Low commodity prices have driven Bartlesville, OK-based PhillipsPetroleum Co. to cut 1,400 jobs and costs and increase availablecash flow in 1999. “We don’t anticipate margin improvements in thenear term, therefore we are adjusting our plans accordingly,” saidCEO Wayne Allen. “The changes will impact our level of operatingcosts, staffing requirements and capital spending. We are takingthese steps to improve our financial performance and create valuefor our shareholders.”

Job losses will occur mainly in the company’s exploration andproduction segment and corporate staffs. Of these, about 550 willbe in foreign locations, and about 850 will be in the UnitedStates. Of U.S. job cuts, about 400 will be at company headquartersin Bartlesville.

These actions are expected to produce annual cost savings ofapproximately $230 million. “As a result, we anticipate that 1999controllable costs will be lower than those of the previous twoyears, and with expected increases in overall production volumes wewill have significant productivity improvement. The cost reductionswill take place in 1999.” Upon completion of the Diamond 66 jointventure, further cost reductions should be achieved.

Phillips has reduced its capital expenditures budget for 1999 to$1.5 billion, about $650 million, or 31%, lower than 1998. Thereduction primarily impacts the company’s E&P segment, whereproposed expenditures are being reduced about 44%, from about $1.4billion in 1998 to $800 million in 1999. However, Allen said,”We’re going to continue to fund projects that will add value toour company, including possible strategic acquisitions… We expecthydrocarbon production to increase slightly in 1999.”

Phillips expects to report a loss for the fourth quarter of1998, primarily due to anticipated special charges resulting fromthe low prices and margins. Charges include after-tax estimatedamounts of $222 million for oil and gas property impairments; $71million for the write-off of costs associated with the Tyonek Deepprospect in Kenai, Alaska; and $46 million of severance costs.Excluding these special charges, the company expects net operatingincome to be near break-even or a slight loss for the quarter.

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