1997 ANNUAL REPORT
Industry Transition

The industry – wide trend toward mergers, consolidations and joint ventures – both upstream and downstream – accelerated in the West during 1997 as new corporate entities emerged and many long –term players left the field.

UPSTREAM

The combination of the producing assets of CalResources, LLC, a subsidiary of Shell Oil, and Mobil Exploration and Production US, Inc. led to the creation of AERA Energy LLC, with production in California nearing 250, 000 barrels per day (b/d).

Texaco, Inc. merged with Monterey Resources shortly after Monterey had purchased McFarland Energy, a move that increased Texaco’s production in California above 180,000 b/d. Monterey itself became a stand-alone company just last fall when it was spun off from its parent Santa Fe Resources.

Berry Petroleum bought Tannehill Oil Company and the Farnox properties in the San Joaquin Valley.

Mac McFarland, chairman of McFarland Energy, explained the situation this way: "Consolidation in the industry is inevitable both because technological requirements are increasing all the time and because the economic demands of the business require efficiencies. But that doesn’t mean the end of small independents," he added. "For every McFarland Energy or Tannehill that agrees to be purchased, another new independent springs up."

DOWNSTREAM

Unocal has sold its refining and marketing assets to Tosco, Inc., which is maintaining the Unocal brand name.

Ultramar Diamond Shamrock was formed as an independent corporation following the merger of Diamond Shamrock, Inc. and Ultramar Corporation.

Shell Oil Products Company and Texaco have proposed a merger of all refining and marketing operations in California while maintaining their well-known brand names.

1997 WSPA Annual Report
Transition