Chevron and BP cutting thousands of jobs

Oil giant Chevron is to slash its workforce by 15– 20% by the end of 2026, losing up to 9000 jobs. The goal is to simplify the company’s structure and reduce annual costs by around $2–3 billion (£1.6–2.4 billion).

Chevron is not alone. In January, BP began cutting around 4700 employees, around 5% of its workforce, and 3000 contractors – again to reduce costs. BP’s profits have fallen behind competitors such as Shell, ExxonMobil and Chevron in recent years, but fossil fuel profits generally are looking volatile.

‘The returns are much weaker than in 2022 and 2023, and cost cutting is one way to try improve that,’ says Alan Gelder, chemicals and oil market analyst at Wood Mackenzie. ‘Oil prices are lower, refining margins are weaker and chemicals margins are pretty poor. So 2024, and particularly [the fourth quarter], was much more difficult.’

Demand growth has slowed, having recovered somewhat from the lows of the Covid-19 pandemic. Additional new refining capacity has also come online. ‘There’s been a huge build in petrochemical facilities in China, so global petrochemical margins are weak from this oversupply,’ Gelder says. And while the extended Organization of the Petroleum Exporting Countries (OPEC+) countries have agreed curbs on production in an effort to shore up prices, growth elsewhere means production has continued to rise.

The US government recently estimated that world petroleum and other liquids supply rose by about 0.6 million barrels per day (mb/d) in 2024 and will increase by 1.9mb/d in 2025 and 1.6mb/d in 2026. Supply growth will mainly be in the US, Canada, Guyana and Brazil, if OPEC+ countries stick to their agreed quotas. In a February report, the International Energy Agency similarly predicted global supply growth of 1.6mb/d in 2025, bringing total global production to 104.5mb/d.

‘We expect production volumes to grow at a low, but steady rate, but capital spending will be subdued in the US given the decline in oil prices,’ comments Joshua Aguilar, equity analyst at investor research firm Morningstar.

Consolidation rush

Meanwhile, there has been a flurry of dealmaking in the last two years, with acquisitions by major players, especially in US shale oil and gas. ExxonMobil bought shale specialist Pioneer in 2023 in a deal valued at $59 billion. This gave it the largest presence in the Permian Basin of Texas and Mexico.

In February 2024, Diamondback Energy merged with Endeavour Energy Resources in a $26 billion deal, combining operations in the Permian shale. ConocoPhillips completed its $22.5 billion acquisition of Marathon Oil in November 2024, boosting its presence in two other major shale formations (Eagle Ford in Texas and Bakken in Montana).

Aguilar says that attractive shale sites are getting harder to find at reasonable prices, driving larger firms to look at acquiring smaller players for their drilling rights. ‘There’s still consolidation going on in the US as a way for companies to grow and save costs,’ says Gelder. The US shale industry is now becoming more corporate, he adds, with ‘a smaller number of larger players trying to optimise what they do’. 

The discussion around transitioning to renewables is legitimate and will continue

US production is expected to grow by 1.1mb/d from 2024 to 2026. ‘Our ability to frack oil and gas has just got better and better. There’s been continually increasing efficiency and technology in the US,’ says James Stock, an energy and climate economist at Harvard University, US. The average breakeven point for shale used to be around $70–80 a barrel, but has fallen to around $50. Higher oil prices encouraged more oil and gas production from US shale in recent years, particularly pre-pandemic, but the focus on investor returns has slowed growth during the 2020s.

Chevron is presently in a legal wrangle with ExxonMobil over Chevron’s plan to acquire Hess for $56 billion, which would give it control over a Hess subsidiary in Guyana. Exxon claimed that it should have had first right of refusal with Hess, owing to an existing joint operating agreement in an oil block off Guyana.

With all this activity, oil and gas watchers believe that the US administration’s encouragement to ‘drill baby, drill’ is unlikely to have much impact on production in the near future. ‘These companies are there to generate returns on investment. The more they drill, the lower the oil price, the weaker their returns,’ says Gelder.

Renewables feel chill

One marked trend amongst companies, however, is to walk back promises on renewable energy and climate targets. BP has now completely abandoned its target to reduce oil and gas output by 2030, having previously reduced the target from a 40% reduction to 25%. The company will now step up its spending on oil and gas, and cut spending on renewable energy by 70%.

Norwegian company Equinor recently trimmed its 2030 target for installed renewable energy generation capacity from 12–16GW to 10–12GW and halved its planned investment in renewables and low-carbon solutions to $5 billion between 2025 and 2027. Equinor also announced it would boost oil and gas production by 10% by 2030.

‘The discussion around transitioning to renewables is legitimate and will continue,’ says Stock. ‘Companies have different degrees of commitment to being broader energy companies than just oil and gas, though for some it was just lip service,’ he adds.

Politics is also coming into play. ‘We’re seeing a lot of political pushback in Germany, the US and in Canada against climate policies,’ says Stock. He adds that the new US administration is causing chaos in the renewable energy markets. A lot of plans for wind or solar energy sites in the US are likely to be put on hold, given uncertainty around subsidies and tax credits.

It is not just in the US. ‘We’re seeing a lot of European majors – Equinor, Shell, BP – roll back because the policy support isn’t there and the projects don’t generate the required returns, so they pivot back to traditional businesses,’ says Gelder. ‘It’s a trend that reflects relative returns,’ he says. ‘The oil industry makes large bets on big projects to generate high returns that it pays back to shareholders as dividends. The challenge for a lot of renewable projects is that the returns were relatively low.’