Phillips to Cut Work Force 7%-10% : Company Will Boost Budget for Oil and Gas Exploration

Phillips Petroleum, the nation’s 10th-largest oil company, Tuesday announced details of a plan to save $150 million to $200 million a year and secure its future at a time of uncertainty for oil prices.

The plan, which was disclosed in general terms last month, includes laying off 7% to 10% of the company’s 22,500 full-time employees but also refocusing its exploration program to spend more money looking for oil and gas, with emphasis outside the United States.

The program, to be implemented early this year, also calls for reducing debt, much of which was incurred in 1985 when Phillips fought off takeover attempts by corporate raiders T. Boone Pickens and, later, Carl C. Icahn.

In fact, the plan is the first that includes any expansion, or increase, in capital spending since Phillips was engaged in the takeover battles.

The firm has had high annual interest payments, which rose to $846 million in 1985 from $314 million in 1984 before the big debt was taken on. In 1986, the company’s debt service totaled $685 million, and a similar figure was paid last year, a spokesman said.

“I want to emphasize that cutting costs is only part of the effort we need to make to improve profitability. We’ve also got to take positive steps to bring in more dollars,” said Phillips Chairman and Chief Executive C. J. Silas.

The announcement came at a time of uncertainty for the oil industry. While prices improved above the July, 1986, low of $10 a barrel, they were still below the $30-a-barrel price of November, 1985.

Wouldn’t Say Where

Industry prospects hinged largely on members of the Organization of Petroleum Exporting Countries remaining faithful to production quotas.

A company spokesman declined to say where Phillips will increase its capital spending, but the company’s international operations were in the Norwegian and British sectors of the North Sea, Nigeria, Ivory Coast and Egypt. It also made offshore discoveries near China.

Domestically, the company was a big operator in the Gulf of Mexico and has had important natural gas wells in Louisiana, Texas and New Mexico.

Phillips planned to spend $800 million to $900 million this year looking for oil and gas, up from the $750 million to $800 million spent in 1987 and sharply above 1985’s figure of $655 million. Exploration budgets were slashed two years ago in the global environment of falling oil prices, said spokesman Jere Smith.

But exploration funds earmarked for 1988 were below those seen earlier in the decade when Phillips spent $2 billion in 1982 alone.

While capital spending plans were rising, the company also wanted to cut debt. Phillips was taking its debt down from the 1985 peak of $8.6 billion. Last year, it cut the debt by $400 million, to $5.8 billion.

The plan also included cutting personnel. Some 5,300 Phillips employees and 2,000 retirees live in Bartlesville, which was a small oil town until 1917, when Frank Phillips and his brothers drilled 70 wells in the area.

With a population of only 38,000, the town, also the birthplace of another oil magnate, J. Paul Getty, will keenly feel the layoffs. “It’s painful for the managers. They see these people on the street every day,” Smith said.

The severance package included three to four weeks’ pay for every year of service, depending upon age.