Chevron CEO Announces Plan to Turn Over Company’s Reins
Chevron Corp. announced Wednesday that Chairman and Chief Executive Kenneth T. Derr will retire Jan. 1 and be replaced by Vice Chairman David J. O’Reilly, Derr’s handpicked successor and a hard-core oilman who has never worked for another company.
The 63-year-old Derr is highly regarded in the oil industry for having pushed the San Francisco-based company into international arenas and for producing a solid growth record during his 11 years in charge.
Derr said he had wanted to retire a year ago but decided to stay longer to steer Chevron, the nation’s fifth-largest oil company by revenue, through one of the worst industry depressions in recent memory. Prices for crude oil dipped last year to less than half the current $24-a-barrel neighborhood, and oil companies were roiled by consolidation and downsizing.
The merger mania also reached Chevron, which negotiated seriously with No. 4 Texaco Inc. about a combination before talks fell apart in June, reportedly not just over price but also over who would run the merged company. Derr was said to have wanted O’Reilly, but Texaco Chief Executive Peter I. Bijur, 56, was believed to have balked.
O’Reilly acknowledged during a news conference Wednesday that Chevron needs to boost earnings and would be interested in more acquisitions such as this week’s purchase of Petrolera Argentina San Jorge, a major Argentine oil and gas exploration and production company.
“But I don’t see that we have to do something in a macro sense to be a top performer in this business,” O’Reilly said.
Despite his statement, analysts are not counting Chevron out of the takeover game.
“My advice to O’Reilly is on Jan. 1 he should make a phone call to Peter Bijur and wish him a happy new year and suggest that they should get together,” said Fadel Gheit, senior energy analyst with Fahnestock & Co. “Combining Chevron and Texaco is a natural.”
The 52-year-old O’Reilly, a native of Dublin, Ireland, is credited with greatly improving the performance of Chevron Products Co., which he took over in late 1994. During his tenure, U.S. refining and marketing earnings rose to $633 million in 1998 from $75 million in 1995. Most recently, O’Reilly engineered Chevron’s current $500-million cost-cutting campaign.
Chevron’s stock rose 56 cents a share Wednesday to close at $88.19 on the New York Stock Exchange.
O’Reilly joined Chevron in 1968 immediately after earning a degree in chemical engineering from Dublin’s University College. He began as a process engineer but quickly moved up the corporate ladder.
