Arco Loses $1.09 Billion in Quarter : Cites $1.5 Billion in Write-Downs From Restructuring Plan

Blaming a $1.5-billion write-down associated with its 3-month-old restructuring, Atlantic Richfield said Tuesday that it lost $1.09 billion in the second quarter.

A year ago, the Los Angeles-based oil company reported earnings of $406 million in the second period. Quarterly sales fell to $5.7 billion from $6.09 billion.

The loss was expected, but analysts on Wall Street who follow the company said it was a little larger than anticipated.

When Arco announced its restructuring program at the end of April, the company predicted that it would show a profit for all of 1985. But on Tuesday, a spokesman said that prediction assumed that the company would take a somewhat smaller charge of $1.3 billion in the second quarter. “It’s too soon to say what the next two quarters might bring,” the spokesman said.

About one-third of the write-down is for Arco’s metals operations, most of which are for sale. The rest is to cover losses on the sale of its East Coast assets as well as costs associated with the retirement or layoff of about 7,900 employees.

Continuing Operations Slip

Without the write-down, Arco’s second-quarter performance was still worse than last year. Arco’s income from continuing operations dropped 11.6% to $402 million from $455 million in the second quarter last year. The company blamed the earnings decline on lower oil and gas sales, lower crude oil prices and higher depreciation charges against its Alaskan oil and gas assets.

But Arco’s second-quarter refining and marketing earnings, primarily gasoline sales, showed a strong improvement over the same period last year. The company said its refining and marketing operations earned $105 million, an 81% gain over 1984’s second-quarter earnings of $58 million.

In April, Arco announced the largest restructuring undertaken by an oil company. The company said it planned to withdraw from the East and has since sold most of its East Coast gasoline stations, a refinery and terminals. It plans to reduce its worldwide work force by about 20% through early retirements and layoffs.

Arco also slashed its exploration budget by 30% to 35% this year. Arco initially expected to take a $1.3-billion charge against earnings, but it increased the size of the charge to $1.5 billion about a week ago, after many more people took early retirement than expected.

Arco said it was dropping money-losing businesses to concentrate on its profitable West Coast operations. It is the biggest gasoline retailer in California.

Arco said the write-down includes a $514-million after-tax charge, mostly on its metals operations, excluding coal. The write-down is an upward revision of the $785-million write-down that Arco took on its metal businesses last September. Most of those businesses are for sale. Tuesday’s write-off also includes a $987-million after-tax charge that mostly reflects losses on the sale of its East Coast refining and marketing operations and the cost of early retirements and layoffs.

Arco said it sold less oil and gas in the second quarter, compared to the second quarter of 1984. The company said the biggest reason for the lower sales volume was loss of 38,000 barrels a day in “makeup” production in Alaska’s Prudhoe Bay, oil that it was allocated by agreement among oil firms in the area. The company said domestic natural gas sales declined because second-quarter 1984 sales were high due to an unusually cold winter.