Jolted by the slump in oil prices, Chevron reported on Friday a first quarter loss that was worse than Wall Street’s expectations, a setback that caused the company’s shares to drop, and raised the specter of thousands of job cuts worldwide this year.
“Matching our organizational size to expected future activity levels” is a major element of Chevron’s quest to slash spending amid the weak oil prices, John Watson, Chevron’s chief executive officer, said in a prepared release.
This changing of the size of the company’s staffing levels will amount to potentially up to 4,000 in job cuts between now and the end of this year, the company told analysts during a conference call on Friday.
“We have reduced our employee head count by more than 4,000 relative to the end of 2014,” Joe Geagea, Chevron’s executive vice president for technology, projects and services, said during the conference call. “We are on target to achieve employee reduction of 8,000 by the end of 2016.”
The loss was fueled primarily by a slump in Chevron’s upstream operations, which consist of exploration, production and development activities. The company’s downstream units, made up of refinery and retail operations, were in better shape.
“Our upstream business was impacted by a more than 35 percent decline in crude oil prices,” Watson said. “Our downstream operations continued to perform well, although overall industry conditions and margins this quarter were weaker than a year ago.”
Chevron lost $725 million for the first quarter that ended in March. That compared with a year-ago profit of $2.57 billion.
On a per-share basis, Chevron lost 39 cents during the first quarter. Wall Street had anticipated a loss of 18 cents a share.
Chevron’s stock fell slightly on Friday.
The upstream operations lost $1.46 billion during the January-through-March quarter, while downstream operations produced a $735 million profit.
San Ramon-based Chevron’s downstream operations in the U.S., which include the vast oil refinery in Richmond, earned a profit of $247 million, but that was down 22.5 percent from the profits a year ago.
That decrease was due primarily to lower profit margins from refined products such as gasoline.
“Our efforts are focused on improving free cash flow,” Watson said. “We are controlling our spending and getting key projects under construction online, which will boost revenues.”