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

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

“We continuously review our businesses to ensure the efficiencyof the company,” said CEO Luke R. Corbett. “The recent divestitureof Kerr-McGee Coal Corp. further emphasized the need to re-examinework processes.”

Kerr-McGee’s announcement follows by a week a report thatAtlantic Richfield Co. plans to reduce the size of its work forceand slash its operating budget because of slumping oil prices. Inan internal memo, CEO Mike Bowlin told staff ARCO was “taking thesesteps to ensure Arco’s long-term independence.” Last week it becameevident the work force reductions would reach into uppermanagement. Two top executives, President William E. Wade andExecutive Vice President Anthony G. Fernandes, announced theirretirement.

Wade was credited for his leadership in negotiations with ARCO’spartners in Prudhoe Bay that materially increased the value of thecompany’s Alaskan assets. He also was instrumental in opening thedoor to negotiations that resulted in ARCO’s recent acquisition ofUnion Texas Petroleum, a move that strengthened ARCO’s globalposition. Fernandes helped build ARCO’s competitive position inChina and led the divestiture of the company’s coal and chemicalsbusinesses.

Michael E. Wiley, executive vice president, will becomepresident and assume the newly created position of COO, and DonaldR. Voelte, senior vice president, corporate planning, will becomethe new executive vice president.

Occidental Petroleum’s Bakersfield, CA-based drilling divisionannounced two weeks ago it was shaving about 80 positions andanother 130 jobs may be lost in other OXY divisions as part of itsmajor restructuring forced by low world oil prices and pressurefrom competitors.

And last week Unocal Corp. share prices suffered a slightsetback when the company warned investors its third quarterearnings were likely to be at the low end of Wall Streetexpectations because of low oil prices, Gulf of Mexico storms andhurricanes and the cost of a greater number of dry-holes during thequarter.

“We are confident that we will have positive earnings for thequarter, but extreme price volatility and timing of dry holes makeit difficult to project an exact number,” CEO Roger C. Beach saidon Tuesday. “While we cannot control prices, we continue toaggressively lower costs to help mitigate the impact on earnings.”

Unocal had recorded adjusted earnings of 26 cents per share inthe second quarter. The latest First Call Corporate Monitor analystestimates for the third quarter ranged from 10 to 25 cents pershare, with a consensus of 20 cents. Unocal said it expects thirdquarter adjusted earnings will be below 10 cents per share,excluding special items. In last year’s third quarter, Unocalreported 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 explorationsubsidiary in the Lower-48 states expects exploration expenses inthe third quarter to be 70% above the second quarter level. Inaddition, the recent storms have had a significant impact onUnocal’s production in the Gulf of Mexico.

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

Rocco Canonica

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