TEX/CON, SPUN OFF FROM BP, UP AND RUNNING

Jan. 1, 1990
BP Exploration Western Hemisphere has spun off its U.S. Lower 48 onshore exploration/development and gas gathering, transportation, and marketing assets into an independent company named Tex/Con Oil & Gas Co. Tex/Con's president is William J. Johnson, former president of BP Exploration Inc. The new company is governed by a board of directors with BP holding a majority of seats. Otherwise, Tex/Con, Houston, will operate independently of BP. "We're not just a bundle of assets and some

BP Exploration Western Hemisphere has spun off its U.S. Lower 48 onshore exploration/development and gas gathering, transportation, and marketing assets into an independent company named Tex/Con Oil & Gas Co.

Tex/Con's president is William J. Johnson, former president of BP Exploration Inc.

The new company is governed by a board of directors with BP holding a majority of seats. Otherwise, Tex/Con, Houston, will operate independently of BP.

"We're not just a bundle of assets and some people coming out of BP," Johnson said.

WHAT'S INVOLVED

Johnson said the cost structure and operating philosophy of an independent is more appropriate for conducting business in the Lower 48.

"One can't operate effectively here with the systems, procedures, and corporate culture required to manage large assets in Alaska and the North Sea," he said.

"Independent from BP, Tex/Con will be low cost and quickly responsive to changing business conditions."

An outright sale of the assets was considered by BP.

"Our judgment was that BP could realize more by holding the assets as an independent operation," Johnson said. "Our performance will dictate if this makes sense or not."

Tex/Con has a flat management structure. Except for some accounting and field operations, no one is more than two management levels removed from the president.

Staff has been reduced 35% to 450 as part of the spinoff.

Tex/Con is expected to generate 20% more cash in 1990 than the same businesses did in 1989, Johnson said.

"As a result of not being in the BP management system, I have retrieved one third of my corporate time, which had been spent in meetings preparation, travel, and meetings."

To improve productivity with fewer people, Johnson said, companies must change their methods of doing business.

At Tex/Con, there will be more direct contact between management and staff, fewer memos, and quicker decision making.

"We won't rework a problem at each stage of management," Johnson said. "We will make a decision when we have enough information."

TEX/CON'S ASSETS

Tex/Con's main areas of operations at present are the Texas Panhandle, western Oklahoma, and North Louisiana. It operates about 800 wells and about 1,400 miles of gas gathering systems.

Current production totals about 9,000 b/d of oil and 140 MMcfd of gas. Pipeline throughput is 700 MMcfd of gas. About 500 MMcfd is marketed by the company.

The company plans to focus on areas where it currently is active.

As part of the spinoff, Tex/ Con obtained BP's extensive Lower 48 land database.

"We have everything we need to conduct business internally," Johnson said. "We are not dependent upon BP for technical support."

In the short term, Tex/Con will be looking for partnership investments in its areas of focus and asset trades.

"We are not hung up about always being operator, although in some areas, such as western Oklahoma, operatorship is very desirable," Johnson said.

The company is interested in spreading risks in order to get more for its investment.

"We are very flexible within our focus area," said Johnson.

"We look forward to joint venture possibilities.

"Our cash flow is perfectly adequate to fund our needs. BP is not bankrolling us."

Copyright 1990 Oil & Gas Journal. All Rights Reserved.