Chevron Corp. and Phillips Petroleum Co. have discussed forming a joint venture in the petrochemical business, people close to both companies said Monday.
The people also said that a merger of the two companies was not imminent.The Sunday Times of London reported over the weekend that Chevron was in talks to buy Phillips in a deal that would be worth about $16.5 billion, or $65 a share. Shares of Phillips rose $2.8125, to $56.5625, Monday on the New York Stock Exchange amid speculation that the company would be bought.
The companies said they had no comment on the report of merger talks. But analysts and other experts said Monday that those oil companies, like Chevron and Phillips, that did not find partners despite a recent wave of mergers in the industry were under less pressure to snare a mate since the recent recovery in crude oil prices.
The price of crude oil has more than doubled since the end of last year, with the benchmark West Texas Intermediate approaching $25 a barrel in recent days.
The wave of mergers last year was spurred in part by a sharp decline in crude oil prices. Among the mergers, British Petroleum Co. acquired Amoco Corp. and that combined company subsequently agreed to buy Atlantic Richfield Co. Exxon Corp. also agreed to buy Mobil Corp. in a deal that would create the world's largest oil company.
More recently, Totalfina SA agreed to buy Elf Aquitaine SA for $48 billion. And Chevron was also in talks earlier this year to acquire Texaco Inc., but Texaco rejected the overture.
"With crude at $25 there is less impetus to merge," said Harry Quarls, a senior vice president who oversees the energy group for Booz Allen & Hamilton, the consulting firm.
Merger activity also has been dampened by uncertainty over the conditions that the Federal Trade Commission could impose before it would approve the proposed merger of Exxon and Mobil.
Nevertheless, Quarls said that companies still felt pressure to strengthen some of their businesses since the mergers had left competitors better able to cut costs.
Further, he added, the petrochemical operations of both Chevron and Phillips were under greater pressure since British Petroleum and Amoco had begun to combine their operations.
Chevron's revenue last year from its chemical business totaled $3 billion while Phillips' totaled $2.4 billion.
"Petrochemicals are also in a downturn," Quarls added. "There's pressure on Chevron and Phillips on the chemical side."
Phillips, the seventh-largest U.S. oil company, is also seeking to sell its natural gas processing division before the end of the year. But while some experts have suggested that Chevron would be a likely buyer, people close to the companies said Chevron had not shown significant interest.
Chevron is the fourth-largest oil company in the United States.