The best laid plans of energy titans can often go astray,particularly where mergers are concerned. ExxonMobil tossed a wrenchinto the BP Amoco-ARCO merger works by suing for a preliminaryinjunction against the merger partners and PhillipsPetroleum. Phillips has agreed to buy ARCO’s Alaskan holdings forabout $7 billion in a deal intended to win Federal Trade Commissionapproval of the merger (see Daily GPI, March17).
ExxonMobil maintains it has a right of first refusal to acquireARCO’s Alaskan assets that stems from agreements dating back to1964. Not so, say the merger partners as ARCO is selling itsAlaskan businesses, namely ARCO Alaska Inc. — not just theAlaskan assets — and preferential rights do not apply to the saleof the business.
ExxonMobil spelled out in a statement why it cares who winds upwith ARCO’s Alaskan holdings. “Agreements relating to the PrudhoeBay field are complex and provide for a unique split in equityownership between the ‘oil rim’ equity owners, representedprimarily by BP Amoco, which owns most of the oil, and the ‘gasrim’ group, represented by ExxonMobil and ARCO, which own most ofthe gas. Historically, ExxonMobil’s and ARCO’s interests have beenaligned and have worked to balance and promote sound developmentand operational decisions between the oil rim and gas rim equityowners, who may sometimes have differing views. The elimination ofARCO and selection of a new partner by BP Amoco — on terms we arenot 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 operatorshipmust be carefully and thoroughly addressed.”
ExxonMobil spokesman Tom Cirigliano said the company is nottrying to interfere with or delay the BP Amoco-ARCO merger.
“What we’re trying to do is enable a proper and careful analysisof the impact the proposed transaction between ARCO and Phillipswould have on ExxonMobil’s rights. We have not been informed,despite our efforts, as to the specifics of the various agreementsbetween Amoco, ARCO and Phillips.”
Edward Jones senior energy analyst Kate Warne said she was notsurprised by ExxonMobil’s move from a strategy perspective as itwould seem to be in the company’s best interest to try to hold upthe merger. “I don’t think it’s likely to be successful, but I dothink it’s a strategy to delay more than to prevent.” Warne saidshe thought BP Amoco, ARCO and Phillips would have ironed out anypotential dispute with ExxonMobil in the course of doing the dealto sell the Alaskan holdings.
Some analyst speculation has been that ExxonMobil might not betrying to hold up the merger but instead maneuvering to sell itsown Alaskan holdings. To that, ExxonMobil’s Cirigliano said, “Wenever speculate on future business decisions… This actioncertainly has nothing to do with that whatsoever.”
The sale of all of ARCO’s Alaskan businesses to Phillipsincludes a 21.9% interest in the Prudhoe Bay oil rim and 42.6% ofthe 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, a22.3% interest in the Trans-Alaska pipeline, and ARCO’s crude oilshipping fleet, which includes six tankers in service and threeunder construction. The booked reserves being sold total 1.9billion Boe.
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