End of month deadline for oil merger

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The Independent Online
PIERRE JUNGELS, the chief executive of Enterprise Oil, yesterday gave one last push to its merger talks with the rival exploration group Lasmo, saying it would be a good move and placing a deadline of the end of this month for a decision.

He was speaking as the oil price sailed back above $13 a barrel - its highest since November - after oil producers meeting in the Hague pledged to cut global output by 2 million barrels a day.

The sharp fall in oil prices last year was reflected, however, in Enterprise's results. It plunged into loss and passed its final dividend, blaming the one-third decline in the price of a barrel in 1998.

The City is sceptical of the benefits of a merger between Enterprise and Lasmo. But Mr Jungels said that he was convinced of the merits of a link-up because the two companies would fit together well strategically and complement each other in terms of cash flow, exploration programmes and geographic spread.

Sir Graham Hearne, the chairman of Enterprise, added that a merger could produce "significant synergies" but Enterprise refused to spell out how big these would be or how many more jobs would disappear.

The two companies have each imposed swingeing job cuts. Enterprise has cut its workforce back to 650 - a reduction of 200 - in a bid to achieve savings of pounds 20m.

Mr Jungels stressed that Enterprise had a viable future as an independent exploration company even if the Lasmo talks ended in failure.

Enterprise plunged to a pounds 19.5m loss last year compared with a pounds 255m profit the previous year. Announcing that the final dividend was being scrapped, leaving the payout for the year at 6.9p compared with 17.4p in 1997, Sir Graham said 1998 had been "the toughest year in the company's history".

Turnover fell by 40 per cent to pounds 563m, three-quarters of the decline being due to lower oil prices and the remainder to lower production because of asset sales.

Analysts had anticipated that Enterprise would pass its final dividend. The shares climbed 6 per cent on the back of the recovery in oil prices in the last few weeks and relief that losses were not greater.

Mr Jungels said Enterprise was looking actively at pooling some of its North Sea assets. It is also in discussions about buying back a large offshore field in Iran and does not expect to hit any problems with the US, which has threatened sanctions against oil companies doing business with Tehran.

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