Frosting from the Frozen North

One of the hottest stocks on the Big Board in recent weeks has been that of Atlantic Richfield--and in this instance there has been some logic behind the heat. Last May the company announced that it was splitting its stock two for one and increasing its dividend. Its first-half sales of $840 million were up 15.5%, and earnings were up 14% to $70 million. On top of that it has, with Humble Oil, confirmed an oil find on the North Slope of Alaska that Interior Secretary Stewart Udall calls "apparently the largest in the history of the country."

The man keeping up the pressure at Atlantic Richfield is Chairman Robert O. Anderson, 51, who says that his aim in the business is to be "not the biggest but the best." An oilman for nearly 30 years, Anderson sold his New Mexico-based Hondo Oil & Gas to Philadelphia's Atlantic Refining Co. in 1963 for $37 million worth of stock and a seat on the board of directors.

He quickly moved up to executive committee chairman and then, in 1965, to chairman and chief executive. He found he was running an overstaffed, 95-year-old company with outlets in 18 Eastern states but with a sleepy attitude and outdated refinery equipment. Anderson shook off the sleep, cut back on staff, ordered a $100 million modernization program. Then, on a fishing trip with Chairman Charles S. Jones of Richfield Oil Corp., he worked out a merger that linked Atlantic with the Los Angeles company. The agreement between the two was a scant five pages long to cover a $1.2 billion organization with worldwide holdings.

Susie No. 1. Since the merger, Atlantic Richfield has increased combined oil reserves from 1.8 billion bbl. to 2.1 billion, added 52 new producing wells for a total of 7,132, and built more than 500 new service stations while modernizing others. Now the Alaskan find is quite a layer of frosting on the cake. "Everybody else," says Anderson, "had pretty well written the Arctic Slope off because of cost, indifferent success, and the absolute need for a major discovery in order to have commercial significance." Atlantic Richfield thought about writing off the area too. On their 90,000 acres of leased land, the first well drilled, called Susie No, 1, turned out to be so expensive a lady that the bill was $4,000,000 before she proved dry at 13,500 ft.

Atlantic Richfield and Humble decided to try one more time at a spot near the Arctic Ocean at Prudhoe Bay. Working in -60DEG weather that snapped wrenches like matchsticks and froze the drilling equipment whenever work stopped, Atlantic as the working partner of the two brought in oil. The industry and the state of Alaska haven't been the same since. Competing companies who were about to pull out of the North Slope are renewing their efforts. The state government is talking about constructing a railroad and highway from Fairbanks, 390 miles away, to the North Slope fields. On Wall Street, Atlantic Richfield stock that was selling as low as 96 this year closed last week at 185.

Out of Oil. Anderson is obviously delighted at what the Alaskan success will do for Atlantic Richfield's long-term future. But he is pleased for another reason too. Domestic crude-oil reserves have increased only 6.1% in a decade. Consumption, meanwhile, climbed 25.2%. The Atlantic Richfield chairman foresees a day in about 15 years when the nation will be using twice as much oil as it does now and the domestic supply will fall short of demand by about 1.4 billion bbl. Meanwhile, for companies like his own, which has overseas holdings in such areas as Iran, Libya, the Persian Gulf and South America, increasing royalty payments are lowering the rate of return and oil agreements between nations are making it more and more difficult for private companies to compete. Anderson points out that Atlantic's return on invested capital in Venezuela is now lower than the prime rate of interest. "We'd be better off running a bank in Venezuela," he says.

One answer to the problem is to retrieve oil from tar sands, oil shale and even coal at home. Toward the goal, Anderson has committed Atlantic Richfield to an expensive synthetic-crude development program, has acquired rights in the Athabasca bituminous sands area of Alberta, thousands of acres of oil shale land in Utah as well as one billion tons of coal reserves. But, he says: "The technology is not yet ready. The expense will be tremendous, hundreds of millions of dollars. The first, generation plants are five to seven years off. Large-scale production is ten to twelve years away. We didn't know how we were going to bridge the gap. Now, with the North Slope, we do."

This file is automatically generated by a robot program, so reader's discretion is required.