Merger mania gripped the global oil industry yesterday, after Exxon, the United States' largest oil company, said it had reached an US$80.1 billion agreement to buy Mobil, the second-largest US oil group.
The move came as France's Total said it also planned to strike a $39 billion deal to merge with Belgium's Petrofina.
The deals came as oil prices are languishing at historic 12-year lows, driven down by the sharp drop in demand following the Asian financial crisis, and a huge build-up in inventories which have created a glut in the market.
Exxon Mobil becomes the world's largest industrial merger, and makes Exxon the world's largest publicly-traded oil company with 20.74 billion barrels of oil and gas reserves.
It also has 1.63 million barrels per day of oil and gas production, and 6.66 million barrels of refining capacity.
Exxon chairman and chief executive Lee Raymond will become chairman, chief executive and president of the merged company, while Lucio Noto, currently chairman and chief executive of Mobil, will become vice-chairman.
Analysts said the sharp drop in oil prices and the increasing need for companies to cut costs and generate savings was a key imperative behind the mergers yesterday.
Petrofina said its merger would help it capture substantial productivity gains, particularly in the oil-rich fields of the North Sea, and help it expand its position in the deep offshore fields in the US and Angola.
The new Total Fina group, which will be the third-largest oil company in Europe, said it should also gain from joint management of refineries and marketing networks, and estimated that joint operating income should rise by about two billion French francs (about HK$2.73 billion) for the next three years.
The increasing competition expected in Europe following the introduction of the euro next month, has also led to rapid consolidation across the oil industry, and follows a similar merger between BP and Amoco, which combined in August to create a firm with a total market capitalisation of $110 billion.
Oil companies are facing extremely difficult trading conditions, and the confirmation of Exxon's merger with Mobil will leave the industry with effectively just three oil giants - Royal Dutch Shell, Exxon-Mobil and BP-Amoco.
Yesterday it was confirmed that Shell had ended potential merger talks with the US group Texaco, but analysts say the latest deals will continue to put pressure on Shell to find a merger partner.
Following its merger, Exxon will gain much greater access to North Sea oil fields, it will enable it to become more closely involved in Saudi Arabian projects, and a stronger presence in US refining and marketing.
Exxon shareholders will own 70 per cent of the new company, but both brands are expected to be retained.
Last year Exxon had a net income of $8.5 billion, generated on revenues of $137.2 billion, while Mobil's net income of $3.3 billion came from revenues of $65.9 billion.
Its total petroleum product sales amount to 5.4 million barrels per day, and it operates 33,000 service stations worldwide, compared to Mobil's petroleum product sales of 3.3 million barrels per day and 15,500 stations worldwide.
Exxon had 80,000 employees around the world last year, while Mobil employed 42,700 people.
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