RNS No 8836d
ATLANTIC RICHFIELD CO
27th July 1998
ARCO'S SECOND QUARTER RESULTS
Lower Upstream Income; Higher Refining And Marketing
Los Angeles, July 27 - ARCO (NYSE: ARC) today reported 1998 second quarter
financial results that reflected the impact of lower oil prices and improved
results from its refining and marketing segment.
Earnings excluding special items (the basis on which earnings were estimated
by security analysts) totaled $220 million, or $0.67 per diluted share, down
44% compared to last year. Net income (which includes special items) for the
second quarter was $154 million, or $0.47 per diluted share.
In the 1997 second quarter, ARCO's net income totaled $390 million, or
$1.19 per diluted share, with special items netting to zero.
"The earnings story for the 1998 second quarter and first half is one of
low oil prices and lower production levels in our upstream businesses," said
ARCO Chairman and Chief Executive Officer Mike R. Bowlin. "Our second half
production should improve. New field start-ups in Alaska, the North Sea and the
Gulf of Mexico coupled with production from former Union Texas properties should
lead to about a 5% production increase for 1998. Low oil prices are a challenge
and cause us to carefully monitor our capital spending, but I'm pleased with our
progress toward our long term goals."
SUBSTANTIAL PROGRESS TOWARD UPSTREAM GROWTH
Bowlin characterized the second quarter as one in which the company took
significant actions on its long-term strategic goals and future growth.
"During the quarter, we completed the acquisition of Union Texas Petroleum
and disposed of our U.S. coal assets. Subsequent to the end of the quarter,
Lyondell Petrochemical Company completed its tender offer for ARCO Chemical
stock, which results in the sale of our 82.1% interest in ARCO Chemical. In
addition, we agreed to acquire a 25% interest in a 10 trillion-cubic-foot gas
resource in the Gulf of Thailand."
While having no material impact on the second quarter's net income, Bowlin
said these were all key events which will contribute to ARCO's future.
"The merger with UTP provides a major step toward our goal of growing our
international presence. With the merger, ARCO's reserves overseas increased by
a half-billion barrels. Union Texas' growing production will supplement ARCO's
expected average annual production growth of 4-5% between 1997 and 2001."
Bowlin said that despite year-over-year Alaska production declines in the
second quarter, meeting the goal of "No Decline After '99" in Alaska
production is still on target. Exploration near existing production in Alaska
has been very successful and has included the Tarn, Tabasco, Northwest Eileen,
Midnight Sun and Sambuca discoveries. Two of these satellite discoveries - Tarn
and Tabasco - are starting production this summer ahead of schedule.
ARCO also announced plans for a miscible gas enhanced oil recovery project
at Point McIntyre, America's third largest oil field, and started construction
on an expanded miscible injectant (MIX) project for Prudhoe Bay, America's
largest field. In addition, ARCO was successful in acquiring more exploration
licenses in and around existing properties in the recent Alaska areawide lease
sale.
LOW OIL PRICES PRIMARY NEGATIVE INFLUENCE ON E&P RESULTS
Worldwide, ARCO's exploration and production operations earned $92 million
after tax in the 1998 second quarter, before a $75 million special item
writedown in the value of a North Sea gas field following the unsuccessful
resolution of a sales contract dispute. In the 1997 second quarter,
exploration and production operations earned $321 million. The 71% drop was
driven by generally lower oil prices and the effect of the Asian economic
situation on West Coast liquids realizations. U.S. petroleum liquids prices were
down $6.40 per barrel, averaging $8.71 per barrel for the quarter. Natural gas
prices for the U.S. operations averaged $1.92 per thousand cubic feet (Mcf), up
from an average $1.72 per Mcf in 1997.
Production on an oil-equivalent basis totaled 904,700 barrels per day for
the quarter, compared with 952,400 in the 1997 second quarter. Production was
negatively affected by lower customer gas takes in the United Kingdom,
Indonesia and China. In addition, expected field decline, warmer ambient
temperatures and greater maintenance led to lower volumes in Alaska.
REFINING AND MARKETING RESULTS IMPROVE
The refining and marketing segment earned $97 million after tax in the
1998 second quarter, up from 1997 earnings of $68 million. Although West Coast
gasoline prices were lower than 1997, margins improved with falling crude oil
prices. ARCO's gasoline sales volumes increased 14%, reflecting the full
integration of the former Thrifty Oil stations into ARCO and increased volumes
at ARCO's retail outlets. Initial benefits from an announced $100 million cost
saving program that was launched in late 1997 are also being realized.
OTHER OPERATIONS
Other operations, predominantly Lower 48 pipeline and aluminum activities,
contributed after-tax earnings of $29 million in the 1998 second quarter,
compared with $24 million in the 1997 period.
DISCONTINUED OPERATIONS AND SPECIAL ITEMS
After-tax earnings from discontinued operations, consisting of ARCO's
interest in ARCO Chemical Company, totaled $90 million in the 1998 second
quarter. Subsequent to the end of the quarter, ARCO classified ARCO Chemical
as discontinued as a result of the tender offer's close.
