The international headquarters of ExxonMobil and Chevron, second and third biggest oil companies in Nigeria, are bracing up to sack at least 10, 000 staff in preparation for a prolonged stretch of weak prices.
The plan by the two United States (US) companies are coming up four days after Shell, Nigeria’s number one company in terms of assets and production volume, gave notice of its plan to sack 6,500 members of staff.
Already, ExxonMobil and Chevron yesterday posted their worst quarterly performances in several years and an impeccable industry source said the headquarters of the companies in the US were already bracing of for “right sizing of staff and expenses to absorb the oil price shock.
” Exxon is the world’s biggest oil company in size, assets and production, the source said “and it is likely to do more than Shell in the ongoing process of right sizing.
Shell will cut 6, 500; Chevron will do below that volume and in all, the two US firms will cut at least 10, 000.”
He said the Nigeria’s subsidiaries of the two oil companies “have been notified of the plan, which will surely affect majorly, the non-technical staff in account, marketing, communications, government and public affairs, among others.
” Exxon, according Bloomberg, yesterday reported its lowest profit since 2009 as crude prices fell twice as fast as the world’s largest crude producer by market value could slash expenses.
Chevron also recorded its lowest profit in more than 12 years after the market rout forced $2.6 billion in asset write-downs and related charges.
The companies’ shares fell to multiyear lows. “Chevron was a disaster; Exxon was a disappointment,” Fadel Gheit, an analyst at Oppenheimer & Co. In New York, who rates the shares of both the equivalent of a hold and owns each.
“A rising tide lifts all ships, but when the tide goes down, all ships go down.” Stung by the worst market collapse since the financial crisis of 2008, oil explorers from The Hague to Calgary to Houston are firing staff, scaling back drilling, cancelling rig contracts and reducing share buybacks to conserve cash.
Chevron said the slump convinced it to lower its long-term outlook for crude prices. “This is the beginning, not the end, of the writedown process,” Paul Sankey, an energy analyst at Wolfe Research LLC, said on Bloomberg TV.
“The biggest concern is that we’ll see weaker demand over the second half of the year.” Oil entered its second bear market since mid- 2014 this month as a flood of output from North American shale regions, the Persian Gulf and deepwater fields overwhelmed consumption by refiners and chemical producers.
Exxon and Chevron contributed to the avalanche of supply by increasing second-quarter crude output by 12 per cent and 1.7 per cent, respectively. Exxon expanded oil production in every region where it operates except Australia/Oceania.
All of Chevron’s growth occurred in the U.S. “Oil prices will be under downward pressure until there is evidence the glut is shrinking,” analysts at IHS Energy said in a note to clients.
“This will not happen quickly unless prices fall even further from recent levels,” discouraging new drilling. Exxon shares fell 4.6 per cent to $79.21 in New York, the lowest closing price since June 2012.
Chevron dropped 4.9 per cent to $88.48, the lowest close since December 2010. The companies were the day’s worst performers in the Dow Jones Industrial Average index.
Exxon cut share repurchases for the current quarter in half to $500 million after net income fell to $4.19 billion, or $1 a share, from $8.78 billion, or $2.05, a year earlier, the Irving, Texas- based company said in a statement.
The per-share result was 11 cents lower than the average estimate of 20 analysts in a Bloomberg survey. Exxon reduced spending on major projects like floating crude platforms and gas-export terminals by 20 per cent to $6.746 billion during the quarter, according to the statement. International crude prices fell 42 per cent from the previous year to average $63.50 a barrel.
