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CHICAGO—Restructuring in the oil industry is the free enterprise system at work, said T. Boone Pickens, Jr., president and chairman of the board of Mesa Petroleum Co., in a speech today before The Investment Analysts Society of Chicago.
“What we’re seeing in the way of acquisitions [Handwritten addition: and] mergers [Text stricken: and such] is [Text stricken: simply] the oil industry utilizing the free enterprise system to put its own house in order,” said Pickens. “This is the best economic system in the world, and if [Handwritten addition: it is allowed to work,] [Text stricken: we’ll leave it alone, we’ll see that it will work to] everyone[Text stricken: ’s] [Handwritten addition: will] benefit shareholders, consumers and the government.”
[Text stricken: Pickens said that proposed legislation in Congress to place a moratorium on mergers in the petroleum industry was not in the best interest of the country.]
Pickens said that proposed legislation in Congress to place a moratorium on mergers in the petroleum industry was [Text stricken: rushed in as] a [Handwritten addition: rushed] response to [Text stricken: Socal’s] [Handwritten addition: Standard Oil Company of California’s] $80-a-share bid for Gulf. “The argument is that mergers between large oil companies will hurt the consumer and [Text stricken: the] national energy security. But I don’t see any harm coming from this deal.” [Handwritten addition: The only harm will come to the 270,000 Gulf shareholders and their families who stand to lose billions if Congress scuttles the deal.] He said that [Text stricken: gasoline price] consumers would not be [Handwritten addition: adversely] affected because the combination of Socal and Gulf would not [Text stricken: affect] increase prices at the gas pump. “The price of gasoline isn’t arbitrarily determined by big oil companies. It is directly linked to the price of oil. And the price of oil is not even determined inside the Untied States. It’s determined by OPEC,” said Pickens.
He added that the consolidation of the combined companies’ downstream operations would be beneficial because the United States already has too much refining capacity.
Speaking to the national security issue, Pickens said that although critics have said that the $13.4 billion which will be used to buy Gulf would be better spent on oil exploration, that course would quickly ruin the industry financially.
“If oil and gas companies were told to take all the money available to them and search for all the oil and gas they could find, the industry would quickly go broke [Handwritten addition: because there are not enough economically viable prospects available.] [Text stricken: We can’t find oil and gas cheaply enough.] And if we’re asked to find petroleum at any cost, [Text stricken: we’ll have to find it at an uneconomical cost, which must be digested somewhere along the line,”] [Handwritten addition: the consumer will have to bear the economic burden,”] said Pickens.
[Text stricken: “There’s plenty of money in the industry to drill all the economically feasible prospects that exist.”]
Pickens stressed that restructuring in the oil industry must take place and that legislation [Text stricken: against] to stop restructuring will not benefit the nation.
“If the industry is left to restructure itself, in the end consumers and the nation will benefit because the industry will be more efficient and viable,” [Handwritten addition: he said.]
[Text stricken: He also warned that legislation against stockholders]
Pickens added that he was concerned about the proposed legislation because “it is aimed directly at a specific group of people that are the cornerstone of the free enterprise system—the stockholders. The general idea in Congress is that if someone is making money, that has to be bad.
“But what Congress fails to see is that the money going to Gulf stockholders won’t just disappear. Instead, it will be reinvested [Handwritten addition: in the oil and gas industry,] placed in savings accounts, used to purchase a new car or make a downpayment on a home. A large portion of that money will be put right back into the economy, and another [Text stricken: large] [Handwritten addition: big] portion will go to the government in the form of tax revenues.”
He said that when stockholders made their investment, they expected to [Text stricken: be able to] make money on it. “But now they’re told that they might not be able to exercise their right to get the maximum value for their investment under the free enterprise system. That doesn’t make much sense to them.[Text stricken: ”]
“What’s even more frightening is that this kind of legislative thinking could spill over and be passed against other industries. And that has unbelievable implications [Handwritten addition: ,” added Pickens.]
He cited a New York Stock Exchange survey conducted in mid-1983 which found that one out of every six Americans is a stockholder in a publicly-owned company.
“Who are those [Handwritten addition: 42 million] people?” Pickens asked. “They’re [Handwritten addition: voters and tax payers] just like you and me. And it’s obvious that [Handwritten addition: some members of] [Text stricken: no one in] Congress [Handwritten addition: care little] [Text stricken: is concerned] about their interests.” [Text stricken: But when legislation starts affecting their pocketbooks, you can bet that those people will get serious quick.”]