Market tentative to laud Chevron Texaco bid for Unocal.(NewsWell)

Publication: Oil and Gas Investor

Publication Date: 01-MAY-05

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The proposed combination of ChevronTexaco and Unocal illustrates several industry trends, including the majors' need to grow and hold Asian assets and their use of higher stock prices as currency. But is the deal a good one?

The marketplace was hesitant to fully endorse it at press time. "The market has reacted more negatively than we would have expected ...," says Deutsche Bank analyst Paul Sankey.

"But our take on the deal is that it is an outstanding strategic move, and [various potential problems], we could be more positive. Return on capital employed is not the way to look at this deal; we believe it is about assets."

Those potential problems include "near-term risk on the deal closing, on Asian anti-trust, the risk of Myanmar opposition rattling investor sentiment, the limited potential for a counterbid, and a nasty downstream earnings report due end-month."

Forming an Asia-Pacific super-major is the leading...

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