Pennzoil Puts Its Costs in Texaco Suit at $400 Million
Pennzoil Co. expects to pay $400 million in lawyer fees and other expenses in the protracted battle with Texaco Inc., which has agreed to make a $3-billion settlement to the smaller oil company.
J. Hugh Liedtke, chairman of Pennzoil, told shareholders in a letter that the company anticipates a “pretax net recovery after all expenses incurred in connection with the litigation and the bankruptcy procedures of in excess of $2.6 billion.”
Pennzoil recently agreed to the $3-billion settlement, dropping its $10.3-billion court-awarded judgment in a battle that erupted in 1984 over Texaco’s acquisition of Getty Oil Co., which Pennzoil previously had agreed to acquire.
A copy of Liedtke’s letter, dated Dec. 23, was obtained by the Houston Post.
“It is clear that the cash recovered in the settlement, along with the cash the company has accumulated over the past two years, puts Pennzoil in a strong position to finance major acquisitions,” Liedtke wrote.
He also said Pennzoil was in a holding pattern during the four-year battle with Texaco, unable “to move forward as rapidly as it might have or to take risks and act on opportunities which under normal circumstances would have been considered favorable.”
Liedtke also told shareholders that the tax consequences of receiving the judgment are still unclear, and the amount of tax the company pays will depend upon how the funds are invested.
The $400-million price tag on Pennzoil’s lawsuit includes all expenses, including attorney’s fees, which may not be disclosed separately, said Robert G. Harper, Pennzoil spokesman.
“All kinds of things were involved in expenses,” Harper told the newspaper.
In the letter, Liedtke defended Pennzoil’s decision to settle for the $3 billion, saying it may have taken years to collect the larger judgment particularly in light of Texaco’s bankruptcy proceedings.
Texaco filed for protection under Chapter 11 of the U.S. Bankruptcy Code in April of this year.