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BPAmoco cuts more jobs
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February 17, 1999: 10:08 a.m. ET
World's third-largest oil group cuts tenth of workforce as oil price slumps
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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.
Browne 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.
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BPAmoco
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