LOS ANGELES, May 3, 1999 (PRIMEZONE) -- ARCO (NYSE: ARC) reported today 1999 first quarter net income of $165 million, or 51 cents per diluted share. In the 1998 first quarter ARCO's earnings totaled $220 million, or 67 cents per diluted share. Excluding special items, income from operations was $172 million, or 53 cents per share, versus $212 million, or 65 cents per share, in the same period of 1998.
"While weak commodity prices were the story during most of the first quarter, excellent results from our refining and marketing operations, strong upstream volume growth, and reduced costs offset these effects," said Mike R. Bowlin, Chairman and Chief Executive Officer. "In fact, income from continuing operations before special items improved by 37% versus last year's quarter."
COST REDUCTION PROGRAM
In October last year, ARCO announced a cost reduction program designed to reduce before-tax costs by $500 million over a two-year period, with approximately $350 million of the savings in 1999. ARCO's operating, exploration, and selling, general, and administrative (SG&A) full-year expenses totaled $4.1 billion in 1998. Compared to the 1998 first quarter, these costs were down $75 million, despite the integration of newly acquired assets and substantial net volume growth.
"We have made good progress toward achieving our cost reduction goals with savings realized in key areas," said Bowlin, "I am confident we are on track to achieve the planned 1999 expense reductions."
The company streamlined its exploration portfolio, announced office closings and consolidations and identified for elimination 1,200 U.S. staff positions that primarily support international and corporate operations. Exploration expenses were down more than 50%, although a portion of the quarter's reduction was due to favorable timing of dry hole and seismic expenses. Five international offices were closed and the size of five other offices was substantially reduced. In addition, the company made significant progress consolidating its Los Angeles area office space. Approximately 45% of the staff reductions were completed as of the end of the first quarter.
A STRONG QUARTER FOR REFINING AND MARKETING
ARCO's refining and marketing operations earned $129 million after tax in the 1999 first quarter, up from $19 million in 1998's first quarter, as a result of lower crude oil costs, coupled with increased retail volumes.
Higher gasoline realizations came late in the quarter and were due primarily to production losses from four separate California refinery incidents -- including one at ARCO's Los Angeles Refinery -- and the switch from winter to summer blends that causes a 10% reduction in volumes.
WORLDWIDE OIL AND GAS PRODUCTION GROWS 15%
Total oil and gas production was up 15% versus the first quarter of 1998. Production totaled 1,104 thousand barrels of oil equivalent per day (MBOE/D) versus 963 MBOE/D in the prior period. The increase was primarily due to the integration of Union Texas Petroleum's assets into ARCO and a strong performance by Vastar Resources, Inc. (NYSE: VRI). Total production from Vastar rose 24% over last year's first quarter. ARCO holds an 82.1% interest in Vastar.
ARCO's petroleum liquids production increased 5% over first quarter 1998. Production of natural gas increased 33% for the quarter, compared to the same period last year.
ARCO's worldwide exploration and production operations for the 1999 first quarter earned $89 million after tax, compared to $182 million last year.
Domestic petroleum liquids realizations averaged $9.75 per barrel for the quarter versus $12.68 last year. Similarly, domestic natural gas prices averaged $1.60 per thousand cubic feet (Mcf) compared to $1.89 per Mcf in the prior period. On the international side, average liquid realizations were down from $12.59 per barrel to $9.16, while average natural gas realizations were down from $2.69 per Mcf to $2.47.
EXPLORATION SUCCESS
The company achieved two significant discoveries during the quarter.
In the Gulf of Mexico, Vastar announced the Mirage deepwater discovery of approximately 300 feet of net oil pay in five intervals. Mirage was the company's second consecutive company-operated deepwater discovery. The previous discovery was at the King prospect.
ARCO, along with its partners, made a Central North Sea gas condensate find just five miles from the Elgin and Franklin fields and close to the Shearwater field development. Only a limited part of the new reservoir has been tested, achieving flows of 23 million cubic feet of gas and 2,100 barrels of good quality condensate per day.
DEVELOPMENT PROGRAMS ON TARGET
A number of upstream developments are underway. Startup of the Villano field in Ecuador is on target for mid-year, with expected production of 20,000 net barrels per day by the 1999 third quarter.
Startup of the new Alpine field is on target for mid-2000 and will be the primary driver in stemming ARCO's Alaska production decline. Net production from Alpine is expected to average 28 MBOE/D in 2000 and 53 MBOE/D in 2001.
The Shearwater field in the Central North Sea is also on target for startup in mid-2000. ARCO's net production is expected to average 21 MBOE/D for 2000 and 42 MBOE/D by 2001.
OTHER OPERATIONS
Other operations, predominantly ARCO's Lower 48 pipelines, contributed after-tax earnings of $24 million 1999 first quarter, compared with $24 million in the 1998 first quarter.
DISCONTINUED OPERATIONS
As part of its strategy to divest non-core-businesses, ARCO completed divestitures of assets totaling more than $500 million during the quarter.
ARCO closed the sale of its wholly owned subsidiary, Union Texas Petrochemicals Corporation at the end of March. In addition, ARCO closed the sale of its 80% interest in the Gordonstone coal mine and of its interest in the Blair Athol Joint Venture, both in Queensland, Australia.
