May 04, 1998 --- Vol. 4, No. 21May 1998

ARCO announces merger agreement with Union Texas Petroleum

ARCO and Union Texas Petroleum said in a May 4 statement that they have signed a definitive merger agreement.

In an agreement approved unanimously by the boards of directors of both companies, ARCO will acquire for cash all outstanding shares of Union Texas common stock for $29 per share in a transaction valued at approximately $3.3 billion, including debt and preferred stock of Union Texas. In connection with the transaction, ARCO said, Kohlberg Kravis Roberts & Co. will tender its holdings of 25.6 percent of outstanding shares of Union Texas. ARCO said it expects the tender offer will be completed by the end of its second quarter.

ARCO Chairman and Chief Executive Officer Mike Bowlin called the agreement “an important building block” for ARCO.

“This acquisition is consistent with our strategy of building scale and presence in five to six core producing areas as a means of creating shareholder value,” Bowlin said in a statement.

“Over 90 percent of Union Texas’ assets are located in ARCO’s core producing areas, specifically Venezuela, Indonesia, the North Sea and Alaska,” Bowlin said.

He said that “the transaction is especially attractive to ARCO because of the exceptional degree of overlap between the assets of the two companies and the ability to implement significant cost reductions as a consequence.”

John Whitmire, chairman and chief executive officer of Union Texas, said that “ARCO’s tender offer reflects the proven value and potential of Union Texas Petroleum.” He credited “significant progress in creating exciting growth prospects for our company in areas such as Venezuela, Kazakhstan, China and Northern Africa” over the past two years in attracting ARCO’s interest.

The transaction is expected to add 140,000 barrels per day of oil equivalent to ARCO’s production and 573 million barrels of proved reserves for a gross cost of $5.76 per BOE.

UTP has total proved reserves of 573 million BOE: 25 percent from the United Kingdom; 37 percent from Indonesia; 27 percent from Venezuela; 5 percent from Pakistan; 6 percent from Alaska.

In Alaska, the merger will increase ARCO’s 56 percent interest in the Alpine field to 78 percent. Total field reserves are estimated at 365 million barrels; UTP’s share of proved reserves is 32 million BOE.

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