UPR Cuts Staff, Expects 4Q Charge
Following the lead of numerous other oil and gas companies who
are trimming staff this year because of low commodity prices, Union
Pacific Resources Group announced it will reduce headquarters staff
by 14%, or about 140 positions. Combined with attrition, UPR's
headquarters staff will have been reduced by about 20% since the
beginning of the year.
UPR said the staff cuts will result in annual pre-tax savings of
$12 million, but it will take an after-tax charge of $34 million in
the fourth quarter that includes severance and other costs of about
$11 million. The fourth quarter charge also includes $23 million
for marking to market certain major gas transportation contracts.
UPR also said it is anticipating a non-cash charge to earnings in
the fourth quarter attributable to a writedown in the book value of
its properties in recognition of weak oil and gas prices and
UPR has significantly cut back its U.S. operations this year,
divesting an estimated $600 million in exploration and production
properties. The property divestitures have covered a vast amount of
acreage in Canada, the Rocky Mountain region, Texas and the Gulf of
Mexico. Additional property sales are scheduled for early 1999. The
properties identified for sale represent about 10% of its reserves,
production volumes and cash flows.
UPR acquired Norcen Energy, with its strong Latin American
focus, earlier this year for $2.9 billion in an effort to expand
production internationally. But the deal came with a large debt
assumption of $900 million.
The company announced two weeks ago it was selling its entire
domestic gathering, processing and marketing operations to Duke
Energy for $1.35 billion. The sale to Duke was designed to pay down
that debt and unload operations that were performing poorly in a
low commodity price environment. The deal is expected to be
complete next March.
As a result, the headquarters staff cuts are just the first wave
of downsizing. About 600 more employees will be leaving the company
as part of UPR's sale to Duke.
UPR reported a $17.3 million net loss during the quarter ended
Sept. 30, compared to $67.2 million in net income during the same
period in the year prior. The earnings decline was attributed to
lower oil and gas prices, a $64 million increase in interest
expenses related to debt from the Norcen acquisition and a $43.4
million loss on foreign currency exchange. Also contributing to the
loss were lower operating results from gathering, processing and
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