Chevron Cuts Thailand Headcount By 800 Amid Low Oil Prices

Chevron Corporation (NYSE:CVX) , one of the largest integrated energy companies in the world, announced that it is planning to reduce its workforce by 800 in the Thailand region amid low oil prices. The company intends to make savings of $500 million in costs so as to continue its operations in Thailand. This is in sync with the company’s late last year’s announcement of a significant headcount reduction plan at its upstream business.

The job cut, which is expected to be effective from Aug 1, is in addition to the layoff of around 100 employees earlier this year. In Thailand, Chevron has around 2,200 staff and 1,700 contractors, and caters to about half of the country's natural gas demand.

Persistent low oil price for a length of time is primarily behind this massive layoff. This is because the upstream and the integrated energy players are not being able to sell crude at attractive prices and are hence not generating significant cash flows for their shareholders. Hence, Chevron, like its peers, is trying to generate more profits by cutting its operating expenses.

Notably, Chevron is in discussions with the Thai government to extend concessions for several oil and gas license blocks which it operates in the Gulf of Thailand beyond the 2022 expiration date. Chevron expects the government to take a decision by early 2017.

San Ramon, CA-based Chevron has an impressive business model. Its current oil and gas development project pipeline is among the best in the industry, boasting large, multi-year projects. However, the oil price slump has affected the group’s earnings and cash flows, particularly at its upstream unit.

Despite slashing costs worldwide, Chevron reported its biggest quarterly loss in 15 years in the first quarter of 2016. The company reported loss per share of 39 cents, wider than the Zacks Consensus Estimate for a loss of 18 cents. In the year-ago quarter, Chevron had earned $1.37 per share.

As a result, the company currently carries a Zacks Rank #3 (Hold), implying that the stock will perform in line with the broader U.S. equity market over the next one to three months.

Some better-ranked players in the energy sector are McDermott International Inc. (NYSE:MDR) , Braskem S.A. (NYSE:BAK) and Pembina Pipeline Corp. (NYSE:PBA) . Each of these stocks sports a Zacks Rank #1 (Strong Buy).