Analyst: PennzEnergy Attractive for Takeover

PennzEnergy, the exploration and production company spawn of the restructuring of Pennzoil and Quaker State, could be an attractive takeover target for a large independent producer or integrated energy company, according to an analyst who follows the company.

"Their stated intention is to grow the company, and in their words 'it's not for sale,'" said J.P. Morgan analyst Jay Wilson. "My own opinion is that the stock is significantly undervalued, and in my mind it is a potential takeout candidate.

"There's a chewable poison pill feature there. If somebody puts in a bid that exceeds the average closing price for the previous 20 days by 35%, the shareholders will get the vote. The stock hasn't traded for 20 days yet. I'm not saying this is imminent. I don't have insider information . I do believe the company has very attractive assets.. I think the assets will be attractive to a lot of the larger E&ampP companies as well as possibly some of the integrateds."

On Dec. 30, Quaker State Corp. was merged into Pennzoil Products Group (Pennzoil Company's marketing, manufacturing and fast oil change businesses) to form Pennzoil-Quaker State, which is traded on the New York Stock Exchange. Pennzoil and Quaker State last week completed a restructuring designed to separate the companies' automotive businesses from exploration and production operations. The restructuring includes the spin-off of Pennzoil's Products Group and combines the marketing, manufacturing and fast oil change businesses of Pennzoil with all of Quaker State.

Meanwhile, Pennzoil Co. has been renamed PennzEnergy Co. and trades on the New York Stock Exchange with the symbol PZE. The company continues as one of the largest U.S.-based independent E&ampP companies.

"Separating the automotive consumer products company from our oil and gas business creates two highly-focused, pure-play companies and allows our shareholders to realize the full value of each business," said James L. Pate, chairman of both companies and CEO of Pennzoil-Quaker State.

Stephen D. Chesebro', president and newly appointed CEO of PennzEnergy, said, "PennzEnergy emerges today as a focused and well-positioned independent exploration and production company with high quality assets and great growth potential." Chesebro' was CEO of Tenneco Energy before it was spun off from Tenneco Inc. and acquired by El Paso.

PennzEnergy core domestic regions include South Texas, West Texas, East Texas, southern Louisiana and the Gulf of Mexico. Internationally, it holds exploration and development concessions in Azerbaijan, Egypt, Qatar and Venezuela.

With the restructuring complete, former Pennzoil shareholders now own one share of Pennzoil-Quaker State Co. common stock and one share of PennzEnergy common stock for each share of common stock of Pennzoil.

Joe Fisher, Houston

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