RNS Number:0153A
Atlantic Richfield Co
29 October 1999
ARCO THIRD -QUARTER, OPERATING RESULTS UP 600 PERCENT
LOS ANGELES - ARCO (NYSE: ARC) today reported 1999 third-quarter net income of
$372 million, or $1.13 per diluted share. Excluding special items, earnings for
the quarter were $511 million, or $1.55 per diluted share - a sixfold increase
over the previous year's results.
In the 1998 third quarter, ARCO's net income was $872 million, or $2.71 per
share, while earnings excluding special items were $73 million, or $0.22 per
share, in the same quarter last year.
"Stronger commodity prices made the headlines this quarter. However, our third
quarter results also demonstrate the strong benefits being realized from our
accelerated cost-reduction program and the impressive accomplishments of ARCO
people as we move toward the combination with BP Amoco," said ARCO Chairman and
Chief Executive Officer Mike R. Bowlin, "ARCO's employees have stayed focused on
the job to be done in 1999 and as a result have made tremendous achievements.
"Our world-class refining and marketing operations continue to deliver strong
results," added Bowlin. "Additionally, we continued to make great strides in
reshaping our asset portfolio,"
ACCELERATED COST-REDUCTION PROGRAM ON TRACK
In October of last year, ARCO announced a program designed to reduce before tax
costs by $500 million over a two-year period, with $350 million of the savings
expected in 1999. Earlier this year, the company announced plans to meet the
entire $500 million reduction target in 1999. Cost savings in the first nine
months of 1999 totaled $370 million, when compared with adjusted 1998 expenses.
"All operating areas as well as staff functions are contributing to the
cost-reduction program, which makes us highly confident that we will meet the
$500 million goal this year," Bowlin said,
At the same time, ARCO has continued to restructure its asset portfolio. During
the quarter, the company announced plans to modify its upstream portfolio in
South America and in North Africa. ARCO has been in negotiations to sell its
interest in the Villano field and exploration interests in Ecuador, Peru and
Colombia to Burlington Resources, Inc. A subsidiary of Elf Aquitaine signed an
agreement to acquire an interest in ARCO's Production Sharing Contract covering
the Rhourde El Baguel field in Algeria.
QUARTERLY E&P OPERATING EARNINGS UP DRAMATICALLY
Reflecting higher commodity prices and cost reductions, ARCO's worldwide
exploration and production operations excluding special items earned $360
million after tax in the 1999 third quarter versus $38 million in the prior
period. Third-quarter net income totaled $183 million compared with a loss of
556 million in the same quarter of 1998. The 1999 results included an after-tax
charge of $175 million on the sale of a share of ARCO's interest in the Rhourde
El Baguel field; the 1998 results included a $94 million after-tax charge
primarily related to ARCO's California heavy oil holdings.
Domestic petroleum liquids realizations averaged $14.49 per barrel for the
quarter versus $8.76 per barrel last year. Domestic natural gas prices averaged
$2.25 per thousand cubic feet (Mcf) compared to $1.75 per Mcf in the prior year
period.
ARCO's international natural gas production grew by 13 percent, with most of
the growth coming from the United Kingdom North Sea. In the U.S., Vastar
Resources, Inc., (NYSE: VRI) reported a 7-percent increase in natural gas
production. ARCO holds an 81.9-percent interest in Vastar, which last week
announced the highest quarterly earnings in its history.
Overall, ARCO's oil and gas production was down 6 percent to 970 thousand
barrels of oil equivalent per day (MBOE/D) versus 1,035 MBOE/D in the third
quarter of 1998. Liquids production was down 14 percent, in line with expected
natural field declines in Alaska and the November 1998 swap of California heavy
oil properties for offshore Gulf of Mexico natural gas and oil assets, now
owned by Vastar.
During the third quarter, ARCO and Anadarko Petroleum announced a revised
development plan for the new Alpine field on Alaska's North Slope that will
increase production rates and reserve estimates. Upon full development,
projected recovery from Alpine is expected to be 429 million barrels of oil, up
from earlier estimates of 365 million barrels of recoverable oil. Additionally,
peak production will now reach 80 MBOE/D, up from previous estimates of 70
MBOE/D. Alpine startup remains on target for mid-year 2000.
