LOS ANGELES, July 26, 1999 (PRIMEZONE)-- ARCO (NYSE: ARC) today reported 1999 second quarter net income of $313 million, or $0.95 per diluted share. In the 1998 second quarter, ARCO's net income was $154 million, or $0.47 per diluted share.
Excluding special items earnings were $302 million, or $0.92 per diluted share, up 37% over earnings of $220 million, or $0.67 per share, in the same quarter last year.
"The improved earnings picture in the second quarter reflects strengthening oil prices and another outstanding performance from ARCO's refining and marketing operations," said ARCO Chairman and Chief Executive Officer Mike R. Bowlin. "In addition, we are able to accelerate delivery of our cost reduction targets, while continuing efforts to focus our portfolio."
COST REDUCTION PROGRAM ACCELERATED
In October of last year, ARCO announced a program designed to reduce before-tax costs by $500 million over a two-year period, with approximately $350 million of the savings in 1999. Through the first half of the year, the company has delivered $220 million of savings, versus the 1998 baseline, exceeding its cost reduction schedule by more than $100 million to-date. Adjusted for special items and material portfolio changes, controllable costs were $1.6 billion for the first half of 1999, compared to $1.8 billion for the comparable period in 1998.
"All areas of our company are contributing to this achievement," said Bowlin. "Given our performance in the first half of the year, we expect to deliver our two-year $500 million commitment by the end of 1999, one year sooner than planned."
A STRONG QUARTER FOR REFINING AND MARKETING
ARCO's refining and marketing operations earned $206 million after tax in the 1999 second quarter, up from $97 million in 1998's second quarter. Several large West Coast refineries' unplanned outages reduced product supplies, driving product realizations higher during the quarter. Higher product prices were partially offset by increased crude oil costs and scheduled maintenance work which shut down production capabilities at ARCO's Cherry Point Refinery near Ferndale, Washington for most of June. At the retail level, ARCO's gasoline sales volumes grew by more than 2% compared to the 1998 second quarter.
EXPLORATION AND PRODUCTION
ARCO's worldwide exploration and production operations for the 1999 second quarter earned $174 million after tax, up from $17 million in the second quarter of last year (which included a $75 million special item writedown in the value of a North Sea gas field). The improvement in earnings was driven by improved crude oil prices, increased production, and cost reduction efforts.
Total oil and gas production was up 10% versus the second quarter of 1998. Production totaled 994 thousand barrels of oil equivalent per day (boe/d) versus 907 thousand boe/d in the prior period. ARCO's petroleum liquids production was flat with the 1998 second quarter. Production of natural gas increased 30% for the quarter, compared to the same period last year. The production growth was primarily due to volume increases in the United Kingdom, Indonesia and Venezuela and increased production at Vastar Resources, Inc. (NYSE: VRI). Total production from Vastar rose 18% over last year's second quarter. ARCO holds an 82.1% interest in Vastar.
Domestic petroleum liquid realizations averaged $11.43 per barrel for the quarter versus $8.71 last year. Domestic natural gas prices averaged $1.85 per thousand cubic feet (Mcf), down slightly from $1.92 per Mcf in the prior period.
On the exploration front, ARCO Alaska and Anadarko Petroleum Corporation announced an oil discovery north of the Alpine Field (which is under development on Alaska's western North Slope). The Fiord accumulation is estimated to contain more than 50 million barrels of proven and potential reserves. The discovery well is located on a lease in which ARCO owns a 78% working interest. Earlier in the quarter, ARCO successfully bid for acreage in the National Petroleum Reserve-Alaska (NPRA).
PORTFOLIO MANAGEMENT
In Venezuela, ARCO agreed to increase its interest in the LL-652 block in Lake Maracaibo by acquiring Phillips Petroleum Company's share of LL-652 in exchange for a portion of ARCO's interest in the Hamaca heavy oil project in eastern Venezuela. In a separate agreement, Texaco assumed ARCO's remaining interest in Hamaca for an undisclosed cash payment.
DEVELOPMENT PROGRAMS
ARCO and its partners in the Malaysia-Thailand Joint Development Area (JDA) in the Gulf of Thailand agreed to commence sale of natural gas from one of its fields to Malaysia and Thailand at the end of 2001, nearly a year ahead of schedule. The field will supply 1 billion cubic feet of gas daily by 2010 and is expected to yield 2.8 trillion feet of gas over its lifetime. Total reserves in this area, in which ARCO has a 25% stake, are expected to exceed 10 trillion cubic feet of gas.
