IW 50 Best: Chevron Enters Cost-Cutting Mode

Company plans to cut 2,000 jobs and sell some overseas operations.

Chevron Corp. plans to shed 2,000 jobs and sell some overseas operations as part of a cost-reduction plan aimed at boosting earnings amid challenging market conditions, the company said March 9.

The job cuts will occur through 2011 and will result in severance charges in the first quarter of $150 million to $200 million.

The company will accept bids on certain operations throughout Europe, including its Pembroke refinery, the Caribbean and Central America. Chevron also plans to review its operations in Hawaii and outside South Africa, said Mike Wirth, executive vice president of the Global Downstream division.

"Downstream market conditions are likely to be difficult for the next several years," Wirth said in a statement. "We intend to further concentrate our downstream portfolio in North America and Asia-Pacific. These are markets in which we have our greatest competitive strength. We are also rapidly and aggressively lowering costs, reducing capital spending, improving efficiency and simplifying our organization."

Chevron Corp.
At A Glance


Chevron Corp.
San Ramon, Calif.
Primary Industry: Petroleum & Coal Products
Number of Employees: 65,000
2008 In Review
Revenue: $267.6 billion
Profit Margin: 8.94%
Sales Turnover: 1.66
Inventory Turnover: 28.18
Revenue Growth: 23.47%
Return On Assets: 16.08%
Return On Equity: 31.04%
Chevron looks to continue cost-cutting momentum it built in 2009 when it reduced operating expenses by $3.9 billion, or 15%, said Pat Yarrington, Chevron's vice president and chief financial officer.

Chevron's earnings declined 56% in 2009 to $10.48 billion. The company posted a fourth-quarter profit of $3.07 billion, or $1.53 a share, down from $4.90 billion, or $2.44 a share, in the year-earlier period.

Chevron continues to shift its focus to natural gas and expects a substantial production increase by mid-decade, said Chairman and CEO John Watson.

"Chevron has held a long-term view favoring aggressive upstream investment, and the company is poised for another decade of upstream growth," said Watson in a statement released after announcing the company's plans in a meeting with financial analysts.

One of the company's larger natural-gas investments is the Gorgon project in northwestern Australia. In January, Chevron signed a 15-year agreement to supply Japan's Nippon Oil Corp. with 300,000 metric tons of liquefied natural gas from the Gorgon field.

Chevron operates the project and owns an approximate 50% interest in it, while ExxonMobil and Shell are the other major stakeholders. The site is located between 80 and 125 miles off the coast of western Australia. It contains about 40 trillion cubic feet of liquefied natural gas (LNG), enough to power a city of 1 million people for 800 years, according to Chevron.

Construction on the US$39 billion Gorgon project began in December. The initial project development will include a three-train, 15 million-metric-tons-per-year LNG facility and a domestic gas plant.

Chevron also signed deals late last year for the Wheatstone project, another natural-gas field located in northwestern Australia. Chevron expects to deliver 4.9 million metric tons of LNG per year to the two buyers. The project has a planned capacity of 8.6 million metric tons per year.


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