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BP deal changes landscape
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August 11, 1998: 2:17 p.m. ET
Analysts disagree whether acquisition of Amoco is harbinger of other deals
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NEW YORK (CNNfn) - Analysts expressed mixed views Tuesday on whether the proposed acquisition of Amoco Corp. by British Petroleum PLC is a harbinger of further major deals in the oil industry.
The deal, if approved, will make BP Amoco PLC the third-largest oil company, behind Royal Dutch/Shell Group and Exxon Corp. Eugene Nowak, an analyst at ABN Amro, said the merger alters the oil industry's playing field.
"What this deal does is it clearly raises the stakes," he said. "This puts more chips on the table for other companies [to make similar deals]."
Nowak said analysts have been looking at a possible Texaco Inc. (TX) Royal Dutch/Shell combination.
"Shell is a large factor in the UK, and they have made it known that they want to do something with it to get value for their shareholders," Nowak said. "Atlantic Richfield would also form a nice combination with someone down the road."
But Norman Rosenberg, oil analyst at S&P Equity Group, told CNNfn other mergers are unlikely.
"I don't think we'll see other mergers between large oil companies," he said. "While I wasn't surprised that BP made a deal, I was surprised at the scope of it. I assumed they would have taken over a smaller independent producer to boost their reserves."
News of the deal sent shares of other oil companies up in midday trading. Texaco (TX) shares rose 2-1/4 at 58-1/2; Atlantic Richfield (ARC) shares gained 5/16 to 64-13/16; Mobil Corp. (MOB) shares were at 64-7/8, up 3/4; and shares of Chevron Corp. (CHV) gained 2-1/16 to 77-3/4. Exxon Corp. (XON) shares, however, slipped 7/16 to 66-3/4.
But Nowak said despite the scope of the BP-Amoco deal, investors should continue to be cautious about the industry because of sagging oil prices.
Amoco itself has been a victim of slumping oil prices. Last month, the company reported a decline of more than 50 percent in its second- quarter earnings.
"Oil prices are at very low levels and there are few signs of that changing, and that's put a damper on everything," Nowak said. "Conditions continue to be difficult, with continuing earnings pressures on the industry."
BP (BP) shares gained 2-1/8 to 78-1/8 in midday trading. Amoco (AN) shares climbed 6-5/16, more than 15 percent, to 47-5/16. 
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British Petroleum
Amoco
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