ExxonMobil expects $200 million in job cuts charges

U.S. energy supermajor ExxonMobil expects up to $200 million in charges related to job cuts in 2021, figured in previously in the company’s cost-savings plans.

ExxonMobil said in a securities filing on Wednesday that the company would get hit with $200 million in charges regarding job cuts. This means that the company will spend more money this year as workers exit than in 2020.

Also, the supermajor will see total cash outflows between $400 million and $600 million, versus $47 million in 2020. According to ExxonMobil, it set aside some money last year toward the costs. The severance cost estimate does not include job cuts related to changes in the company’s portfolio.

Reductions should be “substantially complete” by year-end, including voluntary and involuntary exits and the use of fewer contractors. In the first quarter, the company had before-tax charges of $39 million mostly from employee separation costs in Singapore and Europe.

The company has already announced its intentions to reduce staffing levels at its Singapore affiliate with about 300 positions expected to be impacted by the end of 2021. This is 7 per cent of the company’s more than 4,000 employees in Singapore.

According to ExxonMobil’s filing, before-tax workforce reduction savings from its global staffing, including employees and contractors, are estimated to range between $1 billion and $2 billion per year after program completion when compared to 2019 levels.

The whole story of ExxonMobil cutting its global workforce began in October 2020. At the time, the supermajor said that it would cut its workforce by around 14,000 or 15 per cent – including contractors.

At the end of 2019, the company had about 88,300 workers, 13,300 of which are contractors.

This was in line with other oil majors like Shell, BP, and Chevron which previously announced workforce cuts between 10 and 15 per cent.

The talk of workforce cuts was preceded by ExxonMobil announcing more than $10 billion in budget cuts. Its capital investments for 2020 were about $23 billion, down from the previously announced $33 billion.

This was further curbed in early March 2021. The capital investment budget was reduced to the range of $16 billion to $19 billion. The company also reduced cash operating expenses by 15 per cent in 2020 and expects permanent structural savings of $6 billion a year by the end of 2023 versus 2019.

If nothing, a reduction in spending and higher oil prices enabled ExxonMobil to post estimated earnings of $2.7 billion in the first quarter of 2021 compared with a loss of $610 million in the same quarter last year.

Along with its capex reduction, ExxonMobil made public its plans to focus on developing technologies to reduce emissions, especially carbon capture and storage technology, and eliminate routine flaring by 2030.

Reducing emissions is ExxonMobil’s bone of contention with environmentalist groups and an activist firm since other oil majors – Shell, BP, Equinor, Total, and Eni – have all already pledged to become net-zero companies by 2050 or sooner.

Although, the company’s newly created business, ExxonMobil Low Carbon Solutions, is attempting to improve the company’s stature by commercializing low-emission technologies. One of them is the massive $100 billion carbon capture and storage (CCS) project which ExxonMobil believes will be critical to meeting Paris Agreement emission-reducing goals.