British oil giant BP (BP) will cut 5% of global workforce as part of a cost-cutting drive as pressure grows on CEO Murray Auchincloss to arrest a decline in profitability and the share price.
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Whilst shares of rival Shell (SHEL) have risen 10% in the last 12 months, BP’s stock has fallen almost 5%, though it was trading up by almost 2% on Thursday, January 16th.
News of the job cuts comes after the company warned this week that its Fiscal fourth-quarter results would be dented by weaker oil and gas production, lower refining margins and softer trading. The company also delayed its investor day due to a medical procedure required by Auchincloss.
BP Needs to Lower Costs
BP plans to slash 4,700 internal positions, around 5% of its workforce, as well as cut 3,000 contractor jobs, according to an internal memo seen by both Reuters and Bloomberg.
Last year Auchincloss vowed to reduce BP’s costs by $2 billion by 2026 as he sought to improve profitability and shareholder returns amid investor concerns about the shift to green energy.
“We are strengthening our competitiveness and building in resilience as we lower our costs, drive performance improvement and play to our distinctive capabilities,” the company said in a statement.
BP’s Fiscal Q4 Update
Earlier this week, BP said production in its Fiscal fourth quarter is expected to be lower than in the third quarter. Both oil production and operations, as well as the gas and low-carbon energy segments, are expected to see declines.
In the Oil Production and Operations segment, earnings are expected to decrease by $200 million to $400 million compared to the previous quarter, partly due to price adjustments affecting production in the Gulf of Mexico and the UAE.
In the Customers segment it noted lower seasonal demand, reduced fuel margins, currency exchange losses, and a one-time adjustment related to a bio-ethanol acquisition are expected to impact results.
In Products it warned of lower refining margins, which would be down between $100 million and $300 million, while increased maintenance activities are expected to have a negative effect. Oil trading performance is expected to be weak, BP said.
Is BP a Good Stock to Buy?
Overall, Wall Street has a Moderate Buy consensus rating on BP stock, based on four Buys and six Holds. After declining almost 5% in the last 12 months the average BP price target of $37.20 implies almost 19% upside to current levels.
