Shareholder Says Chevron Offer for Oil Company Is Undervalued

An investment banker who is also a Huntington Beach Co. shareholder contends that the company is worth at least 81% more than Chevron Corp. plans to pay in its bid to take control of the oil and real estate development firm.

Chevron said Thursday that it will ask the directors and shareholders of the Huntington Beach Co. to approve a plan to exchange $65 million of Chevron common stock for the approximately 100,000 outstanding shares of the Huntington Beach Co. that Chevron does not already own. Chevron currently owns about two-thirds of Huntington Beach Co.

Based on Chevron’s calculations, the local firm is worth about $195 million, or $650 a share.

But John H. Norberg, a partner in Diehl & Co., a Newport Beach-based investment banking firm, said Friday he had just completed a study of the Huntington Beach Co. that showed the company is worth more than $353 million--or $1,180 per share--not taking into account the value of its oil reserves.

Huntington Beach Co. President Bill Foster, who is also president of Chevron Land & Development Co., called Norberg’s study “laughable” and “simplistic.”

Real Estate Holdings

Norberg, who claims to own 100 shares of Huntington Beach Co. stock, said that over a two-month period he did a “piece by piece” evaluation of the Huntington Beach Co.’s substantial real estate assets, including shopping centers, office parks and residential developments, and 1,440 acres of as yet undeveloped acreage.

“The company also owns the second largest oil field in the state of California that is only 30% depleted,” Norberg said. But he said figures on the extent of the oil reserve were unavailable from Chevron or the Huntington Beach Co. and, therefore, “placing a value on this asset is impossible.”

Norberg said his analysis was based on information about real estate assets that was in the Huntington Beach Co.’s annual reports. He said he used very conservative methods of calculating land values.

Norberg said he completed an analysis of the Huntington Beach Co., which he compiled in five typewritten pages, to provide information to prospective investors. Diehl & Co. has been brokering Huntington Beach Co. stock for about 18 months, managing partner Russell Diehl said, in belief that the stock is significantly undervalued.

However, Foster criticized the report for characterizing the Huntington Beach oil field as being the state’s second largest and “only 30% depleted.” He said that, instead, the field is about “fifth or sixth (largest in the state) in production” and it is in decline. Moreover, he said that while only about 10% of the oil in the field has been tapped, it is likely that no more than 12% of the oil in it will ever be produced because of geological barriers.

“I don’t think the detail and logic behind it (Norberg’s study) is going to impress anyone,” Foster said. He said that Chevron based its purchase offer on a study of the Huntington Beach Co. done by “a very prominent valuation firm” based in Los Angeles. He said the firm asked him not to release its name until it has completed updating its study, which it made about four months ago.

The Huntington Beach Co.’s largest minority shareholders--John V. Crawford, Thomas H. Crawford and Roy E. Nafatzger--were not available Friday to comment on their opinion of the company’s value.

Mid-May Vote

Foster said the Chevron purchase offer will be formally tendered to the Huntington Beach Co.’s board of directors at its meeting in mid-May, at which time the directors will decide whether to recommend it to the shareholders.