MORE RESTRUCTURING, CUTS SWEEP U.S. INDUSTRY
More U.S. companies have taken steps to restructure and consolidate operations, several reflecting a continuing slump in the U.S. gas industry and the flight of U.S. upstream capital overseas.
Among recent actions are:
- Sun Co. taking a big charge against third quarter earnings as a result of its restructuring and streamlining effort.
- Exxon Corp. planning to create a new division to handle all its worldwide exploration efforts, except Canada, that will mean a cut in jobs.
- Tenneco Inc. consolidating its Tenneco Gas unit.
- McDermott International Inc. planning asset sales to strengthen its balance sheet.
SUN'S EARNINGS HIT
Sun will take an after tax special charge against earnings of about $400 million in the third quarter due to its restructuring effort.
The largest part of the charge, about $220 million, results from a company decision to dispose of all of Radnor Corp.'s real estate holdings so Sun can focus on its core business. Sun had planned to dispose of just half its ownership interest in Radnor.
About $80 million of the charge results from restructuring and consolidation in the company's corporate headquarters and domestic refining and marketing arm (OGJ, Sept. 23, p. 20).
That move will result in elimination of about 900 salaried positions in the combined unit in addition to 100 positions eliminated earlier this year, a cut of about 25% of Sun's salaried positions. The reductions are to cross all organizational groupings.
Sun is offering a voluntary early retirement and severance program Sept.1-Oct. 15, designed to save $100 million/year (OGJ, Sept. 9, p. 42). Most of the restructuring charge is the cost of the severance program, but it also includes elimination of related fixed costs and the cost of moving the company's corporate office to Philadelphia from Radnor.
An added $80 million is an accrual for environmental remediation work at Sun's refineries, terminals, and retail sales locations, and the remaining $20 million relates to the writedown of certain coal assets.
EXXON EXPLORATION
Exxon will establish Exxon Exploration Co. to assume responsibility for the exploration activities conducted by Exxon Co. U.S.A., as well as Exxon affiliates in other countries except Canada.
The unit will become operational Jan. 1, 1992 and be based in Houston. It will have about 1,600 employees, with about 200 fewer exploration positions in the U.S.
L.G. Rawl, Exxon chairman, said Exxon will try to place surplus employees in other positions but estimated a net reduction of about 100 people.
Commenting on stafting levels, Rawl said, "Exxon will continue to increase its emphasis on international exploration opportunities because of greater potential for significant discoveries and because that is where we've been most successful over the last several years."
Exxon noted it already has scaled back its exploration effort in the U.S., but considering the business climate and limited potential for significant discoveries in accessible areas, it plans further cuts in the U.S.
TENNECO GAS CONSOLIDATION
Plans to restructure operations of Tenneco Gas include consolidating several offices and offering voluntary exit incentives to certain employees.
The field operations of Tenneco's interstate pipeline network including Tennessee Gas Pipeline Co., Midwestern Gas Transmission Co., Viking Gas Transmission Co., and East Tennessee Natural Gas Co. will be merged into six regional offices.
Changes include:
- Division A will be expanded to include part of Louisiana and continue to be based in Houston. Currently, it covers Texas operations.
- Division B will be expanded to include added Mississippi operations and will remain based in Houma, La.
- Division C will be the operating unit for Midwestern and Viking with administrative offices in Joliet, III.
- Division D offices will relocate to Nashville and oversee East Tennessee operations in Tennessee and Virginia and all Tennessee Gas operations in Tennessee and Alabama as well as parts of Mississippi and Kentucky.
- Division E will expand to include parts of Kentucky, Pennsylvania, and New York and all of Ohio and West Virginia. The division will be moved to new offices in Pittsburgh.
- Division F will oversee operations in parts of Pennsylvania and New York, all of New Jersey, Massachusetts, Connecticut, Rhode Island, and New Hampshire and will continue to be based in Enfield, Conn.
Voluntary exit incentives will be offered to certain administrative employees in field offices, including those who are at least 55 and have at least 10 years of service with the company as of Dec. 31, 1991.
About 50 technical support positions will be transferred to Houston, and Tenneco estimates 15 people will be relocated to each of the new offices in Nashville and Pittsburgh. Tenneco said the changes should be complete by yearend, with relocations occurring in first quarter 1992.
MCDERMOTT TO SELL ASSETS
McDermott's restructuring plans include asset sales to reduce its present debt level by $450 million and increase equity by $100 million by Mar. 31, 1992.
Among assets targeted for sale are McDermott's equity investment in its Ebensburg, Penn., cogeneration plant, developed and owned by McDermott's Babcock & Wilcox unit. The plant started up earlier this year.
McDermott also plans to sell about 20 pieces of excess marine equipment, including older or less efficient construction vessels that will be sold for scrap or for uses other than marine construction.
McDermott expects the asset sales combined with operating cash flow should enable it to reduce its debt level by about $350 million by yearend 1992, with further reductions to come from issuing common shares.
Copyright 1991 Oil & Gas Journal. All Rights Reserved.