ConocoPhillips says it will slash as much as 25% of workforce — sending oil giant's shares tumbling

ConocoPhillips announced a significant workforce reduction of 20-25%, impacting 2,600-3,250 employees globally, sending its shares down 4.4%. This restructuring is a direct response to persistent pressure from falling oil prices, with US crude futures down 11% YTD, and rising controllable costs, which have increased to $13 per barrel. The company, which reported Q2 net income of $2 billion (its lowest since Q1 2021), aims to streamline operations and realize over $1 billion in cost savings, mirroring similar strategic adjustments by industry rivals.

Analysis

ConocoPhillips is undertaking a significant corporate restructuring, involving a 20-25% reduction of its global workforce, which translates to between 2,600 and 3,250 positions. The announcement triggered an immediate 4.4% decline in its share price to $94.68, exacerbating its year-to-date underperformance relative to the S&P 500 Energy Index (-4% for COP vs +5% for the index). This strategic shift is a direct response to deteriorating market conditions, specifically an 11% year-to-date drop in US crude futures, and significant internal cost pressures, with controllable costs rising from $11 per barrel in 2021 to $13 in 2024. The restructuring, internally named "Competitive Edge," aims to secure over $1 billion in cost and margin improvements on top of synergies from the Marathon Oil acquisition. The decision follows a weak financial performance, with Q2 net income falling to $2 billion, its lowest level since the first quarter of 2021. This action places ConocoPhillips in line with industry peers such as Chevron and BP, which have also announced substantial layoffs, signaling a sector-wide focus on cost containment amid price volatility.

Key Decisions for Investors

• Investors should closely monitor the detailed restructuring plan set to be announced in mid-September, as the successful execution of the targeted $1 billion-plus in cost reductions is now the critical catalyst for the company's future profitability.
• Evaluate the effectiveness of the cost-cutting by tracking key metrics in subsequent earnings reports, specifically the controllable cost per barrel and operating margins, to assess tangible improvements against both historical performance and industry peers.
• Given the stock's significant underperformance against the energy index, consider whether the current valuation reflects an attractive entry point for a more efficient future operation or if it appropriately prices in the execution risks and negative sentiment from falling oil prices.