Not even the best financial quarter since the fourth quarter of1997 could prevent BP Amoco from following through with itsjob-cutting plan as the company said it will cut 2,000 morepredominantly US jobs before the year is over. The integratedenergy giant has already slashed 12,500 jobs from the pay roll. Itwould not elaborate on which US jobs would be eliminated.
“It was just one of those things that happened after such a largemerger,” said BP Amoco Spokesman Ian Fowler, referring to the August1998 merger between British Petroleum and Amoco (See Daily GPI, August 12). “We originally targeted around10,000 as the number of jobs we wanted to cut. But once we startedexamining and cutting, more overlap and integration existed than wasexpected.” The latest cuts will leave BP Amoco with 82,500 jobs byyear’s end.
The job cuts will continue to be made despite a second quarterperformance which exceeded expectations. Second quarter 1999replacement cost profit (which equals earnings excluding inventoryholding gains and losses before interest and taxes) before exceptionalitems was $1.367 billion. The profit represents a 19% increase overthe results for the same period in 1998, reflecting further benefitsfrom integration and from underlying performance improvements. Many ofthe improvements, including three-year plan to cut $4 billion incosts, sell $10 billion in non-core assets, and boost capitalexpenditures $26 billion were outlined by the company last July (SeeDaily GPI, July 16).
The exploration and production segment of the company showed thelargest improvement, reporting a replacement cost operating profitof $1.531 billion, up 54% from 2Q98. Cost savings, higherproduction and stronger prices were the reasons given for theincrease. The company produced nearly 6 Bcf/d of gas in 2Q99,marking an increase of 169 MMcf/d from the first quarter of thisyear. U.S. production fell 2% to 2.38 Bcf/d.
In the near future, the company said its outlook has improveddue to improving price conditions, firming aggregate demand andstabilizing marketing margins.
“We have almost achieved the projected annual run rate of $2billion in merger benefits, significantly earlier than previouslyindicated,” said Sir John Browne, CEO of BP Amoco. “Additionalrestructuring benefits have been identified and will continue toflow through to results in the future.The ratio of restructuringcosts to benefits remains very favorable. These achievements havebenefited results which remain strong in spite of the severedecline in the environment for the half-year. This gives me greatconfidence for the future and, in particular, for the integrationof ARCO.”
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