Posted on 07/31/2003 4:10:24 PM PDT by Willie Green
For education and discussion only. Not for commercial use.
HOUSTON, July 31 -- Anadarko Petroleum Corp. said Thursday it plans to cut its overhead by $100 million, or 15%, by eliminating 400 staff and contract positions, closing offices in Amarillo and Midland, Tex., and focusing spending "on finding and producing oil and natural gas."
Half of the proposed savings will come from personnel reductions, including elimination of currently vacant positions. "The remaining $50 million in cuts include across-the-board reductions in general overhead, closing offices in Midland and Amarillo, and consolidating office space at the company's headquarters in The Woodlands," a planned community north of Houston, said company officials.
Robert S. Morris, an analyst with Banc of America Securities LLC, New York, noted a Bloomberg news service report late Thursday that Anadarko is considering putting itself up for sale. "We certainly believe this is an option, although we don't currently anticipate anyone paying a significant premium to current stock price levels," he said.
In it's announcement, Anadarko made no mention of any plans to reduce its drilling operations. However, it said Bill Sullivan, executive vice-president of exploration and production, had resigned. About 70% of the 400 positions to be eliminated are in "departments supporting the company's exploration and production efforts," with the other 30% to be taken from E&P. Most of the layoffs "will take effect immediately," said company officials. Anadarko currently has 3,400 employees worldwide.
James K. Wicklund, an oil services analyst in the Houston office of Banc of America Securities, said the company "shook up the market," sparking speculation "that between 7 and 44 rigs could be dropped by one oil company."
As one of the largest US-based independents, Anadarko "did have more rigs drilling than any other company in the US, so it does get noticed," Wicklund said. However, he said, "We do not think this is the beginning of a trend, but rather one company that got way off track. Generally, more companies are announcing increases in drilling budgets."
Moreover, said Wicklund, "One point has been ignored. Anadarko was listed as the most active oil company in the US with about 50 rigs running just a few weeks ago. That gives Anadarko about 4% of the market. If the most active company has only 4% of the capacity, then the breadth and depth of the active drillers is dramatic."
"Anadarko is a financially strong company with high-quality assets in North America and international, which offer excellent prospects for future growth. However, our cost structure is too high, and we're taking action now to cut costs and be more competitive," said Robert J. Allison Jr., Anadarko's chairman, president, and CEO.
It previously was a point of pride with Allison that Anadarko avoided massive layoffs through some of the most severe economic slumps in the oil and gas business, so as to be prepared for the rebound. However, he said Thursday, "The decision to reduce staff is a difficult but necessary step in order to make Anadarko a leaner, stronger, and more efficient company. This company can continue to grow profitably because we're redeploying our people to focus on our highest value exploration and production opportunities."
Management also was affected by the personnel cuts, with some executives electing to retire, including Mike Cochran, senior vice-president, Strategy and Planning; Bruce Stover, senior vice-president, Worldwide Business Development; and Paul Taylor, vice-president, Investor Relations. Rex Alman, senior vice-president, Algeria, resigned.
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