Enterprise takeover defense strategy falls short of expectations

LONDON, Feb. 5 -- Enterprise Oil PLC has unveiled its profits for 2001 and a strategy designed to deter a takeover bid expected from the Italian integrated company ENI SPA, Europe's fourth largest oil company.

However, the proposals outlined by Enterprise's CEO Sam Laidlaw, who took over at the company last November, have been described by financial analysts who have been briefed by the company as falling short of expectations and still leaving the company vulnerable.

Enterprise reported a 34% drop in 2001 profits, after tax and excluding one-time items, to £297.4 million, from a restated £447.6 million in 2000.

Enterprise's 2001 production slumped to 242,976 b/d, from 280,563 b/d in 2000, because of technical problems and deteriorating reserves in North Sea fields. Average output this year is expected to rebound by 2.9% to 250,000 b/d.

Laidlaw said Tuesday that his strategy is designed to move the business forward and create consistent value for investors. He plans to cut $43 million/yea in costs, shedding 100 jobs in London and an unspecified number overseas. Enterprise will also increase its stakes in North Sea and Brazilian oil projects and review the future of its Iranian assets in a drive to improve returns.

Laidlaw said Enterprise can grow by 7%/year, more than the goals of bigger rivals such as BP PLC and TotalFinaElf SA.

He said that the company would create a stronger culture of performance, setting challenging but achievable targets such as rebalancing its reserves growth model, maintaining a focused high-impact exploration program at lower cost, rehabilitating fields, and targeting acquisitions.

He said that the business would be restructured along more entrepreneurial lines by moving key skills closer to the opportunities, and strengthening accountabilities.

Laidlaw also announced several steps to take the business forward. These include the purchase of Odebrecht Oleo e Gas Ltda.'s Brazilian E&P assets for $153 million, bringing Enterprise's stake in Enterprise's key operated asset Bijupira-Salema up to 80%, and adding three blocks to the group's exploration portfolio in Brazil.

It bought CNRI Ltd.'s interest in Pierce field, increasing its equity in the UK North Sea asset to 92.52%. The company also announced plans for a redevelopment of the field utilizing water injection to increase recovery rates.

Enterprise bought more shares in the Russian Khanty Mansiysk Oil Corp. to bring its share of the company, subject to certain preemptive rights, up to 46.1% from 27%, and announced a gas marketing alliance with Innogy PLC covering North West Europe.

Enterprise also may end its involvement at South Pars gas field in Iran if it cannot negotiate an improvement in the terms over the next few weeks.

Laidlaw said, "Our exploration record in 2001 was not up to the standard to which we aspire and against which we have historically delivered. We are reshaping the function and have implemented new processes to ensure that we drill our best prospects, manage our exposure to deliver maximum returns, and focus our expenditure on the wells themselves. As to meeting our production targets, we are also sharpening our production forecasting techniques and will continue to increase the concentration of resources on the timely delivery of our projects."

Shares in Enterprise fell 9 pence, or 1.5%, to 598 pence on the London Stock Exchange, valuing the company at £2.9 billion. The stock fell 15% in the year to Jan. 8, when the company announced it was an acquisition target. It has increased 20% since then.