If

BP Amoco

(BPA)

succeeds in its bid to buy

Atlantic Richfield

(ARC) - Get Report

, it could consider

Vastar Resources

(VRI)

its bonus prize.

Atlantic Richfield, known as Arco, owns more than 80 million shares of Vastar Resources, an 82% stake worth $3.8 billion at current prices. And speculation is rife in the market that a combined BP Amoco-Arco would tender for the remaining publicly held Vastar shares.

Shares of Vastar have been trading furiously in the past two weeks, in part due to a huge discovery it announced two weeks ago. But also the shares have gotten a boost from talk of the possible

BP Amoco-Arco union, which was first reported Sunday. Vastar shares popped to a new high of 52 5/16 Monday on triple their average volume. They closed at 47 3/4, off 11/16 Wednesday.

Vastar is a respected exploration and production company with a market cap of $4.7 billion and growing presence in the deep waters of the Gulf of Mexico. Natural gas accounts for 70% of its proved reserves, which totaled approximately 3.7 billion cubic feet equivalent at year-end 1998. A significant discovery -- said to be more than 100 million barrels -- in the Gulf of Mexico was announced earlier this month, its second recent significant discovery.

Vastar also was one of the early entrants into the natural gas and power trading business. In order to buy and sell natural gas, electricity and other energy-related commodities, in 1997 it formed

Southern Co. Energy Marketing

with utility powerhouse

Southern Co.

(SO) - Get Report

. Vastar's 40% share in the joint venture guarantees it a minimum cash distribution of $125 million over the first five years of the joint venture's operation.

Now shareholders and analysts are wondering about Vastar's fate.

"It looks to me as if

BP Amoco would not want this little piece out there in public hands," says Steve Colbert, a senior analyst at Oakland, Calif.-based money manager

Jurika & Voyles

. "Right now it's speculation, but

a buyout probably would be the most likely option."

Steve Smith, an analyst at

Dain Rauscher Wessels

in Houston, concurs with Colbert on Vastar's publicly held shares. Since Vastar would be such a tiny portion of the $188 billion market cap of a combined BP Amoco and Arco, its small public ownership might be considered more of a nuisance, especially if shareholders differ in philosophy from BP Amoco, he says. Smith has a neutral rating on Vastar; Dain hasn't performed underwriting for the firm.

Vastar's fate "is a legitimate question" if BP Amoco buys Arco, says Ian Fowler, a BP Amoco spokesman in New York. But he declined to comment further.

"We are in a mode right now of waiting with the rest of the world to find out what happens with these two companies," says a Vastar spokeswoman. Arco, meanwhile, declined to comment.

The big question in a buyout is price. A simple calculation using the 25% premium BP Amoco may reportedly pay for Arco and Vastar's closing price Friday values Vastar at just over 55 per share.

Colbert, whose firm owns over 1.5 million Vastar shares, says it's undervalued, even at its Wednesday closing price of 47 3/4. Shares have climbed 13% since Vastar announced its latest discovery on March 17. In addition to its big discovery, a recent deal Vastar engineered with

Mobil Exploration and Producing

(a division of

Mobil

(MOB)

) and Arco should increase its reserves this year, Colbert says. Vastar in October acquired interests in 23 producing fields and 80 lease blocks, as well as certain pipeline interests through a three-company transaction with Arco and Mobil.

But BP Amoco, in recognizing Vastar's management skill and nimbleness in operations, could decide to keep Vastar separate, says Colbert. It may even want to add a few former Amoco or British Petroleum properties to Vastar's Gulf of Mexico portfolio, he says.

But if Vastar ends up being folded into BP Amoco, more cost-cutting initiatives and layoffs are sure to follow, as BP integrates Vastar's 1,100 employees. Along with workers, another possible casualty may be long-term rig contracts Vastar has initiated with

Diamond Offshore

(DO) - Get Report

and

R&B Falcon

(FLC) - Get Report

. Vastar contracted those rigs for its multiyear program, says Colbert. If BP Amoco decides to alter Vastar's production schedule, the need for the rigs may diminish.