Texaco is one of the world’s largest oil companies, with exploratory, manufacturing, and advertising and marketing operations throughout the globe. Its major petroleum-based merchandise embrace automotive gasoline and oils, in addition to aviation and heating fuels. Texaco expanded with the expansion of the U.S. vehicle trade in the early twentieth century and quickly developed international production and advertising and marketing pursuits. By the 1960s it had established the most important sales network of any U.S. oil firm, with operations concentrated in refining and advertising and marketing. The oil disaster of the 1970s lower off lots of its worldwide sources of crude oil and left it with restricted reserves. Texaco was poised for recovery in 1984 when it entered right into a court docket battle with Pennzoil Company over the acquisition of Getty Oil. Since settling with Pennzoil in 1988, Texaco has pursued an nearly fixed restructuring effort in an attempt to recapture its former profitability and prominence in the oil business.
Texaco was based through the early growth years of the Texas oil trade. In 1901 a gusher on the Spindletop oil area sent a whole lot of entrepreneurs into Beaumont, Texas. Among them was Joseph S. “Buckskin Joe” Cullinan, an oilman who had begun his profession working for Customary Oil Firm in Pennsylvania. The Spindletop wells led to the speedy institution of over 200 oil firms, pumping out as a lot as one hundred,000 barrels a day. Cullinan noticed a chance in purchasing that crude for resale to refineries. With the help of latest York investment supervisor Arnold Schlaet, he formed The Texas Fuel Company with an initial stock of $50,000. Cullinan and Schlaet started soliciting further investments in New York and Chicago. After elevating $three million, they reorganized their enterprise because the Texas Company.
Cullinan instantly began constructing a pipeline between Spindletop and the gulf coast of Texas. He built a refinery at the Texas coastal metropolis of Port Arthur, and from there the company shipped its oil to Louisiana sugar planters, who used it to heat their boilers. In the fall of 1902, salt water leaked into the Spindletop wells and ruined lots of the businesses based there. The Texas Firm survived with a well timed discovery of oil at Sour Lake, 20 miles northwest of Spindletop. Different strikes soon adopted in Oklahoma and Louisiana.
With Cullinan’s oil expertise and the financing of his New York backers, The Texas Company soon turned one of the nation’s most outstanding oil firms. Cullinan continued to drill wells in the southwest region, constructing extra pipelines to attach them with Port Arthur. By 1908 the corporate was promoting to all but five western states, and by 1913 its property had been worth $60 million. The nickname Texaco came from the cable tackle of the corporate’s New York offices. Texaco gained popularity as a product identify, and in 1906 the corporate registered it as a trademark. The properly-known emblem first appeared in 1909 as a crimson star with a green “T” in the middle. The corporate formally changed its identify to Texaco Inc. in 1959.
At the time of Texaco’s founding, oil was used primarily for lighting and as gasoline for factories and locomotives. Texaco met this demand with its first consumer product, Familylite Illuminating Oil, launched in 1907. After 1910, nevertheless, the vehicle revolutionized the oil business. Demand for gasoline, formerly considered a waste by-product of kerosene, expanded rapidly. Texaco adopted this development, and by 1914 its gasoline manufacturing surpassed that of kerosene. The corporate went from distributing gasoline in barrels to underground tanks to curbside pumps, and in 1911 it opened its first filling station in Brooklyn, New York. By 1916, 57 such stations had been in operation throughout the nation. Powered by the growth of the vehicle industry and the excessive demand for petroleum created by WWI, Texaco quadrupled its assets between 1914 and 1920.
After WWI, Texaco continued to focus on its automotive gasoline and oil manufacturing, introducing new products and expanding its nationwide sales network. In 1920 two researchers at its Port Arthur refinery developed the oil trade’s first continuous thermal cracking process for making gasoline. Named after its founders, the Holmes-Manley course of significantly increased the velocity of the refining course of in addition to the quantity of gasoline that could be refined from a barrel of crude. Texaco marketed this gasoline through its retail community, pushing into the Rocky Mountain area between 1920 and 1926, and into West Coast markets with the acquisition of California Petroleum Firm in 1928.
Merchandise launched during the 1920s included the corporate’s first premium gasoline, as well as Texaco Aviation Gasoline and automobile motor oils. To market the lighter oils it refined from Texas crude, Texaco launched its first nationwide promoting marketing campaign. The slogan “, , Golden” appeared at Texaco’s filling stations, which displayed its motor oils in glass bottles. By 1928 Texaco owned or leased greater than 4,000 stations in all 48 states.
