ExxonMobil Enters BP Amoco-ARCO Fray
The best laid plans of energy titans can often go astray,
particularly where mergers are concerned. ExxonMobil tossed a
wrench into the BP Amoco-ARCO merger works by suing for a
preliminary injunction against the merger partners and Phillips
Petroleum. Phillips has agreed to buy ARCO's Alaskan holdings for
about $7 billion in a deal intended to win Federal Trade Commission
approval of the merger (see NGI March 20).
ExxonMobil maintains it has a right of first refusal to acquire
ARCO's Alaskan assets that stems from agreements dating back to
1964. Not so, say the merger partners as ARCO is selling its
Alaskan businesses, namely ARCO Alaska Inc. --- not just the
Alaskan assets --- and preferential rights do not apply to the sale
of the business.
ExxonMobil spelled out in a statement why it cares who winds up
with ARCO's Alaskan holdings. "Agreements relating to the Prudhoe
Bay field are complex and provide for a unique split in equity
ownership between the 'oil rim' equity owners, represented
primarily by BP Amoco, which owns most of the oil, and the 'gas
rim' group, represented by ExxonMobil and ARCO, which own most of
the gas. Historically, ExxonMobil's and ARCO's interests have been
aligned and have worked to balance and promote sound development
and operational decisions between the oil rim and gas rim equity
owners, who may sometimes have differing views. The elimination of
ARCO and selection of a new partner by BP Amoco --- on terms we are
not aware of --- devalues ExxonMobil's interests."
Citing its multi-billion dollar investment in the North Slope,
Exxon Mobil said it "feels strongly that the issue of operatorship
must be carefully and thoroughly addressed."
ExxonMobil spokesman Tom Cirigliano said the company is not
trying to interfere with or delay the BP Amoco-ARCO merger.
"What we're trying to do is enable a proper and careful analysis
of the impact the proposed transaction between ARCO and Phillips
would have on ExxonMobil's rights. We have not been informed,
despite our efforts, as to the specifics of the various agreements
between Amoco, ARCO and Phillips."
Edward Jones senior energy analyst Kate Warne said she was not
surprised by ExxonMobil's move from a strategy perspective as it
would seem to be in the company's best interest to try to hold up
the merger. "I don't think it's likely to be successful, but I do
think it's a strategy to delay more than to prevent." Warne said
she thought BP Amoco, ARCO and Phillips would have ironed out any
potential dispute with ExxonMobil in the course of doing the deal
to sell the Alaskan holdings.
Some analyst speculation has been that ExxonMobil might not be
trying to hold up the merger but instead maneuvering to sell its
own Alaskan holdings. To that, ExxonMobil's Cirigliano said, "We
never speculate on future business decisions... This action
certainly has nothing to do with that whatsoever."
The sale of all of ARCO's Alaskan businesses to Phillips
includes a 21.9% interest in the Prudhoe Bay oil rim and 42.6% of
the gas cap, a 55% interest in the greater Kuparuk area and a 78%
stake in the Alpine field.
The package also includes 1.1 million net exploration acres, a
22.3% interest in the Trans-Alaska pipeline, and ARCO's crude oil
shipping fleet, which includes six tankers in service and three
under construction. The booked reserves being sold total 1.9
Joe Fisher, Houston