Anderson Returns to Spotlight With Hondo Oil, Pauley Merger

Former Atlantic Richfield Chairman Robert O. Anderson is back in the oil spotlight.

Anderson announced Wednesday that he is merging his private oil company, Hondo Oil & Gas, into Pauley Petroleum of Los Angeles, the publicly held flagship of the late Edwin W. Pauley, a multimillionaire oilman and national political figure. Anderson will be chairman and chief executive of the surviving company, which probably will continue to be called Pauley Petroleum, and current Chairman William R. Pagen will be vice chairman.

The transaction, for which no value was reported, will return Anderson to the helm of a public company and takes the longtime oilman back to his roots as an independent petroleum producer.

“As an old petroleum wildcatter and refiner, I’ve always had the urge to get back to refining,” said the 70-year-old Anderson, who retired from Los Angeles-based Arco at the end of 1985.

“It’s an exciting project for somebody who has spent nearly 50 years in the oil fields to not only be back in California but to be in the heart of the best business in the world,” Anderson said in an interview.

Under the preliminary agreement announced Wednesday, Pauley will issue 10 million shares of common stock to Hondo, which is half-owned by Anderson and half-owned by Lonrho PLC of London, a conglomerate with holdings in such diverse areas as mining, hotels and textiles. Following the merger, current Pauley stockholders will own 22.77% of the surviving company, and Roswell, N.M.-based Hondo will own 77.23%.

Nearly 40% of Pauley’s stock is controlled by the 66-year-old Pagen, the estate of Edwin W. Pauley and by company director Barbara Pauley Pagen, Pauley’s widow who is now married to Pagen.

The merger of Pauley and Hondo “just seemed to be a logical fit,” Anderson said. “It will make a large integrated independent company with a very strong balance between hydrocarbon production and refining capacity.”

Pagen said the deal will make Pauley “one of the larger independent oil and gas companies” and will give the larger Hondo access to public capital that it had lacked as a private company.

“I think it’s a very positive move in the right direction,” said Pagen, who became Pauley chairman in 1982.

Hondo Oil & Gas, which is about four times the size of Pauley Petroleum, was created early this year when Anderson and Lonrho bought oil and gas properties from Arco for a reported $180 million. Hondo has proven oil and gas reserves of about 43 million barrels of oil-equivalent, or about 20 million barrels of oil and 140 billion cubic feet of gas.

An Arco shareholder filed suit over the sale, contending that Anderson got a sweetheart deal because of his Arco contacts. Arco denied the accusations and the suit has been dismissed, although the shareholder has the right to refile.

Pauley Petroleum had proven reserves on Aug. 31, 1986, of nearly 11 million barrels of oil and 4.3 billion cubic feet of gas. Pauley owns a 22,500-barrel-per-day refinery in Newhall, an asphaltic concrete plant in the San Fernando Valley and nearly 200 acres of residential and commercial real estate in Via Verde in eastern Los Angeles County, which are for sale.

Edwin W. Pauley, who died in July of 1981 at 78, “was one of the last of the rugged wildcatters,” Pagen said.

Pauley emerged in the 1930s as a leading spokesman for the oil industry. He then headed Petrol Corp., which became Pauley Petroleum in 1958.

Pauley was an adviser to four Democratic presidents, beginning with Franklin D. Roosevelt, and served on the UC Board of Regents for 32 years. His name is recognized by sports fans who visit UCLA’s Pauley Pavilion, which has housed numerous championship basketball teams.

Anderson, who lives on a ranch in Roswell, N.M., is widely regarded to be Arco’s founder. He was Atlantic Richfield’s first chairman following the 1966 merger of Atlantic Refining Co. of Philadelphia with Richfield Oil of Los Angeles. The company exploded in size under Anderson’s leadership.

When he retired in 1985, Anderson said he planned to “devote more time to my various personal and business interests.”

“He’s been a very successful oilman,” said Bud Scoggins, president of the Independent Petroleum Assn. of America. “He got tired of big business and wanted to get back to looking for oil and gas.”

PAULEY PETROLEUM AT A GLANCE

Los Angeles-based independent oil and gas company is involved in oil and natural gas exploration, development and production. It operates a refinery in Newhall for gasoline and other fuels. Its Blacktop Materials plant in the north San Fernando Valley produces asphaltic concrete. Pauley also makes concrete and asphalt products for retail sale.

9 mos. Year ended Aug. 31 May 31 1986 1985 1984 Revenue (millions) $105 $165 $198 $199 Net income (millions) 0.3 5.0 2.1 0.4

Assets (1986) $64.6 million

Employees 225

Shares outstanding 2.9 million

12-mo. price range $9.625 - $17.50

Wed. close (AMEX) $14.875, up $1