Arco Ups Stake in State’s Largest Oil Field
Atlantic Richfield Co. will buy a major interest in California’s largest oil field from Oryx Energy Co. of Dallas for a total of $642 million in cash and assumed debt, the companies said Wednesday.
The sale boosts Los Angeles-based Arco’s oil production in the state by 60% and gives Arco rights to a field with an estimated 140 million barrels of proven oil reserves.
It also essentially completes Oryx’s plan to sell non-strategic assets in order to reduce about $1 billion in debt from the purchase in September of all shares of its common stock held by Oryx’s founding family.
“Net proceeds from this transaction and previously announced sales amount to nearly $700 million,” said Oryx Chairman Robert P. Hauptfuhrer in a statement. “These funds, coupled with our substantial cash flow from operations, will allow us to reach our billion-dollar debt reduction target much sooner than planned.”
Under terms of the deal, which was effective Nov. 1, Arco Oil & Gas Co. assumes $54 million in Oryx debt, and pays $588 million in cash for all of Oryx’s oil properties in the Midway-Sunset oil field in Kern County. The interests had constituted Oryx’s largest operating U.S. field.
The deal will make Arco, which already has extensive operations in the field, its largest producer of oil and boost Arco’s gross state oil production to 79,000 barrels a day.
The Oryx interests include 1,270 wells, with gross oil production of more than 29,000 barrels a day, as well as an interest in a cogeneration plant that produces electricity and steam for use in enhanced oil recovery operations.
“This purchase makes good sense for Arco, given that it’s a field where we have other production with good infrastructure,” said Arco spokesman Albert Greenstein. “It’s a good fit.”
The sale was in keeping with Oryx’s plans to sell off domestic oil operations and change the company’s balance of operations to emphasize U.S. natural gas production and overseas oil production, analysts said.
The deal will also result in a net gain of $71 million for Oryx and reduce by $545 million Oryx’s $968-million debt from its purchase in September of 18 million shares of stock from Glenmede Trust, which represents the Pew family of Philadelphia, founders of Oryx’s predecessor, Sun Co. At the time of the stock purchase, Oryx vowed to eliminate the debt within a year.
Last month, Oryx sold several properties to four companies, including Geodyne Resources Inc., for $95 million. The sales included two offshore platforms and five non-producing offshore blocks that went to Unocal Corp., said Oryx spokesman Tom Sullivan.
The month before, Oryx sold $109 million in properties to Union Pacific Resources Co. Together, the sales reduced Oryx’s debt by $142 million.
On Wednesday, Arco’s stock closed up 50 cents at $127.875 a share in trading on the New York Stock Exchange. Oryx’s stock closed down $1 at $43.25 a share on the NYSE.
