Newspaper article THE JOURNAL RECORD

No Immediate Impact Expected from Huge Texaco Judgment

Newspaper article THE JOURNAL RECORD

No Immediate Impact Expected from Huge Texaco Judgment

Article excerpt

billion judgment against Texaco Inc. should have no immediate impact on the finances of the nation's third largest oil company, and they question whether the award by a Texas jury will stick.

But the analysts who follow the fortunes of Texaco for investment firms said that should the unprecedented verdict be upheld, Texaco faced serious difficulties just at a time when the company's ownoperations were improving.

The award far exceeds the $8.6 billion market value of all of Texaco's outstanding common stock and analysts questioned whether the heavily indebted company could raise the cash to foot the bill.

In what is believed to be the largest judgment in U.S. history, a district court jury in Houston held Tuesday that Texaco must pay Pennzoil Co. $7.53 billion in actual damages and $3 billion in punitive damages for interferring in Pennzoil's plans to acquire Getty Oil Co. A judge still must review the verdict before entering a final judgment.

Getty backed out of a preliminary agreement to merge with Pennzoil early last year and was purchased by Texaco for $10.1 billion.

Texaco, which said it would appeal the verdict, has been showing renewed growth. Earnings for the third quarter rose 28.1 percent from a year earlier despite a 7.4 percent drop in sales.

"The company is in the best financial position it has been in many, many years, but that doesn't mean it can pay a $10.5 billion settlement," said Bruce Lazier, an analyst at Prescott, Ball & Turben.

Texaco had earnings of $926 million on revenue of $35 billion in the first nine months of the year and reported assets of $37.4 billion.

Two major business-information services, Standard & Poor's Corp. and Moody's Investors Service Inc., left their credit ratings for Texaco unchanged Tuesday despite the huge judgment, saying the eventual outcome of the case remained uncertain.

"The decision is not expected to have any near-term financial impact on Texaco," Moody's said. …

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