Shell Oil Company

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Shell Oil Company

founded: 1922 as shell union oil corporation

Contact Information:

headquarters: 1 shell plz.
houston, tx 77002 phone: (713)241-6161 fax: (713)241-4044 url: http://www.shellus.com

OVERVIEW

Shell Oil is one of the largest petroleum companies in the United States. It is active in both the upstream (exploration and production) and downstream (refining) segments of the industry. The company also makes and markets chemicals and provides logistical and consulting services.

COMPANY FINANCES

Shell Oil reported net income in 1997 of $2.1 billion on $29.0 billion in revenues, compared with net income of $2.0 billion on revenues of $29.2 billion in 1996. The breakdown of 1997 net income was approximately as follows: Exploration & Production, 61 percent; Oil Products, 17 percent; and Chemical Products, 22 percent.

For the first quarter of 1998 Shell Oil's revenues fell 37 percent to $4.8 billion, while earnings dropped to $172 million from $517 million in the first quarter of 1997. The main cause of these declines was the fall in prices for crude oil (40 percent) and natural gas (30 percent).

HISTORY

The familiar seashell trademark that every motorist knows first appeared in the United States in 1912. That year the Royal Dutch/Shell Group, an international oil company with headquarters in both Holland and England, began to import oil into the United States. It first formed the American Gasoline Company in Seattle, then set up Roxana Petroleum in Oklahoma. In 1913 American Gasoline acquired California Oilfields, and in 1915 it built a revolutionary new refinery in Martinez, California. To reflect its growing presence in California, American Gasoline was renamed Shell Company of California in 1915.

In 1922 Shell Company of California and Roxana Petroleum merged with Union Oil Company of Delaware to form a holding company called Shell Union Oil Corporation. The Royal Dutch/Shell Group held about 65 percent of Shell Union's shares. In 1929, after the discovery that chemicals could be made from refinery byproducts, a chemicals subsidiary began manufacturing operations.

In 1949 the firm adopted its current corporate name, Shell Oil Company. It expanded into coal production in 1974 with the creation of the Shell Mining subsidiary. In 1984 Royal Dutch/Shell made a bid to acquire the shares of Shell Oil it did not own, completing the acquisition of all Shell Oil stock in the following year.

STRATEGY

In the mid-1990s Shell Oil's overall strategy was to restructure its operations and reduce its costs. Between 1993 and 1996 Shell reduced its staff by 12 percent to about 20,000 workers. It also reshaped its natural gas, refining, and chemical operations through joint ventures with various other energy firms. For example, in 1997 Shell and Amoco merged their exploration and producing operations in the Permian Basin near Texas. This venture, which was owned 65 percent by Amoco and 35 percent by Shell, reduced costs by eliminating duplicate facilities.

On January 15, 1998 Shell Oil and Texaco reached agreement on the formation of Equilon, a joint venture which would combine major parts of the companies' refining and marketing businesses in the West and Midwest. The joint venture would also combine large parts of their nationwide trading, transportation, and lubricants businesses. Shell Oil owns 56 percent of the company and Texaco, 44 percent. Texaco, Shell Oil, and an affiliate of Saudi Aramco were also planning a separate joint venture that would combine major elements of their refining and marketing businesses on the Eastern Seaboard and Gulf Coast.

FAST FACTS: About Shell Oil Company

Ownership: Shell Oil is wholly owned by Shell Petroleum Inc., which is 60-percent owned by Royal Dutch Petroleum of the Netherlands and 40-percent owned by Shell Transport and Trading of the United Kingdom, commonly known as the Royal Dutch/Shell Group.

Officers: Mark Moody-Stuart, Chmn.; Jack Little, Pres. & CEO

Employees: 19,904 (1997)

Principal Subsidiary Companies: Shell Oil's principal subsidiaries include: Shell Chemical Co., Shell Oil-Products Co., and Shell Pipe Line Corporation.

Chief Competitors: Shell Oil competes against the major oil companies, which include: Chevron; DuPont; Exxon; Mobil; Phillips Petroleum; and British Petroleum.

INFLUENCES

After being assembled in 1922 Shell Union Oil continued to grow through the decade, with major refineries in California, Louisiana, Illinois, and Texas. By 1929 Shell Union was selling gasoline in all 48 states and Hawaii, which was then a territory. The Depression forced the company to retrench somewhat, but it continued research activities. In 1934 it began supplying fuel to the U.S. Air Corps and gradually became one of the largest producers of aviation fuel. During World War II the United States lost its source of natural rubber when Japan occupied Indonesia and Singapore. Shell provided butadiene, a chemical required for the production of synthetic rubber products, which helped to furnish an adequate substitute.

