British Petroleum to Sell Some Assets, Cut Jobs : Restructuring Announcement Fuels Speculation BP Will Bid for Unocal
British Petroleum Co. said Thursday that it will sell a small part of its oil and gas properties for $1.3 billion and is eliminating 1,700 jobs in a major reorganization designed to reduce costs and put more emphasis on exploration.
The company said the streamlining would reduce overhead costs by more than $150 million a year. “The rapid growth of the business in the past three years has prompted us to examine our current shape to make sure it keeps us competitive in a harsher business climate,” John Browne, the chief executive, said in a statement.
Renewed Speculation
The sale of assets to Dallas-based Oryx Energy Co. and the reorganization renewed speculation, however, that BP is positioning itself to make a major acquisition in the United States, most likely Los Angeles-based Unocal Corp.
“What (BP) lacks is the representation in refining and marketing in the U.S., particularly on the West Coast,” said Donald L. Fernow, a New York-based independent oil analyst. Strategically, Unocal fits BP’s needs, analysts said. Although it is not the only U.S. oil concern that would fit, “Unocal is of a size that (BP) could easily digest,” Fernow said.
BP officials have said they want a greater presence in the United States. The sale would provide BP with the cash to make an acquisition or to reduce its debt, which deepened earlier this year when BP borrowed $4.2 billion to repurchase some of its stock from Kuwait.
Unocal’s share price fell Thursday, mainly from anticipation that BP was about to announce an acquisition bid. BP said it had no immediate plan for a U.S. acquisition. In composite trading on the New York Stock Exchange, Unocal closed at $54.50, down $1.625.
Nevertheless, speculation persisted that BP eventually will make a move. The company operates about half the fields of Alaska’s Prudhoe Bay and needs West Coast refining capacity to save the cost of shipping crude to Gulf Coast refineries via the Panama Canal, said Greg Schwerdt, an analyst with Seidler Amdec Securities of Los Angeles.
“Unocal has refineries and marketing on the West Coast, so an acquisition of Unocal makes a large degree of economic sense,” he said.
Some Analysts Disagree
Analysts also said Unocal would meet BP’s desire for a natural gas acquisition in the United States and for additional Gulf Coast exploration properties. Unocal officials would not comment on the speculation.
Not all analysts believed that the Oryx deal was a prelude to a BP acquisition. “I don’t believe the two events are necessarily related,” said Bernard J. Picchi, an analyst with Salomon Bros. in New York. “I feel it’s a decision independent of what they do with the cash, a prudent business decision by BP to cut back on their higher-cost assets,” Picchi said.
The Oryx purchase includes a small portion of North Sea reserves and interests in Indonesia, Dubai, Ecuador, Colombia, Gabon and Italy. Oryx, formerly Sun Exploration and Production Co., which was spun off last year from Sun Oil Co., said the additions will increase its size by a third. “This is very significant to us,” said Oryx spokesman Tom Sullivan. “It fulfills our desire . . . to get back into the international arena.”
The reorganized BP will have three regional operating companies, an international technology division and a global gas unit, the company said.
BP has about 126,000 employees worldwide. It said it plans to eliminate about 280 jobs at the Houston office, and expects to take a charge against earnings of more than $100 million from the job reductions, which it said will come mainly from early retirements and voluntary severance agreements.
