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A showdown at Gulf Oil over T. Boone Pickens's breakup plan

By Staff writer of The Christian Science Monitor / December 2, 1983



New York

Maverick Texas oilman T. Boone Pickens Jr., of Amarillo, ponders the question for no more than an instant. ''We're in it to make money,'' he says frankly.

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If Mr. Pickens is right, the money could be enormous. By splitting the Pittsburgh-based Gulf Oil Corporation into its constituent parts, these would be worth billions of dollars more to shareholders than the company as a single entity, he argues. The price of Gulf stock, which has traded this week in the $ 43-to-$45 range, could double; dividend taxes for many shareholders would diminish; and a separate stream of income, in the form of royalties from oil and gas, would be available to shareholders.

But so controversial is the plan that Gulf management has taken the unusual step of asking stockholders to allow the company to switch its corporate charter to Delaware from Pennsylvania.

In Delaware, laws would enable Gulf to abandon cumulative voting, a system by which shareholders pool their votes in order to elect a single director. Cumulative voting could put Pickens and two or more allies on the Gulf board during the shareholders' annual meeting next May.

A showdown on this point is taking place at a special stockholders' meeting today in Pittsburgh, Gulf's current corporate headquarters. Results of the voting on the question of reincorporating Gulf may not be known until next week, but most analysts expected Gulf to have a tough time convincing shareholders they should yield their say in corporate affairs. For the past two months newspapers have been rife with highly critical advertisements by the Pickens-led Gulf Investors' Group - and equally critical counter-ads from the Gulf corporation.

If Gulf wins this preliminary battle, Pickens admitted in an interview with the Monitor Nov. 30, ''it would probably be harder for us to deal with Gulf management.'' If the Pickens faction prevails, Pickens and several of his associates will probably try to win seats on the 13-member Gulf board and continue to campaign for a major restructuring of the corporation. Failing that, Pickens could set up his group to be bought out by Gulf at a sizable profit.

Pickens in the past four months has bought heavily into Gulf and now owns roughly 12 percent of the company's 165.3 million shares. Why target Gulf? Pickens is asked.

The US oil and gas industry, he argues, is ''in liquidation.'' Most large oil companies are depleting their reserves. New reserves are tough to find. The international price of oil is in danger of dropping further. Oil companies like Gulf are awash in capital from their inventories of oil and are inefficiently using that capital to ''maintain an empire.''

''Gulf happens to be one of the most flagrant violators of protecting their reserve base,'' he says, ''and that's the primary asset of the Gulf stockholders. So there's some great urgency here to do something about these assets.''

Pickens wants to force Gulf management to spin off its oil and gas pumping operation and slim itself down. Under his theory, shareholders would directly receive units representing the income from oil and gas operations, and the total stock price and dividends would be twice the value Gulf has now.