09-10-01 Shell Oil, a wholly owned member of Shell of Companies, announced that it has signed a Memorandum of Understanding to acquire Texaco's interests in Equilon Enterprises, making Shell the 100 % owner.
The Memorandum of Understanding also provides that Shell and Saudi Refining (SRI) will acquire Texaco's interests in Motiva Enterprises whereby each entity will become a 50 % interest holder in Motiva. The two transactions are comprised of $ 2.1 bn in cash, $ 1.4 bn in debt and approximately $ 0.3 bn in pension liabilities. The transactions, which are subject to the execution of definitive agreements and the approval of governmental authorities, are expected to conclude by year-end.

Paul Skinner, a Group Managing Director, and CEO of the Group's Oil Products business, commenting on the acquisition, said, "The US is the world's largest oil products market and this transaction reinforces our confidence in the US economy. It is an important strategic move for the Group's global oil products business. "The acquisition of the Texaco interests will strengthen our excellent market position, based on a strong brand, and afford us the opportunity to achieve additional synergies with the Group's global businesses and networks. The simplified structures will allow us to accelerate initiatives, already underway, which will lead to a significant improvement in our downstream performance in the US and enhance our global competitive position." "It will add a further significant element to the strong relationship the Group has enjoyed with Saudi Aramco for many years," Skinner said.

Synergies and cost reductions from the acquisition, including the removal of duplicate processes and the installation of improved trading and procurement practices, are expected by Shell to generate savings of approximately $ 400 mm per annum by 2004. There will be one-off restructuring costs estimated by Shell at $ 100 mm and re-branding costs of $ 500 mm associated with the Shell and Texaco networks over the following four years. The transaction will be accretive to earnings from 2002.
Under the terms of the transactions, Equilon and Motiva will have exclusive use of the Texaco brand for the marketing of products and services at Texaco branded locations until June 2004 and then on a non-exclusive basis until June 2006. A non-exclusive right to the Havoline lubricants brand will exist for eighteen months.

Shell Oil Company Chairman, President and CEO Steven L. Miller said, "The acquisition of the Texaco interests is of strategic importance to Shell in the US and we are pleased about the benefits it will bring. Our joint venture in Motiva with Saudi Refining remains a strategic complement to Shell's total US oil products portfolio. The new, more streamlined structure will enable us to implement the Oil Products strategy more effectively in the United States."
"Our customers and dealers will benefit by gaining better access to the Shell Group's worldwide portfolio of innovative products and services. While there will besome staff reduction initially, employees will have enhanced opportunities to contribute and grow in a simpler, more efficient organization."
"Motiva operates primarily in the eastern United States and includes nearly 4,800 Shell-branded gasoline stations and about 8,200 Texaco-branded stations, and four refineries and a network of terminals."

In July 1998, Shell's eastern and Gulf Coast refining and marketing businesses were combined with similar operations owned by Star Enterprise, a joint venture between Texaco and Saudi Refining, through the formation of Motiva. Upon completion of the transaction, Shell and SRI will each hold a 50 % interest in Motiva.
Equilon operates primarily in the Western United States, and includes approximately 4,500 Shell-branded gasoline stations and nearly 4,500 Texaco-branded gasoline stations, four refineries, a lubricants business and an extensive pipeline and terminal network. Equilon was formed in January 1998, when Shell's western and midwestern refining, marketing, trading, transportation and lubricants businesses were combined with similar operations of Texaco. Upon completion of the transaction, Shell will own 100 % of Equilon.

Shell Oil, including its consolidated companies and its share in equity companies, is one of America's leading oil and natural gas producers, natural gas marketers, gasoline marketers and petrochemical manufacturers. Shell Oil is the leading oil and gas producer in the deepwater Gulf of Mexico and is a recognized pioneer in oil and gas exploration and production technology. Shell Oil is an affiliate of Shell of Companies.

Saudi Refining is a subsidiary of Aramco Services, headquartered in Houston, Texas. In addition to managing its 32.8 % joint venture investments, SRI sells approximately 525,000 bpd of crude to Motiva, which has a refining capacity of approximately 800,000 bpd.