Higher Oil Prices, Effects of Cost Cutting Credited : Arco Earnings Soar 120% During 2nd Quarter

Atlantic Richfield’s profit leaped by 120% to $330 million in the second quarter because of higher oil prices and the effects of its retrenchment, the company said Wednesday.

The showing fit the scenario expected for the oil industry in general during the April-June quarter.

But Arco’s gain was considerably better than analysts had predicted, and the company said that shows its past cost-cutting steps went deeper than some realized.

“We have said before that as crude prices strengthen, the positive results of our restructuring efforts over the past few years will become increasingly evident,” said Lodwrick M. Cook, chairman and chief executive.

Arco said its price for crude oil shot up 80% in the second quarter compared to year-ago period.

Because of its huge Alaskan reserves, Arco produces more of its own oil than many other companies and its fortunes are more directly tied to the price of crude.

“We figure that every $1 a barrel for crude is worth $100 million in annual earnings to Arco,” said M. Craig Schwerdt, analyst at Morgan Olmstead in Los Angeles. “They were very strong, a little better than we expected, because oil prices were better than expected.”

Other investment firms had forecast earnings of about $1.30 a share for Arco, compared to the $1.80 the company reported.

In the face of lower oil and natural gas production, the higher prices sent revenue up 16% to $4.1 billion for the quarter.

Earnings were boosted $35 million by one-time gains resulting from the settlement of several disputes over natural gas contracts, Arco said.

An additional $29 million of the second-quarter earnings came from the chemicals division, which Arco benefited from higher sales and profit margins.