Newspaper article THE JOURNAL RECORD

Investors May Be Overly Pessimistic about ARCO Future

Newspaper article THE JOURNAL RECORD

Investors May Be Overly Pessimistic about ARCO Future

Article excerpt

N.Y. Times News Service

NEW YORK _ For years Atlantic Richfield lived off the rich reserves of its domestic oil and gas fields and its major 1960s strike in Prudhoe Bay, Alaska.

But the bonanza is running on low and a number of attempts to find major new fields in Alaska have come up dry or have not paid off yet.

Thus the nation's seventh largest oil company is looking for new oil and gas reserves in far-flung places where its management has only had modest experience, although the company has been in Indonesia and the North Sea in a limited way for decades.

Between now and 1997, Arco plans to spend about $3.3 billion on international ventures, up from the nearly $2 billion invested over the last five years.

Of that, about $1.2 billion will be spent on two large gas projects, one under way in Indonesia and one that has just begun in south China. In addition, Arco has acquired exploration rights in Algeria and Romania and is exploring in Yemen and Ecuador. This week the company announced that it would explore jointly with British Gas off the coast of Vietnam.

But the move to more reliance on foreign sources at a time of falling crude oil prices has made investors nervous about Arco's stock.

From a high of $127 last year, the share price has slid as the price of crude oil fell last fall. And since Feb. 4, the stock has tumbled 8.7 percent. It closed Tuesday at $100.75, down 75 cents, in trading on the New York Stock Exchange.

Nevertheless, Arco stock has remained a favorite pick among some analysts.

They say that Arco's new emphasis on gas and oil sources outside the United States is a prudent move into relatively safe projects, mostly in natural gas, that could bring a big payoff in a few years.

"Arco is not blindly throwing money at rank wildcats in unfamiliar territory," said Mary K. Quinn, the oil analyst for S.G. Warburg who did a recent report on the company and recommended the stock.

She predicts that when Arco begins production at its new gas projects in Indonesia and south China _ as well as expanding in the North Sea _ earnings from its international side will jump from a loss last year to $470 million by 1997. …

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