ritish oil and gas giant BP (NYSE: BP) is set to cut its global headcount by about 10,000 people. In an email to employees, CEO Bernard Looney announced the job cuts, which work out to about 15% of the company’s workforce. This is a reversal from the company’s moratorium on job eliminations as the COVID-19 crisis hit the industry hard.
Today’s announcement came out even as many oil stocks rallied, following news that the OPEC+ group of oil-producing nations had agreed to extend their record oil output cuts deal through the end of July.
“Can’t make worries disappear.”
In the email that numerous media outlets obtained, Looney pointed out that BP, like most major oil companies, continues to burn more cash than it is earning with every passing day. After putting it off for three months, BP is joining the ranks of other oil and gas majors to cut staff. Even with prices up sharply over the past month, global oil demand is still down dramatically, while oil output — even with the OPEC+ deal taking almost 10 million barrels per day off the market — continues to exceed consumption.
As Looney put it to employees, he “can’t make [their] worries disappear.” BP reported as $4.4 billion loss last quarter and a nearly 90% sequential decline in operating cash flows. Free cash flows fell from almost $4 billion in the prior quarter, to $2.84 billion in negative free cash flows.
Riding out a protracted downturn
Even though many oil stocks have rallied over the past month on rising crude prices and significant declines in oil production, oil producers continue to book massive losses. Crude prices are still below breakeven for most producers, while demand is still down as much as 20% in much of the world. Factor in record levels of oil in commercial storage, in the offshore room in shipping vessels, and record levels of refined products in the room, the industry could face a protracted downturn.