Marathon organisational and business process changes to increase
efficiency, profitability and shareholder value
Posted: 4 September 2003
Measures expected to result in annual pre-tax savings
of more than $65 million
Marathon Oil Corporation is implementing an organisational realignment
plan and business process improvements that will further enable
Marathon to focus and execute on its core business strategies, providing
superior long-term value growth.
These changes are expected to result in annual pre-tax cost savings
in excess of $65 million. Approximately 45 percent of the projected
savings will result from business process improvements and organisational
efficiencies, with the remaining portion from the elimination of
approximately 265 staff positions, primarily at the company's Houston
headquarters and U.S. production business units. Implementation
of these actions has begun, and it is anticipated that most of the
changes will be completed by year-end.
The actions announced today are the result of a recently completed
business transformation study of Marathon's existing operations
that identified ways to improve the company's competitiveness. Key
actions being taken are:
- Streamlining the company's business processes and services,
and realigning reporting relationships to reduce costs across
all organisations
- Consolidating Marathon's U.S. production organisation, which
will be headquartered in Houston
- Reducing or eliminating a wide range of activities, and their
associated costs, that are not essential to achieving the company's
objectives
"The plans and actions we have announced today are part of
a continuum of steps Marathon has taken during the past two years
to improve our competitiveness and enhance shareholder value,"
said Clarence P. Cazalot, Jr., Marathon President and CEO.
"During this period of time, we have grown our proved reserve
base, expanded our international portfolio with new core areas,
realised exploration success, advanced our integrated gas strategy
and sold non-core assets. However, while we have continued to improve
operations, our current overhead cost structure is too high. The
actions we have announced today will reduce costs, make us more
efficient, improve our business focus and help us achieve the full
potential of our strategic plan."
Marathon anticipates these activities will result in a pretax charge
of approximately $40 million. Approximately 40 percent of this charge
is expected to be recorded in the third quarter of 2003. The remainder
will be recognised when incurred, primarily in early 2004.
Marathon's current U.S. production organisation will be consolidated
into two business units, Northern and Southern, headquartered in
Houston. The company expects to maintain field personnel in its
production offices located in Anchorage, Alaska; Cody, Wyoming;
Lafayette, Louisiana; Midland, Texas; and Oklahoma City, Oklahoma.
Existing production field offices will be retained with few positions
impacted.
The former business unit office in Denver, Colorado, will close.
Approximately 230 positions from these offices will be transferred
to Houston. This consolidation will not affect the company's existing
production operations in these geographic areas.
By consolidating production operations into Houston, the company
will concentrate operational management and technical expertise
in a single location. This will provide economies of scale, enhance
knowledge transfer and sharing of best practices, and improve Marathon's
ability to maximise the potential of its U.S. production operations.
The consolidation will not impact Marathon's international production
operations.
"Although not included in the projected savings announced
today, we anticipate further cost reductions from either outsourcing
certain services and functions, or identifying more efficient ways
of performing the work ourselves," added Cazalot. The company
plans to assess strategic outsourcing opportunities of many support
functions including information technology, finance and accounting,
procurement, human resources and administrative services.
This assessment will be coordinated with the company's 62-percent
owned downstream subsidiary, Marathon Ashland Petroleum LLC, which
is undertaking a similar analysis.
For more information see http://www.marathon.com/.
Posted by Richard Price,
Editor Pipeline Magazine
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