More U.S. companies map 1996 spending plans

Several more U.S. companies have unveiled spending plans for 1996.

Budgets revealed so far vary from cautious to aggressive, depending largely on strategy and opportunities.

Among the latest action:

Texaco Inc. budgeted about $3.6 billion for its 1996 capital and exploration (capex) program, including subsidiaries and affiliates. That is an increase of about $500 million, or 16%, from 1995's spending.
Murphy Oil Corp., El Dorado, Ark., outlined a budget of $416 million, up 29% from projected outlays in 1995.
Murphy also scheduled a series of actions in response to its belief that planning for the foreseeable future must be based on likely continuation of 1995's low prices for oil and gas. Scheduled are the sale of substantially all U.S. onshore production, sale of about 30 nonstrategic leases in the Gulf of Mexico, and a staff reduction program that mainly will involve early retirements.
Diamond Shamrock Inc., San Antonio, reduced planned spending by $124 million for 1995-96. Revised plans call for outlays of $160 million in 1996 and about $140 million in 1997.

Texaco program

About $2.1 billion of Texaco's spending program will go for international development projects, with $1.5 billion aimed at U.S. projects, up from $1.7 billion and $1.4 billion, respectively, in 1995.

The 1996 budget is part of about $20 billion in spending planned for the next 5 years.

Upstream, Texaco plans 1996 projects using advanced technologies such as 3D and vertical cable seismic surveys, subsea completions, and quadrilateral drilling, including:

Delineating deepwater Gulf of Mexico oil and gas discoveries.
Continuing projects in South Louisiana salt domes and the Permian basin of West Texas.
Expanding activities in Colombia with the recently signed Guajira gas project.
Developing offshore projects in the North Sea, Nigeria, Angola, Australia, and Southeast Asia.
Continuing to increase production in the Neutral Zone between Saudi Arabia and Kuwait.

Downstream spending will focus on marketing, in particular:

Broadening the geographic reach of Texaco's CleanSystem3 gasoline to Latin American regions such as Ecuador and Peru.
Continuing cobranding programs with fast food restaurants such as McDonald's, Subway, Taco Bell, and others.
Continuing to expand Texaco's presence in the the Pacific Rim through its Caltex joint venture with Chevron Corp.

Murphy budget

Murphy earmarked $324 million, or 78% of its budget, for exploration and production.

Downstream projects will get $76 million, including $29 million for a distillate desulfurization unit at the company's refinery in the U.K. Outlays for farm, timber, and real estate operations are budgeted at $14 million, with the rest allocated to corporate functions.

E&P's share of the 1996 budget is up 26% from projected 1995 outlays, reflecting an accent on growth through exploration. The 1996 sum includes $100 million for high risk/high potential frontier prospects that include the U.K. North Sea and Offshore China. It also involves increased emphasis on a lower risk exploration program in the Gulf of Mexico, mainly consisting of 3D seismic prospects.

Geographically, $64 million of the exploration budget will go to the U.S., $10 million to Canada, $17 million to the U.K., and $10 million to other overseas areas.

The 1996 budget includes $224 million for oil and gas development programs.

This is an increase of 34% projected 1995 spending. It reflects a gain in spending on projects that will contribute significant production starting in 1997. Those projects include development of Phase II of Tahoe field in the Gulf of Mexico, Hibernia field off Canada, and Mungo/Monan, Schie-hallion, and Thelma fields in the U.K. North Sea.

U.S. projects account for $47 million of the 1996 development budget, while outlays in Canada and the U.K. are budgeted at $88 million and $75 million, respectively. Continuing development of Block 16 in Ecuador accounts for most of the balance.

The staff reduction will reduce the company's worldwide workforce by 135, or about 7.5%, and will result in a $4.2 million after-tax charge for fourth quarter 1995.

The announced actions, along with other cost cutting moves, are expected to result in a decrease in U.S. lifting cost of at least 10% in 1996. Murphy also expects a reduction in selling and general expense of about $3.3 million/year.

Diamond Shamrock

Roger Hemminghaus, Diamond Shamrock chairman, CEO, and president, said his company's spending cuts do not signal a sweeping change in strategy. "Rather, we have reprioritized our budget, keeping those projects with the highest returns and delaying others."

The spending cuts include eliminating retail site construction in most of Texas, while integrating newly acquired stores into the Diamond Shamrock system and continuing to build stores in Arizona.

Diamond Shamrock aims to strengthen its balance sheet and, within 2 years, bring its debt to total capital and interest coverage ratios back to levels prior to acquisition of National Convenience Stores (NCS). It completed the purchase of 660 Stop N Go convenience stores from NCS last month.