WORLDWIDE OIL AND GAS - EXPLORATION RESULTS
Two U.S. discoveries were announced in the third quarter. In the Gulf of Mexico
deepwater, Vastar Resources, Inc. announced a significant oil discovery with an
exploratory well testing the Horn Mountain prospect on Mississippi Canyon Block
127. Vastar holds a two-thirds working interest in the prospect.
In Alaska, ARCO announced an oil discovery in the Fiord accumulation, which is
estimated to contain more than 50 million barrels of proven and potential
reserves. Fiord is situated west of the Kuparuk River field near the new Alpine
development.
REFINING AND MARKETING EARNINGS UP 69 PERCENT
ARCO's refining and marketing operations earned $182 million after tax, an
increase of 69 percent versus the same quarter last year when earnings were $108
million.
Improved light product margins, combined with retail volume increases and cost
reduction efforts, led to another excellent quarter in the refining and
marketing business. At the retail level, ARCO's gasoline sales volumes grew
nearly 6 percent compared to the 1998 third quarter.
OTHER OPERATIONS
Other operations, consisting of ARCO's Lower 48 pipelines and aluminum
operations, contributed after-tax earnings of $25 million in the 1999 third
quarter compared with $45 million in the 1998 third quarter. Excluding special
items, earnings were $20 million after tax in the 1999 third quarter, down from
$28 million in the 1998 third quarter.
BP AMOCO COMBINATION ON TRACK
ARCO shareholders overwhelmingly approved the company's proposed combination
with BP Amoco at a special meeting on August 30, as did BP Amoco's shareholders
in a meeting on September 1. Additionally, on September 29, the European Union
announced approval of the combination pending some North Sea asset sales. The
combination remains subject to FTC approval.
Both companies are currently working to close the transaction later in the year.
Editor's Note: On April 1, ARCO and BP Amoco announced that the two companies
had agreed to combine.
Some of the matters discussed in this news release are forward-looking
statements that involve risks and uncertainties. Actual results could differ
materially based on numerous factors, including the realized level of crude oil
and natural gas production and other risks detailed from time to time in the
company's Securities and Exchange Commission (SEC) reports, including the 1998
report on Form 10-K. The timing of the closing of the combination with BP Amoco
is subject to the timing of governmental reviews. Unless otherwise noted in the
statements, ARC0 does not intend to update such forward-looking statements.
(Cautionary Note to Investors - the SEC only permits oil and gas companies to
disclose in their filings with the SEC those reserves classified as proved,
i.e., reserves that are economically and legally producible under existing
economic and operating conditions. In this press release we use the term "proven
and potential" which SEC guidelines strictly prohibit using in the SEC filings.
Investors are urged to consider the reserve disclosure in our 1998 report on the
Form 10-K.)
Contacts: Media - Linda Dozier or Marylou Flynn, (213)486-3384; Investors -
Eden Warner or David De Sonier, (213)486-1511. Visit ARCO's website at
http://www.arco.com.
