Rough week with all the layoffs! The criteria for the layoff seems, on the surface, to be egalitarian: poor performers, check! But, high grade code? Near pension age? Employees with many kids? Seems to be more like a cost cutting exercise (the higher salaries/wage/benefits of the latter factors). The question one would ask is why is this so?
Saudi Aramco is now a public company. It is scrutinized more so than before becoming a publicly listed company. Five years ago or in 2019, when the company did its IPO, the company was the talk of the investing community! A whopping $1.87 trillion in market capitalization valuation, raising $29 billion and was compared to other trillion dollar companies like Apple, Amazon, and Microsoft. Proponents of the stock even mentioned that Exxon and Chevron are not even peers as they are relatively smaller than Aramco and are fragmented American IOCs (International Oil Company).
Fast forward to 2024 or five years later, Saudi Aramco's valuation is still in the same range ($1.77 trillion); in fact, it is slightly lower. But, what hurts is that Apple, Amazon, and Microsoft have surpassed Aramco's valuation, times over. The three companies are now 200% to 300% higher than their valuations 5 years ago while Aramco’s valuation is down 6% (negative six percent). Even Exxon's and Chevron's valuations are at least 30% higher than they were five years ago. The latter two have similar dividend payout ratios to Aramco's ratio.
The point of all these is this: Saudi Aramco's board and management have to address the lagging performance and deteriorating valuation! Given oil is a commoditized product, management can't control it's pricing, so the only near term option is to work on what they could/can control, and that is COST. The variable cost of human labor is the first to be targeted.
Further, there are mandates to localize jobs (not sure about lower wage expats) and there are pressures from consulting firms with a playbook to make things efficient, to lower cost! Aramco is really left with squeezing out extras - targeting high cost employees - Westerners, mainly Americans with huge pension/medical/other obligations that hit the balance sheet in the financial statement.
Categorically, among Westerners, cost center employees will get hit quite a bit! IT, Contracting, Accounting, and other support departments are prime candidates for the jettison! Law will also be hit, but on a limited scale because a) Saudi's lack formal training derived from working for US/UK law firms (securities law), and second, locals do not have the mastery of the English language used in legal contracts. One caveat here is that investment and management consulting analysts can recommend outsourcing legal work and only keeping the critical ones.
Until the scrutiny of investment and consulting analysts stops and oil price is at the bottom level of the bo-m and bust cycle, the trumpet call to cost cutting will continue. That is the price and burden of being a public company.
For Western expats, the key is to always be prepared. Do not think you are entitled because of your higher salary package! Do not think you are special relative to the Saudis or other nationalities even though you might have more experience and competitive skills. Like it or not, it is not your country, it is not your company! As hard that sounds and as ego/pride buster it gets, Aramco belongs to the Saudis even though many do not appear to be working as hard or effective as you do/are. Ensure you are saving for adverse events that inevitably loom! While there is a difference in being fired in Saudi and in the US, the message is the same! Saudi Aramco is now public company and will be subject to scrutiny. Period! For older employees with grandfathered pensions and cushy benefits, those can change when more financial pressures are encountered by the company. New hires need to really weigh the premium they are taking against the benefits (though reduced as each bust cycle is experience) and cost of being in a far country. Factor in the high probability of a job discontinuity abroad as well!
Aramco's benefits have continued to erode since the 80's and will continue to trend this way especially if the company does not innovate to fit the demands of the modern world. While it will still take some time before oil is replaced by alternative energy sources, the Oil/Gas industry is already in its mature phase where incremental gains are more likely than exponential growth.