Chinese Firm Is Said to Be Eyeing Unocal

A Chinese oil company reportedly is considering a $13-billion takeover offer for El Segundo-based Unocal Corp., which traces it roots to the early days of California’s petroleum industry.

If it comes to pass, the deal would be China’s largest acquisition of an American company. Unocal’s stock jumped nearly 8% on the report, its biggest daily gain in nearly six years.

CNOOC Ltd., an arm of China’s state-owned China National Offshore Oil Corp., is mainly interested in Unocal’s exploration and production in Asia, the Financial Times reported on its website Thursday.

Unocal spokesman Barry Lane declined to comment. Xiao Zongwei, a spokesman for CNOOC, China’s third-largest oil company, also refused to comment.

Unocal’s Asian assets are attractive to international oil companies, which could prompt a bidding fight if CNOOC emerges with an offer, said Jason Putman, an analyst at Victory Capital Management, which owns more than 6 million Unocal shares.

“I think Unocal has a lot of potential buyers,” he said. “That’s one of the reasons we like Unocal.”

Another reason that bidders might surface now is Unocal’s settlement last month of human-rights lawsuits related to its partial ownership of a $1.2-billion natural gas pipeline in Myanmar. The case posed a potential liability to a would-be buyer if Unocal had lost.

However, at least one analyst, Bruce Lanni of A.G. Edwards & Sons Inc., was skeptical.

In a note to clients, Lanni said he was visiting Unocal Chief Executive Charles Williamson and other top executives when the reports surfaced. Although “they did not comment,” Lanni wrote, “it appeared to us that there was little validity to the speculation.”

Formerly called Union Oil Co. of California, Unocal was founded in 1890 in Santa Paula in Ventura County. It has oil and natural gas projects in such countries as Indonesia, Thailand and Bangladesh, and operates in the Gulf of Mexico and in such U.S. regions as Texas’ Permian Basin.

With 6,600 employees, Unocal once owned the Union 76 gasoline brand but sold it in 1997 to focus on exploration and production.

Like other oil companies, Unocal saw its earnings and revenue shoot up last year as crude oil prices hit record highs. Unocal’s revenue in 2003 was $6.5 billion, but its 2004 revenue -- which hasn’t yet been reported -- is expected to show an increase of at least $1 billion. Industry leader Exxon Mobil Corp. had 2003 revenue of $247 billion.

A buyout offer from a Chinese company wouldn’t be surprising because the nation’s booming economy, bulging trade surplus and growing energy demands are prompting China to look overseas for energy assets and other properties, analysts said.

Last month, for instance, China’s biggest computer maker, Lenovo Group Ltd., acquired IBM Corp.’s personal computer business for $1.25 billion. That was one of China’s biggest foreign acquisitions ever, and analysts said that more deals were sure to follow.

Takeover rumors about Unocal are nothing new. The company has fought off three previous hostile bids in its 115-year history.

“Unocal has been a prospective takeover candidate for the past several years,” said Aliza Fan, senior analyst at John S. Herold Inc., an industry consulting firm.

That’s mainly because Unocal is a relatively small, independent player whose stock has lagged behind the industry for an extended period of time, Fan said.

The Asian projects that could appeal to a buyer “will not come to fruition for many years,” she said. “So investors have been unwilling to give credit to Unocal for some of its long-term potential in Asia.”

Whether CNOOC or another suitor would be more patient and make a formal offer for Unocal, or at least for its Asian assets, remains to be seen. CNOOC’s interest is at an early stage and no talks have been held, unnamed sources told the Financial Times.

Reuters News Service quoted anonymous sources as saying CNOOC was eyeing several foreign oil companies.

Unocal fought off its last major takeover attempt 20 years ago, when it foiled a bid by corporate raider T. Boone Pickens Jr. But the episode saddled Unocal with billions of dollars in additional debt, and it wasn’t until the mid-1990s that Unocal fully recovered -- in good part by expanding into Asia.

On Thursday, Unocal’s stock climbed $3.15, or 7.7%, to $44.34 on the New York Stock Exchange. That gave Unocal a total market value of $11.7 billion.

CNOOC’s New York-traded shares rose 54 cents to $51.85.

Times staff writer Ching-Ching Ni in Beijing contributed to this report.