Refining Helps Arco Lift 1st-Quarter Profit 68%

Atlantic Richfield Co. on Monday reported a 68% increase in first-quarter earnings, adding its name to the list of major oil firms profiting from marketing, refinery and chemical operations.

Los Angeles-based Arco had net income of $401 million for the quarter, compared to earnings of $239 million during the first quarter of 1987. While income from oil and gas operations was down--$193 million, compared to $203 million during the 1987 first quarter--Arco sold more coal and natural gas and was bolstered by refining and chemical operations.

The refining and marketing division produced earnings of $87 million, compared to $25 million for the same period in 1987. An Arco chemical division, Lyondell Petrochemical Co., had record earnings of $97 million, compared to $22 million during the 1987 first quarter.

In all, Arco had $4.6 billion in sales and operating revenues during the quarter, compared to $3.8 billion last. Among the revenue was $110 million from the January sale of Britoil stock to British Petroleum, which acquired Britoil. The company said that gain was offset by $118 million in costs relating to servicing debt, the sale of some assets and the planned move of some company operations from Los Angeles to Plano, Tex.

Chemicals Called Good

Other oil companies--among them, Exxon, Mobil and Texaco--have announced substantial first-quarter earnings increases in the past week. Exxon, Mobil and Texaco--the nation’s largest oil companies--said their marketing, refinery and chemical divisions were primarily responsible for the earnings boost. Texaco reported a first-quarter earnings increase of 105%.

“The chemical business is doing very well for everybody,� said James Van Alen, an analyst at Janney Montgomery. “The chemical industry is near 100% (production) capacity and companies have been raising prices.�

Van Alen and other analysts say chemical products are fetching better prices because U.S. production capacity has not kept pace with the growing demand for chemical products. For example, Arco produces the propylene used in anti-freeze, perfume, seat cushions and dash boards. The company also produces the ethylene used to make disposable cups and packaging materials.

In addition, companies are exporting more chemical products because they have become more affordable in the wake of the recent slide in the value of the dollar, according to Herbert Hart, an analyst at S. G. Warburg.

Hart said refining and marketing operations are strong because the cost of crude oil and the cost of refining crude are relatively low. Arco should also have a profitable second quarter, but the company should position for long-term profits by finding more oil abroad, Hart said.

More Foreign Sites

“Considering their strength, they need more of an international presence,� he said.

Arco plans to find and develop more foreign sites, according to Lodwrick M. Cook, Arco’s chairman. Cook talked about the company’s plans at Arco’s annual meeting Monday in Los Angeles.

“We plan,� Cook told shareholders, “to achieve our overseas expansion goals through a mixture of internal growth involving the economic development of our existing reserves and continued exploration, and through external growth, meaning acquisitions of reserves and production in a few selected areas.