Anadarko Petroleum Corp. on Thursday cut 100 exploration and production (E&P) staff positions — including several senior executives — and closed its offices in Midland and Amarillo, TX, which will eliminate more than 15%, or $100 million, in total overhead costs. The cost cutting news preceded an earnings report that showed a 26% gain from a year ago, but changes had been rumored after the company confirmed two days ago that it would shutter some of its onshore U.S. rigs (see Daily GPI, July 30).

Despite the shut rigs and personnel cuts, Anadarko said it would maintain its current production guidance, estimating it would reach 192 MMboe for 2003, followed by 4-10% growth in 2004.

Cost reductions were made in two basic areas, personnel and corporate, the company said. Nearly 400 positions have been cut from full-time and contract employees, and personnel cuts represent about 50% of the savings. Another $50 million in cuts would include across-the-board reductions in general overhead, closing the Texas offices and then consolidating office space at the company’s headquarters in The Woodlands, which is north of Houston.

“Anadarko is a financially strong company with high-quality assets in North America and internationally, which offer excellent prospects for future growth,” said CEO Robert J. Allison Jr. “However, our cost structure is too high and we’re taking action now to cut costs and be more competitive. The decision to reduce staff is a difficult but necessary step in order to make Anadarko a leaner, stronger and more efficient company. This company can continue to grow profitably because we’re redeploying our people to focus on our highest value exploration and production opportunities.”

One-time costs will be approximately $40 million, or $25 million after taxes. These costs will be charged to income as specific liabilities are incurred. It is estimated that $35 million, or $22 million after taxes, will be reflected in third quarter results.

The personnel cuts will bring Anadarko’s full-time worldwide employment to 3,400. The affected employees were already notified, and most layoffs took immediate effect. Of the 400 positions eliminated, approximately 70% were from departments supporting the company’s E&P efforts and 30% percent were in E&P itself.

Several executive officers also elected to retire with the initiative, including Mike Cochran, senior vice president, Strategy and Planning; Bruce Stover, senior vice president, Worldwide Business Development; and Paul Taylor, vice president, Investor Relations. However, Bill Sullivan, executive vice president, Exploration and Production, and Rex Alman, senior vice president, Algeria, chose to resign.

Anadarko, which has scheduled a conference call for Friday, reported quarterly net income increased to $301 million ($1.20 per share diluted) on revenues of $1.28 billion, compared with $239 million (93 cents) on $1 billion in revenues for 2Q02. Several charges, not included in earlier guidance, included $13 million ($9 million after taxes) for oil and gas property impairments and $29 million ($19 million after taxes) in derivative losses. Earnings gains also were partly offset by lower sales volumes, which followed last year’s divestitures of Canadian heavy oil properties and some operational issues in the Gulf of Mexico and Qatar during the second quarter.

Sales volumes totaled 48 MMboe, or 527,000 boe/d, up almost 6% sequentially, but down from the same period a year ago, when sales volumes were 50 MMboe or 546,000 boe/d. Natural gas volumes totaled 1.74 Bcf/d, compared with 1.71 Bcf/d in the first quarter of this year, but down from 2Q02’s 1.79 Bcf/d. Anadarko’s realized average natural gas price was $4.54/Mcf, compared with $3.05/Mcf a year ago.

Anadarko’s 2003 estimates now assume an average New York Mercantile Exchange natural gas price estimate of $4.75/Mcf for the third quarter, and $4.85/Mcf for the remainder of the year, with a full-year average of $5.40. To determine realized prices, Anadarko used these estimates, plus or minus an expected price differential for each of the company’s major producing areas, and any adjustment for hedge positions. Oil and gas sales volumes are expected to total 49 MMboe in the third quarter, and full-year sales volumes are expected to be 192 MMboe.

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