ARCO's liquefied natural gas project, Tangguh, has been given top priority by the Indonesian government. The Tangguh LNG plant will be fed with natural gas from three production-sharing blocks, which contain over 18 trillion cubic feet of proven and probable gas reserves.
First production from the newly developed Villano field in Ecuador began in late May. Production now flows into the Transecuadorian Pipeline System (SOTE) at a rate of approximately 6,000 barrels per day and is expected to increase to about 40,000 b/d later this year.
In June, ARCO reached agreement to supply the Tambak Lorok power plant in Indonesia with between 80-120 million cubic feet of natural gas per day for 10 to 20 years. The natural gas will come from ARCO's Kepodang gas field, which is part of the Muriah block in the Central Java Sea. The power plant will switch from imported diesel fuel to domestic natural gas early in 2004.
OTHER OPERATIONS
Other operations, which include ARCO Aluminum and ARCO's Lower 48 pipelines, contributed after-tax earnings of $24 million in the 1999 second quarter, compared with $29 million in the 1998 period.
During the quarter, the Seaway Pipeline Company, which is operated by ARCO Pipe Line Company, approved funding to increase the capacity of its 30-inch crude oil pipeline by approximately 110,000 barrels a day, with completion expected by January 2000. This expansion will increase the overall long-haul crude oil system capacity to approximately 350,000 barrels per day.
DISCONTINUED OPERATIONS
As part of its strategy to divest non-core businesses, ARCO completed the sale of its 19.5% stake in the Clermont coal deposit in Queensland, Australia, to Queensland Coal Pty Limited, a subsidiary of Rio Tinto Ltd., for $14 million effective May 31, 1999.
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Editor's Note: On April 1, ARCO and BP Amoco announced that the two companies had agreed to combine. A special meeting of ARCO shareholders is scheduled for August 30 to vote on the merger; BP Amoco has scheduled an Extraordinary General Meeting on September 1. 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 SEC reports, including the 1998 report on Form 10-K.
(Cautionary Note to Investors - The Securities and Exchange Commission (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 probable" which SEC guidelines strictly prohibit using in SEC filings. Investors are urged to consider the reserve disclosure in our 1998 report on Form 10-K.)
ATLANTIC RICHFIELD COMPANY
CONSOLIDATED STATEMENT OF INCOME
PRELIMINARY
(Unaudited)
(Millions, except per share amounts) Three Months Ended
June 30,
1999 1998
REVENUES
Sales and other operating revenues $ 3,047 $ 2,564
Other revenues 173 90
Total revenues 3,220 2,654
EXPENSES
Trade purchases 1,179 1,071
Operating expenses 594 559
Selling, general and administrative expenses 176 202
Depreciation, depletion and amortization 428 436
Exploration expenses (including undeveloped
leasehold amortization) 108 126
Taxes other than income taxes 116 122
Interest (a) 95 106
Total expenses 2,696 2,622
Income from continuing operations before income taxes
and minority interest 524 32
Provision (benefit) for taxes on income 202 (37)
Minority interest in earnings of subsidiaries 9 5
Income from continuing operations 313 64
Income (loss) from discontinued operations (b) - 90
Net income $ 313 $ 154
Earned per share:
Basic
Continuing operations $ 0.97 $ 0.19
Discontinued operations - 0.29
Net income $ 0.97 $ 0.48
Diluted
Continuing operations $ 0.95 $ 0.19
Discontinued operations - 0.28
Net income $ 0.95 $ 0.47
Dividends per common share $0.7125 $0.7125
