Atlantic Richfield has agreed to buy back $481,000 in Texas oil-drilling rights from retired Chairman Robert O. Anderson to settle a 1986 shareholders' lawsuit charging that Anderson bought oil properties from Arco at a bargain-basement price.
Arco said the $481,000 represents the "low end" of an appraisal of the oil-drilling rights which had been the focus of a dispute stemming from Anderson's purchase of more than 600 pieces of miscellaneous oil and gas properties for about $180 million.
The repurchase agreement was part of an out-of-court settlement approved Jan. 11 by Judge Fred Woods of the Los Angeles Superior Court. Under the accord, Arco also paid about $211,000 in attorneys' fees and court costs for the shareholders who had sued the company.
The settlement effectively cancels out the part of the original sale that was in dispute and returns to Arco the exploratory drilling rights whose ultimate value won't be known until drilling takes place.
"We believe Anderson thought there was something of value, or he wouldn't have wanted those rights," said San Diego attorney Alan Schulman, a lawyer for the shareholders. "The important thing is that these rights have now been returned to Arco."
But defendants Arco, Anderson and First Boston Corp., the investment bankers who handled the original transaction, reiterated their denials that Anderson got a sweetheart deal. A spokesman said the company agreed to repurchase the drilling rights to "relieve any suggestion that we had sold property rights for below their value" and avoid a protracted court fight.
Anderson, now 70, was Arco's top executive for 17 years until he retired as chairman at the end of 1985. He has since resumed his career as an independent oilman, and his first acquisition was the Arco oil and gas holdings in 11 states in partnership with the British conglomerate Lonrho PLC.
Bids Were Competitive
The deal was described as including about 8,200 wells, nine gas plants and 900,000 acres that produce 10,000 barrels of oil and 40 million cubic feet of natural gas per day. Anderson acted through his Diamond A Cattle Co. in Roswell, N.M., where he lives on a ranch.
Anderson's group acquired the properties through competitive bidding, Arco said. But the lawsuit disclosed that Anderson also acquired certain deep-drilling rights in 15 West Texas oil fields as part of the $180-million deal, even though those assets weren't listed for sale.
The suit said that Anderson's intimate knowledge of Arco's holdings prompted him to demand that the deep-drilling rights be part of the purchase. Other would-be buyers, not privy to the drilling rights, bid barely half the $180 million offered by Anderson's group.
Even though the higher bid presumably meant a better deal for shareholders, one plaintiffs' attorney at the time called the transaction Arco's "going-away present" to Anderson. However, the $481,000 repurchase price agreed upon this month tends to support Arco's position that the drilling rights represented a minor piece of the package.
"The market value of deep-drilling rights in these 15 fields was far too small to affect the fairness of the overall transaction," the defendants contended.
The original sale agreement didn't attach price tags to different elements of the package, so it is apparently impossible to estimate what Anderson paid for the deep-drilling rights that he is now selling back to Arco.
But the lawsuit prompted Arco to seek an appraisal of the controversial drilling rights, and the company spokesman said the two sides agreed on $481,000 because it was "toward the low end" of a range of values defined by the appraiser. Attorney Schulman said the appraisal ranged from $481,000 to "upwards of $2 million."
Arco originally conceded that the drilling rights weren't offered to any other would-be purchasers, a fact that appeared to make the bidding process uncompetitive. Now, the company contends that the drilling rights were offered to one bidder besides Anderson, but refuses to say who it was.
Schulman called that "irrelevant" and said, "We are satisfied that the facts are as we alleged them."
Anderson's new career advanced another notch Tuesday when his company's previously announced merger with Pauley Petroleum Inc. of Los Angeles was approved by Pauley shareholders.
Anderson's company, now called Hondo Co., will control 80% of Pauley shares and Anderson was installed as chief executive. Half of Hondo, in turn, is owned by Lonrho PLC.