BP will cut 10,000 jobs as coronavirus hits the UK oil major’s finances and accelerates a strategic shift to become a “leaner” company under its new chief executive.
The pandemic has dealt a large blow to oil demand and BP’s earnings, with widespread financial damage across the energy industry forcing companies to reduce spending, raise debt and make savings.
Bernard Looney, who took the helm at BP in February, said in a letter to staff on Monday that “we are spending much, much more than we make”.
A three-month redundancy freeze introduced in March has been lifted. BP aims to cut almost 15 per cent of its roughly 70,000-strong workforce by the end of this year.
“The majority of people affected will be in office-based jobs. We are protecting the front line of the company and, as always, prioritising safe and reliable operations,” said Mr Looney.
“It will help strengthen our finances,” he added. “And it will help create a leaner, faster-moving and more competitive company for the majority who are staying.”
In the letter, Mr Looney said it cost $22bn a year to run the company — of which about $8bn was allocated for “people costs”.
US rival Chevron also plans to slash its workforce by up to 15 per cent.
The latest announcement follows one last month on halving the number of top managers at BP, with many of those leaving the company having held leadership positions under former chief Bob Dudley.
“BP is cutting out huge layers of management. He’s rethinking the organisation,” said Jason Gammel at Jefferies.
The group’s push for a new operational and leadership structure comes as it seeks to become a net-zero emissions company by 2050.
“While the external environment is driving us to move faster — and perhaps go deeper at this stage than we originally intended — the direction of travel remains the same,” said Mr Looney in the letter.
However, the company will still generate the bulk of its cash from fossil fuels for the foreseeable future.
Mr Looney told the Financial Times in April that “there will be job cuts globally, towards the end of this year”, as the company sought to drive down costs and reorganise the business, but denied that BP planned to announce sizeable cuts in June.
BP is reducing its capital spending this year by 25 per cent, a cut of $3bn, while driving down operating costs by a similar figure over the next year.
“We will likely have to go even further,” Mr Looney said on Monday.
It has also secured new credit lines and tapped the bond market for nearly $7bn.
BP has kept its dividend intact but has said it will review its payout policy each quarter. Analysts have said its current distributions are unsustainable with BP’s debt levels among the highest in the sector.
Mr Looney said BP would not give senior employees pay rises until March 2021, and that it was unlikely to pay any cash bonuses this year.