Exhibit 99.1
FOR IMMEDIATE RELEASE
April 1, 1999
BP AMOCO AND ARCO IN $26.8 BILLION DEAL
AGREED BY BOARDS OF BOTH COMPANIES
o Makes BP Amoco biggest non-state oil producer
o Combined market capitalisation of some $190 billion
o Annual pre-tax synergies of $1 billion by 2001
o Improved economics will drive Alaskan growth
o Quantum leap in Asian gas position
o Top West Coast network gives US coast-to-coast retail reach
LONDON, April 1: BP Amoco confirmed today that, following a successful
outcome to talks between the two companies, it has reached agreement to
combine with the Atlantic Richfield Company (ARCO) of Los Angeles.
The all-share transaction, approved by the boards of both companies, will
involve the exchange of 0.82 BP Amoco American Depositary Shares (ADS) for
each ARCO share.
At BP Amoco's closing price of $100.44 per ADS on Friday, March 26, 1999,
this valued ARCO at $26.8 billion, representing a premium of 26 per cent.
Based on the closing prices of the two companies last night (Wednesday,
March 31) the premium was 13 per cent.
Describing the deal as "a compelling strategic and geographic fit of
quality assets", BP Amoco chief executive Sir John Browne said it would
yield annualised pre-tax synergies of around $1 billion by the year 2001.
The deal will substantially boost BP Amoco's reserves and production,
giving it the largest oil output of any non-state company, and will
consolidate its position in Alaska where the resulting synergies and
cost-savings are likely to increase the region's competitiveness and
significantly encourage future investment.
"For BP Amoco, the strategic rationale for this deal is the immense
potential it offers for future growth," Browne said. "In Alaska in
particular, the synergies we can achieve from combining our operations will
greatly increase the competitiveness of
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the state in the face of uncertain oil prices and provide a strong
incentive for significant investment in existing and future fields."
Browne said the deal would also give BP Amoco entry to the key West Coast
retail markets of the US where ARCO has a leading market share in five
states and owns two of the most efficient refineries in the region. With
the prime refining and retail network BP Amoco already has east of the
Rockies, this makes it a coast-to-coast marketer in the US.
Elsewhere, onshore the US and the Gulf of Mexico, ARCO will add 360,000
barrels of oil equivalent to BP Amoco's daily output - half of it gas,
chiefly from ARCO's 82 per cent stake in Vastar, one of the most profitable
operators in the Lower 48.
Internationally, the deal will add major volumes in South East Asia, most
notably in Indonesia where ARCO has an estimated net share of up to eight
trillion cubic feet in the Tangguh gas field, regarded as one of the best
liquefied natural gas projects in the region.
It also adds gas reserves in the South China Sea, Malaysia, Thailand and
Qatar and oil interests in Algeria, Venezuela, the Caspian and Russia.
In the UK, ARCO will add gas and oil production equivalent of over 100,000
barrels a day from fields that are complementary to BP Amoco's North Sea
operations, making the group the largest single supplier of UKCS gas.
"The addition of ARCO's international assets powerfully strengthens our
global portfolio," Browne said. "Most significantly, it gives us a major
platform for upstream growth in Asia where we will now have world-class gas
reserves ready to supply Japan, Korea and other key markets when recovery
comes to the region, which it undoubtedly will."
In Alaska, Browne said the deal could help unlock the potential for large
volumes of gas "which are currently uneconomic to develop but could make an
enormous contribution to the energy needs of the US in the next century.
"We have proprietary BP Amoco technology which we believe may allow us to
convert some of that gas into liquids that can be transported through the
existing oil pipeline. We have plans to build a $70 million pilot plant on
the North Slope to test that technology and if it is successful, we will
consider full-scale development."
Browne disclosed that the deal was the outcome of negotiations which began
in January after an approach from ARCO's executive management to consider
options for closer co-operation between the two companies.
In a joint statement today, Browne and ARCO Chairman Mike Bowlin said:
"Against the background of uncertain oil prices and the increased
competitive pressure across
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the sector, it is clear that the uniquely complementary operations of our
companies can compete more effectively together than apart to deliver our
respective shareholders a superior return on their investment."
BP Amoco said the $1 billion synergies - which are on top of the $500
million cost- savings already targeted by ARCO - would be achieved from a
mix of organisational efficiencies, more focused exploration, improved
business processes including IT, and rationalisation of operations.
