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Twentieth-Century Business Archives

Chevron Overseas Finance Co. - Lehman Brothers Collection

Chevron Overseas Finance Co.

List of Deals

Chevron's oldest predecessor is the Pacific Coast Oil Company, founded in 1879 by Frederick Taylor and a group of investors. Soon thereafter, Pacific Coast developed a method for refining California oil into an acceptable grade of kerosene. The company thrived, as kerosene was the most popular lighting source at that time. By the end of the nineteenth century the company had assembled a team of producing wells in the area of Newhall, California, and built a refinery at Alameda Point on San Francisco Bay. Pacific Coast also owned both railroad tank cars and an ocean-going tanker to transport its crude oil from the fields to the refinery.

One of Pacific Coast's best customers was Standard Oil Company of Iowa (Iowa Standard), the far-west marketing subsidiary of Standard Oil Trust, which was headquartered in New Jersey. In 1900 Pacific Coast sold its stock to Standard Oil Company of New Jersey (Jersey Standard), with the understanding that Pacific Coast would produce, refine, and distribute oil for marketing and sale by Iowa Standard representatives. After the completion of the deal, Pacific Coast built California's largest refinery, as well as a set of pipelines to bring oil from its San Joaquin Valley wells to the refinery. The company's production of crude oil rose dramatically over the next decade.

In 1906 Jersey Standard joined its two West Coast subsidiaries into a single entity called Standard Oil Company (California), generally known as "Socal." Socal's head chemist, Eric A. Starke, was chiefly responsible for several breakthroughs in the refining of California's crude oil into usable kerosene. By 1911 Socal was the state leader in kerosene production. To keep its refineries and pipelines full, Socal bought crude from Union Oil, and in return handled a portion of the marketing and sale of Union kerosene and naphtha.

Standard Oil Trust was forced to dissolve in 1911 due to anti-monopoly laws, and Socal became an independent company. Socal's net book value had increased dramatically, from a few million in 1900 to $39 million in 1911. The company lost Standard Oil Trust's financial backing but retained its dominant marketing and refining position, its extensive network of critical pipelines, a growing fleet of oil tankers, its oil wells, and approximately $14 million in earnings.

Socal thrived in the ensuing years. By 1919 the company was producing 26 percent of the nation's crude oil; Socal then found itself in the unusual predicament of having an excess of crude oil and a shortage of outlets for it. Socal maintained its growth within California, while other companies expanded to explore international opportunities for oil production. In the late 1920s Socal began to consider expanding to the Middle East. Socal struck oil in Bahrain, and soon after that success the company obtained drilling rights in Saudi Arabia. Saudi Arabia proved to have an enormous amount of oil, and Socal realized that the company would need access to markets far larger than its own foreign holdings. In 1936 the company sold 50 percent of its drilling rights in Saudi Arabia and Bahrain to the Texas Company (later Texaco). The two companies agreed to market their products under the brand name of Caltex. After World War II, the companies realized that the Saudi Arabian oil fields were too big for even both of them; to raise capital they sold 40 percent of the recently formed Arabian American Oil Company (Aramco).

By 1949 Socal had grown into one of the few American companies with $1 billion in assets. The company experienced a progressive rise in sales as the U.S. economy became increasingly more dependent on oil after World War II. By 1957 Socal was selling $1.7 billion worth of oil products annually and ranked as the world's seventh-largest oil concern. Through the 1950s and 1960s, Socal had the one of the best profit ratios among all oil companies. Chevron Overseas Finance Company was incorporated in 1967 as a wholly owned subsidiary of Socal. Chevron was formed for the purpose of making investments in, including loans to, Socal's foreign subsidiaries and affiliated companies and other foreign companies.

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