ATLANTIC RICHFIELD COMPANY
CONSOLIDATED STATEMENT OF INCOME
PRELIMINARY
(Unaudited)
(Millions, except per
share amounts) Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
REVENUES
Sales and other operating revenues $ 3,423 $ 2,655 $ 8,885 $ 7,755
Other revenues 119 146 428 346
Total revenues 3,542 2,801 9,313 8,101
EXPENSES
Trade purchases 1,418 1,039 3,397 3,096
Operating expenses 593 889 1,753 1,983
Selling, general and
administrative expenses 168 187 496 572
Depreciation, depletion and
amortizaton 423 428 1,334 1,106
Impairment of oil and gas
properties - 148 - 258
Exploration expenses (including
undeveloped leasehold amortization) 100 135 282 410
Taxes other than income taxes 117 121 353 397
Interest (a) 98 123 288 326
Loss on disposition of Algeria assets 175 - 175 -
Restructuring cost adjustment 20 - 20 -
Total expenses 3,112 3,070 8,098 8,148
Income (loss) from continuing
operations before income taxes
and minority interest 430 (269) 1,215 (47)
Provision (benefit) for taxes on income 87 (138) 382 (128)
Minority interest in earnings of
subsidiaries 13 7 25 21
Income (loss) from continuing
operations 330 (138) 808 60
Income from discontinued operations(b) 42 12 42 188
Gain on disposition of
discontinued operations(c) - 998 - 998
Net income $ 372 $ 872 $ 850 $ 1,246
Earned per share
Basic
Continuing operations $ 1.03 $ (0.43) $ 2.51 $ 0.18
Discontinued operations 0.13 3.14 0.13 3.70
Net income $ 1.16 $ 2.71 $ 2.64 $ 3.88
Diluted (d)
Continuing operations $ 1.00 $ (0.43) $ 2.46 $ 0.18
Discontinued operations 0.13 3.14 0.13 3.63
Net income $ 1.13 $ 2.71 $ 2.59 $ 3.81
Dividends per common share $0.7125 $0.7125 $ 2.1375 $ 2.1375
(a) Excludes capitalized interest of:$ 45 $ 29 $ 133 $ 66
(b) Net of income taxes (benefit) of:$ (38) $ 7 $ (38) $ 93
(c) Net of income taxes of: $ - $ 1,612 $ - $ 1,612
(d) No dilution assumed for three
months ended September 30, 1998
due to loss from continuing operations.
ATLANTIC RICHFIELD COMPANY
AFTER-TAX SEGMENT EARNINGS
PRELIMINARY
(Unaudited)
(Millions) Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
Exploration and production $ 183 $ (56) $ 446 $ 143
Refining and marketing 182 108 517 224
Other(a) 25 45 73 98
Unallocated expenses 10 (143) (17) (169)
Interest expense (70) (92) (211) (236)
Income from continuing
operations 330 (138) 808 60
Discontinued operations(b) 42 12 42 188
Gain on disposition of
discontinued operations - 998 - 998
Net income $ 372 $ 872 $ 850 $1,246
SEGMENT OPERATING INCOME
(Unaudited)
(Millions except per share amounts)
Three months ended September 30,1999
Less:
Special
Items Before
Reported (charge) Special
benefit Items
Exploration and production $ 183 $(177) $ 360 Primarily loss on Algeria
assets
Refining and marketing 182 (2) 184 Primarily environmental
Other (a) 25 5 20 Primarily asset sales
Unallocated expenses 10 (7) 17 Environmental, merger
costs, tax adjustments
Interest expense (70) - (70)
Income from continuing
operations 330 (181) 511
Discontinued operations(b) 42 42 - Tax adjustments to
gain/loss on dispositions
Total $ 372 $ (139) $ 511
Average shares
outstanding (diluted) 329.5 329.5
Earned per share $ 1.13 $ 1.55
Three months ended September 30, 1998
Less:
Special
Items Before
Reported (charge) Special
benefit Items
Exploration and production $ (56) $ (94) $ 38 Primarily California
property impairment
Refining and marketing 108 - 108
Other (a) 45 17 28 Asset sales
Unallocated expenses (143) (122) (21) Environmental, tax
adjustment
Interest expense (92) - (92)
Income from continuing
operations (138) (199) 61
Discontinued operations (b) 12 - 12
Gain on disposition of
discontinued operations 998 998 - Gain on ARCO Chemical
disposition, loss on
Australian
Total $ 872 $ 799 $ 73 coal divestiture
Average shares
outstanding(c) 321.2 327.2
Earned per share $ 2.71 $ 0.22
(a) Consists of ARCO Pipeline (Lower 48 pipelines) and aluminum operations
(b) Consists of interest in ARCO Chemical, petrochemical operations acquired
from Union Texas Petroleum, and coal operations.
(c) No dilution assumed for three months ended September 30, 1998 due to loss
from continuing operations.
