Why does OSX keep dropping? Because oil companies to continue to hack away at their capex budgets. BP/Amoco slashing another 3,000 jobs and will chop 1999 E&P outlays by 40%.
BPAmoco cuts more jobs
CNNfn
LONDON (CNNfn) - BPAmoco, the world's third-largest oil company, is cutting a further 3,000
jobs in a bid to deliver its $2 billion cost-savings target a year ahead of schedule.
The extra cuts come on top of the 7,000 job cuts already planned and means the newly-created
group is now cutting a tenth of its global workforce.
Chief executive, John Browne, announced the layoffs at the same time as he unveiled fourth
quarter pre-exceptional replacement cost profits of $875 million, down from $1.382 billion last
time. These results were at the top end of analysts' expectations.
BPAmoco shares were trading slightly lower in London, down 0.88 percent at 850 pence, in
early afternoon trading.
This figure excludes a $351 million one-time charge, including a $200 million write-off of its
investment in troubled Russian oil company Sidanco. Merger costs amounted to $45 million in
the quarter.
Last year was one of the worst ever for the oil industry, with oil prices sinking to a 25-year low
in real terms.
"Certainly 1998 was worse than we expected. We saw the oil price falling at the beginning of the
year and we took quick action to recognize that falling price and it kept falling," Browne told
CNN.
The company blamed the low oil price and increased competition for the extra layoffs. "It is sad
and regrettable that we are having to let very good staff go. But putting together two organizations
means that we need fewer people and that situation is exacerbated by the continuing low oil price
and hostile environment," said Browne.
Brown said BPAmoco was working to an assumed price of between $10 to $11 per barrel for
1999.
The news came on the same day that the oil price dipped below $10. Benchmark Brent crude fell
to $9.92 per barrel. This is a worrying trend for all oil companies, who were hoping that the price
has stabilized.
Oil stocks are still building as production cuts by the oil cartel, the Organization of the Petroleum
Exporting Countries (OPEC), are failing to stick. A relatively mild winter in the northern
hemisphere has compounded the problem, as less oil is required for heating.
On top of the accelerated cost-savings, the group is also cutting its capital spending by $3.4
billion to $7 billion for 1999. The oil giant will also slash exploration and production expenditure
by 40 percent to $3.6 billion.
Browne said he expected the company to take a restructuring charge of around $1.5 billion in
1999 to cover the 10,000 job losses.
Full year profits for 1998 fell 33 percent to 4.651 billion, before exceptional charges of $652
million.
Publication Date: February 17, 1999
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