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Chevron, ExxonMobil cut costs, jobs amid plunging revenues

By on November 4, 2015

Chevron Corporation at the weekend joined other international oil companies (IOCs) planning to cut jobs to stay ahead of the plunging revenues caused by the slump in crude oil prices as the company said it would cut up to 10 per cent of its workforce.

Chevron, along with ExxonMobil Corporation have also unveiled plans to cut future capital spending in a bid to weather a 50 per cent drop in oil prices over the past one year.
Despite the slump in crude oil revenues, both IOCs managed to make a profit during the 2015 third quarter, according to the financial results released at the weekend.

The profits were attributed to the companies’ refining operations and chemical divisions, which are helped by low oil prices.

However, the Wall Street Journal reported that the two biggest US energy companies were forced to slash costs to stay ahead of plunging revenues from their oil-and-gas production businesses.
Chevron, the second-largest energy company in the US by revenue, said it would lay off between 6,000 and 7,000 employees.

The San Ramon, Califonia-based company is trying to dial back its capital spending by 25 per cent next year to between $25 billion and $28 billion.

Chevron’s Chief Executive, John Watson told analysts that job reductions would be concentrated in Australia as the company completes construction of two giant, liquefied natural-gas projects.

According to him, some cuts also will come from West Africa as Chevron reorganises operations in Angola.

Chevron also predicted further spending cuts in 2017 and 2018 that would bring its capital expenditures down to as low as $20 billion. That is a dramatic shift from a year ago, when Chevron was booking the most profit per barrel among the world’s top publicly-traded oil firms, with its sights set on generating more cash than larger rivals Exxon and Royal Dutch Shell Plc.

Still, results for the quarter fell less than Wall Street had expected as Chevron reported earnings of $2.04 billion, or $1.09 a share, down 64 per cent from $5.6 billion a year earlier.

Revenue for the period dropped 37 per cent to $34.32 billion.
“The grim reality is that when you have prices in the mid-$40s as we did in the third quarter, it is tough sledding,” Watson said, adding that “it is a challenge, but we are taking it on.”

Chevron, for example, revised its oil production target for 2017 down by between 100,000 and 200,000 barrels a day, Mr. Watson told analysts.

The company said it still plans to be able to meet its dividend payment with cash flow for 2017.

Exxon confirmed it had cut third-quarter capital spending by 22 per cent from the prior year to $7.67 billion. As costs to drill and pump oil and gas continue to fall in the low-price oil environment, the biggest US oil company said it expected to shave another $1 billion off its capital expenses and $7 billion from its operating expenditures.

“We are always working to reduce the structural cost on our business,” the company’s head of investor relations, Jeff Woodbury, told analysts.

The Irving, Texas, company reported a profit of $4.24 billion, or $1.01 a share, down 48 per cent from $8.07 billion a year prior. Revenue fell 27 per cent to $67.34 billion.

Exxon’s profit in the exploration and production division fell 79 per cent to $1.36 billion in the latest quarter, and its US division became unprofitable, booking a loss of $422 million.

Still, with fatter profits from its fuel refineries that doubled to $2.03 billion, Exxon managed to beat Wall Street expectations.

 

[ThisDay]