By OGJ editors
HOUSTON, Sept. 12 -- Marathon Oil Corp., Houston, said it would cut 265 jobs as part of a realignment plan expected to yield pre-tax savings of more than $65 million annually.
Organizational efficiencies are expected to account for 45% of the projected savings, with the rest coming from the job cuts, primarily at the company's Houston headquarters and US production business units. Most of the changes will be completed by Dec. 31.
The company also said it will reduce or eliminate "a wide range of activities, and their associated costs" considered nonessential, although it did not elaborate.
"Our current overhead cost structure is too high," said Clarence P. Cazalot, Jr., Marathon president and CEO.
Marathon expects that these activities will result in a pretax charge of $40 million, and it said that 40% of that charge is expected to be recorded in the third quarter with the rest to be recognized when incurred, primarily in early 2004.
Current US production organization will be consolidated into two business units, northern and southern, based in Houston. Existing production field offices will be retained with few positions impacted. The consolidation will not impact Marathon's international production operations.
A business unit office in Denver will be closed. All total, 230 positions will be transferred to Houston as part of the realignment.
Cazalot said that Marathon also anticipates "further cost reductions from either outsourcing certain services and functions, or identifying more efficient ways of performing the work ourselves."
This assessment will be coordinated with the company's 62%-owned downstream subsidiary, Marathon Ashland Petroleum LLC, which is undertaking a similar analysis.
The New York-based Standard & Poor's Rating Services said Marathon's actions would not affect its credit ratings or outlook.
"The restructuring is expected to bolster cash flow and combined with the recently announced sale of Marathon Canada�should provide Marathon with an opportunity to make inroads into reducing its debt," S&P said. Marathon announced the Canadian assets sale last month (OGJ Online, Aug. 20, 2003).