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Editor's Note: On April 1, ARCO and BP Amoco announced that the two companies had agreed to combine. The all-share transaction, approved by the boards of both companies, will involve the exchange of 0.82 BP Amoco American Depositary Shares (ADS) for each ARCO share.
(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 reports to the Securities Exchange Commission, including the 1997 report on Form 10-K.)
ATLANTIC RICHFIELD COMPANY
CONSOLIDATED STATEMENT OF INCOME
PRELIMINARY
(Unaudited)
(Millions, except per share amounts) Three Months Ended
March 31,
1999 1998
--------- ---------
REVENUES (Restated)(c)
Sales and other operating revenues $2,415 $2,536
Other revenues 136 110
--------- ---------
Total revenues 2,551 2,646
--------- ---------
EXPENSES
Trade purchases 800 986
Operating expenses 566 535
Selling, general and administrative expenses 152 183
Depreciation, depletion and amortization 483 352
Exploration expenses (including undeveloped
leasehold amortization) 74 149
Taxes other than income taxes 120 154
Interest (a) 95 97
--------- ---------
Total expenses 2,290 2,456
--------- ---------
Income from continuing operations before income
taxes and minority interest 261 190
Provision for taxes on income 93 47
Minority interest in earnings of subsidiaries 3 9
--------- ---------
Income from continuing operations 165 134
Income from discontinued operations (b) - 86
--------- ---------
Net income $ 165 $ 220
========= =========
Earnings per share:
Basic
Continuing operations $ 0.51 $ 0.42
Discontinued operations - 0.27
Net income $ 0.51 $ 0.69
Diluted
Continuing operations $ 0.51 $ 0.41
Discontinued operations - 0.26
Net income $ 0.51 $ 0.67
Dividends per common share $0.7125 $0.7125
(a) Excludes capitalized interest of: $ 39 $ 16
(b) Net of income taxes of: $ - $ 46
(c) Restated for discontinued operations with no change to net
income
ATLANTIC RICHFIELD COMPANY
AFTER-TAX SEGMENT EARNINGS
PRELIMINARY
(Unaudited)
(Millions) Three Months Ended
March 31,
1999 1998
--------- ---------
(Restated)(a)
Exploration and production $ 89 $ 182
Refining and marketing 129 19
Other (b) 24 24
Unallocated expenses (7) (22)
Interest expense (70) (69)
--------- ---------
Income from continuing operations 165 134
Discontinued operations (c) - 86
--------- ---------
Net income $165 $220
SEGMENT OPERATING INCOME
(Unaudited)
(Millions, except per share amounts)
Three months ended March 31, 1999
Less:
Special Items Before
Reported (charge) benefit Special Items
-------- --------------- -------------
Exploration and production $ 89 $ 89
Refining and marketing 129 $ (2) 131
Other (b) 24 24
Unallocated expenses (7) (5) (2)
Interest expense (70) (70)
-------- --------------- -------------
Income from continuing operations 165 (7) 172
Discontinued operations (c) - -
-------- --------------- -------------
Total $ 165 $ (7) $ 172
======== =============== =============
Average shares outstanding 327.2 327.2
======== =============== =============
Earnings per share $ 0.51 $ 0.53
======== =============== =============
Three months ended March 31, 1999
Less:
Special Items Before
Reported (charge) benefit Special Items
-------- --------------- -------------
(Restated)(a) (Restated)(a)
Exploration and production $ 182 $ 182
Refining and marketing 19 19
Other (b) 24 24
Unallocated expenses (22) $ 8 (30)
Interest expense (69) (69)
-------- --------------- -------------
Income from continuing operations 134 8 126
Discontinued operations (c) 86 86
-------- --------------- -------------
Total $220 $ 8 $ 212
======== =============== =============
Average shares outstanding 327.2 327.2
======== =============== =============
Earnings per share $0.67 $0.65
======== =============== =============
(a) Restated for discontinued operations with no change to net income
(b) Consists of ARCO Pipeline (Lower 48 pipelines) and aluminum
operations
(c) Consists of residual interests in foreign coal operations in 1999
and interests in ARCO Chemical and coal operations in
ATLANTIC RICHFIELD COMPANY
CONSOLIDATED BALANCE SHEET
PRELIMINARY
(Millions)
March 31, December 31,
1999 1998
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 790 $ 657
Short-term investments 248 260
Accounts receivable 1,018 1,002
Inventories 489 475
Prepaid expenses and
other current assets 228 317
----------- -----------
Total current assets 2,773 2,711
----------- -----------
Investments and long-term receivables:
Investments accounted for
on the equity method 1,223 1,235
Other investments and
long-term receivables 1,023 831
----------- -----------
2,246 2,066
----------- -----------
