BP to Cut 14% of Global Workforce as Drop in Oil Price Bites - The Wall Street Journal

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“We are spending much, much more than we make—I am talking millions of dollars, every... — “We are spending much, much more than we make—I am talking millions of dollars, every day,” BP Chief Executive Bernard Looney said on Monday.
Photo: daniel leal-olivas/Agence France-Presse/Getty Images

Sarah McFarlane

Updated June 8, 2020 12:13 pm ET

BP PLC is cutting thousands of jobs, accelerating existing plans to reshape the company after the coronavirus pandemic’s crushing impact on oil prices.

The move is one of the first and most drastic from the oil industry, which is expected to shed staff after crude prices hit their lowest level in decades in April, amid pandemic-driven stay-at-home policies that parked vehicles and curbed economic activity.

BP plans to cut nearly 10,000 jobs, or 14% of its workforce, and freeze pay increases for senior level managers as it seeks to strengthen its finances, the company said Monday.

The job cuts come as newly appointed Chief Executive Bernard Looney responds to the pandemic’s devastating effect on oil demand and coincides with his attempts to reshape the U.K.-based oil giant for a low-carbon future.

Mr. Looney, who took the helm in February, had been crafting a yet-to-be revealed reorganization plan that has now been “accelerated and amplified” by the need to respond to market conditions and reduce costs, BP said.

“It was always part of the plan to make BP a leaner, faster-moving and lower carbon company,” Mr. Looney wrote in an email to employees. “Then the Covid-19 pandemic took hold…The oil price has plunged well below the level we need to turn a profit. We are spending much, much more than we make—I am talking millions of dollars, every day.”

BP, with a current workforce of around 70,000 people, said the cuts will help to drive down its operating costs by $2.5 billion by the end of 2021. The cost-cutting plan might have to go even further, Mr. Looney said in the email.

The move follows Chevron Corp. ’s plans to reduce its 44,679 workforce by as much as 15%. “Most of the workforce reductions will take place this year,” said a spokeswoman for Chevron.

Royal Dutch Shell PLC said in April that it will look at resizing parts of its organization, ideally through voluntary redundancies.

Schlumberger Ltd., the world’s largest oil-field-services company by revenue, said it cut 1,500 jobs in North America in the first quarter. Last month, its rival Halliburton Co. said it cut about 1,000 jobs at its Houston headquarters.

“I don’t think there’s ever been an oil-price downturn without a significant job reduction, and therefore we should expect more of it across other companies,” said Bernstein analyst Oswald Clint.

For BP in particular, job cuts were inevitable, given the restructuring announced in February and its cost-cutting plans, Mr. Clint added.

The oil industry’s history of boom and bust cycles are often reflected in staffing levels, but the pandemic has led to even more drastic measures from some, with companies including Shell and Equinor AS A cutting their dividends. BP said in April that it was maintaining its dividend, but Mr. Looney said it wasn’t yet clear whether the pandemic could cause permanent damage to oil demand.

“The pandemic I believe only adds to the challenge of oil in the future,” he said on the April earnings call.

The major oil company said it is aiming to bring down its capital expenditure by 25% in the year, a reduction of around $3 billion.

The cuts will introduce a flatter organizational structure, Mr. Looney said, and will mostly come from office-based roles. The majority of employees affected are expected to leave by the end of 2020.

The revised structure is expected to significantly affect senior-level management. BP said it expects the number of group leaders—the top 400 roles in the company—to be reduced by one-third.

BP is due to announce its revised strategy at a three-day event starting on Sept. 14.