The company’s development was additionally mirrored in its corporate construction. Discovering Texas’s corporation laws too restrictive for doing enterprise on such a big scale, Texaco decided to move its legal house. In 1926 it formed The Texas Corporation in Delaware, which then purchased out the inventory of The Texas Company and reorganized it as a subsidiary referred to as The Texas Company of Delaware. The corporate additionally moved its headquarters from Houston to New York. The Texas Corporation acted as a holding company for The Texas Firm of Delaware and The Texas Company of California–previously The California Petroleum Firm–until 1941, when it merged with both and formed a single firm identified because the Texas Company.
The Texas Company’s earnings reached an all-time excessive in 1929, however then dropped precipitously after the inventory market crash. Overproduction, financial recession, and low costs plagued the oil industry within the early 1930s. The corporate embarked on a technique of introducing new products to stimulate demand. Texaco Fireplace Chief Gasoline was launched in 1932, and the corporate advertised it by sponsoring a nationwide Ed Wynn radio program. Havoline Wax Free Motor Oil, developed after the acquisition of the Indiana Refining Company in 1931, adopted two years later, halting its losses by 1934. In 1938 The Texas Corporation, nonetheless nicknamed Texaco, launched Texaco Sky Chief premium gasoline and likewise started promoting its Registered Rest Rooms program, assuring motorists that their service stations were “Clean throughout the Nation.” In 1940 Texaco began its landmark sponsorship of the new York Metropolitan Opera’s Saturday afternoon radio broadcasts. This program, which remains to be running, is the oldest affiliation between a U.S. firm and an arts program.
Whereas The Texas Corporation promoted its services and products at house, it undertook vigorous growth abroad. In the course of the nineteen thirties it started exploration and production in Colombia and Venezuela. In 1936 it joined with the standard Oil Company of California to create the Caltex group of firms, a 50–50 venture in the Center East. The Caltex group consolidated the operations of each of these firms east of the Suez Canal. Texaco additionally purchased a 50 p.c curiosity from Standard Oil of California within the California Arabian Normal Oil Company, later renamed the Arabian American Oil Firm (Aramco). The Caltex and Aramco ventures vastly expanded Texaco’s sources of crude, and also enabled it to integrate its operations in the Eastern Hemisphere.
The entry of the United States into WWII introduced dramatic adjustments for The Texas Company. About 30 p.c of its wartime manufacturing went to the war effort, primarily within the form of aviation fuels, gasoline, and petrochemicals. The company labored closely with Harold L. Ickes, federal petroleum administrator for the war effort, who organized the nation’s oil companies into a number of nonprofit operations. The Texas Pipe Line Firm, a subsidiary, oversaw the completion of two federally sponsored pipelines from Texas to the East Coast.
Texaco also joined Battle Emergency Tankers Inc., which operated a collective tanker fleet for the Struggle Delivery Administration. Another such venture was The Neches Butane Merchandise Firm, which manufactured butadiene, a vital ingredient in synthetic rubber. This enterprise gave Texaco its begin within the infant petrochemicals business, and after the struggle it purchased a 25 p.c interest from the Federal Government within the Neches Butane plant. Texaco acquired full ownership of this operation in 1980. The company furthered its pursuits in petrochemicals in 1944 when it formed the Jefferson Chemical Company with the American Cyanamid Company. Texaco later purchased out American Cyanamid’s curiosity in this enterprise and then merged it with its newly formed Texaco Chemical Company in 1980.
With the end of WWII, Texaco confronted renewed customer demand at house. U.S. consumption of oil exceeded its manufacturing for the primary time in 1947, and Texaco reacted by tapping new foreign sources for its crude oil. In 1945 Texaco’s jointly owned Caltex corporations increased their refining capability on Bahrain, reaching 180,000 barrels per day by 1951. Texaco also formed the Trans-Arabian Pipe Line Firm with three different oil firms to construct a pipeline connecting Saudi Arabia’s oil fields with the jap Mediterranean. At residence, Texaco elevated its refining capability with the Eagle Point Works close to Camden, New Jersey. It also introduced several new automotive products, including Texaco Anti-Freeze and Texamatic Fluid for automated transmissions.
During the 1950s and 1960s Texaco concentrated on increasing its international refining and advertising operations. The acquisition of the Trinidad Oil Company in 1956 and the Seaboard Oil Company in 1958, each of which held confirmed reserves in South America, expanded its pursuits within the Western Hemisphere. To extend its production in the Amazon Basin, the company constructed a jointly owned trans-Andean pipeline in 1969 and a trans-Ecuadorian pipeline in 1972. To extend its production in Europe, furthermore, Texaco bought the majority interest in the West German oil company Deutsch Erdol A.G. in 1966. It also reorganized the Caltex group in 1967, taking over one-half of the group’s interest in 12 European nations that it had been serving from Saudi Arabia. This move allowed the corporate to broaden its advertising and marketing operations in Europe, whereas leaving the Caltex corporations free to concentrate east of the Suez Canal, where they loved their best market penetration. Texaco brought its petrochemical business to Europe in 1966 with a plant in Ghent, Belgium, and to Japan three years later.
