Chevron to cut up to 7,000 jobs as profits slide

Chevron Corp. said it’s cutting about 10 per cent of its workforce and scaled back its long-term production target amid the worst oil-market slump since the 1980s even as the company posted thirdquarter profit that surpassed analysts’ expectations.

Chevron said in a statement Friday that it will eliminate 6,000 to 7,000 jobs, the deepest cuts since the 2001 Texaco merger that created the company in its modern incarnation. Those numbers include a workforce reduction of 1,500 announced earlier this year.

Specifically in Canada, Chevron said it had recently laid off 130 people as part of its restructuring effort. It did not provide any more details on its “anticipated global workforce reduction through 2018.”

“We expect capital and exploratory expenditures for 2016 to be US$25-28 billion, roughly 25-per-cent lower than this year’s budget,” CEO John Watson said.

“We expect further reductions in spending for 2017 and 2018, to the US$20- to US $24 billion range, depending on business conditions at the time. With the lower investment, we anticipate reducing our employee workforce by 6–7,000.”

Oil and gas output will rise by 13 per cent to 15 per cent through the end of 2017, rather than the previously forecasted 20-per-cent production growth, the company said.

The company earned US$1.09 a share, US33 cents more than the average of 21 analysts’ estimates compiled by Bloomberg. Profit from refining oil into fuels jumped 59 per cent to US$2.2 billion.

Spending in 2016 will be 25-per-cent less than this year, Watson said in the statement.

“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 favourably,” Brian Youngberg at Edward Jones & Co. said in an interview.

The price of Brent, the benchmark crude used by most of the world, declined by half since June 2014 to an average of US$51.30 during the July-to-September period. After a brief rebound, oil entered its second bear market in a year after an avalanche of supplies from U.S. shale and the Persian Gulf flooded markets at a time of faltering demand growth in China and other developing economies.

“We expect further reductions in spending for 2017 and 2018,” Watson said. “We are focused on improving results by changing outcomes within our control.”

Chevron’s stock has fallen 19 per cent this year. Every US$1 decline in the price of Brent crude reduces Chevron’s cash flow by US$325 million to US$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-percent drop in Brent crude during the past year represents the steepest 12-month decline since 1988.

Profit fell to US$2.04 billion from US$5.59 billion, or US$2.95, a year earlier, Chevron said.