Chevron earns $2 billion in quarter but will cut thousands of jobs | Business News

Chevron earns $2 billion in quarter but will cut thousands of jobs

31 Oct 2015 | Author: | No comments yet »

Bank of America Traders Made Money Every Day of Third Quarter.

ExxonMobil and Chevron, the two largest US oil and gas groups, yesterday reported big falls in third-quarter profits because of plunging crude prices, although their earnings exceeded analysts’ expectations.Bank of America Corp. traders posted trading revenue on every business day of the third quarter, the first three-month period without a daily loss since the start of 2014, even as total trading revenue declined.Decades of financial discipline that honed Exxon Mobil Corp. into the leanest, most-efficient oil company in the world are paying off as it navigates the worst market slump since the 1980s.The plummeting price of oil has ripped into the once booming US energy industry so dramatically that the oil sector has laid off 87,000 people so far this year.

On 74 percent of those days, Bank of America generated more than $25 million, the Charlotte, North Carolina-based lender said Friday in its quarterly regulatory filing. As industry job cuts top 200,000 worldwide, Exxon has kept its 75,300-strong workforce intact with none of the sweeping layoffs seen at other oil companies, including its biggest U.S. rival Chevron Corp. “Exxon is just stronger financially than anyone else out there,” Brian Youngberg, an analyst at Edward Jones & Co. in St. Chevron became the latest company to dismiss workers on Friday, announcing that it would lose between 6,000 and 7,000 jobs – the second four-figure round of dismissals at the company since July.

Global markets, the bank’s trading operations run by Chief Operating Officer Thomas Montag, reported third-quarter profit more than doubled to $1 billion from a year earlier because of lower litigation costs. Louis, said in an interview. “They were running a leaner ship to begin with.” Exxon posted higher-than-expected third-quarter earnings Friday thanks to soaring profit at its refineries that process oil into fuel. The company is cutting investment by a fourth. “With the lower investment, we anticipate reducing our employee workforce by 6,000-7,000,” the chairman and CEO, John Watson, said in a statement. Exxon hasn’t needed to record any of the restructuring charges associated with job eliminations amid the 16-month downturn, and doesn’t expect to do so any time soon, Jeff Woodbury, vice president of investor relations, told analysts during a conference call. Chevron plans to cut capital and exploratory spending next year by one-fourth, with further cuts in 2017 and 2018 depending on the oil industry’s condition then.

But the impact of a slowing Chinese economy could be even worse as it spreads to other economies, he said. “We saw a big round of layoffs at the beginning of the year; entering into round two may signal that conditions haven’t improved and further consolidation is necessary. Chevron and undoubtedly other companies are facing similar conditions where their workforce conditions aren’t consonant with their business level,” he said. “I think Chevron is a sign that this is going to last longer than optimists had hoped. The bad news at Chevron wasn’t limited to human resources: Watson scaled back his long-term production growth target to 13 percent to 15 percent through the end of 2017, down from the previous forecast of 20 percent. Spending on capital projects such as floating oil platforms and gas-export facilities will fall by 25 percent next year and continue to shrink through 2018, Watson said.

Watson tied the job cuts and less-ambitious forecast directly to oil prices that have fallen by half in the past year, the worst 12-month slump since at least 1988, according to data compiled by Bloomberg. “We have a good U.S. upstream business, but it didn’t make any money for us in the past quarter,” he said during the call. Watson said prices will eventually rise as production slows in response to low prices, but he said it was hard to know when that will happen. “In the long run the industry can’t survive on $45 oil. Like Exxon, Chevron benefited from rock-bottom feedstock costs at its refineries: profit from processing oil into fuels jumped 59 percent to $2.2 billion. When oil prices rise, Youngberg said, oil companies going through the current downturn will be more cautious about hiring and undertaking big projects.

U.S. gas dropped 31 percent to a quarterly average of $2.735 per million British thermal units as output from shale fields from the Rocky Mountains to Appalachia continued to overwhelm demand for the fuel. California-based Chevron said third-quarter income plunged to $2.04 billion, or $1.09 per share, down from $5.6 billion, or $2.95 per share, a year ago. Per-share profit was 13 cents higher than the 88-cent average of 21 analysts’ estimates collected by Bloomberg, the sixth time in seven quarters that Exxon surpassed expectations. Exxon’s headcount peaked in 1989 at 104,000 and dropped steadily for the next decade to 79,000 in 1998, the year before it bought Mobil Corp. in the biggest-ever energy deal.

On Exxon’s conference call with analysts, Friday, the company maintained the same disciplined tone that has characterized its operations. “All of our assets are managed to maximize returns through the life cycle,” said Woodbury, the investor relations chief. “We really focus on those things that we control, like integrity, reliability, productivity — importantly, our development and operating costs — making sure that we’ve got operational flexibility.”

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