In the United States, Texaco expanded its interests by buying regional companies and increasing its refining capacity. The company strengthened its position on the East Coast by buying the Paragon group of companies in 1959 and the White Gas Company in 1962. In 1962 it additionally acquired mineral rights to 2 million undeveloped acres in west Texas from the TXL Oil Corporation. The corporate’s petrochemical manufacturing grew rapidly throughout this period, with the addition of a new unit at the Eagle Point works in 1960 and one of many world’s largest benzene plants in Port Arthur in 1961. Texaco’s operating volumes doubled between 1960 and 1970, with gross manufacturing surpassing three billion barrels per day in 1970.
Texaco’s tremendous growth came to an abrupt halt in the 1970s. The Arab-Israeli War, the OPEC embargo, and the nationalization of overseas oil belongings in lots of overseas nations minimize Texaco’s revenue margins and endangered its sources of crude. Moreover, federal worth controls and obligatory allocation regulations restricted Texaco’s potential to raise costs or withdraw from unprofitable markets. Its web earnings dropped from $1.6 billion in 1974 to $830.6 million a 12 months later and remained at that degree for the rest of the decade.
Tensions within the Center East prompted a wave of nationalizations in the oil industry. In 1972 Saudi Arabia began to nationalize the property of Aramco, by which Texaco owned a 50 percent curiosity, and took over all of its operations in 1980. Between 1973 and 1974 Libya nationalized the Texas Overseas Petroleum Firm, a Texaco subsidiary. The decade ended with the Iranian revolution displacing Texaco’s pursuits there and the Caltex group promoting off a part of its operations to the Bahrain government.
Texaco increased its exploration efforts and reorganized its marketing operations at home. Drilling activities increased both onshore and offshore within the southwest, as well as in new areas such because the North Sea and eastern Atlantic. The corporate also modernized its refineries in order to maximise the yield from every barrel of crude. Texaco made its most dramatic alterations in its retail community, abandoning the 50-state plan that had made it the United States’s largest seller of oil. It began to withdraw from unprofitable markets, chopping operations in all or components of 19 states within the Rocky Mountain, Midwest, and Nice Lakes areas. It also lowered its variety of service stations and opened extra trendy shops in high-quantity areas.
The 1980s started with the U.S. financial system still affected by recession, however the deregulation of the oil trade supplied Texaco new flexibility in making an attempt to recoup its fortunes. Beneath the course of its new chairman, John Ok. McKinley, Texaco undertook a serious restructuring plan in 1980. It decentralized its operations into three major geographic oil and gasoline divisions representing the United States, Europe and Latin America, and West Africa, as well as one worldwide chemical organization known as the Texaco Chemical Company. The corporate expanded its exploration program and it additionally committed more assets to tasks for growing alternative fuels, resembling coal gasification and shale oil.
Retrenchment in its refining and advertising and marketing operations continued with the closing of six inefficient refineries by 1982 and the discount of its retail outlets from 35,500 in 1974 to 27,000 in 1980. Texaco launched a new brand in 1981, a red “T” inside a white star and pink circle, to advertise its excessive-quantity System 2000 stations. These stations were a fast success, with greater than 1,200 within the United States by 1987. The corporate also added a brand new operating division in 1982, Texaco Center East/Far East, and made several vital acquisitions to bolster its reserve base. By 1985 Texaco’s net revenue was as soon as again above $1 billion.
In the course of this comeback, Texaco became concerned in a legal battle. The 1984 purchase of the Getty Oil Company had promised to hurry Texaco’s recovery by including an estimated 1.9 billion barrels of proven reserves to its assets. Pennzoil Company filed suit, nevertheless, claiming that Texaco had interfered with its plans to acquire three-sevenths of Getty’s shares. Within the resulting court docket case, a Texas State District Court in Houston ordered Texaco to pay Pennzoil $10.5 billion in damages. Arguing that essential New York and Delaware state legal guidelines had been ignored in the case, Texaco obtained an injunction from a federal court in New York that quickly halted the cost of damages while it appealed the choice.
In February 1987 the Texas Court docket of Appeals upheld the choice. In order to protect its assets whereas persevering with its appeals, the company filed for protection under Chapter eleven of the United States Bankruptcy Code. Texaco spent most of 1987 in Chapter eleven whereas continuing its litigation. Consequently, it incurred its first working losses since the nice Depression, ending the year $four.Four billion in the pink. After the Texas Supreme Court docket refused to listen to an enchantment, New York financier Carl Icahn began buying Texaco’s rapidly depreciating inventory in an try and drive it to settle with Pennzoil. A few weeks later Texaco agreed to pay Pennzoil $three billion somewhat than appeal the choice to the Supreme Courtroom, permitting it to begin planning for its emergence from Chapter 11.
