U.S. PETROLEUM INDUSTRY RETRENCHMENT CONTINUES

Retrenchment among U.S. oil and gas companies and their service/supply contractors is very much alive.

ln the latest developments:

• W. R. Grace & Co. began efforts to sell assets of its Grace Energy Corp. unit and retained four investment brokers to assist it in completing divestitures as soon as possible.

• Ashland Oil Inc. is implementing an enhanced voluntary retirement program to cut employment levels and costs.

• Dresser Industries Inc., Dallas, will permanently close its Security Division drillbit plant in Eunice, La.

GRACE'S SELLOFF

Grace Energy, Dallas, consists of:

• Grace Drilling Co., also of Dallas, which claims the world's largest drilling rig fleet with 168 rigs in 17 U.S. states.

• Grace Offshore Co., New Orleans, which provides drilling, work-over, and well completion services in the Gulf of Mexico.

• Homco International Inc., Houston, an oil field service firm.

• Grace Petroleum Corp., Oklahoma City, an oil and gas exploration and production company.

• Support Terminal Services Inc., Dallas, a specialized liquid storage company.

GRACE STRATEGY

Grace decided to shuck its petroleum business piecemeal because it believes that will expedite divestment.

"We have had success with this kind of approach and will pursue these sales with domestic and foreign buyers," Grace said.

Grace retained First Boston to assist in selling Grace Drilling and Homco, Merrill Lynch for Grace Petroleum, Kidder Peabody for Support Terminal Services, and Smith Barney for Grace Offshore.

W.R. Grace recently completed purchase of the 4,070,000 publicly held shares of Grace Energy at $19/share to achieve flexibility to exit the energy business, which it identified as not strategic to its long term future.

W.R. Grace will retain for the present Colowyo Coal Co., a Grace Energy unit that operates the largest low sulfur coal mine in Colorado. Last year, Grace Energy purchased the 50% interest in Colowyo held by M.A. Hanna Co.

ASHLAND PROGRAM GOALS

Ashland is offering its enhanced retirement program to about 425 eligible fulltime employees in its corporate staff, Ashland Petroleum Co., Ashland Services Co., Ashland Exploration Inc., and Ashland Branded Marketing Inc.

John R. Hall, Ashland Oil chairman and chief executive officer, estimates the voluntary retirement program will result in savings of about $15 million/year. The company expects to take a one time, pretax charge against earnings of about $25 million in its fiscal fourth quarter for implementing the program.

"Ashland is working hard to reduce costs and improve efficiency to compete more successfully in the 1990s," said Hall.

"Unfortunately, these measures must include efforts to reduce employment to match projected staffing needs. We hope this program will reduce or eliminate the need for involuntary work force reductions in the immediate future."

ASHLAND'S PLAN

The voluntary retirement program enhances Ashland's existing plan. It is being offered to employees who are at least age 35 or have a combination of age and years of service that totals 80.

The enhanced benefit program offers eligible employees a special incentive of 2 weeks pay per full year of service, with a maximum of 70 weeks.

In addition, the company will enhance participating employees' pension benefits by adding 3 years to their age and 3 years to their service, up to a maximum of 35 years of service. Participants also will receive retiree medical, dental, and life insurance benefits.

Eligible employees have until Sept, 15 to elect to participate in the program. Participants will retire Oct. 1.

DRESSER CLOSURE

Dresser will transfer all production at its Eunice plant to its Security Division plant in Dallas during a phaseout expected to be complete next January,

The Eunice plant started up in October 1977 and currently employs 145. Employment peaked at 574 in 1982, when the U.S. active rotary rig count compiled by the former Hughes Tool Co. reached an average 4,500.

Dresser cited as the reason for the closure the plunge of the Baker Hughes Inc. U.S. active rig count to a post-1940 low of 596 the week ended June 12.

Copyright 1992 Oil & Gas Journal. All Rights Reserved.