Chevron will lay off 15% to 20% of its global workforce by the end of 2026, the U.S. oil company said on Wednesday 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.

Meanwhile, 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 outperformed it with production growth, achieving record production in Guyana and the biggest oilfield in the United States.

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.

Weak margins in the production of gasoline and diesel also hurt Chevron's fourth quarter earnings, as its refining business posted a loss for the first time since 2020, raising pressure on CEO Mike Wirth.

Shares of Chevron declined 1.3% in afternoon trading. The broader S&P 500 Energy Sector index fell 2.4%. Chevron's shares are up 5.6% year-to-date.

“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." (Reuters)