Elf's 'painless' U.K. restructuring

April 12, 1999
With job losses accompanying every merger or takeover at the moment, it feels like the petroleum industry's boom/bust cycle is inescapable. Elf Exploration U.K. plc is as lean and mean as any North Sea operator, but through good timing managed to restructure without much pain to the employees it laid off. Pierre Godec, managing director of Elf Exploration U.K., said the unit had 1,200 staff 3 years ago but now employs 566. Of these, only 68 are offshore, because Elf hired Kvaerner Oil & Gas
David Knott
London
[email protected]
With job losses accompanying every merger or takeover at the moment, it feels like the petroleum industry's boom/bust cycle is inescapable.

Elf Exploration U.K. plc is as lean and mean as any North Sea operator, but through good timing managed to restructure without much pain to the employees it laid off.

Pierre Godec, managing director of Elf Exploration U.K., said the unit had 1,200 staff 3 years ago but now employs 566. Of these, only 68 are offshore, because Elf hired Kvaerner Oil & Gas Ltd. to handle day-to-day operations.

"There has been a revolution inside the discipline," said Godec. "We decided in 1997 that we needed a step change, because the company was very heavy with 1,200 people, and it felt as though it was really two companies."

Elf became an operator off the U.K. in 1991-92 by acquiring the North Sea assets of Occidental Petroleum Corp., but the absorption process was incomplete.

Step change

"At the time, the oil price was $23/bbl," said Godec. "The market was buoyant, so we thought, Why not carry out our step change now?"

Godec said the key move was a fundamental change from a functional structure-with exploration and production, finance, et al., all existing as separate entities-to an asset-based structure.

"We sought to isolate our sources of wealth and build the company around them," said Godec. "Now we have Fourth Round, Central Graben, New Reserves, and Non-Operated asset groups, plus services and corporate groups."

The Fourth Round assets are mainly those acquired from Oxy, including Piper, Claymore, and Saltire fields, which produce about 160,000 b/d of oil.

The Central Graben assets are based around the Elgin/Franklin development (the "jewel in the crown"), due on stream in 2000. Elf drilled a number of tight holes in the West of Shetland area, recently acquired five licenses west of Ireland, and has a 66.66% interest in the Alwyn area fields, operated by Total Oil Marine plc, which produce 160,000-170,000 boed.

Leaving party

"Because of this step change," said Godec, "we have been able to avoid many of the cuts other companies have had to make recently.

"Five hundred people left Elf Exploration U.K. in 1997, of which 200 were outsourced to Andersen Consulting for financial work and to Kvaerner for offshore services.

"Three hundred staff were terminated, but with a good package. We held a party for the leavers, and it went well, because almost all of them already had a job to go to the following week."

But the performance of Elf Exploration U.K. is unique within the Elf organization. The ideas Godec introduced in this unit are to be applied worldwide throughout Elf, which will require a 20% head count reduction.

"We are now where the other Elf units will be in a few years' time," said Godec. "Today I'm very happy we did all this 2-3 years ago in the U.K. I wouldn't like to have to do it now."

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