Big Oil isn’t sparing the axe despite surviving a miserable third quarter in better shape than most analysts had expected.
Chevron Corp. (CVX) said Friday it will cut another 6,000-7,000 jobs and sell up to $10 billion more in assets, in another round of belt-tightening against a backdrop of rock-bottom crude prices. That’s around 10% of a global workforce of 64,700. As a result, the company is also shaving its forecast for production growth to between 13%-17% by 2016, instead of the 20% it predicted earlier.
Chairman and CEO John Watson said the company will cut investment next year by around another $4.5 billion, or 17%, from this year. This year’s capex and exploration budget of $25-$28 billion is already 25% less than what it invested last year, but the company is still spending more on investment and dividends than it is earning from its operations, and will continue to do so until the end of next year, according to analysts polled by Bloomberg.
The news is the latest example of oil majors around the world bracing themselves for a long period of low prices. Yesterday, the third-largest U.S. producer, ConocoPhillips (COP) had announced another $800 million in capex cuts as it swung to a net loss of $1.1 billion for the quarter, driven by write-offs both at home and abroad. Conoco had already announced in September it would cut some 1,800 jobs (also around 10% of its workforce). Smaller producers are, if anything, having an even worse time of it. Canada’s Husky Energy Inc. (HUSKF) said Friday it swung to a net loss of $4.1 billion Canadian dollars ($3 billion) in the quarter due to write-downs at projects across the Alberta oil patch.
Earlier this week, Royal Dutch Shell posted the biggest write-off in its history as it made an expensive farewell from high-cost projects in Alaska and Canada. And BP Plc (BP) said Wednesday it would make further cuts and asset disposals to ensure it covers its capex needs and dividend payout at an average price of $60 a barrel. The international Brent blend benchmark currently trades at below $49/bbl and hasn’t traded above $60 since July.
But the news from Big Oil was far from all bad Friday. Profits at both Chevron and ExxonMobil beat market expectations, thanks to the healthy profits made by their refineries in a world awash with cheap feedstock. Exxon also profited by being able to increase the output of liquids to offset shutdowns at its natural gas operations.
Chevron said net income fell by 64% from a year ago to $2.04 billion, a fourth straight quarterly drop, while ExxonMobil’s fell 47% to $4.24 billion, nearly half of which came from downstream operations.
“Quarterly results reflect the continued strength of our Downstream and Chemical businesses and underscore the benefits of our integrated business model,” ExxonMobil CEO Rex Tillerson said in the company’s release.