Pennzoil Company

Pennzoil Company, American petroleum corporation that became an important producer of crude oil and natural gas and a major marketer of automotive products before disappearing at the end of the 20th century in a series of mergers and acquisitions.

Pennzoil’s origins can be traced to two parallel oil ventures that took place in Pennsylvania in the late 19th century. One of them, the South Penn Oil Company, was founded on May 27, 1889, as an oil-producing unit of the Standard Oil Trust, which at that time owned refineries and distribution networks but no producing oil wells. As part of Standard Oil, the South Penn Oil Company, headquartered in Oil City, Pennsylvania, expanded to become the largest oil producer in the Appalachian region. It became an independent company in 1911 when the Standard Oil Trust was dissolved.

In a parallel development, two related distributors of lubricating oils, one on the East Coast and the other on the West Coast, were founded in 1908 and 1913, respectively. Both companies bought their motor oil, which in 1916 they agreed to market as Pennzoil, from refineries that had operated near Oil City since the 1880s. Through a complex of mergers, the refiners and the growing number of Pennzoil distributors were incorporated in 1925 under the name the Pennzoil Company. That same year South Penn Oil acquired a controlling interest in Pennzoil, and operations became nationwide, from New York to California. More acquisitions followed over the years, and in 1955 South Penn Oil acquired complete ownership of Pennzoil. The company produced a range of products, though its principal products were Pennzoil-brand motor oils, and its reserves were mainly located in the older oil fields of the Northeast.

In 1963 two Texas-based exploration and production corporations—Zapata Petroleum and Stetco Petroleum—merged with South Penn Oil to form a new Pennzoil Company. Zapata and Stetco were owned by two brothers, J. Hugh Liedtke and William C. Liedtke, who were encouraged to invest in South Penn Oil by a major shareholder of that company, oil tycoon J. Paul Getty. Hugh Liedtke became chairman of the new company, which was headquartered in Houston. By 1965 Pennzoil had become a fully integrated company, producing and marketing oil and gas products internationally. After acquiring a controlling interest in United Gas Corp. in 1965, Pennzoil was consolidated with United Gas in 1968 to form Pennzoil United, Inc., which was renamed Pennzoil Company in 1972. On January 4, 1984, the J. Paul Getty interests agreed to merge Getty Oil Company with Pennzoil, but two days later this agreement was breached by the announcement of another agreement, selling Getty Oil to Texaco Inc. Pennzoil’s subsequent lawsuit, which was pursued through state and federal courts, ultimately resulted in a jury decision in 1985 ruling that Texaco had knowingly interfered with Pennzoil’s binding agreement with the Getty interests. Pennzoil was awarded more than $10 billion in actual and punitive damages; Texaco ultimately paid $3 billion in cash in a final settlement in 1988.

Both companies emerged from the lawsuit weakened. Texaco went through bankruptcy reorganization and was eventually purchased by the Chevron Corporation. Pennzoil tried to expand both its reserve base and its product line by purchasing oil and gas deposits in the Gulf of Mexico from Chevron in 1992, as well as the Jiffy Lube oil-change company in 1991. In 1998 Pennzoil’s motor-oil, refined products, and services divisions were spun off as a separate company, which promptly purchased a rival company, Quaker State Corporation, to form the Pennzoil–Quaker State Company. This company in turn was purchased in 2002 by the Shell Oil Company, the American subsidiary of the Royal Dutch/Shell Group. Pennzoil and Quaker State became brands of motor oil produced by Shell Lubricants. Meanwhile, Pennzoil’s remaining exploration and production divisions were renamed the PennzEnergy Company, and this was bought in 1999 by Devon Energy Corporation, based in Oklahoma City.