Phillips and Texaco Act to Restructure : Cutting Work Forces and Selling Assets to Trim Costs, Pay Debt
Texaco and Phillips Petroleum, in unrelated moves Tuesday, said they intend to shrink their work forces and sell assets valued in the millions to streamline operations and, for Phillips, to help pay down some debt it took on during two recent takeover battles.
Phillips offered 2,400 employees, or 10% of its domestic work force, early retirement in an effort to reduce operating costs by $200 million this year and $300 million in subsequent years. The company said it will sell its 25% interest in the Coal Oil Point oil field in the Santa Barbara Channel as part of a $2-billion asset divestiture.
Over the last eight months, Phillips, based in Bartlesville, Okla., took on $4.5 billion in debt to ward off takeover threats from Mesa Petroleum Chairman T. Boone Pickens Jr. and financier Carl C. Icahn.
Texaco said it will sell between $300 million and $400 million of assets acquired when it bought Los Angeles-based Getty Oil for $10.1 billion last year that “don’t fit” with Texaco’s gas and oil operations.
Layoffs May Be Necessary
The company has already disposed of about $2.1 billion of former Getty assets, including the Entertainment and Sports Programing Network, or ESPN, which was sold to American Broadcasting Cos. for $202 million.
In meetings with employees Tuesday in Bartlesville, Phillips Chairman and Chief Executive C. J. Silas said: “Phillips is going to be a very different company.” He said that, “though we won’t be the same in many respects, we’ll remain a viable competitor in the marketplace.”
A Phillips spokesman said many people were expected to take advantage of the early retirement offer, which adds three years to the age and serverance of employees age 58 and older. Layoffs may be necessary if too few employees retire, the spokesman said.
Phillips also said it will sell its mining and chemicals business in North Dakota, its office building in Denver and some undeveloped land in west Houston. The company previously announced that it will sell its 4,000 acres of geothermal property in Geyser Field, north of San Francisco.
Phillips said the retrenchment, which involves the sale of about 12% of its assets, is needed to pay off debt that it took on last December and again in March to ward off two separate takeover attempts.
Texaco, at its annual shareholders meeting in Atlanta, said it will sell 77,000 acres of orchards and vineyards in the San Joaquin Valley that are owned by a former Getty subsidiary, Minnihoma Land & Farming Co. of Bakersfield.
Texaco also will sell Hawkeye Chemical Co., an Iowa-based fertilizer manufacturer, and its mining operations, which include coal and uranium mines in the United States and Canada, a gold mine in Utah and a copper mine in Chile. Also for sale are 77,000 acres of timberland in Louisiana, a spokesman said. Negotiations to sell some of the businesses are under way, he added.
Texaco expects to trim its work force by about 3,000--to 56,000--by the end of the year, mainly through asset sales and early retirements, the spokesman said. After the Getty merger a year ago, Texaco had 76,000 employees.
John K. McKinley, Texaco chairman and chief executive, said the company would continue to focus on its oil and gas operations and sell unrelated businesses, a strategy being pursued by many oil companies.
He said that Texaco has closed six of 15 American refineries and four of 10 European refineries due to a drop in demand for petroleum-related products. He said the company will close some service stations while “increasing volume in preferred markets.
