Oil industry cutting jobs, investment to offset lower prices
Oil companies are cutting investment, slashing jobs and selling off pipelines and other assets as crude prices plunge. "It's going to be a very turbulent year for our industry," says BP CEO Bob Dudley. The latest warnings came from Exxon Mobil, which reported Tuesday that fourth-quarter earnings fell 58 percent in the oil giant's weakest quarter since 2002. The results were even worse at BP, which posted a 91 percent decline in profit.
Those reports follow Chevron Corp.'s first money-losing quarter in more than 15 years and Royal Dutch Shell's warning that its 2015 profit fell sharply. Even with a big glut of oil and low prices, producers are pumping to earn what they can. Exxon boosted production of oil and natural gas by nearly 5 percent. Oil companies are counting on seasonal demand to pick up some of the slack later this year, but it is anyone's guess how long the current lower crude prices will last.
Crude prices first fell below $30 last month from above $100 in mid-2014. Consumers are benefiting from cheaper gasoline and other fuels, but oil companies and employees are feeling the pain. "I expect continued layoffs, restructurings, and consolidation among oil and gas companies," said Gianna Bern, an associate professor of finance at the University of Notre Dame. "We are witnessing the perfect storm in this industry." A snapshot of how the companies are faring:
The fourth quarter was Exxon's weakest since 2002 but better than Wall Street had feared. It earned $2.78 billion, or 67 cents per share. That was 3 cents better than the average forecast of analysts surveyed by Zacks Investment Research.
The company says it has 20 percent fewer workers than five years ago and will continue to focus on "productivity enhancements" and efficiency, said director of investor relations Jeff Woodbury. Exxon slashed fourth-quarter capital and exploration spending by 29 percent compared with a year earlier, and it plans to cut that spending by one-fourth, or about $8 billion, in 2016. But it still plans to start six new projects this year.
Exxon shares fell $1.70, or 2.2 percent, to close at $74.59. The UK's biggest energy company reported that fourth-quarter earnings fell to $196 million from $2.2 billion on lower prices and another huge set-aside to cover costs related to the 2010 drilling rig disaster in the Gulf of Mexico. Higher margins in refining weren't enough to offset lower oil prices.
It will cut 3,000 jobs around the world by the end of 2017, on top of 4,000 cuts planned in exploration and production. The company also forecast asset sales of up to $5 billion this year. US-traded shares of BP dropped $2.68, or 8.5 percent, to $29.02. The No. 2 U.S. oil company behind Exxon reported last week that it lost $588 million in the fourth quarter, compared with a year-earlier profit of $3.47 billion and its first losing quarter since 2002. The company cut 3,200 jobs last year and will eliminate 4,000 more this year. Chevron has already sold off $11 billion in pipelines and other assets in the past two years and hopes to unload up to $10 billion more through 2017.