Oil profitts -- 'music' to certain ears By Mark Stevens
The reporters had gathered to discuss oil profits. But Thornton Bradshaw, the president of Atlantic richfield Company (Arco), launched the press conference by talking about public television and a series the company had sponsored called "Here to Make Music."Skip to next paragraph
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The conneciton was soon clear.
"I only mentioned that because I think we're here to make music today," Mr. Bradshaw said. "I have three announcements, which are music to my ears."
Obviously, the announcements (made Jan. 28) had nothing to do with television or music: (1) Arco profits for 1979 were $1,165,894,000; (2) dividends will be increased 21 percent; (3) Arco will ask its shareholders for permission to split the stock 2-for-1.
With that, Mr. Bradshaw used a pointer to help him interpret a giant multicolored chart that outlined Arco's income and cash flow.He spoke to the bank of reporters and eight television cameras with cool aplomb.
Mr. Bradshaw, who earns $609,580 annually, came prepared. With motorists paying $1.20 or more for a gallon of gasoline, the 45 percent surge in company profits would not go unchallenged. Other companies, including the Exxon Corporation, which broke the alltime record for any American firm by breaking the $4 billion barrier for profits in 1979, recently answered similar questions about their profit pictures.
Even before the questions began, Mr. Bradshaw pointed out that Arco would reinvest 75 percent of its earnings in the search for energy, that 37 percent more exploratory wells would be drilled in 1980 than were drilled in 1979, and that the budget for seismic testing, needed to search for oil, would be increased by 60 percent.
But while Arco expects that $3.7 billion will be available for reinvestment in the company in 1980, as opposed to $2.5 billion in 1979, the budget for exploration into solar energy and coal will not be expanded at all. With shareholder dividends increasing and the budget for investment into chemicals and minerals nearly tripling, one reporter posed this question: "How can Arco say it is looking for solutions?"
"this is the one budget in this company where we constantly ask, 'Can't you spend nay more money?'" Mr. Bradshaw said. "I take a very personal interest in the solar energy situation. We are anxious to spend money in solar energy. We are spending about as fast as we can."
Another reporter was even more blunt: "How do you respond to people in this country who say that a 45 percent increase in profits is unconscionable and obscene?"
Mr. Bradshaw paused. "I try to put it in perspective," he said. "The level of earnings we have this year . . . is somewhat higher than the average American industry, but it isn't much higher. And if we are to have the kind of cash flow that is necessary to spend this kind of money, we have simply got to have a rate of return which provides us with a cash flow to do the job. That really is the answer. I know that answer isn't enough -- it doesn't go over at the pumps."
Mr. Bradshaw also said that "it is highly probable that during 1980 there will be a significant shutdown of the export of foreign crude to the United States." He termed the need for importing 50 percent of domestically consumed oil "very, very unfortunate."
But asked if a rationing plan should be instituted he said, "I think that -- with the stock tanks filled -- I doubt you could get away with it, that's all."
Is rationing, one reporter continued, just politically impractical?" "I've got a gut feeling," Mr. Bradshaw responded, "that as long as you can get away with the discipline of the marketplace you should try to do it." The use of petroleum products is down 7 percent from one year ago, he said, and gasoline consumption is down 5 percent.
Still, he added, "we are operating on a knife edge."
Mr. Bradshaw pinned the blame for the crisis on Congress for creating a "myth" that energy is cheap. "I don't blame the people for being frustrated," he said. "We have a very difficult time trying to come across to the American people in any credible way."
Reporters also tried to pin Mr. Bradshaw to an estimate of future gasoline costs. Would it be $3 per gallon by 1984?"No," he said, "but maybe by 1985 or 1986."