Atlantic Richfield Co., the seventh-largest U.S. oil company, said Friday that it will acquire half of Triton Energy Ltd.'s stake in natural gas reserves in the Gulf of Thailand, providing up to $657 million in financing for the project over seven years.
Arco will pay Triton $150 million in cash, provide $377 million in financing to develop the gas field known as Block A-18 and make payments totaling $130 million if Triton meets production goals by July 1, 2005. The agreement will give Arco and Dallas-based Triton each a 25% stake in the field. Petronas, a Malaysian state-owned oil company, holds the other 50%.
Separately, Triton Energy shares fell 32% after the company failed to announce its sale as expected and said its chief executive quit and that it plans to write off $160 million. Triton shares plunged $9.88 to close at $20.63 on the New York Stock Exchange.
Los Angeles-based Arco's investment comes amid economic crisis in Southeast Asia, with several of the region's economies in recession. Arco said the situation should improve by the time production begins in the field, which won't be for at least 18 months.
"We're optimistic the economies will come out of it and there will be a growing demand for natural gas" by the time commercial production begins, company spokesman Al Greenstein said.
Arco wasn't interested in buying Triton, Greenstein said. Triton, lacking the cash to develop its oil and natural gas reserves in Southeast Asia and Colombia, put itself up for sale in March. Speculation about possible buyers had centered on Unocal Corp. of El Segundo, British Petroleum Co. of Britain and Total of France, all of which have operations in some of the same areas as Triton.
Block A-18 is estimated to hold 10 trillion cubic feet of natural gas. The reserves will add nearly 30% to Arco's natural reserves, which were 8.47 trillion cubic feet at the end of 1997.
Arco said it has been adding to its natural gas reserves to take advantage of the fuel's increasing use worldwide in electricity generation. Natural gas production made up 33% of Arco's total production in 1997, up from 25% in 1987.
Arco shares fell $1.50 to close at $72.31 on the NYSE.
Separately, Arco subsidiary Arco Chemical Co., the world's largest maker of propylene oxide, said second-quarter earnings more than tripled.
Arco Chemical, which recently agreed to be acquired by Lyondell Petrochemical Co., said net income rose to $110 million, or $1.13 cents a diluted share, from $35 million, or 36 cents, a year earlier. Per-share profit exceeded the 90-cent average estimate of analysts.
Sales fell 7.7%, to $882 million from $956 million.