Chevron announced on Wednesday that it plans to lay off 15% to 20% of its global workforce by the end of 2026 as part of its efforts to reduce costs, simplify its business operations, and complete a major acquisition.
The second-largest US oil producer has faced production challenges, including cost overruns and delays in a significant oilfield project in Kazakhstan. Additionally, its $53-billion acquisition deal to purchase oil producer Hess and expand its presence in Guyana’s oilfields is stalled due to a legal dispute with rival Exxon Mobil, which has experienced growth, achieving record production in Guyana and dominating the US oilfield sector.
Chevron aims to achieve up to $3 billion in cost savings through 2026, leveraging technology, asset sales, and streamlining its operations. As of the end of 2023, Chevron employed 40,212 people globally. A layoff of 20% would equate to around 8,000 employees, excluding the approximately 5,400 employees at Chevron service stations.
Weak margins in gasoline and diesel production also affected Chevron’s fourth-quarter earnings, with its refining business posting a loss for the first time since 2020, increasing pressure on CEO Mike Wirth. Chevron’s shares dropped by 1.3% in afternoon trading, while the S&P 500 Energy Sector index fell by 2.4%, though Chevron’s shares are up by 5.6% year-to-date.
Mark Nelson, Chevron’s vice chairman, stated, “Chevron is taking action to simplify our organizational structure, execute faster and more effectively, and position the company for stronger long-term competitiveness. We do not take these actions lightly and will support our employees through the transition.”
Employees have been informed they can begin opting for buyouts from now until April or May, according to sources. Chevron also plans to reorganize its business and announce a new leadership structure in the coming weeks.
The oil industry has seen increasing consolidation, with a focus on mergers and operational efficiency rather than new drilling projects. Exxon Mobil, the top US oil company, recently acquired Pioneer Natural Resources, becoming the largest producer in the Permian Basin and securing the largest stake in a Guyana oil joint venture.
If Chevron fails to close the Hess acquisition, it would mark the second major deal to slip through its grasp. In 2019, Chevron abandoned its bid to acquire Anadarko Petroleum Corp after Occidental Petroleum raised its offer.
Chevron’s oil and gas reserves have reached their lowest point in over a decade, raising concerns about the company’s long-term prospects without the Hess acquisition. In an effort to rejuvenate its leadership, Chevron relocated its headquarters from San Ramon, California, to Houston last year and replaced several long-standing managers.
The company also announced plans to establish a major tech hub in India, which will be its largest outside the United States.
