Organizational redesign doubles cost savings estimate for Apache
Houston-based oil and gas company Apache Corporation has revealed it will be doubling its estimate of annual cost savings stemming from recent organizational redesign.
According to Apache’s statement on Wednesday, the company now expects to deliver an annualized general and administrative (G&A) and level of effort (LOE) cost reduction in excess of $300 million, up from an original target of $150 million.
Around $225 million of the identified savings, which includes the impact of severance and reorganization costs, will be achieved in 2020.
The cost savings are related to Apache’s previously announced organizational redesign under which the company will undertake a comprehensive redesign of its organizational structure and operations to further align its work processes and cost structure with long-term planned activity levels.
John J. Christmann, Apache’s CEO and president, said: “We have made substantial progress on our organizational redesign initiative, which began in the fall of 2019. This is enabling more flexible resource allocation and increased collaboration while delivering cost savings that are critical in the current environment.
“Together with our talented team members and diverse asset portfolio, our new organizational structure is already enabling Apache to be more agile and respond quickly to changing commodity price environments.”
The organizational redesign effort was announced in October of 2019 to streamline the business and improve operational efficiencies, and the new organization went into effect on April 1.
Apache has also recently announced multiple actions in response to current challenges of the ‘historic’ plunge of oil prices and the coronavirus outbreak.
At the time, the company said that it had reduced its 2020 capital investment plan to a range of $1 billion to $1.2 billion from a previous range of $1.6 billion to $1.9 billion.
Additionally, Apache’s board of directors approved a reduction in the company’s quarterly dividend per share from $0.25 to $0.025.
The firm also opted to use the $340 million of cash retained annually from the dividend reduction to further strengthen its financial position.