Fluor Agrees to Sell Oil and Gas Operation

Fluor Corp. said Thursday that it has agreed to sell its remaining oil and gas operations to a subsidiary of Houston Industries Inc. for about $190 million--almost 25% below book value.

The deeply discounted price underscores Fluor’s drive to shed itself of what it calls non-essential businesses, eliminating expenses while raising cash to reduce its debts.

The sale moves the giant, Irvine-based engineering and construction company a step closer to completion of the “asset-redeployment” plan it announced more than a year ago amid mounting financial woes.

Fluor officials said that the sale of Denver-based Fluor Oil and Gas to Primary Fuels Inc. will represent the second-largest divestment of assets under the redeployment plan, which company officials hope will lead to improved profits. In August, Fluor sold its 162-acre Irvine corporate headquarters site to Trammell Crow Co. of Dallas for $340 million.

In a statement issued Thursday, David S. Tappan, Fluor’s chairman, said that further “restructuring actions” are likely to occur before Oct. 31, when the current fiscal year ends.

The final price for the oil operations subsidiary won’t be known until negotiations end, Fluor said. The company also said that the sale cannot be completed until Oct. 31, the end of a 30-day waiting period required by law. According to Fluor, net proceeds from the sale will total approximately $170 million and will be used to reduce the company’s debt.

Despite lower year-to-year revenues in 1984, Fluor’s oil and gas operations resulted in net earnings of $29.5 million, contrasted with $15.7 million in 1983.

Nevertheless, sale of the profitable oil and gas operations “will allow greater concentration on Fluor’s two core businesses, engineering and construction and natural resources management,” Tappan said. “It also improves cash flow by eliminating capital expenditure requirements associated with oil and gas investments.”

Glen Walker, a spokesman for Houston Industries, said that output from the oil and gas operation will be used to power generating plants owned by another of its subsidiaries, Houston Lighting and Power.

“It will provide additional oil and gas reserves for Houston Lighting and Power, but the primary reason (for the purchase) was that it was a good deal,” he said.