ExxonMobil Chairman and CEO Darren Woods warned that job cuts are coming for employees in the U.S. and Canada as part of an ongoing plan announced earlier this year to "redesign work processes and improve cost competitiveness."
While ExxonMobil is exceeding targeted spending reductions, deferring more than $10 billion in capital and cutting 15% of cash operating expenses, Woods said the coronavirus pandemic has resulted in a "devastating" cut to oil demand by about 20%, roughly five times the decline of the 2008 financial crisis.
"I wish I could say we were finished, but we are not. We still have some significant headwinds, more work to do and, unfortunately, further reductions are necessary," Woods wrote Wednesday in an email to the company's workforce of nearly 75,000 employees. "Our plan is to continue to stage project execution and spending, and preserve the value of investments while offsetting inefficiencies and costs associated with deferrals."
He explained that the move to make the organization "more efficient and more nimble will reduce the number of required positions and, unfortunately, reduce the number of people we need."
"These are difficult times. We are making tough decisions, some of which will result in friends and colleagues leaving the company," Woods added. "Our core values have never been more important. We will maintain our focus on doing what is right. We will continue to care for the well-being of our communities and our people - and providing appropriate support for our colleagues who leave our organization."
According to the email, ExxonMobil is "very close" to completing its jobs review and expects to give U.S. employees an update following a discussion with the company's board of directors.
The cuts to the company's workforces in the U.S. and Canada come after ExxonMobil was forced to borrow $23 billion earlier this year in order to stay afloat, nearly doubling its outstanding debt. In July, the company posted its first back-to-back quarterly losses ever, reporting a loss of $1.08 billion, or 26 cents a share, compared with a profit of $3.13 billion, or 73 cents a share, in the comparable quarter last year.
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ExxonMobil isn't the only oil company being slammed by the pandemic. Royal Dutch Schell said it would cut up to 9,000 jobs, or over 10% of its workforce last month as part of a major overhaul to shift the oil and gas giant to low-carbon energy. BP also said it would trim its workforce by 10,000 jobs in June. Meanwhile, Chevron Corp. employees worldwide are being asked to reapply for positions as part of a cost-cutting program expected to eliminate up to 15% of its workforce, according to Reuters.
However, Woods remained hopeful that "industry under-investment today will increase the need for our products in the near future."
Woods said that as of today oil and gas make up about 60 percent of the global energy mix and that despite "increasing investments in renewables and concerns with emissions," oil and gas are still projected to make up about 50 percent of the global energy mix in 2040.
"Today’s alternatives don’t consistently offer the energy density, scale, transportability, availability - and most importantly - the affordability required to be widely accepted," Woods said. "While society will move towards lower-carbon sources of energy as technology improves, oil and gas will continue to play an important role in the long-term energy mix."
According to ExxonMobil's outlook, oil demand is expected to grow at 0.6% per year while gas demand is expected to grow by 1.3 %. Woods added that with depletion rates, new oil production needs to increase by nearly 8% per year and natural gas by 6%, supporting the need for "significant investments."
"Even accounting for the short-term demand impact of Covid-19, the investment case is still clear. There is a direct link between energy consumption and a growing and more prosperous population," Woods said. "As people become more prosperous, society will need more energy. The available alternatives for our existing energy system is incomplete, and - given the size, complexity and existing infrastructure – the energy transition will require significant time. This is a compelling investment case for the industry and our company - and is foundational to our long term strategies and plans."
ExxonMobil shares fell about 1.6% during Wednesday's trading session as oil prices declined on worries that cases of the coronavirus are on the rise globally. The stock is trading near an 18-year low.