Net property, plant and equipment 18,942 18,762
Net assets of discontinued operations 42 339
Deferred charges and other assets 1,360 1,321
----------- -----------
Total assets $ 25,363 $ 25,199
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 2,564 $ 2,403
Accounts payable 830 976
Taxes payable 828 634
Long-term debt due within one year 199 399
Other 897 1,285
----------- -----------
Total current liabilities 5,318 5,697
----------- -----------
Long-term debt 4,618 4,332
Deferred income taxes 3,279 3,318
Dismantlement, restoration and reclamation 1,082 1,058
Other deferred liabilities and credits 2,958 2,955
Minority interest 262 259
Stockholders' equity:
Preference stocks 1 1
Common stock 815 815
Capital in excess of par value of stock 858 863
Retained earnings 6,525 6,589
Treasury stock (313) (344)
Accumulated other comprehensive
income (loss) (40) (344)
----------- -----------
Total stockholders' equity 7,846 7,580
----------- -----------
Total liabilities and
stockholders' equity $25,363 $25,199
=========== ===========
ATLANTIC RICHFIELD COMPANY
FINANCIAL AND STATISTICAL DATA
PRELIMINARY
(Unaudited)
(Millions) Three Months Ended
March 31,
1999 1998
-------- --------
(Restated)
Additions to fixed assets
Exploration and production (including
dry hole costs) $ 642 $ 626
Refining and marketing 104 120
Other 14 9
-------- --------
Total $ 760 $ 755
======== ========
Exploration and production
Pretax earnings, before exploration expense:
Alaska $ 59 $ 206
International 61 72
Vastar 34 101
Other Lower 48 operations 44 45
-------- --------
198 424
Exploration expense 74 149
------ ------
Exploration & production pretax earnings $ 124 $ 275
====== ======
Pretax exploration expense:
Alaska $ 12 $ 19
International 22 57
Vastar 39 68
Other Lower 48 1 5
------ ------
Total exploration expense * $ 74 $ 149
====== ======
After-tax exploration and production earnings
Alaska $ 31 $ 116
International 19 1
Vastar 19 48
Other Lower 48 20 17
------ ------
Total $ 89 $ 182
====== ======
* Includes costs recovered under provisions of production-sharing
agreements $ 2 $ 6
ATLANTIC RICHFIELD COMPANY
FINANCIAL AND STATISTICAL DATA
(Unaudited)
PRELIMINARY
Three Months Ended
March 31,
1999 1998
-------- --------
OPERATING STATISTICS
EXPLORATION AND PRODUCTION:
Crude, condensate and NGL production
(net thousand bbls/day):
United States:
Prudhoe Bay 144.7 157.4
Kuparuk 121.4 130.9
Greater Point McIntyre 33.9 42.7
NGLs / Other 45.1 33.1
-------- --------
Total Alaska 345.1 364.1
Vastar liquids 55.9 51.6
Other Lower 48 liquids 92.2 140.5
-------- --------
Total United States 493.2 556.2
-------- --------
International:
United Kingdom 50.1 15.5
Indonesia 40.4 22.0
Algeria 20.8 21.8
Venezuela 31.5 -
NGLs / Other 36.3 24.4
-------- --------
Total International (a) 179.1 83.7
-------- --------
Total liquids production (net thousand bbls/day) 672.3 639.9
======== ========
(a) Includes equity affiliates 8.2 3.3
======== ========
Natural gas production (million cubic feet per day - net)
United States:
Vastar 1,168.0 902.1
Other U.S. 191.8 189.6
-------- --------
Total United States 1,359.8 1,091.7
-------- --------
International:
United Kingdom 610.5 457.7
Indonesia 266.9 244.7
Indonesia LNG 202.6 -
China 91.1 124.6
Other 57.5 20.6
-------- --------
Total International (b) 1,228.6 847.6
-------- --------
Total natural gas production 2,588.4 1,939.3
======== ========
(b) Includes equity affiliates 68.2 -
======== ========
Total production (barrels of oil
equivalent - net thousands/day) 1,103.7 963.1
======== ========
ATLANTIC RICHFIELD COMPANY
FINANCIAL AND STATISTICAL DATA
(Unaudited)
PRELIMINARY
Three Months Ended
March 31,
1999 1998
-------- --------
OPERATING STATISTICS
Average sales prices
Oil and gas liquids (per barrel):
Alaska $ 6.07 $ 10.26
Lower 48, including Vastar $ 9.75 $ 12.68
U.S. composite average price $ 7.17 $ 11.10
Venezuela $ 3.71 $ -
International composite average price $ 9.16 $ 12.59
Natural gas (per Mcf):
U.S., including Vastar $ 1.60 $ 1.89
International $ 2.47 $ 2.69
Indonesia LNG $ 2.31 $ -
REFINING AND MARKETING:
Refinery runs (net thousand bbls per day):
Crude oil 456.7 464.4
======== ========
U.S. petroleum product sales volumes, including
intersegment sales (net thousand bbls per day):
Gasoline 310.0 295.4
Jet fuels 98.5 110.2
Distillate fuels 87.9 77.9
Other 59.1 63.4
-------- --------
Total 555.5 546.9
======== ========
-0-
CONTACT: ARCO
News Media:
Linda Dozier (213) 486-3384, or
Bill Warren (213) 486-1747
Investors:
Eden Warner (213) 486-1511, or
David DeSonier (213) 486-1811
For a full listing of news releases: http://www.arco.com