XOM Exxon Mobil Corp

By Christopher M. Matthews 

Exxon Mobil Corp. said Thursday that it expects to shed as much as 15% of its global workforce over the next year, including 1,900 jobs in the U.S., as the coronavirus pandemic continues to batter the oil industry.

The struggling oil giant announced the U.S. job cuts Thursday, and in response to questions added that it anticipates it will eliminate around 14,000 positions, including employees and contractors, through 2021. It said most of the cuts to U.S. employees would come from its management offices in Houston, and that it expects the reductions will be both voluntary and involuntary.

Exxon has said it is conducting a global review of its 74,000 employees and more than 13,000 contractors, and previously announced 1,600 layoffs in Europe and voluntary layoffs in Australia.

Exxon made the latest announcement a day before it is set to report quarterly earnings. Analysts expect the company to post its third consecutive quarterly loss for the first time on record.

Despite a modest economic recovery, oil-and-gas companies are being hammered by a sustained drop in consumption of gasoline and jet fuel as millions of people work from home and avoid driving and flying during the pandemic.

New lockdowns in Europe in response to climbing Covid-19 cases are damping hopes that the global economy will regain its footing this year. That is combining with longer-term concerns about future competition from renewable energy and electric vehicles to drag down the value of many oil-and-gas companies to decade lows.

The oil-and-gas industry has shed tens of thousands of jobs, and many of Exxon's peers have already announced significant layoffs.

Royal Dutch Shell PLC said in September it would cut up to 9,000 jobs in a broad restructuring, and BP PLC plans to cut nearly 10,000 jobs, or 14% of its workforce, and freeze pay increases for senior level managers. U.S. rival Chevron Corp. has said it would reduce its 44,679 workforce by as much as 15%.

Exxon's shares have fallen more than 50% this year, and the company has had to borrow billions of dollars to pay its costly dividend. Its shares were up more than 3% Thursday following the layoff announcement.

Shell and BP cut their dividends earlier this year to shore up their finances. Exxon and Chevron said this week they would maintain their current dividend payments. Exxon's dividend, which currently yields around 10%, costs the company about $15 billion per year.

Exxon said earlier this year it would cut its capital expenditures by $10 billion to around $23 billion and has slowed projects from West Texas to Africa. It suspended matching contributions to U.S. employees' retirement plans in October.

Exxon struggled prior to the pandemic after U.S. shale producers unleashed vast amounts of oil and gas, helping push down global prices. It has been six years since Brent oil, the global benchmark, topped $100 a barrel.

Between 2009 and 2019, Exxon spent $261 billion on capital expenditures, while its oil and gas production remained flat, and it added $45 billion in debt, according to investment bank Evercore ISI. Its return on capital employed in 2009 was 16%; last year, it was 4%.

Chief Executive Darren Woods, who took over in 2017, hoped to reverse the company's fortunes by dramatically increasing Exxon's oil production by 2025, a plan that has been put in jeopardy by the pandemic.

Analysts predict that Exxon will have to continue borrowing money to cover its dividend next year, let alone grow production.

In a message to employees last week, Mr. Woods said the company faces significant headwinds and would succeed by becoming more efficient and cutting costs, including jobs. But Mr. Woods said oil demand will ultimately continue to grow, justifying Exxon's long-term plans.

"Even accounting for the short-term demand impact of Covid-19, the investment case is still clear," Mr. Woods wrote.

Write to Christopher M. Matthews at christopher.matthews@wsj.com

(END) Dow Jones Newswires

October 29, 2020 14:33 ET (18:33 GMT)

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