TENNECO, PHILLIPS MOVE TO ENHANCE PROFITS

Echoes of restructuring continue to rumble through the U.S. petroleum industry.

The latest examples are campaigns disclosed last week by Tenneco Inc. and Phillips Petroleum Co.

Tenneco outlined a $2 billion program designed to bolster its balance sheet, enhance financial flexibility, assure long term earnings prospects, and respond to depressed markets served by its J I Case agricultural and construction equipment unit.

Phillips spelled out further steps to boost cash flow by rationalizing assets, reducing costs, and improving performance of its core businesses.

The program is designed to yield at least $500 million from asset sales by the end of 1993 and add more than $200 million/year in cash flow within the next 2-3 years.

TENNECO'S PLAN

Tenneco's program calls for:

he sale by yearend 1991 of noncore assets valued at an estimated $500 million. They include a 12,500 b/d methyl tertiary butyl ether plant under construction next to Tenneco's LaPorte, Tex., NGL butane isomerizer and fractionator (OGJ, May 20, p. 25), certain timberland, and its gold mining operations.
Sale of another $550 million in noncore assets by the end of this year or shortly thereafter.
A 50% cut in the annual common stock dividend rate, starting in this year's fourth quarter, to increase retained earnings by $200 million/year.
Cutting 1992 capital spending by at least $250 million, or about 25%.
A commitment to improve productivity immediately and cut costs company-wide by at least $250 million/year.
Raising another $300 million of equity.

PHILLIPS' PROGRAM

The program planned by Phillips has three initiatives:

Sale of assets. Assets that do not have a long term fit with the company's strategic plan are being earmarked for possible sale. Phillips recently sold or offered for sale several oil tankers, a Utah refinery, its advanced composites business, and a part interest in a pipeline.
Maximize return from existing assets. Phillips has completed or is about to complete more than $1 billion dollars in asset replacements and expansions, including new ethylene and polyethylene manufacturing plants. The program will focus on gaining increased cash flow from these and other assets without compromising safety, environmental, or quality objectives.
Further reductions in costs. Phillips intends to cut operating costs as a result of asset sales and reduction of support functions associated with the assets. In addition, personnel reductions stemming from organizational streamlining are expected, along with other expense cuts. No special early retirement plan is included in this program.