By Emily Burleson – Reporter, Houston Business Journal
Feb 3, 2022, 7:38pm EST
Oil and gas supermajor Exxon Mobil Corp.’s (NYSE: XOM) decision to consolidate its Dallas-based executive team and staff into its massive Houston-area campus will help the company cut costs, executives and analysts said.
The Jan. 31 announcement to move the company's roughly 250-person Irving workforce to Exxon’s campus in City Place comes amid consolidations, asset sales and layoffs. Those and other measures are designed to slash $6 billion per year in what CEO Darren Woods called “structural cost savings” by 2023, relative to what the company spent in 2019.
“I think the heart of the reductions that you're seeing as we go forward is a function of capturing the best of what the corporation can bring to bear in each one of our businesses,” Woods said during a call with investors Feb. 1.
Exxon announced the newest cost-cutting program in 2020, when the company was facing acute pressure amid historic low oil and gas prices and global energy demand destruction. The company’s net loss in 2020 totaled $22.44 billion, a sharp drop from its net income of $14.34 billion the year before. In 2021, Exxon's earnings rebounded, netting $23.04 billion of income on $285.64 billion in total revenue, the company said Feb. 1.
“The biggest pressure in 2020 was really their dividend, that it's as large as it is: nearly $15 billion a year,” said Fernando Valle, a senior energy analyst at Bloomberg Intelligence. “When the cash flow dried out during the peak of lockdown 2020, there were a lot of questions around how they would maintain that. In a credit to them and to the industry at large, they reduced costs.”
Layoffs were among the company’s cost-saving tactics. Exxon announced in October 2020 that it would lay off 1,900 workers in the U.S., including more than 700 based in the Houston area.
Woods said Exxon hasn’t been immune to the so-called "Great Resignation," the recent wave of job turnover across industries, and has been “very thoughtful and cautious about what positions we fill and how we manage that attrition” to avoid further layoffs.
“We made those tough decisions back in 2020,” Woods said. “We recognized how hard that was going to be on the organization.”
The company actually expects to exceed its goal of $6 billion in savings before 2023, Woods said. Exxon sold $3 billion worth of what it calls non-core assets in 2021 alone, Woods said. The company also created $2 billion in structural efficiencies in 2021, on top of $3 billion in structural efficiencies in 2020, he said.
While the launch of Exxon’s cost-savings program aligned with the sudden Covid-related pressures on the oil and gas industry, Valle said the company’s strategies of focusing on low cost-of-supply production and streamlining its approaches across divisions both fit into a bigger picture, one that started after Woods took over as CEO.
Woods replaced former CEO Rex Tillerson, who left the company five years ago to serve as U.S. Secretary of State under the Trump administration.
“Even the move to Houston is part of that,” Valle said. “You don't have to keep two expensive campuses. That's a cost-saving measure. If you go to the campus (near) Dallas, it’s a beautiful place, but it’s very sparsely populated.”