be better for Midland than Shell, as it would be less likely to micro-manage Pure out of existence.

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Comments

And we already have a Chinese oil center sister city......what could be better!!

Posted by: Wallace-Midland Texas at January 10, 2005 11:08 AM

Yeah...the Chamber of Commerce could go wild with this one!

Posted by: Eric at January 10, 2005 11:12 AM
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