The company said that it expected to take a restructuring charge of $1
billion on the transaction. This would cover both a Stamp Duty Reserve Tax
charge of some $400 million and the costs associated with achieving the
synergies.
Some $710 million of the synergy savings are expected from exploration and
production, including $200 million from streamlining Alaskan operations.
Some $110 million are targeted from refining and marketing and $180 million
from corporate costs.
Approximately 2,000 jobs are expected to be lost as a consequence of
merging the operations of the two companies, with the impact likely to be
concentrated on locations in the Lower 48.
ARCO has proven oil reserves of some 2.8 billion barrels, mainly in Alaska
where it shares major interests with BP Amoco in five fields, including
Prudhoe Bay. Its proven gas reserves total 9.8 trillion cubic feet, mainly
in the Gulf of Mexico, the UK North Sea and the South China Sea, but it
holds unbooked gas volumes of a further 15 trillion cubic feet, mainly in
Indonesia, Thailand, Malaysia and Qatar.
In 1998 it produced 660,000 barrels of oil a day, approximately half from
Alaska, and 2.1 billion cubic feet of gas, mainly from the Gulf of Mexico,
the UK North Sea and Indonesia.
ARCO's refining and marketing business is the leading gasoline marketer on
the US west coast, with 1,760 retail sites spread across California,
Arizona, Nevada, Oregon and Washington. Its two refineries, in Carson,
California and Cherry Point, Washington, are among the top quartile
performers in the region.
The transaction is subject to the approval of the shareholders of both
companies and the consent of various state and regulatory authorities,
including the US Federal Trade Commission (FTC) and the European
Commission. The process of obtaining regulatory consents will be led by BP
Amoco co-chairman Larry Fuller.
Pending completion of the deal and subject to normal legal constraints on
the exchange of competitive data in the interim, the two companies will
establish a small team of executives from both sides to plan the
integration of their operations. This will be led by BP Amoco executive
vice president, Dr Byron Grote.
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Browne said ARCO's assets would be absorbed with minimal impact into the BP
Amoco organisational structure. The team planning the integration would be
'ring- fenced' so that the deal does not interfere with the ongoing
integration of BP and Amoco assets which was progressing more rapidly than
expected and likely to be concluded during the year.
The company said that closure of the ARCO transaction is currently
estimated to occur around the end of the year.
Browne said the deal would not affect BP Amoco's rigorous approach to the
management of its balance sheet. "On a combined basis, taking a snapshot of
the current position, our ratio of net debt to net-debt-plus-equity would
remain below the 30 per cent ceiling we have set ourselves.
"Neither will there be any impact on our dividend policy," he said. "We
will continue to aim to pay out around 50 per cent of underlying earnings
on a through-cycle basis."
The transaction will be accounted for as a purchase under UK GAAP rules.
Further information on BP Amoco and ARCO is set out in Part ll of this
release and a summary of the proposed transaction is set out in Part lll.
The companies said they intend to publish detailed information for dispatch
to shareholders within the next three months.
Investment bank advisers: Morgan Stanley for BP and Goldman Sachs and
Salomon Smith Barney for ARCO.
CONTACTS FOR FURTHER INFORMATION
BP AMOCO LONDON ARCO LOS ANGELES
Press - Roddy Kennedy Press - Linda Dozier
Tel: 44 (0)171 496 4624 Tel: (1) 213 486 3384
Investor Relations - David Peattie Investor Relations - David De Sonier
Tel: 44 (0)171 496 4717 Tel: (1) 213 486 1811
BP AMOCO NEW YORK
Press - Tom Koch
Tel: (1) 212 451 8019
Investor Relations - Chuck Koepke
- Terry Lamore
Tel: (1) 212 451 8034
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BROKER CONTACTS
FOR BP AMOCO FOR ARCO
Bob Maguire - Morgan Stanley Michael Carr - Goldman Sachs
Tel: 44 (0) 171 425 5643 Tel: (1) 212 902 2266
Steve Munger - Morgan Stanley Maureen Hendricks - Salomon
Tel: (1) 212 761 4257 Smith Barney
Tel: (1) 212 816 0967
Stephen Robinson - Merrill Lynch
Tel: 44 (0) 171 772 2608
David Mayhew - Cazenove & Co
Tel: 44 (0) 171 825 9453
Further information on the two companies is available on the Internet at:
http://www.bpamoco.com and http://www.arco.com