Chevron greases Internet spin-offs


contributed by Globalight

By Ken Yamada

source:
Redherring.com, February 09, 2000

Chevron (NYSE: CHV) chairman and CEO Dave O'Reilly has lofty goals for the nation's second-largest oil company. They include being first in shareholder returns among big oil companies over the next five years, a long-term earnings growth rate in the top quarter of the S & P 500, and a minimum 12 percent return on capital employed.

The ambitions sound more like those of a Web company than a maturing multinational giant. Perhaps that's why last fall Chevron enlisted Don Paul, the company's technology and environmental affairs vice president, to head its Internet-style electronic-business development group, a unit charged with spinning out new companies. His charter epitomizes how the Web is affecting even the biggest, most established companies in the world.

Under Mr. Paul's supervision, Chevron announced last month its first Internet spin-off: Petrocosm Marketplace is a business-to-business electronic exchange for the energy industry, created with Ariba (Nasdaq: ARBA). Petrocosm is the first of up to four spin-offs planned over the next year. Mr. Paul also oversees Chevron Technology Ventures, the company's first foray into Silicon Valley venture capital investing.

SLICK LOCATION

Perhaps most remarkable is that Chevron's Internet activities represent the biggest push by the world's biggest oil companies into the Internet, for which Mr. Paul credits the company's San Francisco headquarters' proximity to Silicon Valley. Still, with a staff of a half-dozen people, the oil giant is only dipping its little toe in the Web.

From his 39th floor office overlooking San Francisco Bay, Mr. Paul says, "We're the only energy company that's located here -- I think it really affects the mindset of management."

Over the past several months, Chevron officials have been rubbing shoulders with the region's venture capitalists, who provide inside connections to potentially big deals and hot startups. Those recently forged connections, Mr. Paul says, give Chevron a "home-court advantage" over oil company competitors.

Pledging $60 million to its technology venture fund, Chevron invests in early-stage companies focused on information technology, biotechnology, or materials science. So far, the company has made direct investments in Harmony Software, a provider of business performance management technology located in San Mateo, California; Illumina, a biotechnology company based in San Diego, California; and OuterLink, a supplier of vehicle tracking systems in Concord, Massachusetts.

The $60 million also is used to invest in other funds managed by traditional VCs, such as CMEA Ventures, ARCH Venture Partners, and Oxford Bioscience Partners. Mr. Paul says it's too early to say what kinds of returns Chevron's fund will generate.

SYMBIOTIC RELATIONSHIPS

Mr. Paul says his venture group looks for opportunities that benefit Chevron both in terms of new technology and financial rewards. Like typical venture funds, it targets young companies that hope to launch initial public offerings.

Within Chevron, Mr. Paul envisions two to four new companies being spun off from his e-business group. The first, Petrocosm, plans in the second quarter to unveil a Web site that enables companies of all sizes to buy and sell products such as drilling equipment, electrical supplies, and pipes, as welll as services such as engineering and construction services.

Chevron, Ariba, and Crosspoint Venture Partners agreed to take minority stakes in Petrocosm, leaving majority equity ownership open to energy industry companies. In this way, Chevron hopes to establish the company's independence, while enlisting other players who'll be more willing to participate in Petrocosm as part owners.

According to Mr. Paul, Petrocosm represents a new kind of company, which he describes as a "synthesis" of technology and information. As a result, buyers and sellers can interact more efficiently, which should drive billions of dollars in cost savings and efficiencies for the oil industry.

GREASING THE WHEEL

Mr. Paul believes the oil industry is ripe for change. Much of its infrastructure and many of its processes were established years ago. Those dynamics have shaped the way oil companies think and operate with a conservative, long-term planning approach. By contrast, new companies with faster-moving, flexible cultures can drive new efficiencies, open new markets, and generate new sources of revenue.

"In our business, we develop and own things that last a long time, say 20 or 40 years, so the kind of management processes you bring to bear on those are different," Mr. Paul says. "The ideal state for operating a plant that's producing something like gasoline or crude oil is that it works exactly as designed, exactly the same, every day, forever."

New companies, Mr. Paul says, must "get to the marketplace, capture the value, then get to another marketplace." That's why it's important that new companies are spun off from Chevron. "I just don't think they'll have the same DNA," he says.

"In this world," Mr. Paul says, "the winners see the opportunities, get there first, and run faster."

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Comments:
Chevron, one of the oil industry giants (alongside Amaco - who both use interesting symbols as mentioned in Davids book The Biggest Secret) is now doing what? Getting involved with the Internet? Hmmm..very odd.

For anyone who hasn't yet figured it out - AOL (America Online) uses the PYRAMID off the top of the dollar bill, as the All Seeing Eye. For those who know that the number 13 is a very important number over here in the States, will be pleased to see that AOL knew that, and put it to good use too (13 letters).

Oil companies, Internet, Media, all trying to link up. Notice they split Microsoft up at the same time as AOL merged with Time Warner. Clever move on their part. Maybe Microsoft aren't the bad guys aren't all.

Internet fans, if you've noticed AOL's appauling service, and its blantant logo, then DISCONNECT. Get another Internet Service Providor!

Let's stop these media giants. David's doing a good job.

And David beat Goliath, remember!

[footnote]
Catholic Cardinal Blesses Chevron Station
by Chuck Shepherd
sources: St. Louis Post-Dispatch, AP

December 29, 1995

The owners of a new Chevron gas station in Oakhurst, California, received an official blessing by their neighbor, Catholic Cardinal Roger M. Mahony of Los Angeles, which included the pumps, a snack area, and an advertisement for Marlboros.



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