Marathon Oil Corp. said Thursday it is planning a corporate restructuring that will claim 265 jobs but will lead to cost savings of about $65 million/year. However, it will have to take a $40 million pre-tax charge, 40% of which will come in the third quarter. Most of the job reductions are expected to be at its Houston headquarters and in its U.S. production unit and will take place before the end of the year.

The restructuring plan is designed to streamline business processes and services, and realigning reporting relationships to reduce costs across all organizations, the company said. It will include consolidating U.S. production operations in Houston. The company also said it anticipates eliminating a wide range of “nonessential” unspecified activities, and their associated costs.

Marathon said the actions are the result of a recently completed business transformation study of its existing operations that identified ways to improve the company’s competitiveness.

“The plans and actions we have announced today are part of a continuum of steps Marathon has taken during the past two years to improve our competitiveness and enhance shareholder value,” said Clarence P. Cazalot, Jr., Marathon CEO. “During this period of time, we have grown our proved reserve base, expanded our international portfolio with new core areas, realized exploration success, advanced our integrated gas strategy and sold non-core assets.

“However, while we have continued to improve operations, our current overhead cost structure is too high,” he added. “The actions we have announced today will reduce costs, make us more efficient, improve our business focus and help us achieve the full potential of our strategic plan.”

Under the restructuring, Marathon’s current U.S. production organization will be consolidated into two business units, Northern and Southern, with headquarters in Houston. Field personnel will remain in its production offices located in Anchorage, AK; Cody, WY; Lafayette, LA; Midland, TX; and Oklahoma City, OK. “Existing production field offices will be retained with few positions impacted,” Marathon said. However, the former business unit office in Denver, CO will close. Approximately 230 positions from these offices will be transferred to Houston.

“Although not included in the projected savings announced today, we anticipate further cost reductions from either outsourcing certain services and functions, or identifying more efficient ways of performing the work ourselves,” added Cazalot. The company plans to assess strategic outsourcing opportunities of many support functions including information technology, finance and accounting, procurement, human resources and administrative services. This assessment will be coordinated with the company’s 62% owned downstream subsidiary, Marathon Ashland Petroleum LLC, which is undertaking a similar analysis.

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