Exxon to Slash Up to 15% of Global Workforce, Including 1,900 Jobs in U.S. -- Update
October 29 2020 - 2:48PM
Dow Jones News
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)
Copyright (c) 2020 Dow Jones & Company, Inc.
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