Schlumberger Cuts 2,000 More Jobs in Full-Scale Industry Crisis
(Bloomberg) -- Schlumberger Ltd. cut another 2,000 jobs in the first quarter as the world’s largest provider of oilfield services sees the industry in a full-scale crisis.
The reduction sent the company’s global headcount down to about 93,000 at the end of the first quarter, Joao Felix, a spokesman for the company, said by e-mail.
“The decline in global activity and the rate of activity disruption reached unprecedented levels as the industry displayed clear signs of operating in a full-scale cash crisis,” Chairman and Chief Executive Officer Paal Kibsgaard said in an earnings report Thursday.
Profit fell as the company adjusts to shrinking margins in North America during the worst crude market crash in a generation.
First-quarter profit declined to $501 million, or 40 cents a share, from $975 million, or 76 cents, a year earlier, the Houston- and Paris-based company said in a statement Thursday. The profit was 1 cent more than the 39-cent average of 37 analysts’ estimates compiled by Bloomberg.
Challenges from the collapse in crude prices can be seen in the world’s largest hydraulic fracturing market, North America, where Schlumberger was expected to generate an operating profit margin at break-even, according to Capital One Southcoast. That’s better than smaller competitors reporting margins as low as negative 30 percent.
"Break-even is the new up," Luke Lemoine, an analyst at Capital One in New Orleans who rates the shares the equivalent of a buy and owns none, said in a phone interview before the results were released. "In this environment, it’s hard to defend the 5 percent margins in North America they had talked about."
The global energy industry has slashed more than $100 billion in spending and 250,000 jobs to keep pace with crude prices that have tumbled by more than half since June 2014. More pain is being felt this year as the industry cuts further production in an oversupplied market.
"Today the E&P industry finds itself in the deepest financial crisis on record, with profitability and cash flow at unsustainable levels for most oil and gas operators,” Kibsgaard told investors last month at an energy conference in New Orleans.
Schlumberger has laid off about 34,000 workers since the third quarter of 2014 as it seeks to cut costs to weather the rout. The company announced earlier this month plans to cut back activity in Venezuela, holder of the biggest oil reserves of any country, due to unpaid bills.
The second quarter is expected to get worse for Schlumberger, with North American margins dipping as much as 4 percent into the red, Lemoine said.
"A lot of it is carrying excess costs," he said. "Service companies have cut personnel and facilities, but they’re unwilling to cut to the bone. So, they are maintaining some slack in capacity."
The earnings statement was released after the close of regular trading in New York.
(Schlumberger is scheduled to hold an earnings conference call Friday at 9 a.m. New York time, accessible at EVTS.)
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