The 1998 second quarter results include no income from discontinued coal
operations. Although cash proceeds were received, the sale of U.S. coal assets
will not be recognized in income until disposition of the company's Australian
coal assets is completed.
In the 1997 second quarter, ARCO's worldwide coal operations earned $24
million after tax while the interest in ARCO Chemical earned $29 million. The
1997 second quarter also included $46 million in after-tax earnings from
ARCO's equity interest in Lyondell. ARCO disposed of that interest in the third
quarter of 1997.
Second quarter 1998 special items charges totaled $66 million, including
the $75 million for the writedown of the North Sea gas field.
Summary of Special Items
1998 1997
Asset valuation adjustment ($75) --
Restructure cost revision 12 --
Debt retirement ($118)
Tax/interest reversal 0 118
Other (3) --
Total ($66) --
(Some of the matters discussed in this news release are forward-look
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 1997 report on Form 10-K.)
ATLANTIC RICHFIELD COMPANY
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(Millions except per share amounts)
Three Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
REVENUES (Restated) (Restated)
Sales and other operating
revenues $2,546 $3,534 $5,082 $7,426
Other revenues 90 148 200 248
Total revenues 2,636 3,682 5,282 7,674
EXPENSES
Trade purchases 1,071 1,634 2,057 3,455
Operating expenses 651 649 1,186 1,227
Selling, general and
administrative expenses 202 204 385 384
Depreciation, depletion
and amortization 326 341 678 687
Exploration expenses
(including undeveloped
leasehold amortization) 126 90 275 216
Taxes other than income
taxes 122 144 276 340
Interest(a) 106 (12) 203 132
Total expenses 2,604 3,050 5,060 6,441
Income before income taxes,
minority interest &
extraordinary item 32 632 222 1,233
Provision (benefit) for
taxes on income (37) 212 10 411
Minority interest in
earnings of subsidiaries 5 11 14 22
Income from continuing
operations before
extraordinary item 64 409 198 800
Income from discontinued
operations, net of income
taxes of $43 and $89 (1998)
and $30 and $67 (1997) 90 99 176 191
Net income before
extraordinary item 154 508 374 991
Extraordinary item - loss
on extinguishment of debt
(net of income taxes of
$74 million) -- (118) -- (118)
Net income $154 $390 $374 $873
Earned per share:
Basic
Continuing operations $0.19 $1.27 $0.61 $2.48
Discontinued operations 0.29 0.31 0.55 0.60
Extraordinary loss -- (0.37) -- (0.37)
Net income $0.48 $1.21 $1.16 $2.71
Diluted
Continuing operations $0.19 $1.25 $0.60 $2.44
Discontinued operations 0.28 0.30 0.54 0.59
Extraordinary loss -- (0.36) -- (0.36)
Net income $0.47 $1.19 $1.14 $2.67
Dividends per common
share $0.7125 $0.7125 $1.425 $1.400
(a) Excludes capitalized interest of $21 million and $12 million for the
three-month periods and $37 million and $14 million for the six-month periods
ended June 30, 1998 and 1997, respectively.
AFTER-TAX SEGMENT EARNINGS
(Unaudited)
(Millions) Three Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
(Restated) (Restated)
Exploration and production $17 $321 $199 $773
Refining and marketing 97 68 116 114
Other 29 24 53 37
Unallocated expenses (4) (3) (26) (26)
Interest expense (75) (1) (144) (98)
Income from continuing
operations 64 409 198 800
Discontinued operations 90 99 176 191
Extraordinary item - loss
on extinguishment of debt -- (118) -- (118)
Net income $154 $390 $374 $873
ATLANTIC RICHFIELD COMPANY
CONSOLIDATED BALANCE SHEET
(Millions) June 30, December 31,
1998 1997
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents 513 $434
Short-term investments 215 222
Accounts receivable 840 929
Inventories 451 456
Prepaid expenses and other
current assets 295 204
Total current assets 2,314 2,245
Investments and long-term
receivables:
Investment in Union Texas
Petroleum 2,646 --
Investments accounted for
on the equity method 821 763
Other investments and long-term
receivables 979 1,820
4,446 2,583
Net property, plant and
equipment 14,308 13,560
Net assets of discontinued
operations 2,013 2,777
Deferred charges and other
assets 1,354 1,260
Total assets $24,435 $22,425
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $4,364 $1,456
Accounts payable 791 948
Long-term debt due within
one year 102 164
Taxes payable 190 308
Other 920 953
Total current liabilities 6,367 3,829
Long-term debt 3,679 3,619
Deferred income taxes 2,335 2,661
Other deferred liabilities
and credits 3,740 3,396
Minority interest 251 240
Stockholders' equity:
Preference stocks 1 1
Common stock 814 807
Capital in excess of par
value of stock 855 640
Retained earnings 6,969 7,054
Treasury stock (356) (170)
Accumulated other comprehensive
income (220) 348
Total stockholders' equity 8,063 8,680
Total liabilities and
stockholders' equity $24,435 $22,425
ATLANTIC RICHFIELD COMPANY
FINANCIAL AND STATISTICAL DATA
(Unaudited)
(Millions) Three Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
Additions to fixed assets
Exploration and production
(including dry hole costs)$699 $425 $1,325 $812
Refining and marketing 140 53 260 88
Other 18 12 27 18
Total $857 $490 $1,612 $918
Exploration and production
Pretax earnings, before
exploration expense:
Alaska $97 $332 $303 $810
International (79) 98 (7) 220
Vastar 76 83 177 221
Other Lower 48
operations 43 84 88 185
137 597 561 1,436
Exploration expense 126 90 275 216
Exploration & production
pretax earnings $11 $507 $286 $1,220
Pretax exploration expense:
Alaska $9 $13 $28 $27
International 52 47 109 85
Vastar 64 26 132 97
Other Lower 48 1 4 6 7
Total exploration expense* 126 90 275 216
After-tax exploration and
production earnings:
Alaska $55 $194 $171 $483
International (91) 35 (90) 80
Vastar 33 58 81 121
Other Lower 48 20 34 37 89
Total $17 $321 $199 $773
* Includes $14 million and $3 million of costs recovered in the three-
month periods and $20 million and $5 million in the six-month periods ended June
30, 1998 and 1997, respectively, under provisions of production-sharing
agreements.
