BP Amoco in $25bn merger talks with US oil producer
Monday 29 March 1999
The talks are understood to be at a fairly advanced stage, although there is no certainty they will result in agreement.
However, analysts said there would be strong commercial logic to a tie- up between the two. A merger of BP Amoco and Atlantic Richfield (Arco) would create a group with sales approaching $80bn, reserves of more than 13 billion barrels of oil and a market capitalisation of about $185bn, putting it ahead of Royal Dutch Shell but still behind Exxon-Mobil.
BP Amoco, itself the result of an pounds 80bn merger last year, and Arco are joint operators of the biggest oil field in North America - the Prudhoe Bay field in Alaska.
There has long been speculation that they might merge their activities to cut costs, particularly in light of low oil prices. Although the price of crude has risen from $10 to $14 a barrel in the past two months, it remains low by historic standards.
If BP Amoco is to pull off another acquisition so soon after last year's Amoco takeover, analysts believe now might be the time to strike before the oil price rally starts to be reflected in company valuations.
Apart from Alaska, Arco has extensive petrol retailing interests and some refining capacity on the West Coast of America, where BP Amoco has relatively little presence. It also has reserves in the Far East and Middle East, which would help make it a good strategic fit for BP Amoco.
Last year, Los Angeles- based Atlantic Richfield had revenues of $10.3bn. It made a fourth-quarter loss of nearly $800m after taking heavy charges to cover 1,200 job cuts and a writedown in the value of some of its oil and gas fields following the decline in oil prices. It was the company's first quarterly loss in six years, and it left Atlantic Richfield with a loss for the year of $631m.
In October last year the Atlantic Richfield chief executive, Michael Bowlin, pledged that the company would stay independent despite the fall in oil prices, and announced an efficiency programme aimed at saving $500m a year by 2000.
A BP Amoco spokesman said: "We do not comment on market rumours."
Meanwhile, BP Amoco is also continuing talks with Mobil to buy out its minority share in their European petrol retailing joint venture. The European Commission has told Mobil it must dispose of its 30 per cent share of the joint venture following its takeover by Exxon. The deal could cost BP Amoco $2bn. It has a 70 per cent stake in the venture, which operates a chain of more than 5,000 petrol stations throughout Europe.
But BP Amoco is in a strong position, with cost savings from the merger flowing through faster than originally forecast.
Sir John Browne, the BP Amoco chief executive, said last month that he expected to achieve $2bn of savings by February 2000, a year ahead of schedule. Most analysts believe the eventual savings will be nearer to $3bn.
- 1 I've been called an abusive and dangerous parent, when all I did was listen to my transgender child
- 2 Why this father didn’t hide his daughter’s heroin overdose in her obituary
- 3 Company breaks open Apple Watch to discover what it says is 'planned obsolescence'
- 4 Teaching profession headed for crisis as numbers continue to drop and working lives become 'unbearable'
- 5 The most powerful passports in the world
Nepal earthquake in pictures: Photos show devastation caused by 7.8 magnitude earthquake
Smartphones are making children borderline autistic, says psychiatrist
Nepal earthquake: The race is on to help thousands trapped under rubble around Kathmandu, while remote villages face a long wait for help
Royal baby: Live updates as superbug closes ward at St Mary's Hospital where Duchess of Cambridge is due to give birth
Teaching profession headed for crisis as numbers continue to drop and working lives become 'unbearable'
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband
The sickening truth about food banks that the Tories don't want you to know
Migrant boat disaster: Ukip candidate mocks victims in sickening Twitter post
Nigel Farage wants the BBC to stop making programmes like Doctor Who, Strictly Come Dancing, and Top Gear
Global warming: Scientists say temperatures could rise by 6C by 2100 and call for action ahead of UN meeting in Paris
General Election 2015: Britain would become a 'communist dictatorship' under Ed Miliband and Nicola Sturgeon, claims wife of Michael Gove
iJobs Money & Business
£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...
£50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...
£18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...
£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...