Due to quickly changing market conditions, Weatherford International Plc is realigning and reducing its cost and organizational structures to match the new environment, including eliminating 5,000 positions, of which more than 85% are located in the Western Hemisphere. The headcount reduction is expected to be completed by the end of the first quarter of 2015, resulting in expected annualized savings of over $350 million.
Weatherford is also offering a Voluntary Separation Opportunity Program to eligible employees as part of its workforce reduction efforts, with a focus on both operating and support positions. In addition, the company has launched a procurement savings initiative in the last quarter of 2014, which is designed to achieve $300 million of annualized savings over the next two years.
This year, Weatherford’s focus will be to generate positive free cash flow from operations, despite the current challenging industry conditions. The company expects its cost actions, a reduction in capital expenditures by $550 million to $900 million in 2015, and a positive contribution from working capital balances to more than offset any reduction in earnings.
Bernard J. Duroc-Danner, chairman, president, and CEO, commented, "We will focus the entire organization on ensuring that we are cash flow positive in 2015. This means that, for every dollar of revenue we lose due to reduced activity and pricing, we will make up for it in cost, capital expenditure, and working capital reductions. Our team will be focused on swift market responsiveness. The joint effect of driving our technologies and optimizing our cost structure will support our customers' priorities. We enter 2015 with strong core businesses, a de-risked financial position and an organization focused on working closely with our customers. We expect to emerge from this down cycle much leaner and stronger than we were going into it."
In implementing these measures, Weatherford joins other oil and gas firms, such as Halliburton, BP, ConocoPhillps, Apache, and Schlumberger, which have all begun workforce reductions and other actions to offset the effects of plummeting oil prices.