BP Amoco PLC
5 November 1999
BP AMOCO AGREES SETTLEMENT WITH STATE OF ALASKA
BP Amoco and ARCO today announced they have reached provisional agreement
with the Alaskan State Governor on a package of asset disposals and other
measures designed to secure Alaskan government acceptance for the proposed
combination of the two companies.
Subject to the completion of the combination, BP Amoco will sell 175,000
barrels of production per day together with associated infrastructure, 620,000
acres of state and federal exploration leases, and matching stakes in the
Trans-Alaska pipeline system (TAPS).
BP Amoco chief executive Sir John Browne said: 'Today's agreement with Alaska
is a critical step in our progress towards completing the ARCO deal.
'After several months of complex negotiations we have agreed terms which
will allow BP Amoco to retain nearly three-quarters of the value of ARCO's
Alaskan assets. At the same time, we have met the exacting requirements of the
state of Alaska in a deal we believe will be acceptable to Alaska as a whole.'
Browne said the disposals would have minimal impact on the $1 billion
of synergies targeted worldwide from the combination of BP Amoco and ARCO.
'Most importantly, this agreement preserves our interests in the Prudhoe
Bay field, including the single-operatorship. With the efficiencies we will
achieve from that and the other assets we retain, we can still deliver over
$140 million of the $200 million synergies we targeted from the Alaskan
element of the combination. We also expect the value of the synergies we
forego to be reflected in the price we get for the assets we sell,' he said.
Browne said more than half a dozen major companies had already expressed
strong interest in the properties on offer and data-rooms would shortly be
opened to enable would-be buyers to prepare for bidding.
Today's deal means BP Amoco will keep just over half of the production
currently coming from ARCO in Alaska, increasing BP Amoco's Alaskan output by
about 175,000 barrels a day -- and will retain over a million acres of
exploration land on the North Slope, including 430,000 acres in the
newly-opened National Petroleum Reserve area.
While Alaskan Governor Tony Knowles conducts a two-week public consultation
on the agreement, the company said it would continue to work with the US
Federal Trade Commission (FTC) and the West Coast States of California,
Oregon and Washington to secure overall regulatory approvals for the ARCO
combination.
'This agreement makes Alaska a stronger and more competitive player in the
world oil market,' Governor Knowles said. 'It achieves the important goals
Alaskans agree on when it comes to development of Alaska's resources:
increased competition, environmental protection and corporate commitment.'
Under the terms of today's agreement with Alaska, BP Amoco proposes to divest
the operatorships of the Kuparuk and Alpine fields and 175,000 barrels of
production per day, primarily from the Kuparuk field.
It will also dispose of a 13 per cent stake in TAPS, corresponding to the
level of production on offer, and will undertake to sell further stakes to
future new producers.
As part of the agreement BP Amoco will make up to 1.2 billion standard cubic
feet of North Slope natural gas a day available to commercial projects at
competitive netback prices.
The company has additionally agreed to a range of other Alaskan
State requirements, including:
Sale or transfer of Jones Act ships to buyers of production
Purchase of oil from small producers at a pre-arranged price formula
Making available certain of its proprietary exploration data and
encouraging partners to do likewise
Committing to take an industry lead and spend up to $10 million cleaning up
North Slope sites created by and abandoned by other companies
Reviewing its corrosion-monitoring programme for in-field flowlines at
least twice a year with State environmental agencies
Allowing continued access by other companies to its North Slope spill
response facilities
Hiring qualified Alaskans when they are available, encouraging BP
Amoco contractors and service providers to train and hire qualified Alaskans,
and using Alaska-based companies to fabricate production facilities in Alaska
when feasible
Donating the equivalent of 0.2 per cent of production a year to Alaska,
currently estimated at approximately $6 million a year, of which 30 per cent
will go to the Alaska university system.
In a concluding statement on today's agreement, Sir John Browne said: 'This
deal is a crucial milestone in the approval process and I believe a
similarly constructive and timely outcome is within reach on the concerns of
the FTC and the other states, allowing us to complete the ARCO transaction
as soon as possible.'
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