BP Slashes Workforce By 5% To Reach $2 Billion In Savings Goal

BP, the British multinational oil and gas company, has announced a significant workforce reduction of 4,700 employees and 3,000 contractor positions, representing around 5% of its global workforce. This move is part of CEO Murray Auchincloss' ongoing efforts to cut costs and rebuild investor confidence in the energy giant. The job cuts, which were announced in an internal memo seen by Reuters, are expected to be made this year and follow reviews of all of BP's divisions.

The company has not disclosed the exact breakdown of the cuts, but it has stated that about 2,600 of the contractors involved in the job cuts have already left the business. BP has a workforce of around 90,000 worldwide, and while the cuts will affect several regions, specific details on country-level job losses have not been disclosed.

In addition to the job cuts, BP has also stopped or paused 30 projects since June 2024, indicating a focus on high-value opportunities. The company aims to simplify and focus its operations, strengthening its competitiveness and building resilience as it lowers its costs, drives performance improvement, and plays to its distinctive capabilities.

The job cuts and project suspensions are part of BP's broader strategy to reduce costs and improve its competitiveness in the energy market. The company has set a goal to achieve at least $2 billion in cash cost savings by the end of 2026, with a quarter of the target ($500 million) to be delivered by the end of 2024. The remaining $1.5 billion is expected to be achieved by the end of 2026.

BP's decision to scale back its oil and gas production reduction targets for 2030 has been controversial, with some investors supporting the decision. In 2020, BP set a goal to reduce its oil and gas production by 40% by 2030. The goal was abandoned in October 2024.

BP's cost-cutting efforts come as the company seeks to address investor concerns over its energy transition strategy and restore confidence following the abrupt resignation of its predecessor, Bernard Looney, in September 2023. Looney resigned after failing to disclose relationships with employees, leaving Auchincloss to take the helm and implement a new strategy.

BP's shares have underperformed most of its rivals over the last year, down by over 5% compared to a 5.5% gain for Shell and a 14% gain for Exxon Mobil. The company's underperformance has likely contributed to the decision to cut costs and improve its competitiveness in the energy market.

In conclusion, BP's workforce reduction and cost-cutting efforts are part of a broader strategy to improve the company's competitiveness and energy transition strategy. By allocating the cost savings to strategic initiatives such as portfolio high-grading, digital transformation, supply chain optimization, investment in renewable energy, and hydrogen market exploration, BP aims to enhance its financial resilience and accelerate its transition towards a lower-carbon future. These investments not only contribute to the company's sustainability goals but also provide new revenue streams and opportunities for growth.