(a) Excludes capitalized interest of: $ 49 $ 21
(b) Net of income taxes of: $ - $ 43
(Millions, except per share amounts) Six Months Ended
June 30,
1999 1998
REVENUES
Sales and other operating revenues $ 5,462 $ 5,100
Other revenues 309 200
Total revenues 5,771 5,300
EXPENSES
Trade purchases 1,979 2.057
Operating expenses 1,160 1,094
Selling, general and administrative expenses 328 385
Depreciation, depletion and amortization 911 788
Exploration expenses (including undeveloped
leasehold amortization) 182 275
Taxes other than income taxes 236 276
Interest (a) 190 203
Total expenses 4,986 5,078
Income from continuing operations before income taxes
and minority interest 785 222
Provision (benefit) for taxes on income 295 10
Minority interest in earnings of subsidiaries 12 14
Income from continuing operations 478 198
Income (loss) from discontinued operations (b) - 176
Net income $ 478 $ 374
Earned per share:
Basic
Continuing operations $ 1.48 $ 0.61
Discontinued operations - 0.55
Net income $ 1.48 $ 1.16
Diluted
Continuing operations $ 1.46 $ 0.60
Discontinued operations - 0.54
Net income $ 1.46 $ 1.14
Dividends per common share $ 1.425 $ 1.425
(a) Excludes capitalized interest of: $ 88 $ 37
(b) Net of income taxes of: $ - $ 89
ATLANTIC RICHFIELD COMPANY
AFTER-TAX SEGMENT EARNINGS
PRELIMINARY
(Unaudited)
(Millions) Three Months Ended
June 30,
1999 1998
Exploration and production $ 174 $ 17
Refining and marketing 206 97
Other (a) 24 29
Unallocated expenses (20) (4)
Interest expense (71) (75)
Income from continuing operations 313 64
Discontinued operations (b) - 90
Net income $ 313 $ 154
Six Months Ended
June 30,
1999 1998
Exploration and production $ 263 $ 199
Refining and marketing 335 116
Other (a) 48 53
Unallocated expenses (27) (26)
Interest expense (141) (144)
Income from continuing operations 478 198
Discontinued operations (b) - 176
Net income $478 $ 374
SEGMENT OPERATING INCOME
(Unaudited)
(Millions except per
share amounts) Three months ended June 30, 1999
Less:
Special Items Before
Reported (charge) benefit Special
Items
Exploration and production $ 174 $ 5 $ 169
Refining and marketing 206 - 206
Other (a) 24 - 24
Unallocated expenses (20) 6 (26)
Interest expense (71) - (71)
Total $ 313 $ 11 $ 302
Average shares outstanding
(diluted) 328.9 328.9
Earned per share $ 0.95 $ 0.92
(Millions except per
share amounts) Three months ended June 30, 1998
Less:
Special Items Before
Reported (charge) benefit Special
Items
Exploration and production $ 17 $ (75) $ 92
Refining and marketing 97 - 97
Other (a) 29 - 29
Unallocated expenses (4) (3) (1)
Interest expense (75) - (75)
Income from continuing
Operations 64 (78) 142
Discontinued operations (b) 90 12 78
Total $ 154 $ (66) $ 220
Average shares outstanding
(diluted) 327.6 327.6
Earned per share $ 0.47 $ 0.67
(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
AFTER-TAX SEGMENT EARNINGS
PRELIMINARY
SEGMENT OPERATING INCOME (continued)
(Unaudited)
Six months ended June 30, 1999
Less:
Special Items Before
Reported (charge) benefit Special
Items
Exploration and production $ 263 $ 5 $ 258
Refining and marketing 335 (2) 337
Other (a) 48 - 48
Unallocated expenses (27) 1 (28)
Interest expense (141) - (141)
Total $ 478 $ 4 $ 474
Average shares outstanding
(diluted) 328.1 328.1
Earned per share $ 1.46 $ 1.44
Six months ended June 30, 1998
Less:
Special Items Before
Reported (charge) benefit Special
Items
Exploration and production $ 199 $ (75) $ 274
Refining and marketing 116 - 116
Other (a) 53 - 53
Unallocated expenses (26) 5 (31)
Interest expense (144) - (144)
Income from continuing
Operations 198 (70) 268
Discontinued operations (b) 176 12 164
