Unocal Corp intensifies talks with 2 possible bidders: Report

Unocal, one of the largest independent oil companies, was talking intensely last night with two potential bidders, in a deal that could be worth about $17.4 billion, according to executives involved in the discussions, The New York Times Electronic Edition reported Monday.

The bidders were Eni of Italy, which is ranked fourth in Europe, and ChevronTexaco, the second-largest American oil company. The executives said Eni's board was meeting this morning in Italy to discuss the final details of the offer. A winner could be announced as early as today, the executives said. But they cautioned that a deal might not be reached and Unocal might instead enter into exclusive talks with a preferred bidder.

CNOOC, a state-owned Chinese oil company, which had been part of the bidding, dropped out of the auction.

The takeover negotiations comes after months of speculation over which company would end up buying Unocal, the eighth-largest oil company in the United States. The interest generated by the sale comes at a time when global energy companies are flush with cash but short of fresh opportunities to develop new fields as many oil-rich areas of the world remain closed to foreign companies.

At the same time, the world's 10 largest oil companies made over $100 billion in profit last year thanks to crude oil that averaged $41 a barrel in 2004. The boom is expected to grow this year. Futures in crude oil on the New York Mercantile Exchange set a record last week, rising above $57 a barrel.

Acquiring Unocal would give the buyer a portfolio of attractive fields in Azerbaijan, Bangladesh, Thailand and Indonesia, as well as in the Gulf of Mexico, which are all expected to start producing this year.

These projects, if successful, are expected to increase Unocal's production as much as 10 percent a year through 2010 - making it one of the industry's best performers.

A takeover of Unocal, which is based in El Segundo, Calif., would be the biggest acquisition in the industry since the consolidation wave of the late 1990's. That was when Exxon bought Mobil for $80 billion and BP acquired Amoco for $48 billion.

Interest in Unocal started earlier this year when CNOOC first expressed interest in the company. That sparked a discreet bidding war that sent the company's shares soaring 49 percent since the beginning of the year, compared with a 20 percent gain on the Standard & Poor's 500-energy index. Its stock closed Friday at $64.35, up $2.66.

Unocal has refocused its attention on exploration and production, particularly in North America and Asia, after selling its marketing and refining businesses in the United States. Many analysts have long considered it to be a candidate for a takeover.

They said that Unocal frustrated investors in recent years, repeatedly failing to meet its growth forecasts and also because of its knack for courting controversy.

In 1998, Unocal was forced to abandon plans to build a gas pipeline through Afghanistan, which was then under the control of the Taliban, after the United States started bombing in an effort to destroy training camps of Osama bin Laden.

Unocal was founded in 1890 as the Union Oil Company of California. It has about $3 billion of debt. Barry Lane, a spokesman, declined to comment last night. (*)