Mergers committee votes to notify FTC it favors Phillips' purchase
The Alaska Legislature's Joint Special Committee on Mergers voted March 21 to notify the Federal Trade Commission that the committee approved the purchase of ARCO's Alaska assets by Phillips Petroleum Co. as a way to resolve Alaska concerns over the acquisition of ARCO by BP Amoco.
On Feb. 8, the committee had voted unanimously to oppose the merger "as not being in the best interests of Alaskans."
Senator Rick Halford, chairman of the committee, said March 21: "The only step that remains is for the court to enter into a consent decree recognizing the Phillips purchase of ARCO Alaska assets and approving the BP/ARCO merger."
"These latest developments satisfy all of the committee's concerns aimed at retaining a major, vertically integrated oil producing competitor in Alaska," said committee member Senate President Drue Pearce. "Though we understand that Alaska issues are not the only consideration before the FTC, we do hope that a consent decree is entered soon. This would herald an auspicious future for Alaska's oil patch."
Phillips Petroleum credit rating downgraded
In line with expectations noted by Phillips Petroleum Co. Chairman, CEO and President Jim Mulva in Anchorage March 15, the company's credit rating was downgraded March 17 based on its plan to purchase ARCO's Alaska assets.
Phillips' senior unsecured debt, formerly an A-minus (A-), was downgraded by Duff & Phelps Credit Rating Co. to a triple-B (BBB).
The company's trust preferred securities were downgraded to Triple-B-minus (BBB-) from Triple-B-plus (BBB+).
Duff & Phelps said the acquisition of ARCO's Alaska assets will raise Phillips' debt/capital ratio to approximately 65 percent after the transaction closes early in the second quarter.
Initial financing will consist of $6.5 million in bridge financing that will backstop commercial paper issuance to fund the transaction.
Soon after the closing of Phillips' joint venture of its gas marketing business Phillips will receive a $1.2 billion distribution which it will use to retire a portion of its bridge debt.
Subsequently, Phillips will term out approximately $3 billion of the bridge leaving around $2.3 billion remaining. The timing of the bond issuance is anticipated to be completed in the near term. By the end of the second quarter 2000, Phillips will receive about $800 million from its contribution to the Chevron-Phillips chemical joint venture. This amount will be used to further reduce the bridge to $1.5 billion. This remaining amount will then be re-syndicated into a revolving facility.
Winter seismic at Fiord, Milne Point
ARCO Alaska Inc. has received a state permit for a 50-100 square mile 3D seismic program in the Fiord area north of Nuiqsut, continuing offshore into Harrison Bay. A contractor was not named.
Western Geophysical has applied for a seismic permit to shoot an 18-25 square mile 3D program for BP Exploration (Alaska) Inc. in the western Milne Point area.
Both programs will begin in March and be completed by the end of May.
Western Geophysical has also received a permit from the U.S. Minerals Management Service to shoot an unspecified amount of seismic in the Beaufort Sea by the end of May.