BP Amoco in $25bn merger talks with US oil producer

BP AMOCO, Britain's largest company, is in talks to acquire the US oil producer Atlantic Richfield in a $25bn (pounds 15.4bn) deal that would propel it ahead of Royal Dutch Shell as the world's second-largest oil group by market capitalisation.

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.

News
i100
News
Netherlands' goalkeeper Tim Krul fails to make a save from Costa Rica's midfielder Celso Borges during a penalty shoot-out in the quarter-final between Netherlands and Costa Rica during the 2014 FIFA World Cup
newsGoalkeepers suffer from 'gambler’s fallacy' during shoot-outs
News
people
Arts and Entertainment
Standing the test of time: Michael J Fox and Christopher Lloyd in 'Back to the Future'
filmReview: A week late, Secret Cinema arrives as interactive screening goes Back to the Future
PROMOTED VIDEO
Travel
travel
Arts and Entertainment
Sydney and Melbourne are locked in a row over giant milk crates
artCultural relations between Sydney and Melbourne soured by row over milk crate art instillation
Arts and Entertainment
Adèle Exarchopoulos and Léa Seydoux play teeneage lovers in the French erotic drama 'Blue Is The Warmest Colour' - The survey found four times as many women admitting to same-sex experiences than 20 years ago
filmBlue Is The Warmest Colour, Bojack Horseman and Hobbit on the way
Arts and Entertainment
Preparations begin for Edinburgh Festival 2014
Edinburgh festivalAll the best shows to see at Edinburgh this year
News
Two giraffes pictured on Garsfontein Road, Centurion, South Africa.
i100
Environment
View from the Llanberis Track to the mountain lake Llyn
Du’r Arddu
environmentA large chunk of Mount Snowdon, in north Wales, is up for sale
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Regulatory Reporting-MI-Bank-Cardiff-£300/day

£200 - £500 per day + competitive: Orgtel: I am currently working on a large p...

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

Training Programme Manager (Learning and Development)-London

£28000 - £32000 per annum + benefits: Ashdown Group: Training Programme Manage...

1st Line Support Technician / Application Support

£20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...

Day In a Page

Dress the Gaza situation up all you like, but the truth hurts

Robert Fisk on Gaza conflict

Dress the situation up all you like, but the truth hurts
Save the tiger: Tiger, tiger burning less brightly as numbers plummet

Tiger, tiger burning less brightly

When William Blake wrote his famous poem there were probably more than 100,000 tigers in the wild. These days they probably number around 3,200
5 News's Andy Bell retraces his grandfather's steps on the First World War battlefields

In grandfather's footsteps

5 News's political editor Andy Bell only knows his grandfather from the compelling diary he kept during WWI. But when he returned to the killing fields where Edwin Vaughan suffered so much, his ancestor came to life
Lifestyle guru Martha Stewart reveals she has flying robot ... to take photos of her farm

Martha Stewart has flying robot

The lifestyle guru used the drone to get a bird's eye view her 153-acre farm in Bedford, New York
Former Labour minister Meg Hillier has demanded 'pootling lanes' for women cyclists

Do women cyclists need 'pootling lanes'?

Simon Usborne (who's more of a hurtler) explains why winning the space race is key to happy riding
A tale of two presidents: George W Bush downs his paintbrush to pen father’s life story

A tale of two presidents

George W Bush downs his paintbrush to pen father’s life story
Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover

The dining car makes a comeback

Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover
Gallery rage: How are institutions tackling the discomfort of overcrowding this summer?

Gallery rage

How are institutions tackling the discomfort of overcrowding this summer?
Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players

Eye on the prize

Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players
Women's rugby: Tamara Taylor adds fuel to the ire in quest to land World Cup

Women's rugby

Tamara Taylor adds fuel to the ire in quest to land World Cup
Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

The day America’s love of backyard tigers led to a horrific bloodbath

With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

How Samuel Beckett became a French Resistance spy

As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
We will remember them: relatives still honour those who fought in the Great War

We will remember them

Relatives still honour those who fought in the Great War
Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

Kodak's last-ditch bid to keep celluloid alive

Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

Acting in video games gets a makeover

David Crookes meets two of the genre's most popular voices