Shell Oil Co. has contracted to purchase Belridge Oil Co. of California for as much as $3.65 billion. Government sources call it the biggest cash takeover in American history.
Belridge properties in Kern County, Calif., 40 miles west of Bakersfield, include at least 376 million barrels of proven reserves of heavy oil, with present production of about 40,000 barrels a day. These reserves, plus a farm producing cotton, citrus, almonds and other crops, are included in the deal. The land totals over 20,000 acres.
A Shell spokesman here said that the actual amount of oil in the ground is expected to be substantially larger than the 376 million barrels of proven reserves, and that Shell hopes to increase production considerably beyond 40,000 barrels a day because right now it is short of oil for its refinery runs. "We're crude-poor at the moment; sometimes we run 100,000 barrels a day below capacity," he said.
Last year, Shell produced nearly 1.1 million barrels a day but this year its runs have dropped to about 950,000. The Shell spokesman said the company views the California field as capable of producing into the next century.
Shell is the biggest U.S. marketer of gasoline.
The deal, because it involves immense amounts of money and oil, is sure to undergo careful examination by the Federal Trade Commission or the Justice Department to determine if it would lessen competition, an FTC spokesman said yesterday.
"It's not just nickels and dimes," said a government source, pointing out that Exxon's recent giant deal to acquire Reliance, the elctric motor firm, involved only a third as much money.
To point up how big the Shell takeover is, a congressional source said that the Kennedy-Metzenbaum anticonglomerate bill now before Congress would bar takeovers involving industrial firms (not oil deals) with assets over $100 million.
Ed Rothschild of Energy Action, a consumer-oriented energy lobby here, said in a phone interview, "Certainly the government should take a very serious look at this, because it is another in a series of actions by large oil companies in acquiring smaller firms with large land- holdings that have future potential for oil and gas. We could end up with a few companies controlling most of the oil and gas."
Belridge was founded in 1911 by the Greene, Whittier and Buck families, whose descendants still hold majority control. Two big oil firms, Mobil and Texaco, together own 35 percent.
Shell has offered Belridge three different plans of takeover or merger, under which Shell would acquire anywhere from 59 percent to 100 percent of its 996,800 shares of stock. If Belridge agrees to 100 percent, the price will be $3.65 billion.
Belridge executive Joe Greene was reported to have said Friday that there were other bidders for the firm but that Shell prevailed. Mobil and Texaco earlier had gone to court in an attempt to block any sale.
Although Mobil and Texaco now own a substantial minority of shares in the company, California law permits the majority shareholders to force sale of all shares under certain conditions.
A Shall spokesman said the company doesn't consider the takeover anticompetitive since it would only marginally increase the company's share of production and reserves. He said Shell will have to borrow to pay the $3.65 billion. Belridge earned $44 million on sales of $156 million last year.
The United States as a whole has huge heavy oil deposits -- perhaps up to 30 billion barrels in California alone -- but most can't be produced at today's prices. U.S. production of heavy oils is only about 300,000 barrels a day compared with 8 million of normal oils.
However, Jim Woods, head of the California Independent Producers Association, estimated in an interview recently that if price controls and environmental constraints were lifted, heavy-oil production could rise 1 million barrels a day by 1985.
Staff writer J.P. Smith contributed to this report.