BP Amoco added another 3,000 to the heap of 7,000 job cutsalready announced in the wake of the merger of British Petroleumand Amoco and in the midst of depressed oil and gas prices. Thenewest job cuts will be worldwide, and it is not yet known how manywill be in the United States. Last week the company also announcedreplacement cost operating profit for 1998 of $6,437 million, off39% from $10,583 in 1997.
BP’s $48 billion stock purchase of Amoco was completed at theend of last year. The latest results reflect a $351 million chargefor merger-related integration costs. For the year, profit afterexceptional items was $4.65 billion, down from $6.97 billion a yearearlier.
Realized U.S. gas prices for 1998 were $1.80/Mcf, off 18% from$2.20 in 1997. U.S. gas production also declined to 2,401 MMcf/dfrom 2,513 MMcf/d, a decrease of about 4.5%.
CEO Sir John Browne said the company now aims to achieve pre-taxsavings running at an annual rate of $2 billion within the next 12months – nearly a year ahead of the original target date ofend-2000.
Browne said that, despite a $6 drop in the crude oil price andthe effects of global recession on demand for oil and chemicalproducts, the company had delivered a post-tax improvement of $500million in self-help in 1998 and aimed to achieve a further $400million post-tax this year.
“Taking this self-help, together with the benefits ofaccelerated integration, BP Amoco is looking, in around a year fromnow, to an improvement in underlying performance of over $2.5billion pre-tax. Even more important, this is something we aim todeliver even if prices remain at their current levels through1999.”
Speaking at a press conference summary of a company presentationto financial analysts in London, Browne said the BP-Amoco merger”takes us a long way to fulfilling many of our strategic ambitionsand provides us with the most powerful platform for growth, even ina hostile environment. The merger gives us a better hydrocarbonbase, with higher-margin gas. It radically improves ourpetrochemicals portfolio and dramatically strengthens our marketingand refining in the US.”
Browne said the company would set out a detailed three-year planwith new financial targets later in the year, but in the meantimeBP Amoco has embarked on a program to secure the short term andkeep the company on a trajectory of growth.
Joe Fisher, Houston
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