Houston exploration and production company Occidental Petroleum is enacting across pay cuts after making a second round of budget cuts as crude oil prices remain stuck at record lows.
Occidental plans to cut $2.5 billion from its capital budget and $600 million from its operating budget. After the cuts, the company plans to spend between $2.7 billion and $2.9 billion on drilling and completion projects, a 47 percent reduction from its original budget of $5.2 billion to $5.4 billion.
“We are making solid progress with additional cost reductions to help withstand the low commodity price environment and other macroeconomic pressures impacting our industry and the global economy,” CEO Vicki Hollub said.
In a memo obtained by the Houston Chronicle, Occidental told employees it was cutting their pay by 30 percent and suspending many benefit programs as of April 1. Senior executives will take even larger pay cuts, with CEO Vicki Hollub’s pay being reduced more than 80 percent.
“During this unprecedented time impacting our industry, and the global economy, we’re taking aggressive actions to ensure the health of the company while protecting jobs,” Occidental spokeswoman Melissa Schoeb said. “We deeply value our employees and want to keep them working for the health of their families, the communities we serve, and the overall economy.”
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In addition, Occidental has suspended bonuses and hiring, while also offering unpaid leaves of absence to employees who want to make use “of these current and unique circumstances to return to school, spend time with children or parents or engage in other personal goals.”
The company enacted the cuts as Chevron, Shell, Total and numerous others in the industry are cutting billions of dollars in response to decades-low oil prices.
A price war between Russia and Saudi Arabia has exacerbated a global supply glut while the coronavirus outbreak has lowered global demand. West Texas Intermediate crude oil is trading around $23 per barrel, a price that has not been seen since February 2002 and is too low for most shale drillers.
Oxy is ranked as the third most-active driller in Texas. The company filed for 488 drilling permits for projects in Texas during 2019 with the bulk of that activity in the Permian Basin.
Last year’s decision to buy rival Anadarko Petroleum in a $38 billion deal put Oxy’s management at odds with billionaire investor Carl Icahn.
After months of discord, Oxy announced Wednesday that the company reached an agreement with Icahn that allows the billionaire to appoint three members to the board of directors. One of the board members Icahn chose was Oxy’s former CEO Steve Chazen.
“We believe Oxy is a good company with good assets,” Icahn said in a statement. “We are pleased to have reached this settlement and can now focus on working with Steve Chazen to enhance value for all Oxy stockholders.”
