U.S. oil and gas producer ConocoPhillips will cut 20-25% of its workforce as part of a broad restructuring, a company spokesperson said on Wednesday, after five sources told Reuters that CEO Ryan Lance detailed the plans in a morning video message.

Shares of the third-largest U.S. oil producer declined 4.5% to $94.55, outpacing a 2.6% drop in the broader S&P 500 Energy Index.

A fall in oil prices has put ConocoPhillips and its rivals under pressure this year, forcing them to cut staff, curb capital spending, and reduce drilling. U.S. oil major Chevron announced it would lay off up to 20% of its staff in February, and other energy companies, including SLB and BP, are also cutting workforces.

“I know these changes create uncertainty, and they are unsettling,” Lance said in the video heard by Reuters.
Costs have risen by about $2 per barrel, making it harder for the company to compete, Lance said. He said controllable costs had risen to $13 per barrel in 2024 from $11 in 2021.

“As we streamline our organization and take work out of the system, we will need fewer roles,” Lance said.

MOST JOB CUTS COMING BY YEAR-END

Last month, ConocoPhillips identified more than $1 billion of ways to cut costs and improve margins, on top of the more than $1 billion in cost savings from its acquisition of Marathon Oil last year.

The company has about 13,000 employees globally, meaning between 2,600 and 3,250 employees will be affected. Most of the cuts will be made before the end of the year, ConocoPhillips spokesperson Dennis Nuss said in an email.

The new structure and management will be made public in mid-September, and the reorganization will be completed by 2026, two of the sources said.

The company is set to hold a town hall meeting on Thursday at 9 a.m. Central Time (1400 GMT), the sources said.

In April, two sources told Reuters that Houston-based ConocoPhillips had hired management consulting firm Boston Consulting Group to advise on the restructuring and layoff program, referred to internally as “Competitive Edge.”

ConocoPhillips’ net income shrank in the second quarter to about $2 billion, the lowest since the quarter ended March 2021, when COVID-19 ravaged demand.

Benchmark U.S. crude futures prices have decreased by about 11% this year as OPEC and its allies increase output and battle with U.S. oil producers for market share.

As of Wednesday afternoon, the company’s shares have fallen 4.7% this year, compared with a 5% rise in the S&P 500 Energy Index.

“Companies are figuring out how to do more with less,” said Dan Pickering, chief investment officer at Pickering Energy Partners.

Source: Reuters