Chevron cuts more jobs and spending as oil slump saps profit

Chevron Corp. said it is cutting about 10 percent of its workforce amid the worst oil-market slump since the 1980s even as the company posted third-quarter profit that surpassed analysts' expectations.

Chevron said in a statement Friday that it will eliminate 6,000 to 7,000 jobs, the deepest cuts since the 2001 Texaco merger that created the company in its modern incarnation. Those numbers include a workforce reduction of 1,500 announced earlier this year.

The company earned $1.09 a share, 33 cents more than the average of 21 analysts' estimates compiled by Bloomberg. Profit from refining oil into fuels jumped 59 percent to $2.2 billion. Spending in 2016 will be 25 percent less than this year, said Chevron Chairman and Chief Executive Officer John Watson in the statement.

"The concern for investors has been that they've been outspending cash flow, so anything they can do to alleviate those concerns will be looked upon favorably," Brian Youngberg, an analyst at Edward Jones in St. Louis, said in an interview.

The price of Brent, the benchmark crude used by most of the world, declined by half since June 2014 to an average of $51.30 during the July-to-September period. After a brief rebound, oil entered its second bear market in a year after an avalanche of supplies from U.S. shale fields and the Persian Gulf flooded markets at a time of faltering demand growth in China and other developing economies.

"We expect further reductions in spending for 2017 and 2018," Watson said. "We are focused on improving results by changing outcomes within our control."

Watson has stuck to plans to boost production 20 percent by the end of 2017 and continue dividend payouts to investors, even as the downturn erodes cash flow for the second-largest U.S. oil producer.

Chevron's stock has fallen 20 percent this year, putting it on pace for the worst annual performance since 2002. Every $1 decline in the average quarterly price of Brent crude reduces Chevron's cash flow by $325 million to $350 million.

The company is expected to outspend cash flow until at least the end of 2016, according to the average of six analysts' estimates in a Bloomberg survey. The almost 45 percent drop in Brent crude during the past year represents the steepest 12- month decline since 1988, according to data compiled by Bloomberg.

Net income fell to $2.04 billion from $5.59 billion, or $2.95, a year earlier, Chevron said. The statement was released before the opening of regular U.S. trading. Chevron rose 1.8 percent to $91.54 at 9:34 a.m. Thursday in New York. The company has 12 buy ratings from analysts, 16 holds and two sells.