Chevron Corp.’s sweetened bid for Unocal Corp. won’t affect Chevron’s credit ratings (Aa2 senior long-term, Prime-1 commercial paper), Moody’s Investors Service said Thursday. Chevron increased the cash portion of its offer for Unocal on Wednesday to $7.5 billion from $4.4 billion, valuing the total transaction at $17.8 billion, including a reduced amount of net debt to be assumed (see Daily GPI, July 21). Unocal’s board has recommended that its shareholders approve the proposed merger in a special meeting scheduled for Aug. 10.

Despite the increased cash and full valuation placed on reserves, Chevron’s strong financial and liquidity position and the 60% equity component of the offer will support the higher acquisition price without affecting the company’s credit profile, Moody’s said.

“Chevron’s financial leverage is at a cyclical low and its cash and marketable securities, which totaled $11.85 billion [on March 31] are continuing to build and will more than cover the cash portion of the bid,” the credit ratings agency stated. “The company, however, will also be challenged to maintain and strengthen its future capital returns based on a fully valued purchase price that has increased with the amended offer.”

Moody’s estimates the acquisition cost increased slightly to $10.80/boe on a total reserves basis, adjusted to exclude Unocal’s Canadian oil and gas reserves, which are being divested in a separate transaction for about $1.5 billion after-tax.

Meanwhile, the House Energy Committee canceled a hearing Thursday on China National Offshore Oil Co’s $18.5 billion bid to buy Unocal. The committee’s members were busy tackling comprehensive energy legislation, which is in conference committee. The hearing is expected to be rescheduled at a later date.

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