ConocoPhillips announces it will reduce its workforce by 20-25%. Shares fall
ConocoPhillips, the U.S. oil-and-gas producer, will reduce 20-25% its workforce in a restructuring that is expected to take place over the next few months, according to a spokesperson for the company. Five sources had previously reported that CEO Ryan Lance revealed his plans via a video message sent out early on a Wednesday morning.
The shares of the third largest U.S. oil company fell 4.5%, to $94.55, compared with a 2.6% decline in the S&P 500 Energy Index. ConocoPhillips, as well as its competitors, have been under pressure from the fall in oil prices this year. They were forced to reduce staff, cut capital expenditure, and reduce drilling. In February, U.S. energy giant Chevron announced that it would cut up to 20% from its workforce. Other energy companies such as SLB, BP and SLB have also reduced their workforce.
Lance says in a video that was heard, "I understand these changes create uncertainty and are unsettling."
Lance stated that the cost of a barrel has risen by $2, which makes it more difficult for the company's competitors to compete. Lance said that controllable costs have risen from $11 per barrel to $13 in 2024.
Lance explained that as we streamline our organisation and remove work from the system, there will be fewer roles.
Most job cuts will be made by the end of the year
ConocoPhillips has identified over $1 billion worth of cost-savings and margin improvement opportunities in the last month. This is on top of its more than 1 billion dollars of cost savings that it achieved from its purchase of Marathon Oil.
Around 2,600 to 3,250 people will be affected by the company's global workforce of 13,000 employees. ConocoPhillips' Dennis Nuss, a spokesperson for the company, said that most of the cuts would be made by the end of this year.
Two sources stated that the new management and structure will be revealed in mid-September and that the reorganization would be complete by 2026.
Sources said that the company will hold a town-hall meeting on Thursday, at 9 am Central Time (1400 GMT). Two sources said that Houston-based ConocoPhillips hired Boston Consulting Group in April to provide advice on its restructuring and layoffs program, internally referred to as "Competitive Edge."
ConocoPhillips net income fell to $2 billion in the second quarter, the lowest level since March 2021 when COVID-19 devastated demand.
The benchmark U.S. crude oil futures price has fallen by approximately 11% in the last year, as OPEC and allies increased output and competed with U.S. producers of oil for market share.
As of Wednesday, the shares of the company had fallen by 4.7% in this year. This compares to a rise of 5% for the S&P 500 Energy Index.
Dan Pickering is chief investment officer of Pickering Energy Partners. "Companies are finding ways to do more with less," he said. Reporting by Georgina Mccartney, Arathy Sommesekhar, and Ernest Scheyder from Houston; Shariq Khan from New York. Editing by Nathan Crooks. David Gregorio. Rod Nickel.
(source: Reuters)
