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CHEVRON ANNOUNCES EXCHANGE OF STOCK WITH PENNZOIL INVOLVING GROUP OF U.S. OIL AND NATURAL GAS FIELDS

CHEVRON ANNOUNCES EXCHANGE OF STOCK WITH PENNZOIL INVOLVING GROUP OF U.S.
 OIL AND NATURAL GAS FIELDS
 SAN FRANCISCO, Sept. 30 /PRNewswire/ -- Chevron Corporation (NYSE: CHV) today announced that Pennzoil Company (NYSE: PZL) will acquire a group of Chevron U.S. oil and natural gas fields through a tax-free exchange of shares of stock.
 Chevron will trade all the shares of a newly formed subsidiary that owns the fields and related facilities for 15,750,000 shares of Chevron common stock now owned by Pennzoil. This will reduce Pennzoil's holdings in Chevron after the transaction closes from about 9.7 percent of Chevron's outstanding shares to about 5.3 percent, or about 17.2 million remaining shares.
 "This deal is excellent for Chevron," said Chevron Chairman and CEO Ken Derr. "We announced earlier this year a complete restructuring of our U.S. upstream business, which involved a reorganization and the accelerated disposition of fields that we identified as non-strategic to our long-term business. We have been working hard since then on a wide range of options, and this tax-free exchange with Pennzoil clearly results in the highest value for our stockholders."
 Derr said Chevron has no plans to re-issue the shares it is receiving in the exchange, so the number of Chevron shares outstanding will be reduced by approximately 4.6 percent, from about 341 million to about 325 million. The transaction, he pointed out, should have a positive effect on Chevron's per-share earnings and cash flow.
 The transaction is expected to close in the fourth quarter after review by the Federal Trade Commission, with terms effective July 1, 1992. Derr said the transaction is expected to result in a profit of about $375 million in the fourth quarter. Many of the approximately 340 Chevron employees involved in the operation of the fields will be needed by Pennzoil following the exchange.
 "This is another significant step toward making us a top competitor in the U.S. upstream business," said Ray Galvin, president of Chevron U.S.A. Production Company. "We have reduced operating expenses this year to date by more than one dollar per barrel, we have already disposed of more than 200 fields in small sales packages and trades, and our reorganization and the relocation of our headquarters to Houston were effective Sept. 1. The reorganization, coupled with the property dispositions, will result in our having some 5,900 employees when the Pennzoil trade closes compared with the 8,100 in our company at the beginning of 1992.
 "Now we can focus the efforts of our new organization on managing an outstanding group of almost 400 core fields that have good potential for development and improved profitability. Many of the fields we're keeping," Galvin continued, "offer us unique opportunities to apply our technical expertise in such areas as enhanced recovery, and to realize economies of scale in areas where we have a major resource base."
 As a result of the exchange, Chevron will dispose of 266 oil and natural gas fields, accounting for about 90 million barrels of net proved oil reserves and about 690 billion cubic feet of net natural gas reserves based on year-end 1991 totals adjusted for the first six months of 1992 production. The properties involved in the exchange produce some 33,000 barrels per day of oil and natural gas liquids and 310 million cubic feet per day of natural gas, net of royalties. On the other hand, Chevron is retaining oil and gas fields representing roughly 92 percent of its U.S. proved reserves and about 90 percent of its U.S. net production. The value Chevron receives in the exchange with Pennzoil is more than $5.35 per barrel of proved oil and equivalent gas reserves.
 CUSA Production Co. has major offices in Houston, New Orleans, Bakersfield, Calif., and Midland, Texas. Its focus is on producing fields located primarily in California, Texas, the Rocky Mountain region, Louisiana and the Gulf of Mexico.
 The fields going to Pennzoil are located mainly in the Gulf of Mexico and the onshore Gulf Coast and in the major producing basins of West Texas.
 - - -
 Also, Chevron and Pennzoil agreed today that at closing, they will drop all legal claims against each other stemming from Pennzoil's 1989 investment in Chevron stock. As part of the agreement, neither company will purchase additional shares of each other's stock for five years.
 -0- 09/30/92
 CONTACT: Larry Shushan of Chevron, 415-894-2978
 (CHV PZL) CO: CHEVRON CORP.; PENNZOIL CO.; CHEVRON U.S.A. PRODUCTION
 CO.


IN: OIL ST: CA,TX,LA -- SF007 -- X659 09/30/92
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Date:Sep 30, 1992
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