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.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
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

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

Gaping hole at the heart of the European Union

Treatment of Greece has shown up a lack of genuine legitimacy
Number of young homeless in Britain 'more than three times the official figures'

'Everything changed when I went to the hostel'

Number of young homeless people in Britain is 'more than three times the official figures'
Compton Cricket Club

Compton Cricket Club

Portraits of LA cricketers from notorious suburb to be displayed in London
London now the global money-laundering centre for the drug trade, says crime expert

Wlecome to London, drug money-laundering centre for the world

'Mexico is its heart and London is its head'
The Buddhist temple minutes from Centre Court that helps a winner keep on winning

The Buddhist temple minutes from Centre Court

It helps a winner keep on winning
Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate
Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'