By Christopher M. Matthews
Exxon Mobil Corp. said 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
The steep job cuts, which follow similar layoff announcements by
rivals Royal Dutch Shell PLC, BP PLC and Chevron Corp., are part of
a wholesale effort by the beleaguered industry to restructure
itself to weather the worst downturn in a generation. In all, big
oil producers and services firms are collectively shedding more
than 50,000 jobs.
Exxon is in the midst of one of its toughest stretches ever
after Chief Executive Darren Woods, who took over in 2017, embarked
on an ambitious plan to reverse the company's declining fortunes by
dramatically increasing oil production by 2025. In hindsight,
Exxon's heavy spending on new output now appears spectacularly
ill-timed and has put its finances under severe stress.
New lockdowns in Europe in response to climbing Covid-19 cases
are damping hopes that the global economy will regain its footing
this year, severely crimping demand for oil and gas. That is
combining with l onger-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.
Exxon 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.
Noah Barrett, an analyst at Janus Henderson Investors, said the
severity of the industrywide job cuts suggest that they are not
temporary, but instead a signal that the companies are
repositioning themselves for an uncertain future.
"It's maybe a sign of a greater appreciation that the impact of
this downturn is more structural than cyclical," Mr. Barrett said.
"Even if demand improves, even if we get some type of vaccine, on a
go forward basis, the world may just need less oil."
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.
The International Energy Agency said earlier this month that a
prolonged pandemic could eliminate more than 4 million barrels of
oil a day from global demand for much of the decade. The world
consumed nearly 100 million barrels a day before the pandemic.
U.S. oil prices fell to $36 per barrel Thursday, their lowest
prices since June.
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.
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
Shell said in September it would cut up to 9,000 jobs in a broad
restructuring, and BP plans to cut nearly 10,000 jobs, or 14% of
its workforce, and freeze pay increases for senior level managers.
U.S. rival Chevron 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
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 a
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
Analysts predict that Exxon will have to continue borrowing
money to cover its dividend next year, let alone grow
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 while investment in
production shrinks, 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
(END) Dow Jones Newswires
October 29, 2020 18:10 ET (22:10 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.