Continuing a trend of merger, takeover, and consolidation in the oil industry, Occidental Petroleum and Diamond Shamrock announced tentative plans Monday for a $2.5 billion merger that would create the nation's seventh-largest oil company. Directors of Los Angeles-based Occidental, the nation's ninth-largest oil company, and Diamond Shamrock, an independent oil and gas producer based in Dallas, were to meet Monday to consider a merger plan approved by the corporate managements. As part of the agreement, Diamond Shamrock common stock would be converted on a one-to-one basis to new common stock of a Delaware holding company to be formed by Occidental. Occidental common shares would be converted one to one for shares of the new holding company.
This is the latest in a series of consolidations among big oil companies in the United States. In recent years, Gulf was acquired by Chevron, Getty by Texaco, and Superior by Mobil, and there have been many smaller combinations. Oil companies also have been under attack by raiders such as T. Boone Pickens, whose activities prompted the Gulf-Chevron merger and who recently led a raid on Oklahoma-based Phillips Petroleum which forced that firm into a costly stock buy-back.
In general, the current weakness of world oil prices and the relative undervaluation of the stock of many oil companies has contributed to the consolidations.