ARCO Takeover Could Spur Oil Industry Consolidation Phillips Petroleum Stock Up 5%
NEW YORK (AP) -- A takeover of Atlantic Richfield by BP Amoco could spur more job cuts and mergers as the industry struggles to cope with historically oil low prices. However, it isn't expected to have much of an impact at the gas pump.
The companies confirmed Monday they are talking about combining, but have yet to conclude an agreement that sources close to the negotiations valued at $25 billion.
A deal would be the eighth major merger in the oil and gas business in the past six months. During the same time, the industry has announced it was eliminating almost 43,000 jobs, including significant cuts at BP Amoco and Arco. By combining in a deal that would create the world's second- largest oil producer, the companies could save $1 billion a year in overlapping costs, analysts said. But workers know that's usually just a diplomatic way of saying "You're fired." "Like all mergers, everybody waits until the other shoe drops," said Tom Evans, a spokesman for Teamsters Union Local 959 in Anchorage, Alaska, a state where Arco and BP Amoco together control 75 percent of oil production. If history is any guide, the companies could be expected to cut about 10 percent of their combined payroll, or about 10,000 to 12,000 jobs. Most of the cuts probably would come on the Arco side, which could mean a loss of one-third of its work force of 19,000, said Fadel Gheit, an oil analyst with Fahnestock & Co. "Every single function in oil production is duplicated. Especially (in) Alaska," he said. "You don't have to have dual management, dual accounting, dual transportaion. All of the departments of the company are mirrored by the other company." On the news of merger talks Monday, Arco's stock surged more than 13 percent, or by $8.68 3/4 to close at $74.06 1/4 a share on the New York Stock Exchange, where BP Amoco's U.S. shares rose 4.5 percent, or by $4.56 1/4, to $105. If BP Amoco is successful in its bid for Arco, it could spur further consolidation as companies like Unocal, Occidental Petroleum and Phillips Petroleum look for partners to remain competitive. "We do believe this is an industry in need of further rationalization and consolidation," said Jay Wilson, …
Questia, a part of Gale, Cengage Learning. www.questia.com
Publication information: Article title: ARCO Takeover Could Spur Oil Industry Consolidation Phillips Petroleum Stock Up 5%. Contributors: Not available. Newspaper title: THE JOURNAL RECORD. Publication date: March 3, 1999. Page number: Not available. © 2009 THE JOURNAL RECORD. Provided by ProQuest LLC. All Rights Reserved.
This material is protected by copyright and, with the exception of fair use, may not be further copied, distributed or transmitted in any form or by any means.