Chevron Said to Explore Options for U.S. Midstream Business

Chevron Corp. (CVX), the fourth-largest oil and natural gas company by market value, is conducting a strategic review of its U.S. midstream business which could result in a sale of some or all of the unit, people with knowledge of the matter said.

Chevron’s midstream unit manages pipelines and other infrastructure for handling oil and gas between wells and refineries. A precise valuation for the assets is difficult to reach because the market is volatile and Chevron hasn’t disclosed specific financial details, the people said.

The San Ramon, California-based company is working with Jefferies Group LLC on the review and any related asset sales, said two of the people, who asked not to be identified because the process is private. The U.S. business is probably worth $3 billion to $5 billion, according to Fadel Gheit, a New-York based analyst for Oppenheimer & Co.

Large energy companies have been selling or spinning off transportation and storage operations to cut costs and raise money for exploration. Chevron sold a northwestern U.S. pipeline business last year to Tesoro Logistics LP. The company has also begun seeking buyers for pipeline and storage assets in Texas and Louisiana that could be worth more than $1 billion, people familiar with the matter said in January.

Photographer: David Paul Morris/Bloomberg

Chevron Corp. signage stands at the entrance to the company's corporate headquarters in Richmond, California. Close

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Photographer: David Paul Morris/Bloomberg

Chevron Corp. signage stands at the entrance to the company's corporate headquarters in Richmond, California.

Exit Unlikely

Chevron may fetch more for the assets selling them off piece-by-piece to pipeline companies, than it could in a spinoff to shareholders, Gheit said. The pipelines are not an integral part of Chevron’s business, he said.

Chevron gained 0.7 percent to $114.97 at the close in New York, giving the company a market capitalization of $219.5 billion.

It could take months for Chevron to decide what to do with its entire domestic midstream business, according to one of the people familiar with the situation. It may decide to against a sale and is unlikely to exit midstream entirely, the people said.

Richard Khaleel, a spokesman for Jefferies, declined to comment, as did Gareth Johnstone, a spokesman for Chevron.

Chevron’s fourth-quarter profit fell 32 percent to $4.93 billion amid slumping prices, it reported on Jan. 31. Chevron plans to increase asset sales and is “doing some rationalizing” in its midstream business, Chevron Chief Executive John Watson said on a conference call with analysts that day.

Exxon Mobil Corp., Royal Dutch Shell Plc and PetroChina Co. are the largest energy producers by market value.

To contact the reporter on this story: Matthew Monks in New York at mmonks1@bloomberg.net

To contact the editor responsible for this story: Mohammed Hadi at mhadi1@bloomberg.net

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