In a bid to bounce back from the drastic reduction in commodity prices resulting from the plaguing coronavirus, Chevron Corporation CVX is slashing headcount by nearly 10-15%, indicating an approximatecut of 6,000 of its 45,000 non-gas station staff. This move is in line with the company’s continued portfolio rationalization to reflect its operational efficiencies and match the projected activity levels.
Per the company’s previously-announced plans, it will also furlough roughly 300 workers in Pennsylvania where it has gas wells and will slash jobs at its giant Australian liquefied natural gas facility.
The oil industry is reeling under the adverse impact of coronavirus pandemic that crippled most sectors until now. Fuel demand took a huge hit following large-scale travel constraints imposed globally. Against this backdrop of a pullback in oil prices, Chevron's stock price has shed 23% of value since the beginning of 2020 when crude was trading at more than $60 a barrel.
In the earnings report released last month, this San Ramon, CA-based company trimmed its 2020 capital spending guidance by 30% to $14 billion from its prior expectation for organic capital and exploratory expenses. Further, the industry player anticipates total capital and exploratory expenses for the last two quarters of 2020 to be around $7 billion, suggesting an annual run rate 30% lower than the earlier issued budget, which was announced in December 2019.
The company is also making efforts to lower its run-rate operating costs in excess of $1 billion by this year end. Apart from the cost cuts, Chevron suspended its $5-billion share buyback program to weather the current oil price woes.
By dint of its prudent cost-controlling exercise, this Zacks Rank #3 (Hold) Chevron joins other oil super majors including BP Plc BP, Royal Dutch Shell Plc RDS.A and Exxon Mobil Corporation XOM. While BP Plc intends to curtail senior management positions, Shell is proposing voluntary unemployment. Additionally, ExxonMobil is set to contain operating expenses by 15% and at the same time, adheres to no retrenchment policy. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.These industry players aim to overcome the tough times induced by the coronavirus by sustaining financial flexibility and operational excellence. Notably, strengthening the companies’ cash balance at a time when oil prices fetch no profits to most producers, certainly makes sense.
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