COMPANIES PRESS RESTRUCTURING MOVES

Restructuring efforts continue to cut a swath through the petroleum industry.

Chevron Corp. is marking progress in its cost cutting effort. As a result of a study focused on reducing headquarters staff costs, the company will reduce its headquarters staff in San Francisco by about 28%. The changes will result in a net reduction of about 1,000 positions from early 1992 staff levels, but since about 550 corporate staff employees elected to take early retirement, the net surplus will be about 450 employees.

Chevron also will restructure its in house information technology service organization, Chevron Information Technology Co. (CITC), based in San Ramon, Calif., which is expected to reduce costs another $35 45 million/ year.

In other U.S. restructuring action, Arkla Inc., Shreveport, La., approved a restructuring plan that includes sale of its upstream unit (see related story, this page), effectively pulling out of exploration and development.

Meanwhile, France's Total will implement a restructuring program and plans to take a charge of 600 million francs against 1992 earnings related to the restructuring and a writedown of undisclosed assets.

Although details were not forthcoming, Total Pres. Serge Tchuruk said the restructuring would account for half the charge and affect activities in France, the U.S., and elsewhere that the company considers nonstrategic. He declined to say whether asset sales are involved.

Total also plans to ask shareholders to approve changes in its bylaws to simplify them and deter unsolicited takeover bids. The French government in June cut its stake in Total to 15% from 34%. Of the remaining Total stock, 40% is held by foreign interests, mainly in London and New York.

CHEVRON RESTRUCTURING

Chevron said the reductions will occur in more than a dozen departments, including tax, treasury, public affairs, security, law, and human resources.

Chevron Chairman Kenneth T. Derr said the move will reduce corporate wide operating costs by about $200 million/year from 1991 levels, a savings of about 30% for headquarters functions.

CITC will lose 22%, or 500 positions, compared with early 1992 staff levels. Two hundred of the positions were eliminated earlier this year, and another 300 positions, mainly in San Ramon, will be cut in this effort.

Derr said the changes will occur during several months, and most of the cost savings will be achieved in 1993.

He said the company hopes to find other Chevron jobs for as many surplus employees as possible, but some involuntary terminations likely will be necessary.

Chevron has already this year reassigned more than 700 employees made surplus by the company's cost cutting program (OGJ, May 11, p. 26).

ARKLA PLANS

Arkla Chairman Thomas McLarty said his company approved a plan to refocus the company strategy to better compete in the wake of Federal Energy Regulatory Commission Order 636, to improve its financial condition by slashing debt, and to boost earnings.

In addition to pulling out of exploration and production, Arkla will exit the intrastate gas pipeline business in Louisiana and divest certain distribution properties in noncore areas.

Proceeds from the sale of those businesses will be used to pay about $525 million in debt. Together with steps taken earlier this year, the measures will cut Arkla debt by about $700 million.

Proceeds from the sale of Arkla Exploration Co., combined with proceeds from forward trades and sale of noncore AEC assets earlier this year, will net almost $500 million.

"AEC is a first class organization with high quality reserves," McLarty said. "However, its earnings contribution to Arkla has been small and declining in recent years since we have not had the financial flexibility to fund the exploration program needed to replace production.

"Rather than liquidate our E&P assets over time, we chose to sell the company and will use the cash proceeds to reduce debt. This debt reduction will go a long way to achieving a major goal of returning as quickly as possible to a solid investment grade rating."

Arkla also negotiated letters of intent to exchange its South Dakota properties for Midwest Gas Co.'s Minnesota properties plus Arkla's payment of $38 million and sell its Nebraska properties to Utilicorp's Peoples Natural Gas unit for $78 million. The company expects to sign definitive agreements on those two transactions by yearend and close the deals by mid 1993. Net after tax proceeds are expected to total about $50 million.

In addition, Arkla is studying the possible sale of Louisiana Intrastate Gas Co. because of the unit's limited ability to integrate with Arkla's other pipeline activities and the parent's need to trim debt. Arkla expects to complete the evaluation in first quarter 1993 and apply sale proceeds to debt reduction.

Finally, Arkla recently received FERC authorization to spin off its Arkla Energy Resources (AER) interstate pipeline unit into a separate subsidiary 100% subject to FERC jurisdiction. That, the company said, will ensure more equitable rate treatment and provide Arkla more flexibility to pursue more business opportunities in a timely manner.

In order to improve performance of its pipeline business, particularly AER, Arkla is taking these steps:

Expanding gas marketing activities to provide increased on system market penetration and new off system markets with on system and off system supplies.
Restructuring AER's gathering systems to operate as stand alone profit centers.
Debottlenecking the east end of AER's system through extension of Line AC to interconnect points with long lines serving Northeast and Midwest markets.
Negotiating customer settlements related to Order 636 tariff changes.
Continuing to adhere to stringent cost control measures.