Energy giant Chevron Corp. is working to reduce operating expenses related to its production of oil and fuels and increase its output.
The San Ramon, Calif.-based oil major in January reported profit of $15.6 billion for 2021, up from a loss of $5.5 billion in 2020. It brought down costs during the Covid-19 pandemic. Its $5 billion acquisition of Noble Energy Inc. in 2020 gave Chevron additional exposure to the Permian Basin in West Texas and added several mature, less-risky assets to its portfolio. Operating expenses last year totaled $20.73 billion, down 3.1% from 2019, when the company said it would restructure its operations.
Chevron last year produced an equivalent of 3.1 million barrels of oil per day. It said it expects production to rise at a compound annual growth rate of at least 3% through 2025.
Chief Financial Officer Pierre Breber discussed layoffs, cutting back on operating costs and how to get more out of its capital investments. This is the fourth part of a series that focuses on how CFOs reduce debt and other costs. Edited excerpts follow.
WSJ: What have you done to reduce expenses?
Mr. Breber: We’re a much better company than we were a few years ago because we are more capital- and cost-efficient. I wouldn’t necessarily call it a cut in capital, [but] an improvement in capital and cost efficiency. We can get the same business results for less capital. We gave guidance [in March] to lower our cost per barrel [of oil] by 10% over the next five years. So it’s a unit cost and you can do that, both by becoming more cost efficient, but also by having underlying production growth.
WSJ: Your head count last year fell 10.8% to 42,595 compared with a year earlier. To what extent did you cut staff?
Mr. Breber: We did, as part of our enterprisewide transformation. We’ve been operating under the new model for more than a year. We did have reductions in staff. The majority of them were essentially voluntary and then some were involuntary.
WSJ: How much net debt do you have?
WSJ: How are you managing your capital investments?
Mr. Breber: Our capital expenditures are up this year by nearly 30%—to an expected $15 billion from $11.7 billion [in 2021]—and then [they] will be in a flattish range. We’re clearly going to have more cost pressure. We deliberately reduced capital when Covid hit because we didn’t want to add short-term supply in markets that were oversupplied. We didn’t know exactly how long it was going to go on, but we expected it to get back to that prior investment level [of about $14 billion]. Now we’re on that level.
Demand has bounced back faster. Supply’s trying to catch up. There’s been a lag and then, of course, you have geopolitical risk that has increased commodity prices in general and including oil, and it’s a fast-moving environment.
WSJ: How are you affected by Russia’s invasion of Ukraine?
Mr. Breber: We were in a recovery even before the [Russian] war with Ukraine was under way. We do not have exploration production activities in Russia like a number of our peers do.
WSJ: Do you have tips for other CFOs on how to become more efficient?
Mr. Breber: We are a big company, but we’re not everywhere and we don’t do everything. We pick our spots. If you think of our downstream business, we’re primarily on the U.S. West Coast, U.S. Gulf Coast and parts of Asia. That’s a very focused portfolio. It’s easy for companies to think you can do more than you can and that’s when you tend to get cost inefficient.
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