Nonetheless, Icahn continued to purchase the corporate’s stock, and in early 1988 he began a takeover bid. Texaco’s board of directors had submitted a restructuring plan to the shareholders for assembly the corporate’s debt obligations. Icahn favored, instead, the sale of the corporate. He launched the biggest proxy battle in business historical past when he tried to achieve management of 5 seats on the board of directors, but he was in the end defeated in a June 1988 shareholders’ election. The board of directors then agreed to buy out Icahn’s curiosity in Texaco.
With the Pennzoil case and the takeover try behind it, Texaco rebuilt its market position underneath the management of chairman and CEO James Kinnear by selling off belongings and undertaking new joint ventures. From 1987 to 1989 it bought its operations in Germany and Canada, as well as fastened belongings within the United States (including 2,500 fuel stations) and the Middle East, raising $7 billion in the method. It additionally expanded drilling operations in the North Sea and offshore California, while persevering with its exploration efforts in Asia, Africa, and South America.
In 1988 Texaco U.S.A. transferred approximately two-thirds of its refining and advertising and marketing operations to Star Enterprise, a joint enterprise established with Saudi Arabia’s Aramco. Different moves have included the acquisition of Chevron’s marketing operations in six European countries and the company’s first industrial utility of its coal gasification technology in an electric plant within the Los Angeles basin.
The recession of 1991–92 depressed demand for petroleum products and pressured prices decrease. Consequently, Texaco’s income dropped from $forty.51 billion in 1990 to $37.Sixteen billion in 1991 to $36.53 billion in 1992, while web earnings fell from $1.Forty one billion in 1990 to $1.29 billion in 1991 to $1.04 billion in 1992. By 1993, internet income had improved to $1.07 billion, however revenue continued to fall, dropping to $34.07 billion. That same yr Kinnear retired and was succeeded by Alfred C. DeCrane Jr.
Starting in 1993, DeCrane guided Texaco by means of yet one more restructuring intended to improve its competitiveness. Like virtually every other U.S. oil firm going via restructuring at the time, Texaco diminished its work drive. A cut of 2,500 staff, or eight percent, over a one-year period contributed to a $200 million discount in overhead in 1994. DeCrane additionally needed Texaco to deal with its core oil and gas operations, so he divested the company of its chemical business. In 1994 Texaco sold the Texaco Chemical Company to the Huntsman Corporation for $850 million. That 12 months the company additionally sold more than 300 scattered, unprofitable oil- and gas-producing properties to Apache Company for $600 million.
With the funds generated by way of these strikes, Texaco might now enhance its funds for overseas exploration and production. Seeking to increase production by 125,000 barrels a day by the tip of the decade, Texaco began to pursue alternatives in Russia, China, and Colombia. So as to attenuate its exposure in such dangerous areas of operation as Russia, Texaco, like other oil firms, turned to joint ventures with its rivals. As an example, Texaco formed the Timan Pechora Company L.L.C. with Exxon, Amoco, and Norsk Hydro to negotiate a production-sharing agreement with Russia for the Timan Pechora Basin, which may hold more than two billion barrels of oil.
The much leaner Texaco of the mid-nineties had but to return to its former prominence, but was in better shape than in many years. One positive sign was Texaco’s reentry into the Canadian market in 1995 with its $30 million reacquisition of Texaco Canada Petroleum Inc. With the company dedicated to rising its capital spending overseas from 45 percent of total capital spending to 55 percent by 1998, Texaco seemed determined to get its share of the oil available exterior the United States. Whether or not that could be sufficient for Texaco to recapture its past glory in a decade of heated competition remained to be seen.
Principal Subsidiaries: Caltex Petroleum Corp. (50%); Four Star Oil & Gasoline Co.; Saudi Arabian Texaco Inc.; Star Enterprise (50%); TEPI Holdings Inc.; Texaco Cogeneration Co.; Texaco Exploration & Production Inc.; Texaco Worldwide Trader Inc.; Texaco Overseas Holdings Inc.; Texaco Pipeline Co.; Texaco Refining & Advertising Inc.; Texaco Trading & Transportation Inc.; TRMI Holdings Inc.; Texaco Brasil S.A. Produtos de Petroleo; Texaco Canada Petroleum Inc.; Texaco Denmark Inc.; Texaco Investments (Netherlands), Inc.; Texaco Overseas (Nigeria) Petroleum Co.; Texaco Panama Inc.; Texaco Britain Restricted (U.K.); Texaco Restricted (U.Ok.); Texaco North Sea U.Ok. Co.
