ConocoPhillips to Cut 25% Workforce Amid Rising Costs and Falling Oil Prices

ConocoPhillips, the Houston-based oil giant, plans to significantly reduce its workforce as part of a broader cost-cutting initiative in response to declining oil prices. The company announced intentions to cut between 20% and 25% of its global staff, which translates to approximately 2,600 to 3,250 jobs, out of its current workforce of about 13,000 employees. This strategic move comes as ConocoPhillips seeks to streamline operations to become more efficient in an increasingly challenging economic environment.

The layoff plan was confirmed by a company spokesperson, with expectations that the majority of these workforce reductions will occur before the year 2025 concludes. ConocoPhillips' shares witnessed a sharp decline of over 4%, now trading at approximately $95 per share, marking a nearly 11% drop from the previous year’s figures. The announcement of the job cuts follows a video message where CEO Ryan Lance explained the necessity to reduce roles, attributing these changes to rising operational costs.

Recently, ConocoPhillips reported second-quarter earnings amounting to $1.97 billion, outperforming Wall Street predictions but falling short when compared to $2.33 billion from the same period last year. As part of cost-cutting efforts, the company highlighted that it has already identified over $1 billion in potential cost savings and margin optimization avenues. Part of the ongoing financial strategy also included the sale of its Anadarko Basin assets for $1.3 billion.

The cuts are part of a trend within the industry where several oil producers are forced to adjust to the current financial pressures by reducing capital expenditures and workforce size. The company aims to counterbalance the effects of elevated costs, which have reportedly risen by about $2 per barrel, escalating controllable expenses to $13 per barrel by 2024, up from $11 in 2021. This cost increase is parallel to a notable decrease in US crude futures by 11% this year.

As the restructuring advances, ConocoPhillips is set to reveal its new organizational structure and management details by mid-September, with the entire reorganization expected to conclude by 2026. Additionally, a town hall meeting is scheduled, where further details regarding the restructuring will be discussed. This endeavor is part of an internal project referred to as "Competitive Edge," supported by management consultancy Boston Consulting Group, aiming to adapt the organization to the evolving market conditions.

Despite these measures, ConocoPhillips continues to face pressure from the market with its net income declining in the recent quarter to about $2 billion, the company’s lowest earnings since the pandemic-affected March quarter of 2021. As of mid-week, shares in ConocoPhillips reflect a 4% downward shift this year, contrasting with the 5% rise observed in the S&P 500 Energy Index.