American energy company Chevron Corp. said it is cutting about 10% of its workforce amid the worst oil-market slump since the 1980s while Exxon Mobil Corp. reported a 47% loss in third-quarter profit by low crude prices.
Chevron said in a statement Friday that it will eliminate 6,000 to 7,000 jobs, the deepest cuts since the 2001 Texaco Inc. merger that created the company in its modern incarnation. Those numbers include a workforce reduction of 1,500 announced earlier this year, Bloomberg reported.
Profit from refining oil into fuels jumped 59% to $2.2 billion. Spending in 2016 will be 25% less than this year, said Chevron chairman and chief executive officer John Watson in the statement.
“We expect further reductions in spending for 2017 and 2018,” Watson said. “We are focused on improving results by changing outcomes within our control.”
The company earned $1.09 a share, 33 cents more than the average of 21 analysts’ estimates compiled by Bloomberg.
“The concern for investors has been that they’ve been outspending cash flow, so anything they can do to alleviate those concerns will be looked upon favorably,” Brian Youngberg, an analyst at Edward Jones & Co. in St. Louis, said in an interview.
Chevron’s stock has fallen 20% this year, putting it on pace for the worst annual performance since 2002. Every $1 decline in the average quarterly price of Brent crude reduces Chevron’s cash flow by $325 million to $350 million. The company is expected to outspend cash flow until at least the end of 2016, according to the average of six analysts’ estimates in a Bloomberg survey.
The almost 45% drop in Brent crude during the past year represents the steepest 12-month decline since 1988, according to data compiled by Bloomberg.
Net income fell to $2.04 billion from $5.59 billion, or $2.95, a year earlier, Chevron said.
Meanwhile, Exxon said crude decline hurt its oil and gas business but also boosted profit margins in refining by lowering feedstock costs.
