Following the lead of numerous other oil and gas companies whoare trimming staff this year because of low commodity prices, UnionPacific Resources Group announced it will reduce headquarters staffby 14%, or about 140 positions. UPR has significantly cut back itsU.S. operations this year, divesting an estimated $600 million inexploration and production properties. It also acquired NorcenEnergy, with its strong Latin American focus, and recently sold itsdomestic midstream business to Duke Energy.

UPR’s property divestitures have covered a vast amount ofacreage in Canada, the Rocky Mountain region, Texas and the Gulf ofMexico. Additional property sales are scheduled for early 1999. Theproperties identified for sale represent about 10% of its reserves,production volumes and cash flows.

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 inthe fourth quarter that includes severance and other costs of about$11 million associated with reduced operations and staffreductions. The fourth quarter charge also includes $23 million formarking to market certain major gas transportation contracts. UPRalso said it is anticipating a non-cash charge to earnings in thefourth quarter attributable to a writedown in the book value of itsproperties in recognition of weak oil and gas prices and reserverevisions.

Combined with attrition, UPR’s headquarters staff will have beenreduced by about 20% since the beginning of the year. Furthermore,the headquarters staff cuts are just the first wave. About 600 moreemployees will be leaving the company as part of UPR’s sale of itsdomestic gathering, processing and marketing operations to DukeEnergy. Duke expects to complete the $1.35 billion purchase nextMarch. UPR sold its midstream business to Duke after paying morethan $2.6 billion for Norcen earlier this year in an effort toexpand production internationally.

The company reported a $17.3 million net loss during the quarterended Sept. 30, compared to $67.2 million in net income during thesame period in the year prior. The earnings decline was attributedto lower oil and gas prices, a $64 million increase in interestexpenses related to debt from the Norcen acquisition and a $43.4million loss on foreign currency exchange. Also contributing to theloss were lower operating results from gathering, processing andmarketing operations.

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