October 15, 1998 --- Vol. 4, No. 50October 1998

Alaska largely spared in ARCO’s $500 million, 2-year cost savings plan

Atlantic Richfield Co. will cut costs by $500 million over the next two years, ARCO said today, a month after it announced it would be making worldwide budget reductions due to low oil prices.

The bad news is, the cost cuts will include the elimination of 900 jobs from the company’s work force of 20,000 people. The good news is, Alaska will be largely spared from the work force reductions, which are “principally in the LA area and Plano, Texas,” ARCO spokesman Lee Tashjian told PNA.

ARCO Alaska Inc.’s only cost cut to date was a tentative announcement Sept. 16 that a 10 percent drop in spending levels from $550 million in 1998 to $500 million for 1999 was likely. Spending levels for Alaska in 1999 have since been restored to $550 million, ARCO Alaska spokesman Ronnie Chappell told PNA today.

“We will be doing some restructuring of our operations here in Alaska,” said Chappell, “and some jobs will be eliminated.” But because ARCO Alaska has kept its per barrel operating costs flat, it won’t be seeing the same kinds of cuts that other ARCO operations are seeing, he said.

ARCO Chairman Mike Bowlin said the company can’t afford to cut back in Alaska, Bloomberg Energy reported today. Tashjian confirmed Bloomberg’s report. ARCO’s costs for bringing oil to market are the lowest in Alaska, where the company is working to reverse production declines and boost reserves, said Bowlin.

ARCO is looking to reduce its cost per barrel to the lower fourth among oil companies in all its projects, he said, and will abandon efforts in a number of countries where it cannot achieve a leading position. Bloomberg said Bowlin would not comment on which international operations might be dropped.

About $330 million of the $500 million in cost savings will affect company operations that find and produce oil. Of that, $150 million will come from international operations.

Michael E. Wiley, ARCO president and chief operating officer, said in the company’s statement today that ARCO is “seeking the same level of performance in our international activities that we have achieved in ARCO’s Alaska, Lower 48, and Gulf of Mexico operations. All of these are best quartile operators."

5-5-3 retirement plan

In addition to the elimination of approximately 900 administrative and technical jobs — 450 at Plano and 270 at company headquarters in Los Angeles — ARCO will close 20 small offices, which are located primarily outside the United States, and downsize a number of other offices.

Most of the jobs will be eliminated by firings rather than attrition or early retirement, Bowlin told employees at the initial Sept. 16 announcement. However, a letter describing a 5-5-3 retirement package went out to employees system-wide recently, which would give retirees 5 additional years on their retirement, extend their current age in ARCO’s data banks by 5 years and give them 3 weeks of paid vacation for every year they have worked for the company.

The package is involuntary, said Tashjian.

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