Exxon Mobil Files Suit Over Sale of Arco Assets

Exxon Mobil Corp. on Friday sued to stop Atlantic Richfield Co. from selling its Alaskan assets to Phillips Petroleum Co., a move that could delay or even derail the much-challenged acquisition of Arco by BP Amoco.

The lawsuit, filed in Los Angeles Superior Court, contends that a 36-year-old agreement between two oil companies that became part of what today are Exxon Mobil and Atlantic Richfield gives Exxon Mobil first crack at buying certain Alaskan oil and gas assets if Arco should decide to sell them.

Los Angeles-based Arco announced March 15 that it agreed to sell its Alaskan oil-and-gas subsidiary to Phillips for as much as $7 billion.

The sale was intended to satisfy Federal Trade Commission concerns that BP Amoco’s proposed $27-billion purchase of Arco would sharply reduce competition in the Alaskan oil and gas industry and would increase gasoline prices in California. BP Amoco and Arco are the two largest producers of oil and natural gas in Alaska, and most of the oil refined into gasoline in California comes from Alaska.

Phillips agreed to buy all of Arco Alaska, including a 21.9% interest in the oil and a 42.6% interest in the natural gas of Prudhoe Bay, North America’s largest oil field.

But Exxon Mobil said in its lawsuit that it has right of first refusal to the Prudhoe Bay assets under an agreement signed in 1964 by Richfield Oil Corp. and Humble Oil & Refining Co., then Exxon’s oil-producing, refining and marketing subsidiary. Exxon merged with Mobil in November to become the world’s largest publicly traded oil company. Richfield merged with Atlantic Refining Co. in 1966, and the resulting company agreed last April 1 to be purchased by London-based BP Amoco.

The suit, filed Friday, seeks an injunction stopping the sale to Phillips and a judicial determination of Exxon Mobil’s rights under the 1964 agreement. The suit names Atlantic Richfield, Arco Alaska Inc., BP Amoco and Phillips Petroleum.

Exxon Mobil said it does not want to prevent the merger of BP Amoco and Arco--or that it necessarily wants to buy the Prudhoe Bay assets. The company said it was forced to sue because the rival oil companies would not address its concerns about the Alaskan sale.

Exxon Mobil contacted BP Amoco and Arco before the deal was announced with Phillips, but the companies have refused to discuss details of the transaction or how the Prudhoe Bay field would be run, said Larry Feldman, a Los Angeles trial attorney who represents the Irving, Texas-based oil giant. Exxon Mobil holds a 23.8% interest in the oil and 42.9% interest in the gas at Prudhoe Bay, but the field is jointly operated by BP Amoco and Arco.

Officials at BP Amoco and Arco said Exxon Mobil’s right of first refusal was not triggered by the proposed Phillips transaction, because Arco is selling all the stock of Arco Alaska rather than individual assets. The companies said they believe the lawsuit will not interfere with FTC approval of the deal.

The lawsuit coincidentally was filed on the 11th anniversary of the Exxon Valdez oil tanker’s running aground in Alaska’s Prince William Sound, an environmental disaster that poured 11 million gallons of crude oil into the water. Alaska officials, who are pushing for the BP Amoco-Arco merger in the hope that languishing North Slope production will be rejuvenated, found the timing ironic.

“We are strongly opposed to this last-minute attempt to try to run this deal on the rocks,” said Bob King, a spokesman for Alaska Gov. Tony Knowles. “We were hoping for a quick resolution to this so that we could get . . . Alaskans back to work.”

Fadel Gheit, senior energy analyst with Fahnestock & Co., said BP Amoco “pulled the tiger by the tail and he turned around to claw them.” Gheit said he expects the deal to be delayed somewhat, until concessions are made to Exxon Mobil.

In New York Stock Exchange trading, Arco shares declined $3.31 to close at $79.50, BP Amoco’s American depositary receipts lost 88 cents to $50.63, Exxon Mobil gained $1.75 to $77.25 and Phillips gained 31 cents to $42.94.