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	Notes for Speech to Investment Analysts Society of Chicago

I’m shocked at this legislation.

Let’s look at all the facts

Appraised value	114
When we got in	37
Highest ever	54
Our ave. price	45
Socal’s offer	80

Who lost?

It’s the marketplace reflecting a price closer to appraised value.
Our portion is only a fraction of what will go to 60 SHs.
$13b flowing back into the economy.
     Buy more stock.
     Buy new car.

Will they all put in under the mattress?
Panic legislation race in to stop this.
What is an easier way to make tax profits.
Point to leave with urgency to restructure in o&g co’s that are depleting and not replacing.
          —Once oil price leveled
          —Reserves going down 12 yrs.
          —SH must be considered
          —inefficient to deplete that way
          —dividends up

Consolidation
          —Marketing
                    —how could it?
                    —too much refining capacity now
                    —higher gasoline prices?
                    —the price is determined by OPEC

          —Exploration
                    —won’t decrease funds for drilling
                    —a lot of cash among majors
                    —they don’t use it all for exploration
                    —plenty of cash to drill all the economically feasible prospects.
                    —people say that these deals won’t find any more oil, reserves will decline and dependence on OPEC will increase.
                    —But they’re wrong if they think that the plan we’ve been following is increasing our reserves.
                    —It’s true that we’ve found lots of oil and gas, but we’re still producing more than we find and it’s been that way since 1970.

Why do people want to stop consolidation of the industry?
          Afraid of less competition
                    (plenty of room for streamlining)
                    (no. of companies)
                    (who does the most drilling?)
          Afraid of losing tax revenues?
                    (deals like this generate more revenues)

—dividends tied to salaries wrong

Reserve life index is 10 yrs.

Days of cheap energy are over. Best we’ll do is to have price set by OPEC.

If you demand that we take all the $ we have and go out and search for all the o&g we can find, you’ll break the oil companies quickly because they can’t find it cheaply enough. It will be found at a price that is uneconomical. Someplace, the high cost must be digested.

The SH makes $ and the govt collects revenues. That’s the way it’s supposed to be.

Consumer won’t be hurt. Downstream operations consolidated. Won’t make any difference at gas pump. Gasoline prices are set by oil prices, which are set by OPEC.

They think if a lot of $ is made, there is something wrong.

When you get in these deals, mgmts’ true colors show. They make self-righteous statements about having no golden-parachutes. But, all of sudden, the parachutes begin to pop.

SHs are the only ones with money at risk. Mgmts have no money at risk. The SH has his money out there and no one is looking after it. Mgmt is looking out for its position and maintaining the power base.

All of the 60 SHs are better off—by a measurable amount—today. 35 pts on 165 mm shares. $5.8b increase in value. $37 Summer ’83.

Greedy SHs
SHs want what they brought and they expect mgmt to perform for it.

1 out of every 6 Americans is a SH.
42 mm people. NY Stock Exchange survey mid-83
          2 out of 6} interest
          3 out of 6}

When it starts affecting their pocketbook, people get serious quick.

Congressmen think mgmts own companies—not SHs. Many mgmts think so, too.

Let the SHs decide.

Concerned
          1. Against SHs and free enterprise.