You can be on Entrepreneur’s cover!

Oil Prices Drop, Chevron Slashes 2016 Budget in Response Cutting the budget by 25 percent will mean laying off 7,000 employees.

By Reuters

entrepreneur daily

This story originally appeared on Reuters

Shutterstock

Chevron Corp, the second-largest U.S.-based oil producer, slashed its 2016 capital budget by 25 percent and said it would lay off roughly 10 percent of its workforce, one of the most-drastic reactions to date to the plunge in crude prices CLc1.

The price drop has forced Chevron and dozens of its peers to make tough decisions about what projects to fund or not fund in order to offset natural declines at its existing fields.

The choices are that much starker at large international oil giants like Chevron that rely heavily on their massive budgets to fund exploration projects crucial to finding new energy sources.

Chevron said on Friday it plans to spend between $25 billion to $28 billion next year and expects to further slash spending in 2017 and 2018 as well, an acknowledgment that oil prices are not expected to rise at all in the near future.

The San Ramon, California-based company also said it would lay off 6,000 to 7,000 workers as part of the cuts.

"We are focused on improving results by changing outcomes within our control," Chief Executive John Watson said in a statement.

Chevron posted a sharp drop in quarterly profit that still beat Wall Street's expectations due to cost cuts and strong refining margins.

The company reported net income of $2.04 billion, or $1.09 per share, compared with $5.59 billion, or $2.95 per share, in the year-ago period.

By that measure, analysts expected earnings of 76 cents per share, according to Thomson Reuters I/B/E/S.

Production fell 1 percent to 2.5 million barrels of oil equivalent per day (boe/d).

Profit at the company's downstream unit, which makes gasoline, lubricant and other refined products, jumped 49 percent. Refiners tend to be more profitable when oil prices are low.

Chevron cut operating and administrative expenses by 7 percent during the quarter, but it was not enough to fully offset the price drop.

Shares of Chevron rose 1.4 percent to $91.15 in pre-market trading on Friday.

(Reporting by Ernest Scheyder; Editing by Chizu Nomiyama and Phil Berlowitz)

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick

Business News

From Tom Brady to Kevin O'Leary – See Who Lost Big in the Wake of the FTX Crypto Collapse

The crash exposed an $8 billion hole in FTX's accounts, leaving investors and customers scrambling to recoup their funds.

Business News

This Highly-Debated Piece of Cinematic History Just Sold For Over $700,000 at Auction

The wood panel from "Titanic" is often mistaken as a door. Either way, he couldn't have fit. (Sorry.)

Business News

'Wildly Inappropriate': Woman Says She Was Denied a Job Because She Didn't Wear Makeup During the Interview

Melissa Weaver was applying for a VP of HR job at a tech company via video.

Business Ideas

63 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.