NGI The Weekly Gas Market Report / NGI All News Access

Kerr-McGee, Arco, OXY Trim Staff, Unocal Warns of Low Earnings

October 5, 1998
/ Print
| Share More
/ Text Size+

Kerr-McGee, Arco, OXY Trim Staff, Unocal Warns of Low Earnings

Kerr-McGee Corp. last week joined a growing number of production companies, including ARCO, Occidental Petroleum and Unocal, that are restructuring or reducing work forces because of the depressed oil market. Kerr-McGee said it plans to layoff about 70 workers, reducing its Oklahoma City metropolitan area work force by 7% and its exploration and production company staff by a similar amount.

The company, which has $3.7 billion in assets and already had shed its coal businesses this year, said the restructuring is designed to save 20% of annual overhead cost, or about $18 million.

"We continuously review our businesses to ensure the efficiency of the company," said CEO Luke R. Corbett. "The recent divestiture of Kerr-McGee Coal Corp. further emphasized the need to re-examine work processes."

Kerr-McGee's announcement follows by a week a report that Atlantic Richfield Co. plans to reduce the size of its work force and slash its operating budget because of slumping oil prices. In an internal memo, CEO Mike Bowlin told staff ARCO was "taking these steps to ensure Arco's long-term independence." Last week it became evident the work force reductions would reach into upper management. Two top executives, President William E. Wade and Executive Vice President Anthony G. Fernandes, announced their retirement.

Wade was credited for his leadership in negotiations with ARCO's partners in Prudhoe Bay that materially increased the value of the company's Alaskan assets. He also was instrumental in opening the door to negotiations that resulted in ARCO's recent acquisition of Union Texas Petroleum, a move that strengthened ARCO's global position. Fernandes helped build ARCO's competitive position in China and led the divestiture of the company's coal and chemicals businesses.

Michael E. Wiley, executive vice president, will become president and assume the newly created position of COO, and Donald R. Voelte, senior vice president, corporate planning, will become the new executive vice president.

Occidental Petroleum's Bakersfield, CA-based drilling division announced two weeks ago it was shaving about 80 positions and another 130 jobs may be lost in other OXY divisions as part of its major restructuring forced by low world oil prices and pressure from competitors.

And last week Unocal Corp. share prices suffered a slight setback when the company warned investors its third quarter earnings were likely to be at the low end of Wall Street expectations because of low oil prices, Gulf of Mexico storms and hurricanes and the cost of a greater number of dry-holes during the quarter.

"We are confident that we will have positive earnings for the quarter, but extreme price volatility and timing of dry holes make it difficult to project an exact number," CEO Roger C. Beach said on Tuesday. "While we cannot control prices, we continue to aggressively lower costs to help mitigate the impact on earnings."

Unocal had recorded adjusted earnings of 26 cents per share in the second quarter. The latest First Call Corporate Monitor analyst estimates for the third quarter ranged from 10 to 25 cents per share, with a consensus of 20 cents. Unocal said it expects third quarter adjusted earnings will be below 10 cents per share, excluding special items. In last year's third quarter, Unocal reported net earnings of $177 million, or 71 cents a share.

Spirit Energy 76's estimated average gas price realization was $1.58/Mcf for September, and about $1.98 for the third quarter, 8% below the second quarter. At the same time, Unocal's exploration subsidiary in the Lower-48 states expects exploration expenses in the third quarter to be 70% above the second quarter level. In addition, the recent storms have had a significant impact on Unocal's production in the Gulf of Mexico.

Unocal's Lower 48 E&ampP division Spirit Energy 76 also reached a definitive agreement Friday to sell substantially all of its oil and gas assets in Michigan to Newstar Energy USA Inc. and Omimex Energy Inc. for about $37.25 million in cash and 670,000 shares of stock in Newstar Resources, the parent company of Newstar Energy.

Rocco Canonica

©Copyright 1998 Intelligence Press, Inc. All rights reserved. The preceding news report may not be republished or redistributed in whole or in part without prior written consent of Intelligence Press, Inc.

ISSN © 2577-9877 | ISSN © 1532-1266
Comments powered by Disqus