One hand washes the other.(Atlantic Richfield Co's acquisition by BP Amoco plc benefitted Phillips Petroleum Corp)

Byline: Jaret Seiberg

With his tour de force acquisition of Atlantic Richfield Co. in jeopardy, BP Amoco plc chief executive Sir John Browne in the spring of 2000 dispatched one of his top lieutenants to Alaska.

Rodney Chase's mission: Arrange a sale of BP Amoco's and Arco's overlapping production assets in the North Slope oil field.

There, Chase sold all of Arco's Alaskan assets to Phillips Petroleum Corp. for $7 billion, hurting the expected synergies of the $29 billion Arco-BP deal. But the divestiture got Washington off Browne's back. The Federal Trade Commission, which had worried about the Arco-BP merger's effect on West Coast gasoline prices, dropped a lawsuit challenging the deal.

BP did well for itself and got what it wanted. But analysts believe Bartlesville, Okla.-based Phillips made the savvier deal. "It was a bonanza for them," said George Gaspar, an analyst at Milwaukee-based Robert W. Baird & Co. "Phillips Petroleum was in the right position at the right time."

Others are more blunt. "Phillips made out huge on this," another analyst agreed. "BP was required to sell the Arco Alaska assets and they really got snookered."

By buying Los Angeles-based Arco, London-based BP cemented its position as a global leader among integrated oil companies and gained access to new markets. With Alaskan assets, Phillips became a major player in the U.S. market, supplying a large portion of the oil used by the West Coast.

Since both deals were completed last spring, however, Phillips' stock has outperformed not just BP's, but also the oil industry's other giants. Phillips has recorded a stock rise of 26%, while BP's has jumped 6%, and ExxonMobil and Chevron Corp. have each experienced 14% increases. Phillips also has fatter operating and profit margins than BP, and its return on equity is larger.

Gaspar estimates Phillips underpaid for the Alaskan assets by at least $1 billion. That's calculated by assuming the oil reserves are worth more than $3 per barrel, a standard way to value these assets. "When the deal was made, BP made clear they …