Atlantic Richfield - 4th Quarter & Final Results

RNS No 1618f
ATLANTIC RICHFIELD COMPANY
26th January 1998

 
ARCO REPORTS 1997 EARNINGS, MEETS PRODUCTION INCREASE GOALS
 
Los Angeles, January 26 - ARCO (NYSE: ARC) today reported 1997 net income of
$1.77 billion, or $5.51 earnings per share (basic), compared with $1.66
billion, or $5.17 per share, in 1996.
 
The 1997 fourth quarter earnings totaled $382 million, or $1.19, per share,
compared with $380 million, or $1.18 per share, in the 1996 fourth quarter.
 
'GREAT YEAR' HIGHLIGHTED BY HIGHER OIL AND GAS PRODUCTION
 
"1997 was a great year for ARCO. We met a key growth goal with a 3.5% increase
in daily average oil and gas production for the year, and we increased
earnings despite a lower average oil price," said Mike R. Bowlin, ARCO
Chairman and Chief Executive Officer. "The year ended with a strong fourth
quarter year-over-year production increase of nearly 5% as a result of our
stable U.S. oil production, increases in Algeria and Qatar, and new oil
production from the Ashtart and Tengiz fields, along with added gas production
in the U.S., North Sea, and China.
 
"In the downstream businesses, our refining and marketing operations concluded
a strong year with a 13% increase in earnings driven by margin improvements
and volume growth. Chemical earnings were negatively impacted by lower product
margins, higher plant turnaround costs and higher foreign exchange charges."
 
STRONG PROGRESS TOWARD KEY GOALS
 
"1997 was a banner year for ARCO. We made substantial progress toward meeting
our key goals for growing our core businesses -- upstream oil and gas plus
downstream refining and marketing and chemicals. This focus and our excellent
performance earned us an improved shareholder return which was superior to
most of our competitor comparison group," Bowlin said.
 
ARCO dramatically advanced its international growth objectives with the
confirmation of its Tangguh natural gas discovery in eastern Indonesia.
Estimates put Tangguh's gross reserves at 13 trillion cubic feet, making it
the third largest discovery in ARCO's history, with another 6.5 trillion cubic
feet of possible reserves.
 
The company formed a joint venture with Russian oil major LUKOIL giving ARCO
an interest in the giant Tengiz field in Kazakhstan and in the Caspian
Pipeline Consortium.
 
In South America, ARCO was successful in bidding with partners on four oil
blocks in Venezuela, which are expected to produce more than 800 million gross
barrels of oil. Also in Venezuela, ARCO received the Venezuelan Congress'
approval to proceed with the Hamaca oil production and upgrading project.
 
"While expanding our international oil and gas business, we recognize the need
to maintain a stable platform with our U.S. production, particularly in Alaska
which provides most of ARCO's oil production," Bowlin reported. "In fact, in
1997 we experienced several exploration successes near existing production on
the North Slope, began production from the large West Sak reservoir and
started development of the Alpine Field."
 
ARCO has said production in Alaska will stabilize after 1999.
 
OIL AND GAS PRODUCTION, EARNINGS UP
 
ARCO's worldwide exploration and production operations earned $1.35 billion
after tax in 1997, up from $1.33 billion in 1996. In the fourth quarter, E&P
earnings totaled $286 million, down from $425 million in the 1996 fourth
quarter due to lower oil prices.
 
International natural gas production grew by 16% showing increased sales from
ARCO's Yacheng natural gas field offshore China. In the U.S., natural gas
sales grew by 2% for the year. ARCO's total petroleum liquids production grew
by 2% as a result of new production in Algeria, Tunisia and Kazakhstan plus
strong U.S. production.
 
REFINING AND MARKETING EARNINGS UP
 
ARCO's refining and marketing business reported after-tax earnings of $325
million for 1997, up from $287 million after tax in 1996, and the best in four
years. Increased West Coast gasoline margins contributed to the improved
results as did growing gasoline sales volumes. ARCO integrated 218 former
Thrifty gasoline stations into its network during 1997, giving it more than
1,700 retail outlets throughout the five western states. ARCO also concluded a
deal for 41 retail outlets in Vancouver, British Columbia, as part of its
initial expansion into Canada.
 
In the fourth quarter, refining and marketing earned $76 million, compared to
a loss of $8 million in the 1996 fourth quarter.
 
CHEMICALS EARNINGS DOWN
 
ARCO's 82.3% interest in ARCO Chemical Company earned $128 million, compared
with $320 million in 1996. The 1997 full year earnings included an after-tax
charge of $95 million, net of minority interest, for the company's
restructuring program and other actions. In the fourth quarter, ARCO Chemical
contributed $63 million to ARCO's earnings, compared to $61 million in the
1996 fourth quarter.
 
