Where the axe should fall

ExxonMobil bucks layoff trend

reports Upstream Online.

ExxonMobil will not make any major staffing cuts or reorganisations of its corporate structure, bucking a growing trend within the industry of operators slashing their headcounts in order to preserve cash amidst the steepest decline in oil prices in decades.

I suspect the reason for this is that they were running a pretty lean operation to begin with.  Take a look at the table below (numbers taken from Wikipedia: ExxonMobil, Shell, BP, Chevron, Total;  Financial figures are for 2014, employee numbers for 2015).

CompanyRevenue(bn)Profit(bn)No. of EmployeesProfit per Employee

This is a very crude method of comparing the added value of oil company employees (for instance, it doesn’t take into account the split of operated to non-operated assets), but given each company does roughly the same thing (E&P, LNG, refining, and petrochemicals) it is nonetheless a useful indicator of where each company sits in relation to finances versus headcount.

ExxonMobil appears to be doing a lot better than its competitors here: with just over 75 thousand employees they made a profit of $32.5bn, which equates to $432k per employee.

This is miles better than its nearest rival Chevron, which is half the size in terms of revenue but marginally more profitable (percentage-wise).  However, Chevron needs 65 thousand employees to achieve this, only 10 thousand fewer than ExxonMobil.  It is probably a reflection of the US labour market, and the American attitude to employment in general, that ExxonMobil and Chevron are way out in front of their European rivals on this measure.

Shell has impressive revenues but makes 25% less profit than Chevron (who has half the revenue) yet apparently needs 94 thousand people to do so.  This is almost 20 thousand more people than ExxonMobil, and each Shell employee adds half as much value as a Chevron employee.

BP scores very badly as well, with enormous revenues rivalling ExxonMobil’s but a pathetic profit margin and a headcount of 84 thousand, with each employee adding $47k of value: close to a tenth of that of ExxonMobil, a sixth of Chevron, and a third of Shell.

But as you’d expect from a French company, Total is the worst of them all.  Revenues broadly similar to that of Chevron but with a profit of just $4.2bn – a full 75% less.  To achieve this, Total supposedly needs over 100 thousand employees: a third more than ExxonMobil, who have revenues twice as large and profits 8 times higher.  Each employee adds a miserable $41k of value, which in many cases would be a lot less than their annual salary.  On this (admittedly crude) measure, ExxonMobil’s employees are ten times as productive.

This is not an exact science by any means, and I’m tackling the subject with a broad brush.  But even using such unrefined methods it is easy to see why ExxonMobil is not in any hurry to cut employee numbers.  Shell look a bit overstaffed but could probably tick along on the back of large revenues and a decent enough profit margin, but it is difficult to look at the above table and not come to the conclusion that both BP and Total need to be shedding not thousands, but tens of thousands of employees.  BP might be able to avoid doing this by making better profit margins on its impressive revenues, but Total simply doesn’t have the revenues to support an employee headcount numbering over 100 thousand.

The problem is, being French, Total is the company least willing and able to do what’s necessary.

“We’re down to a skeleton crew.”


2 Responses to Where the axe should fall

  1. Graeme says:

    I was going to suggest stripping out one-offs and exceptional items in order to get a feel for the ongoing, underlying profit but, on second thoughts, every year is exceptional in oil land – a rig explodes, a tanker crashes, a potential field is abandoned, Putin seizes your assets, Obama fines you, the British government imposes a windfall tax…

    Your numbers tell the right story anyway. Shell the bagpuss-like fat cat. Total the basket case. BP trying to cling on. And, if I get you right, this is before the impact of the price crash really hits home. Stormy times ahead!