A True Jobs Massacre Spreads in US Oil & Gas
It’s been tough for US oil companies. And even tougher for their investors. The hero du jour is Marathon Oil.
Today afterhours it reported an eye-popping 48% plunge in revenues in the second quarter and a net loss of $386 million. To stem the bleeding, it slashed capital expenditures by 40% from the prior quarter. “Importantly,” as it said in the press release, it was able to reduce production costs in North America by over 30% per barrel of oil equivalent from a year ago. And it cut is general and administrative costs by more than 20%.
The key to survival in this environment of plunging revenues is conserving cash and slashing expenses, including “workforce reductions,” as the company calls them. And something else….
Marathon proudly said that its global production from continuing operations (excluding Libya) rose 6% from a year ago, with its US production soaring “nearly 30%.” And it’s not backing down either: Total company production would increase 5-7% year-over-year, with a 20% jump in production in the US.
Thus it joined the cacophonous chorus of oil and gas companies that have been bragging about production increases despite the oil glut, despite the oil price plunge, despite the mayhem in the oil markets, just when investors are desperately waiting for the ever elusive production cuts.
BP’s debacle is even worse. Last week, it announced a loss of $6.3 billion and warned of more layoffs to come. It raised the restructuring charges for those layoffs from $1 billion, put forward in December, to $1.5 billion. “We will continue to identify more opportunities for simplification and efficiency,” is how CEO Bob Dudley put it in perfect corporate-speak. And cuts are now coming at “a faster pace.”
Dozens of companies in the oil & gas sector have announced job cuts since last fall, with some of the global players, like Baker Hughes, pushing their layoff numbers into the low five-digits. It has been a relentless litany.
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