UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
April 26, 2000
PHILLIPS PETROLEUM COMPANY
(Exact name of registrant as specified in its charter)
Delaware 1-720 73-0400345
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
Phillips Building, Bartlesville, Oklahoma 74004
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
918-661-6600
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Item 2. Acquisition of Assets.
On April 26, 2000, Phillips Petroleum Company, a Delaware
corporation (Phillips or the company), completed the purchase of
all of Atlantic Richfield Company's (ARCO) Alaskan oil and gas
properties and those related marine assets that are currently
operating. The purchase is effective as of January 1, 2000, with
appropriate adjustments to give the parties the benefit of the
transaction as if it had been consummated at such earlier date.
Phillips expects to complete the balance of the acquisition
(three double-hulled tankers under construction and certain
pipeline assets) late in the second quarter or early in the third
quarter of 2000, following the expiration of preemptive rights
and the grant of consents to certain contract assignments and
regulatory approvals. The businesses acquired on April 26, 2000,
represent approximately 84 percent and 92 percent, respectively,
of Arco Alaska Combined Operations historical revenues and net
income for the year ended December 31, 1999. The acquisition
included ARCO's interest in the Prudhoe Bay field and related
fields; a 55 percent interest in the greater Kuparuk area; a
78 percent interest in the Alpine field; and 1.1 million net
exploration acres, as well as the operating marine assets.
The press release issued by Phillips in connection with the
consummation of the purchase is attached hereto as Exhibit 99.1
and is incorporated herein by reference.
The initial purchase price for all of ARCO's Alaskan businesses
was approximately $6.5 billion. The company paid approximately
$5.5 billion in cash on April 26, for the oil and gas properties;
the estimated fair value of crude oil inventory in pipelines,
tanks and tankers; and the operating marine assets. Upon the
closing of the purchase of the remaining assets, Phillips will
pay approximately $700 million for the pipelines and tankers
under construction, and assume approximately $300 million of
variable-rate, long-term debt. Under the terms of the purchase
agreement, the company also could have to pay up to $500 million
more over the next five years. Formula-based contingent monthly
payments are required when New York Mercantile Exchange West
Texas Intermediate crude oil prices exceed $25 per barrel. The
$5.5 billion payment made on April 26, 2000, included $73 million
for these formula-based payments for the three-month period
ending March 31, 2000, leaving $427 million that may have to be
paid. There may be purchase price adjustments later in 2000
after an audit of the preliminary estimates of the cash flows
generated by the purchased Alaskan businesses prior to closing,
and after the calculation of the fair value of the crude oil
inventory on hand at April 26 is finalized.
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This forward-looking statement should be read in conjunction with the
company's disclosures under the heading "CAUTIONARY STATEMENT FOR THE
PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995," beginning on page 76 of the company's
Annual Report on Form 10-K for the year ended December 31, 1999.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
The audited ARCO Alaska Combined Operations financial
statements for the three years ended December 31, 1999, were
included in Phillips Petroleum Company's Current Report on
Form 8-K, filed on April 18, 2000.
(b) Pro Forma Financial Information.
Unaudited pro forma financial information reflecting the
impact of Phillips' acquisition of all of ARCO's Alaskan
businesses was reported in Phillips Petroleum Company's
Current Report on Form 8-K filed on May 8, 2000.
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(c) Exhibits.
99.1 Press release, dated April 26, 2000.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
PHILLIPS PETROLEUM COMPANY
/s/ Rand C. Berney
May 10, 2000 -----------------------------
Rand C. Berney
Vice President and Controller
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NEWS Phillips Petroleum Company
Public Relations
Bartlesville, Oklahoma 74004
http://www.phillips66.com
[Phillips logo]
CONTACTS: FOR IMMEDIATE RELEASE
Kristi DesJarlais (media) 918/661-6117
Howard Thill (investors) 918/661-4757
Phillips Completes ARCO Alaska Acquisition
ARCO Alaska president to head Phillips Alaska
BARTLESVILLE, Okla., April 26, 2000 --- Phillips Petroleum Company
[NYSE: P] has completed its acquisition of ARCO's Alaskan businesses.
The transaction has received Federal Trade Commission approval and is
effective retroactive to January 1.
"We are pleased to complete this landmark acquisition, which
represents a significant part of our overall company strategy," said
Jim Mulva, chairman and chief executive officer. "Development of
Alaska's natural resources provides a platform for the growth of our
worldwide exploration and production business."
Kevin Meyers, 46, currently president of ARCO Alaska Inc., will become
president and chief executive officer of Phillips Alaska Inc.
Phillips Alaska will include ARCO's Alaskan businesses, plus all of
Phillips' current Alaska operations, including the Kenai liquefied
natural gas plant.
As a result of the previously announced alignment agreement regarding
the Prudhoe Bay Unit, Phillips' earnings and cash flow accretion are
projected to exceed original expectations. In addition, net daily
production from the assets in 2000 is now expected to be 340,000
barrels of oil equivalent (BOE), and Phillips will now add a total of
2.2 billion BOE to its reserves base.
As previously announced, Phillips will pay BP $6.5 billion in cash and
up to an additional $500 million based on a formula tied to the price
of crude oil.
Today marked the first of two closings and included all of the
producing assets. A second closing on certain pipeline and marine
assets is pending regulatory approval and expiration of preferential
rights.
- more -
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Phillips Completes ARCO Alaska Acquisition
Page 2
Phillips Petroleum is an integrated petroleum company engaged in oil
and gas exploration and production worldwide; gas gathering,
processing and marketing in the United States; refining, marketing and
transportation operations primarily in the United States; chemicals
and plastics manufacturing and sales around the globe; and technology
development. Founded in Bartlesville, Okla., in 1917, the company had
15,900 employees and $15 billion of assets at the end of 1999, and $14
billion of revenues for the year.
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CAUTIONARY STATEMENT FOR THE PURPOSES OF THE "SAFE HARBOR" PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This press release contains forward-looking statements about Phillips'
exploration and production business, and the impact of the acquisition
of all of ARCO's Alaska operations on Phillips' reserves, production,
earnings and cash flow. Where in any forward-looking statement,
Phillips has expressed an estimate, potential expectation or belief as
to the future results, such expectation or belief is expressed in good
faith and believed to have a reasonable basis. However there can be no
assurance that the statement of expectation or belief will result or
be achieved. The actual results may be affected by a variety of
risks, which could cause the stated expectation or belief to differ
materially. Some of the important risk factors, but not necessarily
all such factors that may cause expectations or results to differ,
particularly as to reserves, production, earning and cash flow are:
the price of oil; interest rates on financing; production results;
environmental laws and the cost of compliance with such laws;
legislative, tax and regulatory development; and the integration of
ARCO personnel, business systems and operations with those of the
company. Additional information concerning factors that could cause
actual results to differ materially are contained in Phillips' reports
with the Securities and Exchange Commission ("SEC"). Copies of the
company's SEC filings are available by calling Phillips at 918-661-
3700. These reports are also available through Phillips' Web site at
http://www.phillips66.com. Phillips undertakes no obligation to
update the information in this release.