Total $ 374 $ (58) $ 432
Average shares outstanding
(diluted) 327.4 327.4
Earned per share $ 1.14 $1.32
(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) June 30, December 31,
1999 1998
ASSETS
Current assets:
Cash and cash equivalents $ 640 $ 657
Short-term investments 259 260
Accounts receivable 1,245 1,002
Inventories 487 475
Prepaid expenses and other
current assets 159 317
Total current assets 2,790 2,711
Investments and long-term receivables:
Investments accounted for on
the equity method 1,264 1,235
Other investments and long-term
Receivables 1,199 831
2,463 2,066
Net property, plant and equipment 18,964 18,762
Net assets of discontinued operations 51 339
Deferred charges and other assets 1,413 1,321
Total assets $ 25,681 $ 25,199
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 1,451 $ 2,403
Accounts payable 802 976
Taxes payable 821 634
Long-term debt due within one year 174 399
Other 927 1,285
Total current liabilities 4,175 5,697
Long-term debt 5,870 4,332
Deferred income taxes 3,314 3,318
Dismantlement, restoration
and reclamation 1,104 1,058
Other deferred liabilities and credits 2,904 2,955
Minority interest 269 259
Total Liabilities 17,636 17,619
Stockholders' equity:
Preference stocks 1 1
Common stock 815 815
Capital in excess of par value
of stock 860 863
Retained earnings 6,608 6,589
Treasury stock (294) (344)
Accumulated other comprehensive
Income 55 (344)
Total stockholders' equity 8,045 7,580
Total liabilities and
stockholders' equity $ 25,681 $ 25,199
ATLANTIC RICHFIELD COMPANY
FINANCIAL AND STATISTICAL DATA
PRELIMINARY
(Unaudited)
(Millions) Three Months Ended
June 30,
1999 1998
Additions to fixed assets
Exploration and production
(including dry hole costs) $ 556 $ 699
Refining and marketing 77 140
Other - 18
Total $ 633 $ 857
Exploration and production
Pretax earnings (loss),
before exploration expense:
Alaska $ 180 $ 97
International 73 (79)
Vastar 86 76
Other Lower 48 operations 49 43
388 137
Exploration expense 108 126
Exploration & production
pretax earnings $ 280 $ 11
Pretax exploration expense:
Alaska $ 20 $ 9
International 41 52
Vastar 46 64
Other Lower 48 1 1
Total exploration expense * $ 108 $ 126
After-tax exploration and production earnings (loss)
Alaska $ 100 $ 55
International 8 (91)
Vastar 48 33
Other Lower 48 18 20
Total $ 174 $ 17
* Includes costs recovered under
provisions of production-sharing
agreements: $ 1 $ 4
(Millions) Six months ended
June 30,
1999 1998
Additions to fixed assets
Exploration and production
(including dry hole costs) $1,198 $1,325
Refining and marketing 181 260
Other 14 27
Total $1,393 $1,612
Exploration and production
Pretax earnings (loss), before exploration expense:
Alaska $ 239 $ 303
International 134 (7)
Vastar 120 177
Other Lower 48 operations 93 88
586 561
Exploration expense 182 275
Exploration & production
pretax earnings $ 404 $ 286
Pretax exploration expense:
Alaska $ 32 $ 28
International 63 109
Vastar 85 132
Other Lower 48 2 6
Total exploration expense * $ 182 $ 275
After-tax exploration and production earnings (loss)
Alaska $ 131 $ 171
International 27 (90)
Vastar 67 81
Other Lower 48 38 37
Total $ 263 $ 199
* Includes costs recovered under
provisions of production-sharing
agreements: $ 3 $ 10
ATLANTIC RICHFIELD COMPANY
FINANCIAL AND STATISTICAL DATA
PRELIMINARY
(Unaudited)
Three Months Ended
June 30,
1999 1998
OPERATING STATISTICS
EXPLORATION AND PRODUCTION:
Crude, condensate and NGL production
(net thousand bbls/day):
United States:
Prudhoe Bay 127.7 142.1
Kuparuk 108.5 123.5
Greater Point McIntyre 29.6 41.6
Tarn 13.7 -
NGLs / Other 37.2 32.7
Total Alaska 316.7 339.9
Vastar liquids 59.7 49.4
