press release

Chevron Press Release - Arco, Chevron Plan Combination In Permian Basin

MIDLAND, Texas, Feb. 2, 1999 -- ARCO Permian, a unit of Atlantic Richfield, and Chevron U.S.A. Production Co. have agreed to exclusively pursue a combination of the two companies' oil and gas producing assets in the Permian Basin of west Texas and southeast New Mexico. If final agreement is reached, ARCO and Chevron will each own 50 percent of the new company, which will be headquartered in Midland, Texas.

The new entity, yet to be named, would conduct oil and natural gas development and production, marketing of crude oil, natural gas, and natural gas liquids and related products in the Permian Basin. In addition, the company would produce, transport and market carbon dioxide from assets contributed by ARCO and Chevron in Colorado, and operate other CO2 assets such as the Sheep Mountain Pipeline.

If finalized, the new company will become one of the largest operators in the Permian Basin, producing over 170,000 barrels of oil equivalents per day and owning 600 million barrels of proved reserves. Once formed, the company will operate over 7,000 wells and 150 fields. The oil and gas pipeline businesses of ARCO and Chevron would not be part of the venture.

"This combination will create a long term, top performing company, building on the success of both companies' Permian Basin business units," said Michael E. Wiley, president and chief operating officer of ARCO. "The formation of this company in a mature basin will bring lower unit costs through the combination of staff and producing assets and will create opportunities for an ongoing high-return capital investment program. I see this new venture as an autonomous, independent company with long-term viability and a commitment to its local markets."

"We're confident that combining our Permian assets as a joint venture will provide much better operating and financial results than Chevron and ARCO could continue to achieve separately," said Peter Robertson, president of Chevron USA Production Co. "We're also pleased that our two companies share a commitment to core values such as teamwork and participative leadership, safe operations, environmental protection and community involvement."

As a consequence of this combination, a consolidation of the companies' offices would occur. Both companies now employ about 850 personnel. It is anticipated that a 15 percent to 20 percent reduction in force would be implemented if the new venture were formed.

Preparation of legal documents, final agreements, governmental approval, transfer of assets and due diligence activities are expected to take several months to complete. The companies expect to have the new venture formed by mid-year.

Updated: February 1999