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CEO Lance admits company backslid on cost efforts

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ConocoPhillips ( COP ) to cut up to 25% of jobs amid restructuring

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Layoffs reflect broader industry challenges with rising

costs,

lower prices

By Georgina McCartney and Arathy Somasekhar

HOUSTON, Sept 5 (Reuters) - ConocoPhillips ( COP ) CEO

Ryan Lance told employees on Thursday that one of the reasons he

had to cut up to 25% of the workforce was because the U.S. oil

and gas producer had become less competitive as it focused on

swallowing smaller rivals.

Lance was speaking to employees in a town hall meeting a day

after he sent employees a video announcing the job cuts as part

of a broad restructure focused on cost reductions.

Employees watching the hour-long meeting online and in

person at the company's Houston headquarters on Thursday morning

also learned later that day that layoffs would begin as early as

November 10.

Lance said he had prioritized recent acquisitions over

controlling costs.

"The cost and the whole competitiveness of the company

probably took a backseat to those initiatives and those things

we were doing for very real reasons, important reasons for the

company," Lance said in a recording of the town hall heard by

Reuters.

"I fault myself for not paying attention and keeping the

other things sort of centered and important," added Lance, who

has been in the top job for 12 years.

"I have to pay more attention to it," Lance said, referring

to the sustainable structure and health of the company.

Conoco bought smaller peer Marathon Oil last year

for $22.5 billion. In 2021, it bought Concho Resources for $9.7

billion, and also acquired Permian assets from oil major Shell

for $9.5 billion. The energy industry has gone through

the largest consolidation in a generation in the past two years.

"We probably backslid a little bit in the cost effort...

maybe we should have been smarter about how we did it," Lance

told employees in the town hall.

Though many expected job cuts after the company flagged the

need to cut costs, the scope of the reduction surprised the

industry, said Ed Hirs, an energy fellow at the University of

Houston.

"It is like Lance took his hands off the steering wheel,"

said a Conoco source, who attended Thursday's town hall meeting.

The source, who declined to be named because they were not

authorized to speak on the record, said that while they

appreciated the honesty from Lance, they also felt he avoided

answering certain questions.

"Lance was just dancing around the questions and not

answering directly. Things did not feel any more transparent or

clear after the town hall," the source added.

An employee asked how people would be laid off fairly and

with dignity during Thursday's town hall. The atmosphere was one

of disappointment and frustration, the source said.

"There is a lot of weight in this decision, and it is

what we need to do for the company's long-term growth and

success. Our executive leadership team and I take this

seriously, and I don't underestimate the impact that it has on

people, on families and on the workforce that we have within our

company," Lance said on Friday in a statement to Reuters.

While management changes are expected to be announced

mid-September, there will be no changes or cuts to the executive

leadership team, a source familiar with the matter said, adding

that the company's executive leadership team shrank by two to

seven this year due to retirements.

TOUGH JOB MARKET

The job cuts at Conoco are the latest hit to a major oil

and gas company, an industry facing rising costs and lower

prices as OPEC+ brings more production online in a bid to regain

market share.

Workforce reductions undermine U.S. President Donald

Trump's promise to increase U.S. oil and gas production and its

clout in global markets.

Conoco's controllable costs have risen by about $2 per

barrel from 2021 to 2024, to $13, making it harder for the

company to compete, Lance said in Wednesday's video message.

"That has been our problem. Unit cost is rising faster than

our production and our revenue, which is eating into our margin,

and obviously you can't let that go on forever," Lance said

during Thursday's town hall.

Conoco has targeted about $1 billion in cost savings related

to its acquisition of Marathon Oil last year, and the company

has also said it wants to save another $1 billion by the end of

2026 from layoffs and other cost-cutting measures

targeting lease operations, transportation and processing.

In April, two sources told Reuters that Conoco had hired

management consulting firm Boston Consulting Group to advise on

the restructuring and layoff program, referred to internally as

"Competitive Edge."

"Everybody just scrambled and started looking for something

else after that, because we were unsure what the outcome would

be and who would get let go because there are a lot of positions

within the facilities that do not need to be there," said a

second source, who left ConocoPhillips ( COP ) last month.