After the war Shell Oil benefited from the expanding U.S. economy and Americans' passion for the automobile. The company increased its exploration activities and built new chemical plants. It also helped to develop new energy products, including jet fuel and high-octane unleaded gasoline for autos. On the retail end, Shell Oil gained significant market share by agreeing to honor all other oil company credit cards and by issuing a travel and entertainment card bearing the Shell name.

While some petroleum companies sought to diversify in the late 1970s and 1980s, Shell Oil continued to focus on the oil and gas business. In 1978 it upgraded its refineries and closed many of its less profitable service stations. Its takeover of Belridge Oil in 1979 brought Shell Oil substantial crude oil reserves that it badly needed. Shell increased its oil exploration activities in the Gulf of Mexico and was rewarded with a major strike at the Bullwinkle prospect in 1983. In 1994 the Gulf of Mexico represented 40 percent of the company's net domestic production of oil and gas.

CHRONOLOGY: Key Dates for Shell Oil Company

1912:: The Royal Dutch/Shell Group forms American Gas Company and begins importing oil into the United States
1915:: American Gas is renamed Shell Company of California
1922:: Shell merges with Union Oil Company to form Shell Union Oil Corporation, 65 percent owned by Royal Dutch/Shell
1931:: Shell Point synthetic chemical plant is the first in the world to use natural gas to make ammonia
1949:: Shell Union becomes Shell Oil Company
1958:: Shell develops a new "ranch style" station that becomes the industry standard
1974:: Becomes the largest developer of epoxy resins
1984:: Royal Dutch/Shell purchases the rest of Shell Oil
1997:: Amoco and Shell merge their exploration and producing operations
1988:: Texaco and Shell form a joint venture to combine major parts of their refining and marketing business

SHELLING OUT THE SPONSORSHIP CASH

When you think motor oil, you think golf, right? Well, if you don't, Shell does. In the 1960s, Shell presented a program called The Wonderful World of Golf, which was one of the most innovative sports programs of its time. Not only did it boost the visibility of golf as a sport, but it was also one of the first made-for-television sporting events. No longer did an event actually have to draw live spectators to be viable. If it could be filmed and broadcast on television, that was good enough. The concept was simply to have two golfers go head-to-head and may the best man win. The original series was broadcast on NBC, but the program is being reinvented for broadcast on ABC. As a spokesman for Shell said, "Shell invests in the show because golf is clean, individualistic, based on honesty and integrity, and on earning what you get."

In 1984 Royal Dutch/Shell, which owned 65 percent of the company, decided it wanted 100-percent ownership. It eventually gained full control in 1985, but some Shell shareholders sued, claiming that their interests were undervalued in the buyout. In 1990 a judge awarded the shareholders $110 million.

CURRENT TRENDS

In 1997 Shell integrated its new oil and gas development activities overseas with those of the other Royal Dutch/Shell Group companies. Shell kept its international producing properties in Brazil, Cameroon (in Africa), China, and Yemen (in the Middle East). However, it would concentrate its future exploration activities in and near the United States.

In early 1998 Shell Oil acquired Tejas Gas for $1.45 billion. Shell said that the merger created one of the nation's largest companies for the transporting, processing, and storage of natural gas. The new company will be known as Tejas, an affiliate of Shell Oil.

PRODUCTS

As a huge oil and gas company Shell Oil has developed expertise in a wide variety of management and technical fields. The Shell Services subsidiary was formed in early 1995 to sell this expertise to companies in the petroleum industry and in other industries. It offers services in the following fields: information technology, general accounting, human resources, and procurement and invoice processing. One interesting specialty is the Year 2000 Problem, where Shell is helping companies convert the calendars in their computers for the next century.

CORPORATE CITIZENSHIP

Shell Oil is involved in numerous programs for community improvement. The Shell Oil Company Foundation is one of the largest company-sponsored foundations in the United States. The Shell Youth Training Academy offers skills training to high school students to help them find jobs. SERVE (Shell Employees & Retirees Volunteer Effort) is a volunteer program for Shell employees and retirees that has raised more than $750,000 for community betterment agencies. In 1996 the Shell Houston Open donated $1.9 million to local charities, which made this tournament one of the top two charity events on the PGA Tour.

Shell is also involved in programs that seek to study and improve the environment. The Shell Marine Habitat Program is a joint effort between the Shell Oil Company Foundation and the National Fish and Wildlife Foundation to help conserve the Gulf of Mexico marine environment. One of the program's primary purposes is to investigate the dynamics of human interaction with estuaries and oceans.