Arco to Swap Most State Assets in Deal With Mobil

Atlantic Richfield Co. on Tuesday said it will exchange oil and gas properties in the San Joaquin Valley for some Mobil Corp. properties in the Gulf of Mexico, resulting in a $100-million charge to Arco and the potential loss of 270 jobs.

With this asset exchange, the Los Angeles oil giant will divest a bit of its corporate history. The old Richfield Oil Corp., which merged with Atlantic Refining Co. in 1966, got its start in the heavy-oil fields of the Bakersfield area.

Arco will continue to drill for oil in Long Beach harbor but will have no onshore holdings in California.

Arco and Mobil officials said the property swap is designed to bolster each company’s strengths. Arco has interests in the central and western shelf of the Gulf of Mexico through Houston-based Vastar Resources, of which it owns 82.2%; Mobil, through its Bakersfield-based Aera Energy joint venture with Shell, is the largest oil production company in California.

“This is a value-enhancing exchange for all parties,” Arco Chairman and Chief Executive Mike R. Bowlin said.

For Mobil, the transaction “will add to this significant piece of business [in California] with very little overhead,” said J. Michael Yeager, president and general manager of Mobil Exploration & Producing U.S. Inc.

Arco’s Western Midway subsidiary in Bakersfield will exchange five fields in Kern and Los Angeles counties, as well as a 49% interest in an electricity cogeneration facility in Kern County, for Mobil’s interests in 23 producing fields and 93 drilling platforms, as well as interests in more than 80 lease blocks in the Gulf of Mexico.

Arco then will sell Western Midway to Vastar Resources for $170 million in cash and $300 million in existing debt. The Bakersfield headquarters of Western Midway will be closed, affecting 270 employees. Mobil will hire some of those employees, but the number has not been determined, Yeager said.