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Chevron ( CVX ) plans to cut up to 20% of global workforce

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Executives say business has become overcomplicated, costs

rising

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Some employees say layoffs were expected

By Ernest Scheyder and Sheila Dang

HOUSTON, Feb 18 (Reuters) - During an internal town hall

meeting last week, roughly 40,000 Chevron ( CVX ) employees were shown a

video touting the oil giant's success in Colorado as the largest

oil and gas producer in the state.

Less than 30 minutes later, executives announced plans to

cut up to 20% of the global workforce.

Despite progress in safety and financial performance,

Chevron ( CVX ) had fallen behind its competitors, company

leaders told employees during the internal meeting on February

12. The business had become over-complicated, costs had crept up

and Chevron ( CVX ) struggled to quickly make decisions, they said on

the webcast.

Reuters reviewed presentation slides and a recording of

the town hall that was webcast to staffers globally.

Chevron's ( CVX ) plan to cut as much as a fifth of its

workforce - about 8,000 people - comes after oil prices

traded in the $70-80 per barrel range for most of the past year.

Oil prices and refining margins were lower than the previous

year, but still sufficient to drive a full year 2024 profit for

Chevron ( CVX ) of $18.3 billion, down from $24.7 billion in 2023.

The layoffs cap a tough 18 months for the second-largest

U.S. oil producer, which inked a $53 billion agreement to

acquire New York-based oil firm Hess in October 2023 in

order to gain an important stake in Guyana's profitable

oilfields, only to have Exxon Mobil ( XOM ) and CNOOC, Hess'

partners in Guyana, challenge the deal in court.

The deal is stalled pending arbitration.

Four Chevron ( CVX ) employees told Reuters the layoffs were widely

expected internally. Some even conceded the move was necessary

to compete with Exxon and other rivals.

"I think it will be a good thing," said a Chevron ( CVX ) employee,

who requested anonymity because they were not authorized to

speak publicly.

"It's tough going through this, but we are the last of the

majors to (make cuts). Everyone was wondering when Chevron ( CVX ) would

do it."

Chevron ( CVX ) said in November it aimed to cut up to $3 billion in

costs by 2026, including by changing how and where work is

performed.

A Chevron ( CVX ) spokesperson said changes to the company's

structure will improve efficiency and results.

"While these changes are necessary, the decision to reduce

our workforce is not an easy one," the spokesperson said.

UK-based oil major Shell planned to scale back its

oil and gas exploration and development workforce by 20% as part

of a cost-saving drive, Reuters reported in August. Rival UK

major BP said last month it would lay off about 4,700 employees

and cut 3,000 contractor positions.

Three Chevron ( CVX ) employees said they had been through several

rounds of layoffs during their careers, due to the cyclical

nature of the oil and gas business. Layoffs during the COVID-19

pandemic were worse, one of them said.

"They always say it will be the last time," the employee

said.

The outlook for global fuel demand is uncertain due to the

rapid increase in electric vehicle sales in the world's largest

crude importer China, which for over a decade has driven rising

oil consumption.

Uncertainty about global demand and China's economy could

cap oil prices in the future, said Nick Hummel, an equity

analyst at Edward Jones.

Mass layoffs in the oil industry usually come after a plunge

in oil prices. One Chevron ( CVX ) employee expressed dismay at the

timing of the layoffs during a period of relative price

stability.

"It bites," said the person outside Chevron's ( CVX ) Houston

headquarters who identified himself as an employee but declined

to give his name. "Oil prices seem stable and then they bring

the hammer down."

ACCOUNTABILITY

During the town hall, Chevron's ( CVX ) vice president of the

Rockies business unit, Kim McHugh, read questions submitted by

employees, who asked whether Chevron ( CVX ) executives would hold

themselves responsible for the company's lagging performance.

"People feel like they are being held accountable. Their

question is, how is leadership accountable?" McHugh said.

CEO Mike Wirth said he looked for action and

transparency within the leadership team.

"When things aren't going well, do you get a nice

explanation and a pile of excuses, or do you get a plan?" he

said.

In simplifying the business, Chevron ( CVX ) will also clarify

which roles have decision-making rights and hold those

individuals accountable, Wirth said in response to another

question.

After several previous reorganizations, staffers are

seeking reassurance that the latest restructuring will be

successful, McHugh told Wirth.

"I think the employees would want me to say, 'You've

committed to giving us simplicity,'" she said to the CEO.

"Let's make sure this time that you pick the people and

stuff to make this work, so that we don't have to go through

this again."