Pennzoil Says No to Texaco’s Latest Proposal
Pennzoil directors Thursday rejected as no “kind of serious settlement discussion” a new offer by Texaco to settle the dispute that led to an $11.1-billion damage award against Texaco.
Pennzoil Chairman J. Hugh Liedtke, speaking to reporters after the oil company’s annual meeting Thursday morning, would not disclose the terms of the latest offer except to say that it was “not very” different from Texaco’s previous settlement proposals and was not even a formal written proposal.
The Times has learned from a source close to the negotiations that Texaco offered to give Pennzoil several oil and gas properties and other assets that together are valued at less than $1 billion. The properties, the source said, are not part of those formerly owned by Getty Oil, whose 1984 acquisition by Texaco is central to the dispute. Pennzoil won a lawsuit in which it accused Texaco of illegally interfering in Pennzoil’s agreement to acquire Getty.
Texaco has made two previous settlement offers, both rejected by Pennzoil. The first involved some Getty properties, and the second was an offer to merge Texaco and Pennzoil.
In rejecting Texaco’s latest offer, Pennzoil issued this explanation: “Based on the conversations we’ve had, we did not think that what they were talking about would serve as a point of departure for any kind of serious settlement discussion.”
Separately Thursday, Pennzoil cited lower oil and natural gas prices for a 26% decline in first-quarter earnings, which totaled $42.3 million, compared to $57.4 million a year earlier.
To cope with the collapse of oil prices, Pennzoil has cut all employees’ salaries, halved its capital spending budget and is expected to announce Monday an early retirement program. It also warned shareholders Thursday that it may face a substantial write-down of assets on oil and gas properties 49% owned by Pennzoil.
Texaco, too, has been forced to reduce its capital and oil exploration budgets and cut operating expenses. But in doing so, the oil giant said Thursday, it was able to forestall an earnings decline in the first quarter.
In fact, Texaco’s earnings actually rose slightly--to $328 million from $320 million a year earlier.