ANCHORAGE (AP) -- With oil prices high, Phillips Petroleum Co. plans to accelerate repayment of its heavy debt load, chief executive Jim Mulva said Tuesday.
The company took on $6.5 billion in debt to buy Arco Alaska Inc. from BP Amoco in April. But Mulva said he is taking advantage of high oil prices to pay down Phillip's bill on Wall Street. By the close of the second quarter at the end of June, debt was down $500 million to $6 billion.
With high prices, the Arco Alaska buy is ''looking very good,'' Mulva said.
The deal nearly doubled the Oklahoma-based company's oil production and reserves. But getting money for the purchase loaded the company with debt, prompting credit agencies to downgrade their ratings of Phillips' ability to repay its lenders.
Since the deal, oil prices have hovered between $25 and $30 per barrel. Mulva bought Arco Alaska expecting long-term oil prices of about $18.50 per barrel. Mulva said that within the year he wants to restore a top-drawer credit rating to Phillips.
Meanwhile, the debt is not pinching development plans, Mulva said. Phillips plans to increase its investment spending in Alaska on drilling, construction and field development by $35 million to $550 million this year.
The company will need to find oil, said Mulva and Phillips Alaska president Kevin Meyers.
The two have set an ambitious goal of holding production between 350,000 and 400,000 barrels a day for the next five years. To offset a natural decline at Prudhoe Bay, Phillips will need to produce about 20,000 new barrels a day from other sources to keep its Alaska production steady.
The plan involves a combination of new discoveries and extra production from old fields. Phillips plans to spend $50 million to drill at least 12 exploration wells in the coming year.
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