ATLANTIC RICHFIELD COMPANY
AFTER-TAX SEGMENT EARNINGS
PRELIMINARY
SEGMENT OPERATING INCOME (continued)
(Unaudited)
Nine months ended September 30, 1999
Less:
Special
Items Before
(charge) Special
Reported benefit Items
Exploration and production $ 446 $(172) $ 618
Refining and marketing 517 (4) 521
Other (a) 73 5 68
Unallocated expenses (17) (6) (11)
Interest expense (211) - (211)
Income from continuing
operations 808 (177) 985
Discontinued operations (b) 42 42 -
Total $ 850 $(135) $ 985
Average shares outstanding
(diluted) 328.5 328.5
Earned per share $ 2.59 $ 3.00
Nine months ended September 30, 1998
Less:
Special
Items Before
(charge) Special
Reported benefit Items
Exploration and production $ 143 $(169) $ 312
Refining and marketing 224 - 224
Other (a) 98 17 81
Unallocated expenses (169) (117) (52)
Interest expense (236) - (236)
Income from continuing
operations 60 (269) 329
Discontinued operations (b) 188 12 176
Gain on disposition
of discontinued operations 998 998 -
Total $ 1,246 $ 741 $ 505
Average shares outstanding
(diluted) 327.3 327.3
Earned per share $ 3.81 $ 1.54
(a) Consists of ARCO Pipeline (Lower 48 pipelines) and aluminum operations
(b) Consists of interest in ARCO Chemical, petrochemical operations acquired
from Union Texas Petroleum, and coal operations.
ATLANTIC RICHFIELD COMPANY
CONSOLIDATED BALANCE SHEET
PRELIMINARY
(Unaudited)
(Millions)
September 30, December 31,
1999 1998
ASSETS
Current assets:
Cash and cash equivalents $ 745 $ 657
Short-term investments 246 260
Accounts receivable 1,504 1,002
Inventories 427 475
Prepaid expenses and other
current assets 224 317
Total current assets 3,146 2,711
Investments and long-term receivables:
Investments accounted for
on the equity method 1,291 1,235
Other investments and long-term
receivables 1,322 831
2,613 2,066
Net property, plant and equipment 18,563 18,762
Net assets of discontinued
operations 67 339
Deferred charges and other assets 1,438 1,321
Total assets $ 25,827 $25,199
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 1,958 $ 2,403
Accounts payable 717 976
Taxes payable 509 634
Long-term debt due within one year 105 399
Other 1,007 1,285
Total current liabilities 4,296 5,697
Long-term debt 5,691 4,332
Deferred income taxes 3,468 3,318
Dismantlement,restoration and
reclamation 1,138 1,058
Other deferred liabilities
and credits 2,845 2,955
Minority interest 285 259
Total liabilities 17,723 17,619
Stockholders' equity:
Preference stocks 1 1
Common stock 816 815
Capital in excess of par
value of stock 859 863
Retained earnings 6,749 6,589
Treasury stock (285) (344)
Accumulated other comprehensive
income (loss) (36) (344)
Total stockholders' equity 8,104 7,580
Total liabilities and stockholders'
equity $ 25,827 $ 25,199
ATLANTIC RICHFIELD COMPANY
FINANCIAL AND STATISTICAL DATA
PRELIMINARY
(Unaudited)
(Millions) Three Months Ended Nine months ended
September 30, September 30,
1999 1998 1999 1998
Additions to fixed assets
Exploration and production
(including dry hole costs) $ 483 $ 721 $ 1,681 $ 2,046
Refining and marketing 109 137 290 397
Other 3 7 17 34
Total $ 595 $ 865 $ 1,988 $ 2,477
Exploration and Production
Pretax earnings (loss),
before exploration expense:
Alaska $ 221 $ 115 $ 460 $ 418
International (39) (34) 95 (41)
Vastar 113 57 233 234
Other Lower 48 operations 83 (137) 176 (49)
