M & A Roundup: Oil Industry M&A Is Cooling Off for Now

Authorities expect that the merger of BP Amoco PLC and Atlantic Richfield Co. will be the last major pact among the giant oil producers for the time being. “Nobody is talking about any specific deal that will come next,” said G. Allen Brooks, an analyst at CIBC World Markets in Houston. The Federal Trade Commis-sion in a 5-0 vote approved the Arco acquisition in mid-April, but only after Arco agreed to sell all of its Alaskan oil production assets to Phillips Petroleum Co. for about $6.5 billion. Earlier this year, the FTC sued to block the deal on the basis that the BP Amoco/Arco combination would allow the company to dominate Alaskan oil production, but the agreement to sell the Alaskan assets to Phillips assuaged the regulators’ concerns. Now that it has gotten the green light from the FTC, BP Amoco/Arco joins the two other giant oil companies, Exxon Mobil Corp. and Royal Dutch/Shell Group, in the category of players that can run a number of huge projects at the same time in different sections of the world. The combination last year of Total Fina SA and Elf Aquitaine in a $54 billion deal created the world’s fourth-largest oil power. Brooks said that in Europe, at least, this company has clout similar to its three larger competitors. And while oil industry sources aren’t pointing to a looming next big merger, the remaining large oil companies, such as Chevron Corp., Texaco Inc., and Unocal Corp., are all assessing their options in light of the consolidation that has already occurred. It is assumed that Phillips won’t be doing any deals until it integrates the Alaskan assets it picked up from Arco, a process that usually takes 12 to 18 months in the industry. Unocal has been named in published reports as a potential partner for BP Amoco/Arco. Some observers have said that the exploration and production company’s natural gas holdings in Southeast Asia would be a good fit for BP Amoco/Arco, which lags Exxon Mobil and Royal Dutch/Shell in natural gas in the region. However, BP chief executive Sir John Brown has said that the company’s immediate focus will be on smoothly meshing the Arco operations into the framework of BP Amoco. In addition, BP faces the lingering problem of accusations by the FTC that BP exported Alaskan crude to Asia in order to reduce supplies available on the U.S. West Coast and increase prices.