You are here
HOUSTON -- ConocoPhillips plans to lay off 4 percent of its work force, illustrating that even the oil majors may not ride out a mean recession without taking some punches, according to a report by The Houston Chronicle.
The company is cutting capital spending by 12.6 percent and will write down the value of various assets by $34 billion -- including its minority stake in Russian oil company Lukoil -- to gird itself for what economists increasingly expect to be a protracted downturn, according to the report.
ConocoPhillips was the first major oil company to announce workforce reductions, according to the report.
"We are positioning ourselves in the current business environment to live within our means in order to maintain financial strength," said James Mulva, chairman and chief executive of the nation’s third-largest oil company. "We are doing this by reducing our cost structure, addressing our balance sheet, and continuing to manage the company through prudent capital discipline."
Analysts said Conoco¬Phillips's actions indicate it sees weakness in oil and gas prices as more than temporary given global economic struggles. "It’s really a batten-down-the-hatches type of thing," Phil Weiss, an analyst with Argus Research, told the newspaper. "It says a lot to me about what Conoco¬Phillips thinks the environment’s going to look like for a while."
Exxon Mobil Corp., the largest of the publicly traded majors, and Chevron have indicated their spending levels will be the same as in 2008, while Marathon Oil said last fall it expected to reduce 2009 spending by about 15 percent. None have announced layoffs, according to the report.
Last year’s rise and swift fall in oil and gas prices have left the industry scrambling to adapt to falling demand amid still-high costs to do business, the newspaper reported. Onshore drilling has plunged and final investment decisions on some large long-term projects have been delayed, leaving oil field services companies and drillers to take the first hit. Earlier this month giants Schlumberger and Halliburton were among such companies indicating they would cut their workforces, the newspaper noted.
The swift, decisive action taken by Conoco¬Phillips is more characteristic of a smaller and more nimble independent than an oil major, said Dan Pickering, co-president of Tudor, Pickering, Holt & Co. in Houston. "It looks to me like you’ve got a ‘rather be proactive than reactive’ move by ConocoPhillips," Pickering told the newspaper.
ConocoPhillips employs more than 4,000 people in Houston and 30,800 people worldwide. "Four percent is meaningful," Pickering said, "but it is not substantial relative to retrenchments we’ve seen in past down cycles."
The company also said it would reduce contractors, but declined to reveal how many.
ConocoPhillips spokesman Bill Tanner told the paper it was premature to speculate on what parts of the company would see layoffs. "Those decisions will be made in the coming weeks," he told the newspaper. The company’s operations include exploration and production, refining, emerging businesses and corporate divisions.