Chevron, Phillips to Combine Chemical Units

Chevron Corp. and Phillips Petroleum Co. on Monday said they will combine their chemical businesses into a joint venture and cut about 600 jobs, or 10% of the new company’s work force.

The companies expect the moves to reduce costs by more than $150 million a year. The venture will have more than $6 billion in assets and be one of the world’s biggest producers of olefins and polyolefins used to make basic chemicals and plastics.

San Francisco-based Chevron is the second-largest U.S. oil company in terms of assets. Phillips, based in Bartlesville, Okla., is sixth. Both are cutting costs to keep up with larger rivals, such as Exxon Mobil Corp., created by a recent wave of mergers.

The venture, to be named later, will be based in Houston. It will borrow $1.6 billion so it can pay Chevron and Phillips $800 million each in cash.

The companies expect to complete the transaction by midyear and said the deal will boost their earnings. Combined, their chemical businesses employ about 6,000 people and had 1999 revenue of about $6 billion.

In New York Stock Exchange trading, Chevron shares rose 50 cents to close at $79.06, and Phillips rose $1 to close at $40.

Chevron Chemical Co. makes chemicals, plastics and fuel additives in nine U.S. states and in Brazil, France, Japan, Mexico, Saudi Arabia and Singapore. Phillips produces chemicals in Texas, Puerto Rico, Singapore and Belgium.

The venture won’t include Chevron’s Oronite fuel and lubricant additive business.

It didn’t complement Phillips’ operations and wouldn’t bring about enough cost savings, the companies said.

Talks between Chevron and Phillips surfaced in September. Phillips was seeking a partner or buyer for its chemical and natural-gas processing businesses. It now has both. Phillips and Duke Energy Corp. agreed in December to combine their gas-processing units into a separate, publicly traded company.

Chevron and Phillips are trying to focus on more-profitable oil and gas exploration.