Chevron will lay off 15% to 20% of its global workforce by the end of 2026, the U.S. oil company said on Feb. 12 as it seeks to cut costs, simplify its business, and complete a major acquisition.

The No. 2 U.S. oil producer has faced production challenges including cost overruns and delays in a large Kazakhstan oilfield project. Its $53-billion deal to acquire oil producer Hess and gain a foothold in Guyana's lucrative oilfield is in limbo due to a court battle with larger rival Exxon Mobil, which has more aggressively expanded its own production.

Chevron also faces industry-wide weakness in the refining business and the expectation that oil prices could be under pressure over the next two years as global production growth outpaces demand.

Chevron has said it is targeting up to $3 billion in cost cuts through 2026 from leveraging technology, asset sales and changing how and where work is performed.

At the end of 2023, Chevron employed 40,212 people across its operations. A layoff of 20% of total employees would be about 8,000 people. Those figures exclude another roughly 5,400 employees of Chevron service stations. Shares of Chevron declined 1.3% in afternoon trading.

The company told employees during an internal town hall that they can begin opting for buyouts now through April or May, according to a source familiar with the matter.

The oil industry has been consolidating in recent years, focusing on mergers and operational efficiency more than drilling new wells. Chevron will reorganize its business and announce a new leadership structure in the next two weeks, the source said.

“Chevron is taking action to simplify our organizational structure, execute faster and more effectively, and position the company for stronger long-term competitiveness," said Mark Nelson, vice chairman of Chevron, in a statement. "We do not take these actions lightly and will support our employees through the transition."

The company's oil and gas reserves have declined to their lowest point in at least a decade, raising concerns about its long-term prospects and highlighting the importance of closing the Hess acquisition.

Chevron moved its headquarters from San Ramon, California to Houston last year and replaced several long-standing managers to renew its leadership.

Last year, it also announced a new hub in India that will be its largest tech center outside the U.S.

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