Chevron Announces About 20% Workforce Reduction In Cost-Saving Initiative: 'Responsible Leadership Requires Taking These Steps'
In a significant cost-saving move, oil behemoth Chevron Corp. (NYSE:CVX) has announced plans to slash its workforce by up to 20%.
What Happened: Chevron announced on Wednesday that it intends to commence major layoffs this year, aiming to complete the majority by the end of 2026. The move is part of a broader cost-cutting plan, with the company targeting a reduction of $2 billion to $3 billion by the end of 2026, reported CNBC
With Chevron’s total employee count of 45,600 as of December 2023, a 20% cut could result in the severance of over 9,000 workers. Vice Chairman Mark Nelson stated that the company intends to offer complete support to the outgoing staff during the transition. “But responsible leadership requires taking these steps to improve the long-term competitiveness of our company for our people, our shareholders and our communities,” explained Nelson.
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Why It Matters: This decision comes on the heels of Chevron’s fourth-quarter earnings report, which, despite beating revenue estimates, disappointed on adjusted net earnings. The company’s revenues and other income of $52.23 billion exceeded the consensus of $46.75 billion. However, its adjusted net earnings were $3.63 billion, with an adjusted EPS of $2.06, missing the consensus of $2.11.
Despite this, Goldman Sachs analyst Neil Mehta observed that at 3,349 MBOE/d, Chevron’s production volumes almost matched their expectations. The company plans further cost reduction even as it foresees a 6% annual growth in its production over the next two years on the back of new wells in Kazakhstan and other nations.
The workforce reduction is a part of Chevron’s strategic move to improve its competitiveness in a sustained way amid these financial challenges. According to a New York Times report in January, Chevron’s cost reduction strategies include hiring engineers and geologists in locations with cheaper labor such as in India, to support activities in the U.S. and other countries.
Despite President Donald Trump‘s agenda of ‘drill, baby, drill’, Wall Street expects the U.S. oil producers to be conservative with spending. Senior portfolio manager at Tortoise Capital, Rob Thummel stated, "We expect most oil and gas producers to remain disciplined with capital expenditures. However, less regulation will make it easier to increase drilling activity if commodity prices reach levels that are too high."
Following the announcement, Chevron shares lost over 1% yesterday. The stock has gained nearly 3% over the past year.
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