ARCO Reports 1998 Net Loss of $794 Million Amid Weak Commodity Pricing

Strategic Insights -

Facing a turbulent year with oil prices plummeting to a 30-year low, ARCO (NYSE: ARC) reported a $794 million net loss in the fourth quarter of 1998, offsetting a $382 million net earnings in the same period the previous year. The company's Chairman and Chief Executive Officer, Mike R. Bowlin, acknowledged the challenging year but emphasized strategic progress. Amid the financial turmoil, ARCO made significant strides, including the sale of non-core assets, divestitures, and investments in key focus areas.

Key Takeaways:

  • ARCO reported a net loss of $794 million in the fourth quarter of 1998, compared to a net earnings of $382 million in the same period the previous year.
  • The company's Chairman and Chief Executive Officer, Mike R. Bowlin, highlighted the difficult year but emphasized the strategic progress made, including divestitures and investments in key focus areas.
  • In the fourth quarter of 1998, ARCO sold interests in ARCO Chemical Company and U.S. coal assets, and agreements were reached to sell interests in most of its Australian coal properties.
  • The company plans to continue divesting other non-core assets and is implementing a two-year $500 million global cost reduction program.
  • Worldwide oil and gas production grew by 12% in the fourth quarter of 1998, with a 51% increase in international natural gas production and a 21% growth in domestic natural gas production.
  • ARCO's refining and marketing segment earned $57 million after tax in the fourth quarter of 1998, while the segment operating income decreased by 24% compared to the same period the previous year.
  • The company's domestic petroleum liquids prices averaged $9.08 per barrel, down from $14.84 per barrel in the 1997's fourth quarter, and natural gas prices averaged $1.75 per Mcf, compared to $2.23 per Mcf in the same period the previous year.
  • ARCO's exploration and production operations for the 1998 fourth quarter earned $74 million after tax, before charges of $833 million related to asset writedowns and restructuring.
  • The company started up three new satellite fields in Alaska (Tarn, Tabasco, and Midnight Sun) and four fields in the UK North Sea (Britannia, Waveney, Deben, and Bure West) in 1998.
  • ARCO increased the proved, probable, and possible reserves of the Indonesian Tangguh field to 21.3 Tcf.

Statistics:

  • ARCO reported a net loss of $794 million in the fourth quarter of 1998.
  • The company's net earnings in the same period the previous year were $382 million.
  • Worldwide oil and gas production grew by 12% in the fourth quarter of 1998.
  • International natural gas production increased by 51% in the same period.
  • Domestic natural gas production grew by 21% in the fourth quarter of 1998.
  • ARCO's refining and marketing segment operating income decreased by 24% in the fourth quarter of 1998.
  • The company's domestic petroleum liquids prices averaged $9.08 per barrel in the fourth quarter of 1998.
  • Natural gas prices averaged $1.75 per Mcf in the same period.

Sources:

  • ARCO Press Release, January 25
  • Atlantic Richfield Company, Preliminary Consolidated Statement of Income (Unaudited)