Other Lower 48 liquids 85.6 138.6
Total United States 462.0 527.9
International:
United Kingdom 43.0 14.4
Indonesia 27.5 26.1
Algeria 13.6 18.9
Venezuela 30.7 -
NGLs / Other 35.2 24.6
Total International (a) 150.0 84.0
Total liquids production
(net thousand bbls/day) 612.0 611.9
(a) Includes equity affiliates 8.2 3.2
Natural gas production (million cubic feet per day - net)
United States:
Vastar 1,095.0 940.5
Other U.S. 164.0 180.0
Total United States 1,259.0 1,120.5
International:
United Kingdom 356.2 287.2
Indonesia 287.5 245.6
Indonesia LNG 235.9 -
China 103.8 97.2
Other 49.9 17.8
Total International (b) 1,033.3 647.8
Total natural gas production 2,292.3 1,768.3
(b) Includes equity affiliates 78.8 -
Total production (barrels of oil
equivalent - net thousands/day) 994.1 906.6
Six months ended
June 30,
1999 1998
OPERATING STATISTICS
EXPLORATION AND PRODUCTION:
Crude, condensate and NGL production
(net thousand bbls/day):
United States:
Prudhoe Bay 136.2 149.7
Kuparuk 114.9 127.2
Greater Point McIntyre 31.8 42.1
Tarn 11.8 -
NGLs / Other 36.2 32.9
Total Alaska 330.9 351.9
Vastar liquids 57.8 50.5
Other Lower 48 liquids 88.9 139.6
Total United States 477.6 542.0
International:
United Kingdom 46.5 15.0
Indonesia 33.7 24.1
Algeria 17.2 20.3
Venezuela 31.0 -
NGLs / Other 35.6 24.4
Total International (a) 164.0 83.8
Total liquids production
(net thousand bbls/day) 641.6 625.8
(a) Includes equity affiliates 8.6 3.3
Natural gas production (million cubic feet per day - net)
United States:
Vastar 1,131.3 921.4
Other U.S. 177.5 184.7
Total United States 1,308.8 1,106.1
International:
United Kingdom 482.1 372.0
Indonesia 276.1 245.2
Indonesia LNG 252.9 -
China 97.5 110.8
Other 53.6 19.2
Total International (b) 1,162.2 747.2
Total natural gas production 2,471.0 1,853.3
(b) Includes equity affiliates 82.5 -
Total production (barrels of oil
equivalent - net thousands/day) 1,053.4 934.7
ATLANTIC RICHFIELD COMPANY
FINANCIAL AND STATISTICAL DATA
PRELIMINARY
(Unaudited)
Three Months Ended
June 30,
1999 1998
OPERATING STATISTICS
Average sales prices
Oil and gas liquids (per barrel):
Alaska $ 10.44 $ 7.58
Lower 48, including Vastar $ 13.59 $ 10.74
U.S. composite average price $ 11.43 $ 8.71
Venezuela $ 3.95 $ -
International composite
average price $ 12.88 $ 12.11
Natural gas (per Mcf):
U.S., including Vastar $ 1.85 $ 1.92
International (excluding LNG) $ 2.03 $ 2.56
Indonesia LNG $ 3.03 $ -
REFINING AND MARKETING:
Refinery runs (net thousand bbls per day):
Crude oil 376,900 445,500
U.S. petroleum product sales volumes, including
intersegment sales (net thousand bbls per day):
Gasoline 316,200 313,900
Jet fuels 104,200 111,800
Distillate fuels 79,700 78,100
Other 89,100 89,600
Total 589,200 593,400
Six months ended
June 30,
1999 1998
OPERATING STATISTICS
Average sales prices
Oil and gas liquids (per barrel):
Alaska $ 8.17 $ 8.95
Lower 48, including Vastar $ 11.66 $ 11.71
U.S. composite average price $ 9.24 $ 9.92
Venezuela $ 3.47 $ -
International composite
average price $ 10.83 $ 12.35
Natural gas (per Mcf):
U.S., including Vastar $ 1.72 $ 1.91
International (excluding LNG) $ 2.27 $ 2.63
Indonesia LNG $ 2.65 $ -
REFINING AND MARKETING:
Refinery runs (net thousand bbls per day):
Crude oil 416,600 454,900
U.S. petroleum product sales volumes, including
intersegment sales (net thousand bbls per day):
Gasoline 312,000 304,700
Jet fuels 100,800 111,000
Distillate fuels 83,300 78,000
Other 73,700 76,500
Total 569,800 570,200
CONTACT: Atlantic Richfield Company
News Media:
Linda Dozier or Marylou Flynn
(213) 486-3384
Investors:
Eden Warner (213) 486-1511
or
David DeSonier (213) 486-1811
Visit our website at http://www.arco.com