Phillips to Sell Huntington Leases : Account for 70% of Beach City’s Annual Oil Production

About the only thing that outnumbers surfboards in Huntington Beach is oil wells.

On Friday, the city’s largest oil drilling operator, Phillips Petroleum, said it wants to sell its stake in oil drilling leases that account for nearly 70% of the city’s annual oil production.

The Phillips operation is one of Southern California’s largest remaining oil tracts.

Last year, Phillips took control of the coastal property when it bought Aminoil for about $1.6 billion. Strapped for cash, Phillips now wants to shrink the $4.5 billion in debt that it incurred when it successfully fought off hostile takeover bids earlier this year.

Seeks to Raise $2 Billion

Phillips intends to raise $2 billion in a hurry--hopefully before mid-1986, says spokesman Dan Harrison at the company’s Bartlesville, Okla., headquarters.

About $1 billion has already been raised through the sale of various assets during the past six months.

While the proposed sale of its Huntington Beach drilling rights would be a relative drop in the bucket, Phillips insists that it will not sell the operation unless it receives a solid offer.

The company would not disclose how much it would consider “solid.”

At first glance, it might appear that the sale of the operation--with scenic views of the Pacific Ocean--would be a grand opportunity for a real estate developer. But Phillips does not own the land; it merely leases the rights to drill and produce oil.

The identity of the landowner was not immediately available.

Some officials say the eyesore from the city’s scattered oil wells is the culprit that has long prevented Huntington Beach--which boasts nearly eight miles of uninterrupted beach--from developing into a true resort town. But it appears that the biggest oil field will still be around for some time.

Officials from both Phillips and Huntington Beach say the property remains a lucrative oil producer. The company would not disclose reserves, but one industry source, who asked not to be named, estimated them at slightly less than 1 million barrels.

Phillips’ Harrison said the 350 active wells on the site are producing about 12,800 barrels of oil daily.

“When you find a field producing close to 13,000 barrels of oil a day, you don’t usually build houses on it,” he said.

Agreed Florence Webb, senior city planner for Huntington Beach: “The land is far too valuable (as a producing field) to be used for anything else.”

Webb noted that the previous owner, Aminoil, spent millions to drill deeper wells and meet strict environmental standards.

Even with its wells almost exclusively on land, most of the oil is drilled from deep under the ocean floor and brought ashore through an intricate network of pipes.

Could Produce for Years

The Huntington Beach field was discovered in the mid-1920’s, and shortly thereafter was tapped for oil.

While it is regarded as a so-called mature oil field, industry experts say it could profitably produce oil for many more years.

While Phillips would not disclose its revenue on the field, Harrison said: “I can tell you it is very profitable. If it wasn’t profitable, we wouldn’t have purchased it in the first place.”

Phillips recently reported that its third-quarter profits plunged 83% even though its revenue climbed 7%.

The company’s third-quarter profits fell to $36 million, compared to $217 million during the year-ago period.