A wave of consolidation and restructuring looks set to engulf the western world's oil industry as US and European companies yesterday announced separate deals that will intensify competition in a sector besieged by low prices.
In New York, Exxon announced an agreed take-over of Mobil, valued at $75.3 billion (£50.1 billion) based on early afternoon share prices, in the world's biggest industrial merger. The combined entity will be known as Exxon Mobil and will be the world's largest company in revenues terms.
In Europe, Total of France confirmed it is to take over PetroFina of Belgium in a deal that will create the world's sixth biggest oil company, and Europe's third biggest, with a market capitalisation of almost $40 billion. The two moves are the latest response to the twin threats of low crude prices and a downturn in demand, especially in Asia.
They follow British Petroleum's take-over last August of Amoco of the US. Analysts said they could trigger further restructuring.
Even if antitrust regulators force some divestments, with a current market capitalisation of more than $240 billion, compared with former leader Royal Dutch/ Shell's $160 billion-plus, Exxon Mobil will tower over its competitors. But the companies insisted that regulatory concerns may be overblown.
The deal will set new standards for an industry which has been slow to follow the merger trend.
Mr Lee Raymond, Exxon's chairman, who will lead the new company, and Mobil's Mr Lucio Noto, who will be his deputy, said they expected near-term cost-savings of $2.8 billion. Mr Raymond said he saw the deal resulting in 9,000 jobs lost from a combined total of 123,000. The two companies said the link-up would boost their competitiveness and ability to produce superior returns.
"The merger will enhance our ability to be an effective global competitor in a volatile world economy and in an industry that is more and more competitive," the chairmen said in a prepared statement.
The companies will control or supply almost 50,000 service stations between them. Last year they sold almost nine million barrels of petroleum products daily and had interests in 50 refineries. They earned about $12 billion on aggregate revenues of $203 billion.
The smaller Total PetroFina deal is significant in that it suggests national sensitivities about the fate of former state oil companies in Europe are receding.
Based on Friday's Total share price, its offer valued PetroFina at 19,482 Belgian francs per share, and the whole group at Bfr456 billion (£8.9 billion). That was a 36.7 per cent premium to Friday's closing PetroFina share price of Bfr14,250, and above analysts' estimates of a Bfr18,000-ashare offer on Monday. The French company's shares slid 87 French francs, or 12.3 per cent, to Ffr618 on the weak Paris market amid suggestions that the group had overpaid.
The combined group, to be called Total Fina, will have 69,100 employees, 14,000 filling stations, reserves of 5.7 billion barrels of oil equivalent, and annual sales of $54 billion.
