ARCO second quarter up

Company $100 million ahead in $500 million two-year cost reduction program announced last October

Petroleum News Alaska Staff

ARCO said July 26 that it had second-quarter net income of $313 million, 95 cents per diluted share, compared to net income of $154 million in second quarter 1998, 47 cents per diluted share.

“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.”

ARCO said it had delivered $220 million of a $500 million two-year cost reduction plan announced in October. Originally, $350 million of the before-tax cost savings were to come in 1999 — through the first half of the year, ARCO said, the program was $100 million ahead of schedule.

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.

The company’s refining and marketing operations earned $206 million after tax in the 1999 second quarter, up from $97 million in 1998’s second quarter. The company said that unplanned outages at several large West Coast refineries 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, Wash., for most of June. At the retail level, ARCO’s gasoline sales volumes grew by more than 2 perent compared to the 1998 second quarter.

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.Total oil and gas production was up 10 percent versus the second quarter of 1998.

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 Aug. 30 to vote on the merger; BP Amoco has scheduled an Extraordinary General Meeting on Sept. 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.