Minor Breakthrough in Oil Battle : Pennzoil, Texaco OK More Talks

All they agreed to Tuesday, in their first cordial encounter in three months, was another meeting.

But for the feuding chairmen of Texaco and Pennzoil, their one-on-one meeting in New York and the agreement to bring together their management teams for further talks amounted to a minor breakthrough in the long-stalled talks toward a settlement of their multibillion-dollar differences over Texaco’s 1984 acquisition of Getty Oil.

After he emerged from the rare face-to-face meeting with Texaco Chairman John McKinley, Pennzoil Chairman J. Hugh Liedtke was described as “hopeful” that the two adversaries at last will resume serious settlement discussions.

McKinley issued a statement from Texaco’s White Plains, N.Y., headquarters confirming that management officials for the two sides will meet soon to resume settlement talks, but he didn’t comment on his perception of Tuesday’s meeting.

Going into the meeting, Liedtke told friends he wasn’t optimistic about engaging McKinley in substantive negotiations. And, based on reports from the Pennzoil side, there were none. Nor was a specific date set for the resumption of talks by Texaco and Pennzoil management teams.

But Liedtke told friends after the 1-hour, 40-minute meeting that while he still isn’t optimistic about a settlement, neither is he pessimistic.

“He said he is hopeful,” said Joseph D. Jamail, Pennzoil’s chief trial lawyer during the Texaco fight and one of Liedtke’s best friends.

That is quite a change of heart from 11 weeks ago, when Liedtke called reporters to his Houston headquarters to say he saw “no reasonable likelihood” of a settlement with Texaco and to predict a lengthy appeals battle.

Those comments followed Texaco’s unwelcomed cash merger offer for Pennzoil in January and a request that Pennzoil drop its $11.1-billion Texas state court judgment against the much-larger oil company.

Since then, the feud has grown increasingly bitter, even though incentives for a settlement continue to grow.

Texaco’s bill gets bigger every day, since interest on the judgment is mounting at the rate of $3 million a day. And because of a standstill agreement with Texaco signed last December, Pennzoil--despite the judgment in its favor--can’t file liens on Texaco properties as security for the judgment.

The standstill agreement expired Tuesday. But Pennzoil’s lawyers believe that a federal appeals court ruling last month--which Pennzoil is appealing--continues to prevent Pennzoil from filing liens.

Exchange of Letters

That is so even though Texaco apparently is now free to pledge some or all of those properties as security for new financing, a step it couldn’t take as long as the standstill agreement was in effect.

Tuesday’s meeting was arranged after an exchange of letters between the two chairmen last week. McKinley wrote Liedtke, inviting a discussion. Liedtke replied that he has always been willing to meet with McKinley and noted that he intended to be in New York on Tuesday. They then agreed to meet.