Bill Spindle, The Wall Street Journal, 02 November 2015

Chevron said it would cut up to 10 per cent of its workforce and, along with ExxonMobil, cut its ­future capital spending further as the two oil giants try to weather a 50 per cent drop in oil prices over the past year.

Both companies managed to make a profit during the third quarter, bolstered by refining ­operations and chemical divisions that are helped by low oil prices. But the two US energy giants were forced to slash costs to stay ahead of plunging revenues from their oil and gas production businesses.

Chevron, the second-largest energy company in the US by revenue, said it would lay off between 6000 and 7000 employees. The San Ramon, California company is trying to dial back its capital spending by 25 per cent next year to between $US25 billion and $US28bn ($35bn-$39bn).

Chevron chief executive John Watson told analysts that job reductions would be concentrated in Australia as the company completed construction of two giant, liquefied natural gas projects. Some cuts also would come from West Africa as Chevron reorganised operations in Angola.

Chevron also predicted further spending cuts in 2017 and 2018 that would bring its capital expenditures down to as low as $US20bn. That is a dramatic shift from a year ago, when Chevron was booking the most profit per barrel among the world’s top publicly traded oil firms, with its sights set on generating more cash than larger rivals Exxon and Royal Dutch Shell.

Still, results for the quarter fell less than Wall Street had expected. Chevron reported earnings of $US2.04bn, or $US1.09 a share, down 64 per cent from $US5.6bn a year earlier. Revenue for the ­period dropped 37 per cent to $US34.32bn.

“The grim reality is that when you have prices in the mid-$US40s as we did in the third quarter, it’s tough sledding,” Mr Watson said. “It’s a challenge, but we’re taking it on.”

Guy Baber, an analyst with Simmons & Company International, said Chevron was not alone. So far this year the 14 major oil companies he followed were collectively spending more on dividends and capital expenditures than their cashflow generation by $US90bn, or 11 per cent.

Meanwhile, Exxon confirmed it had cut third-quarter capital spending by 22 per cent from the prior year to $US7.67bn. The biggest US oil company said it expected to shave another $US1bn off its capital expenses and $US7bn from its operating expenditures.

“We’re always working to reduce the structural cost on our business,” Jeff Woodbury, the company’s head of investor relations, told analysts.

The Irving, Texas company reported a profit of $US4.24bn, or $US1.01 a share, down 48 per cent from $US8.07bn a year prior. Revenue fell 27 per cent to $US67.34bn.

Exxon’s profit in the exploration and production division fell 79 per cent to $US1.36bn in the latest quarter, and its US division became unprofitable, booking a loss of $US422m. Still, with fatter profits from its fuel refineries that ­doubled to $US2.03bn, Exxon managed to beat Wall Street expectations.

Other large global oil companies also reported sharply lower earnings earlier this week.

Royal Dutch Shell posted a $US6.1bn loss in the third quarter after its decision to walk away from exploring the Arctic for oil and exploiting Canada’s oil sands resulted in $US7.9bn in charges. ConocoPhillips, the biggest US shale driller, reported a loss of $US1.1bn and announced new plans to trim spending.

Extracted in full from The  Australian.