Fortune 500 Pioneer shrinks work force...aka "layoffs"

The company also cut another 300 workers in April, Reuters reported, noting that the reductions represent a quarter of Pioneer's workforce.

Coal miners never recovered and most likely the industry will not regain the number of jobs lost due to cuts in the use of this dirty fossil fuel.  Now, it would appear, the oil and gas industry employees are facing the same fate.

Echo report by Mitchell Schnurman in:

Dallas Morning News - Pioneer Natural Resources* laid off 230 employees, using police to escort people off the Irving property and promising to pack up their stuff and mail it to them. The layoffs came after 300 workers had earlier accepted buyout offers — and nearly 350 more positions were eliminated elsewhere.
In total, Pioneer has reduced its headcount more than 25% this year, the company said.

That’s a startling number, especially for a Fortune 500 company that appears to be rich and healthy — and often brags about employees being treated like family.

It’s not as if Pioneer were awash in red ink and starved for cash. It’s projecting about $800 million in free cash flow this year and plans to share much of that with investors.

Pioneer doubled its dividend a year ago and doubled it again in April. Those payments to shareholders will top $100 million annually, compared with $14 million two years ago, by my estimate.

Last year and in the first quarter, Pioneer spent about $400 million to buy back company shares. In December, the board of directors approved spending up to $2 billion on stock buybacks.

Pioneer also is building a 10-story gleaming headquarters in Las Colinas, just down the road from its current offices. 

Unbelievable because the cost of that upgrade was $217 million at the end of December, according to a company filing. Moreover, the project still isn’t finished.

Pioneer will lease the new building and pay annual rent of $33 million for 20 years, the filing said.

Does that sound like a company that has to jettison a quarter of its workforce — at a time when record low unemployment has spawned a so-called war for talent?

To put Pioneer’s cuts in perspective, consider that all oil and gas extraction jobs in the U.S. declined almost 21% a few years ago. That was the largest year-over-year percentage drop since at least 1990, and was prompted by oil prices dropping from over $100 a barrel to $44.

Pioneer reported its largest net income ever last year, $978 million. Oil and gas revenue totaled nearly $5 billion in 2018, also a record high for the company.

For the first three months of 2019, oil and gas revenue declined 10%, but net income doubled for Pioneer.

So what’s the problem? Think Wall Street.**

A year ago, Pioneer’s stock price hit $212 a share. On Thursday, it closed at just over $145. Nearly $12 billion in market value has evaporated for Pioneer investors in the past 12 months.

With Pioneer and other oil and gas companies, investors want to see a bigger payoff from the huge investments in shale plays, including in the energy-rich Permian. While Permian production has grown sharply, profits and stock prices have lagged — and cutting costs is a key piece of Pioneer’s new plan.

The goal is to trim hundreds of millions of dollars in drilling expenses, midstream costs and facilities. 

And Pioneer wants to cut $100 million from general overhead, which is why it decided to do layoffs.

Scott Sheffield, the longtime Pioneer chairman who suddenly returned as CEO in February, is pushing the cost-cutting plan. And he started in the executive suite.

“After listening to a lot of the employees and getting with the management team, the first thing we did, we asked 30% of the officers to retire,” Sheffield said this month in an earnings call with analysts.

“We’re going to a very simple structure, flattening the organization, less managers, more functional,” Sheffield said, adding that Pioneer exceeded its capital spending budget in the previous two years — and won’t miss it in 2019.

That all sounds reasonable, but why the fixation on cutting $100 million in overhead? It’s a nice round number, but what about the impact on corporate culture?

Pioneer offers terrific benefits, including a 2-to-1 match on the 401(k), free buffet lunches for full-time employees and flexible schedules that let workers skip Friday afternoons. 

In The Dallas Morning News’ annual Top 100 Places to Work, Pioneer has been a 10-time winner — placing among the best in every year of the competition.

Last year, it also was recognized for having the best benefits as voted by employees.

Some workers who lost their jobs said the severance package was generous. In a quarterly filing, Pioneer estimated severance and related costs at $140 million to $180 million. It’s unclear how that was distributed among employees and the number who qualified for equity awards with accelerated vesting.

At the end of 2018, according to a company filing, Pioneer had 3,177 employees. Today it has about 2,300, a spokesman said. So it's eliminated 877 jobs since the end of the year.

*Pioneer Natural Resources Company is a company engaged in hydrocarbon exploration. The company is organized in Delaware and headquartered in Irving, Texas.

**The message: The CEO and board are determined to pay more to shareholders even if it means cutting more people.