In 1997, ARCO earned $119 million from the 49.9% equity interest it held in
Lyondell Petrochemical Company until September 15. Following the settlement of
ARCO's 9% Exchangeable Notes with Lyondell stock, ARCO no longer holds an
interest in Lyondell Petrochemical Company.
 
1997 SPECIAL ITEMS
 
The 1997 results included a net benefit of $65 million after tax, comprised of
the following special items:
 
                                     $ Millions

   Exchange of Lyondell stock         $291
   Tax-related adjustments             248
   Environmental                      (184)
   Restructuring                      (141)
   Early debt retirement              (118)
   Other, net                          (31)
                                       $65
 
Special items included in 1996 results netted to zero.
 
Some of the matters discussed in this news release are forward-looking
statements that involve risks and uncertainties. Actual results could differ
materially based on numerous factors, including the realized level of crude
oil and natural gas production and other risks detailed from time to time in
the company's SEC reports, including the 1996 report on Form 10-K, filed on
February 26, 1997.
 

CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
 
(Millions except per share amounts)
                          Three Months Ended         Twelve Months Ended
                               December 31                December 31
                           1997          1996         1997          1996
 
REVENUES
   Sales and other
   operating revenues   $4,500        $5,129      $18,684       $18,592
   Other revenues           77           107          588           577
   Total revenues        4,577         5,236       19,272        19,169
 
EXPENSES
Trade purchases          1,745         2,400        7,881         7,949
Operating expenses       1,054         1,062        4,372         3,953
Selling, general and
administrative expenses   282           290        1,083         1,018
Depreciation, depletion
and amortization          469           431        1,746         1,633
Exploration expenses
(Including undeveloped
leasehold amortization)   179           105          508           413
Taxes other than
income taxes              181           202          766           800
Interest (a)              115           168          422           668
Unusual items(b)           75            --          250            26
Total expenses          4,100         4,658       17,028        16,460
Income before gain on
subsidiary stock
transaction               477           578        2,244         2,709
Gain on sale of
Lyondell Petrochemical
Company stock              --            --          633            --
Income before income taxes,
minority interest &
extraordinary item        477           578        2,877         2,709
Provision for taxes
on income                  71           173          920           941
Minority interest in
earnings of subsidiaries   24            25           68           105
Net income before
extraordinary item        382           380        1,889         1,663
Extraordinary Item - loss
on extinguishment of debt
(net of income taxes
of $74 million)            --            --        (118)            --
Net income                $382          $380       $1,771        $1,663
Earned per share(c):
Basic                   $1.19         $1.18        $5.51         $5.17
Diluted                 $1.17         $1.16        $5.41         $5.09
Weighted average equivalent
shares outstanding(c):
Basic                   320.6         321.9        321.2         321.7
Diluted                 327.5         326.9        327.4         326.5
Dividends per
common share(c)       $0.7125       $0.6875       $2.825         $2.75
 
(a) Excludes capitalized interest of $16 million and $1 million for the
three-month periods and $47 million and $22 million for the twelve-month
periods ended December 31, 1997 and 1996, respectively.
 
(b)  Restructuring charges in 1997.
 
(c) Prior year share and per share data is restated for the effect of the
second quarter 1997 100% stock dividend.
 
AFTER-TAX SEGMENT EARNINGS
(Unaudited)
 
   (Millions)                 Three Months Ended        Twelve Months Ended
                                December 31                December 31
                            1997          1996         1997          1996
 
Exploration and
production                $286          $425       $1,347        $1,329
Refining and marketing      76            (8)         325           287
Chemicals                   63            61          128           320
Other(d)                    28            25          257           200
Unallocated expenses        12           (15)        (156)          (27)
Interest expense           (83)         (108)        (303)         (446)
Gain on sale of LPC stock   --            --          291            --
Extraordinary item - loss
on extinguishment of debt   --            --         (118)           --
Net Income                $382          $380       $1,771        $1,663
 
(d)  Includes equity from earnings in Lyondell
 
Note To Editors
 
ARCO Chemical Company (NYSE: RCM) reported earnings on January 22; Vastar
Resources, Inc. (NYSE: VRI) announced earnings on January 21.
 
Contact: Media: Albert Greenstein, tel USA 00 1 213-486-3384, or Investors:
Kim Howell, tel [phone], or e-mail to: [e-mail] Web site:
http://www.arco.com
 
 
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