Schlumberger Profit Falls 39%; 11,000 More Jobs Cut
Oil-services company says workforce down 15% from peak levels
Schlumberger had a decline in earnings and revenue as lower oil prices slowed drilling activity.
By DAN MOLINSKI
Wall Street Journal
April 16, 2015 8:49 p.m. ET
Schlumberger Ltd., the largest oil-field service company in the world, will cut an additional 11,000 workers from its ranks, bringing the firm’s layoffs to 20,000 employees.
The company, a bellwether for the energy industry, announced the steep cuts late Thursday as it told investors that profit for the first quarter had plunged by 39% amid a slowdown in drilling for oil and gas.
“The abruptness of the fall in activity, particularly in North America, required us to take additional actions,” said Paal Kibsgaard, chief executive of Schlumberger.
Schlumberger, which has dual headquarters in Houston and Paris, announced 9,000 job cuts in January this year. The combined workforce reductions amount to a 15% reduction in its world-wide workforce, said Angie Sedita, an analyst at investment bank UBS.
Schlumberger helps oil producers drill and frack their wells and competes with rivals Halliburton Co. and Baker Hughes Inc., which have announced they plan to merge. Both Halliburton and Baker Hughes announced layoffs following Schlumberger earlier this year, so the continued job-cutting may spur other big oil-field service firms to follow suit.
“Batten down the hatches,” Ms. Sedita said in a note to investors, adding that Schlumberger’s aggressive response to the downturn in oil prices “is clearly a strong indicator of the expectation of a still highly challenging market in 2016.”
The number of drilling rigs operating in the U.S. has plummeted in recent weeks. As of last week, there were 760 oil rigs operating—half the number working across the U.S. as recently as October, according to data from Baker Hughes.
The oil sector is reeling from crude prices that have fallen from over $100 a barrel last summer to the $50-a-barrel range. Since prices began to fall, energy companies have cut more than 100,000 workers, according to research by Graves & Co., a Houston consulting firm.
Oil-services companies have been warning that their corporate clients are spending much less money to find and pump new fuel from the ground. Moody’s estimated a 25% reduction in oil companies’ spending on exploration and production so far this year.
“No segment of the oil-field services and drilling industry will be immune,” Moody’s said.
In response to its customers’ cutbacks, Schlumberger dialed down its own 2015 capital expenditure guidance to $2.5 billion from the $4 billion it spent in 2014.
“We believe that a recovery in U.S. land-drilling activity will be pushed out in time, as the inventory of uncompleted wells builds and as the refracturing market expands,” Mr. Kibsgaard said. “We also anticipate that a recovery in activity will fall well short of reaching previous levels, hence extending the period of pricing weakness.”
Schlumberger posted a first-quarter profit of $975 million, or 76 cents a share, down from $1.6 billion, or $1.21 a share, a year earlier. Excluding charges stemming from layoffs, among other items, the company booked a per-share profit of $1.06, down from $1.21 a year earlier. Revenue fell 8.8% to $10.25 billion.
Shares in the company, down about 9% over the past 12 months through Thursday’s close, rose 2.4% to $94.05 in after-hours trading.
—Lisa Beilfuss contributed to this article.
Write to Dan Molinski at Dan.Molinski@wsj.com
Schlumberger had a decline in earnings and revenue as lower oil prices slowed drilling activity.
By DAN MOLINSKI
Wall Street Journal
April 16, 2015 8:49 p.m. ET
Schlumberger Ltd., the largest oil-field service company in the world, will cut an additional 11,000 workers from its ranks, bringing the firm’s layoffs to 20,000 employees.
The company, a bellwether for the energy industry, announced the steep cuts late Thursday as it told investors that profit for the first quarter had plunged by 39% amid a slowdown in drilling for oil and gas.
“The abruptness of the fall in activity, particularly in North America, required us to take additional actions,” said Paal Kibsgaard, chief executive of Schlumberger.
Schlumberger, which has dual headquarters in Houston and Paris, announced 9,000 job cuts in January this year. The combined workforce reductions amount to a 15% reduction in its world-wide workforce, said Angie Sedita, an analyst at investment bank UBS.
Schlumberger helps oil producers drill and frack their wells and competes with rivals Halliburton Co. and Baker Hughes Inc., which have announced they plan to merge. Both Halliburton and Baker Hughes announced layoffs following Schlumberger earlier this year, so the continued job-cutting may spur other big oil-field service firms to follow suit.
“Batten down the hatches,” Ms. Sedita said in a note to investors, adding that Schlumberger’s aggressive response to the downturn in oil prices “is clearly a strong indicator of the expectation of a still highly challenging market in 2016.”
The number of drilling rigs operating in the U.S. has plummeted in recent weeks. As of last week, there were 760 oil rigs operating—half the number working across the U.S. as recently as October, according to data from Baker Hughes.
The oil sector is reeling from crude prices that have fallen from over $100 a barrel last summer to the $50-a-barrel range. Since prices began to fall, energy companies have cut more than 100,000 workers, according to research by Graves & Co., a Houston consulting firm.
Oil-services companies have been warning that their corporate clients are spending much less money to find and pump new fuel from the ground. Moody’s estimated a 25% reduction in oil companies’ spending on exploration and production so far this year.
“No segment of the oil-field services and drilling industry will be immune,” Moody’s said.
In response to its customers’ cutbacks, Schlumberger dialed down its own 2015 capital expenditure guidance to $2.5 billion from the $4 billion it spent in 2014.
“We believe that a recovery in U.S. land-drilling activity will be pushed out in time, as the inventory of uncompleted wells builds and as the refracturing market expands,” Mr. Kibsgaard said. “We also anticipate that a recovery in activity will fall well short of reaching previous levels, hence extending the period of pricing weakness.”
Schlumberger posted a first-quarter profit of $975 million, or 76 cents a share, down from $1.6 billion, or $1.21 a share, a year earlier. Excluding charges stemming from layoffs, among other items, the company booked a per-share profit of $1.06, down from $1.21 a year earlier. Revenue fell 8.8% to $10.25 billion.
Shares in the company, down about 9% over the past 12 months through Thursday’s close, rose 2.4% to $94.05 in after-hours trading.
—Lisa Beilfuss contributed to this article.
Write to Dan Molinski at Dan.Molinski@wsj.com
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