ARCO’s announcement last week that it will cut $500 million inexpenses and 900 jobs over the next two years was put inperspective yesterday when the company said third quarter earningsexcluding special items plummeted 81% to $61 million, or$0.19/share, compared to $313 million, or $0.96/share, in the thirdquarter of last year. Net income, including special items anddiscontinued operations, was $872 million, or $2.67 per dilutedshare, compared to $516 million, or $1.57/share in 3Q97.

“From an industry perspective, the 1998 third quarter resultswere driven by low oil prices, which were down $5.60 per barrelrelative to the same quarter in 1997 and were the lowest seen in 12years,” said ARCO CEO Mike R. Bowlin. “Our results are sensitive tooil prices which, of course, means when prices rise we alsobenefit. However, we are not merely waiting for higher prices. Aswe recently announced, we are taking a number of cost-savings stepsto streamline our operations and improve results.”

ARCO sold its chemical division during the third quarter andconsolidated Union Texas Petroleum, which ARCO acquired late in thesecond quarter. Its domestic coal assets were divested in the 1998second quarter, and the company has reached agreement to sell itsinterest in two coal properties in Australia. ARCO also continuedto build scale in core areas, announcing it will trade its heavyoil holdings in California to Mobil for producing properties andacreage in the Gulf of Mexico, where they will be owned andoperated by Vastar Resources, Inc., in which ARCO holds an 82.2%interest. Despite the impact of hurricanes in the Gulf, Vastar’sgas production rose 10% to 977 MMcf/d during the quarter as aresult of increased levels from more than a dozen offshore fields.

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