press release

Chevron and Phillips to Close Transaction Launching New Chemical Company

CHEVRON AND PHILLIPS TO CLOSE TRANSACTION LAUNCHING NEW CHEMICAL COMPANY

SAN FRANCISCO, June 30, 2000 -- Chevron and Phillips today announced that they have received the necessary regulatory clearance to proceed with the combination of their worldwide chemicals businesses into a 50/50 joint venture. The companies expect to close July 1 on the transaction.

With more than $6 billion in assets, the new company -- named Chevron Phillips Chemical Co. -- will be one of the world's top producers of olefins, polyolefins, aromatics and styrenics.

"Outstanding employees from both organizations, with demonstrated skills and expertise, and complementary products and technology, will create a formidable company with the scale to compete in today's vibrant marketplace," said Dave O'Reilly, Chevron's chairman and CEO. "We expect synergy from the combined operations to reduce annual costs by $150 million and to improve the effectiveness of capital spending.

"The transaction is expected to be accretive immediately to Chevron's net income and net cash flow," added O'Reilly.

Chevron's Oronite additives business, which has a global position in fuel and lubricants additives, is not included in the joint venture. Oronite will remain a stand-alone Chevron operating company.

Jim Gallogly, previously senior vice president of Phillips' chemicals division, will be president and chief executive officer of the new company.

"We are on the threshold of creating a major player in the worldwide chemicals market by joining two of the most respected names in the business," said Gallogly. "Chevron Phillips Chemical Co. has the people, the assets and the technology to pursue chemicals opportunities on a global scale. That makes all the difference in a highly competitive industry where innovation and an entrepreneurial spirit set the standard."

Chevron Phillips Chemical Co. will obtain $1.8 billion of debt financing and will make one-time cash distributions of approximately $800 million to each parent. On a pro forma basis, revenues for the combined businesses for 1999 would have been nearly $6 billion.

Jim Mulva, chairman and CEO of Phillips Petroleum Co., said, "This transaction will implement another step in fulfillment of the Phillips strategic model for the future. We can continue to participate in the chemicals segment, but through a joint venture with a stronger and more competitive asset base. Phillips will remain integrated and retain a major role in the chemicals business, while continuing to focus on our strategy of growing our exploration and production business."

Chevron Phillips Chemical Co., to be headquartered in Houston, will be one of the top five worldwide olefins and polyethylene producers, and among the top three producers of aromatics and alpha olefins. The company will have the annual capacity to produce 8.2 billion gross pounds of ethylene, 5.5 billion gross pounds of polyethylene, 7.4 billion pounds of aromatics, 1.6 billion pounds of alpha olefins, 1.7 billion pounds of styrene monomer, more than 1.2 billion pounds of styrenic polymers, and more than 400 million pounds of specialty chemicals.

Chevron Corp., headquartered in San Francisco, is a leading energy and chemical company, operating in about 90 countries. Chevron, which employs 31,000 people worldwide, has $40.7 billion in total assets. Total revenue in 1999 was $36.6 billion.

Phillips is an integrated petroleum company engaged in oil and gas exploration and production worldwide; gas gathering, processing and marketing in the United States; refining, marketing and transportation operations primarily in the United States; chemicals and plastics manufacturing and sales around the globe; and technology development. Founded in Bartlesville, Okla., in 1917, the company had 14,800 employees, $20 billion of assets and $18 billion of annualized revenues for 2000.

More information is at Chevron Phillips Chemical Co.'s web site, www.cpchem.com

Updated: June 2000