Chevron to cut as many as 7,000 jobs amid spending cuts

Chevron Corp. reported third-quarter earnings of $2 billion, down from $5.6 billion in third-quarter 2014. The sharp decrease in earnings and budget cuts will result in the reduction of 6,000-7,000 jobs, the company said.

“While downstream earnings remained strong, lower overall earnings reflected weaker market prices for both crude oil and natural gas, which depressed upstream profitability,” explained said John Watson, Chevron chairman and chief executive officer. “We are focused on improving results by changing outcomes within our control. Operating and administrative expenses are 7% lower than last year, and we expect further reductions in the quarters ahead.”

Capital and exploratory expenditures during this year’s first 9 months were $25.3 billion, compared with $29 billion in the corresponding 2014 period. That includes $2.5 billion in 2015 and $2.4 billion in 2014 for the company’s share of expenditures by affiliates, which did not require cash outlays by the company. Expenditures for upstream represented 92% of the companywide total during the first 9 months.

“We expect capital and exploratory expenditures for 2016 to be $25-28 billion, roughly 25% lower than this year’s budget,” Watson said. “We expect further reductions in spending for 2017 and 2018, to the $20-24 billion range, depending on business conditions at the time. With the lower investment, we anticipate reducing our employee workforce by 6,000–7,000.

“We continue to make good progress on our asset sales program,” he added. “In the last 2 years we’ve generated $11 billion in proceeds. We expect $5-10 billion in additional proceeds by the end of 2017.”

Upstream takes losses

US upstream operations incurred a loss of $603 million in the third quarter, compared with earnings of $929 million from a year earlier. The decrease was due to sharply lower crude oil realizations, higher depreciation expenses, and the absence of gains on asset sales. Partially offsetting these effects were higher crude oil production and lower operating expenses.

Net oil-equivalent production of 730,000 b/d during the quarter was up 53,000 b/d, or 8%, from a year earlier. Production increases due to project ramp-ups in the Gulf of Mexico, the Permian basin in Texas and New Mexico, and the Marcellus shale in western Pennsylvania were only partially offset by normal field declines and the effect of asset sales. The net liquids component of oil-equivalent production increased 9% in the third quarter to 505,000 b/d, while net natural gas production increased 6% to 1.35 bcfd.

International upstream earned $662 million in the quarter, down from $3.72 billion from a year earlier due to sharply lower crude realizations and higher tax items, partially offset by lower operating expenses. Foreign currency effects increased earnings by $258 million in the quarter, compared with an increase of $344 million a year earlier.

Net oil-equivalent production of 1.81 million b/d during the third quarter decreased 82,000 b/d, or 4%, from a year ago. Production increases from entitlement effects in several locations and a project ramp-up in Bangladesh were more than offset by the Partitioned Zone shut-in, normal field declines, and higher planned maintenance-related downtime at Tengizchevroil in Kazakhstan. The net liquids component of oil-equivalent production decreased 5% to 1.17 million b/d in the quarter, while net gas production decreased 3% to 3.81 bcfd.

US downstream operations earned $1.2 billion in the third quarter, up from $809 million a year earlier due to higher margins on refined product sales and lower tax items, partially offset by the absence of a 2014 asset sale gain. Refinery crude oil input during the quarter increased 2% to 942,000 b/d from the year-ago period.

International downstream operations earned $962 million in the quarter, up from $578 million a year earlier primarily due to higher margins on refined product sales and a favorable change in effects on derivative instruments. Foreign currency effects increased earnings by $141 million in the quarter, up from an increase of $21 million a year earlier. Refinery crude oil input of 777,000 b/d during the third quarter decreased 61,000 b/d from the year-ago period, mainly as a result of the Caltex Australia Ltd. divestment (OGJ Online, Mar. 27, 2015).

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