Conoco CEO: 'I blame myself for not paying attention'

ConocoPhillips' CEO Ryan Lance said to employees on Thursday, that he was forced to reduce the number of workers by up to 25 percent because the U.S. energy producer became less competitive due to its focus on acquiring smaller competitors.

Lance spoke to employees at a town-hall meeting, a day after sending them a video informing them of the job cuts. The job cuts are part of a broader restructure focusing on cost reductions.

The company announced that it would start laying off employees as soon as November 10 to those who watched the meeting live online or in person on Thursday morning at its Houston headquarters.

Lance stated that he prioritized recent purchases over cost control. Lance stated that the cost and competitiveness of the business took a second place to the initiatives and things the company was doing for real, important reasons.

Lance, the 13-year-old leader of the company, said: "I blame myself for not paying enough attention to the important things and keeping other things in the forefront."

Lance said that he had to pay closer attention to the health and sustainability of the business.

Conoco purchased Marathon Oil, a smaller competitor, for $22.5 billion last year. Concho Resources was purchased for $9.7 Billion in 2021. Shell Permian assets were also acquired for $9.5 Billion. In the last two years, the energy industry underwent the biggest consolidation since a generation.

Lance said to employees at the town hall: "We probably slipped a bit on the cost front... perhaps we could have done it better."

The S&P 500 Energy Index fell 2.4% on Friday while the shares of the US's third largest oil producer dropped 3.7%.

Ed Hirs is an energy fellow from the University of Houston. He said that the extent of the job reduction was surprising to the industry.

A Conoco employee who was present at the town hall meeting on Thursday said, "It's like Lance has taken his hands off of the steering wheel."

Source, who refused to be identified because they weren't authorized to speak publicly, stated that they appreciated Lance's honesty, but felt he avoided certain questions.

"Lance did not directly answer the questions, but rather danced around them." The source also added that the situation did not seem to be any clearer or more transparent after the townhall.

During the town hall on Thursday, an employee asked about how people will be laid off with dignity and fairness. Sources said that the atmosphere was one filled with frustration and disappointment.

This decision is important for the long-term success and growth of our company. Lance, in a Friday statement, said that he and his executive leadership team take the decision very seriously. "I don't undervalue the impact it has on our employees, their families, or the company as a whole," he added. Although management changes will be announced in mid-September there won't be any changes to the executive team. A source familiar with the situation said that while the changes to the management team are expected, the team itself is not going to change.

According to LSEG, Simon Wong, portfolio manager for energy at Gabelli, has a 0.05% stake or $50.8 million in ConocoPhillips.

TOUGH JOB MARKERS

Conoco's job cuts are the latest blow to a major oil company. The industry is facing lower prices and rising costs as OPEC+ increases production in an effort to regain market shares.

The reduction of U.S. workers undermines President Donald Trump’s promise to boost U.S. production of oil and gas and the country's influence on global markets.

Lance stated in a video message on Wednesday that Conoco’s controllable cost has risen from 2021-2024 by $2 per barrel, or $13, which makes it more difficult for the company compete.

"That's been our problem." "Unit cost is increasing faster than production and revenue, which is eating away at our margins. You can't allow that to continue forever," Lance said in Thursday's Town Hall.

Conoco has set a goal of saving $1 billion from its purchase of Marathon Oil in the past year. The company also wants to save an additional $1 billion through layoffs, cost-cutting and other measures that target lease operations, transport and processing.

Two sources reported that Conoco hired Boston Consulting Group, a management consulting firm, to provide advice on its restructuring and layoffs program. This was internally referred to as "Competitive edge."

A second source who had left ConocoPhillips in the last month said, "Everyone scrambled to find something else because we didn't know what would happen and who would be let go. There are many positions within the facilities which do not need be there." (Reporting and editing by Liz Hampton and Simon Webb in Houston.

(source: Reuters)