ATLANTIC RICHFIELD COMPANY
FINANCIAL AND STATISTICAL DATA
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
OPERATING STATISTICS
EXPLORATION AND PRODUCTION:
Crude, condensate and NGL production
(net thousand bbls/day):
United States:
Prudhoe Bay 142.1 168.6 149.7 175.6
Kuparuk 123.5 124.7 127.2 127.8
Greater Point
McIntyre 41.6 49.7 42.1 50.3
NGLs / Other 32.7 31.3 32.9 32.9
Total Alaska 339.9 374.3 351.9 386.6
Vastar liquids 49.4 52.8 50.5 51.9
Other Lower 48
liquids 138.6 126.9 139.6 125.8
Total United States 527.9 554.0 542.0 564.3
International:
Indonesia 26.1 28.3 24.1 24.8
United Kingdom 14.4 17.5 15.0 18.6
Algeria 17.0 15.0 20.6 14.6
NGLs / Other 24.6 18.3 24.4 16.9
Total International 82.1 79.1 84.1 74.9
Total liquids
production 610.0 633.1 626.1 639.2
Natural gas production
(million cubic feet per
day - net)
United States:
Vastar 940.5 879.6 921.4 876.8
Other U.S. 180.0 180.5 184.7 177.8
Total United States 1,120.5 1,060.1 1,106.1 1,054.6
International:
United Kingdom 287.2 367.3 372.0 385.1
Indonesia 245.6 313.7 245.2 310.3
China 97.2 155.5 110.8 149.9
Other 17.8 18.9 19.2 21.7
Total International 647.8 855.4 747.2 867.0
Total natural gas
production 1,768.3 1,915.5 1,853.3 1,921.6
Total production
(barrels of oil
equivalent) 904.7 952.4 935.0 959.5
ATLANTIC RICHFIELD COMPANY
FINANCIAL AND STATISTICAL DATA
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
OPERATING STATISTICS
Average sales prices
Oil and gas liquids
(per barrel):
Alaska $7.58 $14.65 $8.95 $16.36
Lower 48, including
Vastar $10.74 $16.06 $11.71 $17.65
U.S. composite
average price $8.71 $15.11 $9.92 $16.77
International $12.11 $17.06 $12.35 $19.00
Natural gas (per MCF):
U.S., including
Vastar $1.92 $1.72 $1.91 $2.03
International $2.56 $2.75 $2.63 $2.70
REFINING AND MARKETING:
Refinery runs
(bbls per day):
Crude oil 445,500 465,100 454,900 464,300
U.S. petroleum product
sales volumes, including
intersegment sales
(bbls per day):
Gasoline 313,900 275,800 304,700 270,500
Jet fuels 111,800 122,400 111,000 120,600
Distillate fuels 78,100 78,100 78,000 77,900
Other 89,600 75,100 76,500 68,400
Total 593,400 551,400 570,200 537,400
CHEMICALS
Chemical product sales
volumes, including
intersegment sales (millions):
Propylene oxide, PO
derivatives, TDI and
ADI - pounds 1,040 974 2,111 1,976
Styrene monomer and
derivatives - pounds 696 627 1,395 1,335
TBA and
derivatives - gallons 244 260 494 520
Note to EDITORS: ARCO Chemical (NYSE: RCM) reported earnings on July 17;
Vastar Resources, Inc. (NYSE: VRI) announced earnings on July 22.
Contact: Media: Albert Greenstein, tel Los Angeles 001 213 486-3384, or
Investors: Dennis Schiffel, tel 001 213 486-1511, both of ARCO, or
arconews@arco.com or Web site: http://www.arco.com
END
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