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	NOTES FOR TEXAS OIL MARKETERS ASSOCIATION DALLAS APRIL 6, 1984

IMPORTANT FOR YOU—AS MARKETERS OF PETROLEUM PRODUCTS—TO UNDERSTAND RESTRUCTURING

ENTIRE INDUSTRY HAS BEEN SUBJECT TO CHANGE:
—REFINERIES MOTHBALLED AND DISMANTLED
—STILL TOO MUCH REFINING CAPACITY RUNNING AT 75%
—MARKETING HAS UNDERGONE CHANGES: DEMAND SLUGGISH, CONTINUING TAX PROBLEMS INCREASED OPEC REFINING CAPACTITY

MERGERS AND ACQUISITIONS JUST PART OF THE PROCESS

MY EXPERTISE IS IN E&P
—WANT TO EXPLAIN WHY RESTRUCTURING IS NECESSARY IN UPSTREAM OPERATIONS

U.S. OIL & GAS INDUSTRY IS UNIQUE

U.S. RESERVES DECLINING SINCE 1970

RISING OIL PRICES MASKED THE PROBLEM.

WITH STABLE OIL PRICES, RESERVE REPLACEMENT HAS BECOME CRITICAL IN EYES OF SHAREHOLDERS—THE OWNERS OF COMPANIES.

SHAREHOLDER DISSATISFACTION HAS RESULTED IN MERGER/ACQUISITION ACTIVITY.

ASSETS FLOW FROM WEAK TO STRONG MANAGEMENTS.

OTHER TOOLS MAY BE USED, LIKE ROYALTY TRUSTS—DOESN’T AFFECT REFINING OR MARKETING

RESTRUCTURING IS HEALTHY

THIS IS THE FREE ENTERPRISE SYSTEM WORKING TO CORRECT INEFFICIENCIES.

Q&A BACKGROUND

GULF-SOCAL
—13.2 BILLION INTO THE ECONOMY
—$6.5 BILLION IN PROFIT TO SHAREHOLDERS
—$2 BILLION IN TAXES TO THE GOVERNMENT

42 MILLION STOCKHOLDERS IN AMERICA

LEIF OLSON, CHAIRMAN OF ECONOMIC POLICY COMMITTEE, CITIBANK
—$30 TRILLION IN EQUITY TRANSACTIONS LAST YEAR
—SO THE BILLIONS INVOLVED IN OIL MERGERS IS INSIGNIFICANT
—MUCH OF THE MONEY FROM THE EURODOLLAR MARKET

VOLCKER, [Handwritten addition: and] SEC
—DO NOT DISTORT CREDIT MARKETS
—NO IMPACT ON CONSUMERS’ ABILITY TO OBTAIN CREDIT
—BASICALLY A TRANSFER OF EXISTING ASSETS

FTC
—PLENTY OF LAWS ON THE BOOKS FOR ANTI-TRUST PROBLEMS

JOHNSTON
—SHOULD USE $13.2 BILLION FOR EXPLORATION

KELLER
[Handwritten addition: “]YOU CAN’T BORROW THAT KIND OF MONEY FOR THAT KIND OF CRAPSHOOT[Handwritten addition: ”]

GULF-SOCAL
—10.8% OF REFINING AND MARKETING
—5.8% OF U.S. RESERVES