378 1 964 562
Exploration expense 100 135 282 410
Exploration & production
pretax earnings $ 278 $ (134) $ 682 $ 152
Pretax exploration expense:
Alaska $ 9 $ 4 $ 41 $ 32
International 52 91 115 200
Vastar 38 36 123 168
Other Lower 48 1 4 3 10
Total exploration expense $ 100 $ 135 $ 282 $ 410
After-tax exploration and
Production earnings (loss)
Alaska $ 151 $ 70 $ 282 $ 241
International (77) (69) (50) (160)
Vastar 71 37 138 118
Other Lower 48 38 (94) 76 (56)
Total $ 183 $ (56) $ 446 $ 143
Includes costs recovered
under provisions of
production-sharing $ 1 $ 3 $ 4 $ 13
agreements:
ATLANTIC RICHFIELD COMPANY
FINANCIAL AND STATISTICAL DATA
PRELIMINARY
(Unaudited)
Three Months Ended Nine months ended
September 30, September 30,
1999 1998 1999 1998
OPERATING STATISTICS
EXPLORATION AND PRODUCTION:
Crude, condensate and NGL production
(net thousand bbls/day):
United States:
Prudhoe Bay 114.6 138.2 128.9 145.8
Kuparuk 102.3 112.0 110.7 122.0
Greater Point McIntyre 28.8 39.5 30.8 41.2
Tam 13.0 6.9 12.2 2.4
NGLs/Other 32.5 38.0 34.9 34.7
Total Alaska 291.2 334.6 317.5 346.1
Vastar liquids 62.5 44.8 59.4 48.6
Other Lower 48 liquids 82.7 136.4 86.8 138.5
Total United States 436.4 515.8 463.7 533.2
International:
United Kingdom 47.2 54.4 46.7 28.2
Indonesia 22.1 38.6 29.8 28.9
Algeria 20.8 20.2 18.4 20.3
Venezuela 32.8 33.4 31.6 11.6
NGLs/Other 40.7 31.8 37.3 27.0
Total International(a) 163.6 178.4 163.8 116.0
Total liquids production
(net thousand bbls/day) 600.0 694.2 627.5 649.2
(a)Includes equity affiliates 6.2 6.5 7.2 4.3
Natural gas production
(million cubic feet per day
- net)
United States:
Vastar 1,043.0 977.2 1,102.0 940.0
Other U.S. 179.0 186.3 178.0 185.0
Total United States 1,222.0 1,163.5 1,280.0 1,125.0
International:
United Kingdom 275.4 193.4 397.2 311.8
Indonesia 270.0 310.4 262.8 267.1
Indonesia LNG 260.8 193.1 266.8 65.1
China 133.8 139.5 109.7 120.5
Other 57.6 47.1 55.0 28.6
Total International(b) 997.6 883.5 1,091.5 793.1
Total natural gas production 2,219.6 2,047.0 2,371.5 1,918.1
(b) Includes equity
affiliates 84.3 55.9 83.1 18.8
Total production
(barrels of oil equivalent
- net thousands/day) 969.9 1,035.4 1,022.8 968.9
ATLANTIC RICHFIELD COMPANY
FINANCIAL AND STATISTICAL DATA
PRELIMINARY
(Unaudited)
Three Months Ended Nine months ended
September 30, September 30,
1999 1998 1999 1998
OPERATING STATISTICS
Average sales prices
Oil and gas liquids
(per barrel):
Alaska $ 13.32 $ 7.84 $ 9.76 $ 8.59
Lower 48, including
Vastar $ 16.85 $ 10.47 $ 13.40 $ 11.31
U.S. composite
average price $ 14.49 $ 8.76 $ 10.91 $ 9.55
Venezuela $ 8.47 $ 7.94 $ 6.41 $ 7.96
International
composite average price $ 16.68 $10.96 $ 12.87 $ 11.62
Natural gas (per Mcf):
U.S., including
Vastar $ 2.25 $ 1.75 $ 1.89 $ 1.85
International
(excluding LNG) $ 2.09 $ 2.29 $ 2.22 $ 2.51
Indonesia LNG $ 3.53 $ 2.29 $ 2.94 $ 2.29
REFINING AND MARKETING:
Refinery runs
(net thousand bbls per
day):
Crude oil 428,600 449,700 420,600 453,200
U.S. petroleum product
sales volumes, including
intersegment sales
(net thousand bbls per
day):
Gasoline 314,600 304,900 312,900 304,800
Jet fuels 104,700 97,100 102,100 106,300
Distillate fuels 77,000 83,500 81,200 79,900
Other 74,200 75,400 73,800 76,100
Total 570,500 560,900 570,000 567,100
END
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