Schlumberger Struggles Despite 10,000 Job Cuts
Schlumberger Ltd Chief Executive Paal Kibsgaard said a significant recovery in oilfield activity was not expected until 2017, and he indicated that the company might struggle to meet analysts' estimates for its current-quarter profit.
In announcing the company’s full-year 2015 results, Kibsgaard said the company’s revenue of $35.5 billion decreased 27 percent year-on-year in line with upstream capex spending cuts that resulted in significantly lower exploration and production investment levels. North America revenue declined 39 percent, with land falling 45 percent while offshore was down 17 percent.
Like its customers, Schlumberger has been cutting costs. The company said on Thursday it had laid off 10,000 employees in the fourth quarter, taking its total job cuts to 34,000, or 26 percent of its workforce, since November 2014.
Kibsgaard, however, said he was optimistic the company would not have to cut more jobs in the current oil downturn.
Shares of the world's largest oilfield services provider, which reported a better-than-expected profit on Thursday, rose as much as eight percent.
“If we focus on (earnings per share), I would say that the current first quarter earnings per share consensus is probably a best-case scenario from what we can see today,” Kibsgaard said on a post-earnings call on Friday.
Analysts on average are expecting Schlumberger to post a profit of 55 cents in the first quarter ending March.
Demand for services provided by Schlumberger and its rivals is waning as oil companies tighten their belts in response to a 73 percent slide in global crude prices since June 2014.
It would be tough to keep profit margins at current levels, Chief Financial Officer Simon Ayat said.
The company, which also unveiled a $10 billion share buyback program on Thursday, expects investment in exploration and production to fall for the second straight year in 2016.
Although North American oil companies have scaled back spending, their output remains high as they steer drilling rigs to the most prolific shale spots and frack wells more intensely.
Production in North America and outside of OPEC is resilient because oil companies, looking to maximize cash flow, are keeping “taps wide open,” Kibsgaard said.
“We still expect positive movement in oil prices during 2016 with specific timing being a function of the shape of the non-OPEC decline rates,” he said.
Schlumberger shares were up 3 percent at $63.39 in noon trading, after touching a high of $66.25 earlier.
Up to Thursday's close, the stock had lost a quarter of its value in the past 12 months.
Golar LNG and Schlumberger sign Memorandum of Understanding
This week, Golar LNG and Schlumberger announced the signing of a Memorandum of Understanding to co-operate on the global development of greenfield, brownfield and stranded gas reserves.
Under the Memorandum, Golar and Schlumberger have agreed to jointly market gas monetization solutions to owners, investors and governments. Golar will contribute the Floating LNG assets and technology while Schlumberger, via its special project management division, will provide upstream development knowledge, resources and capital. The intention of this integrated offer is to gain access to a wide range of uneconomic gas reserves by delivering low-cost LNG production solutions.
Key Agreements Made in 2015
On October 19, 2015, Schlumberger and Energy Recovery signed a 15-year technology agreement to provide Schlumberger exclusive rights to Energy Recovery’s VorTeq hydraulic pumping system.
On November 9, 2015, Schlumberger and Ikon Science announced an agreement to further develop the quantitative seismic interpretation capability in the Petrel E&P software platform.
On November 16, 2015, Schlumberger announced the acquisition of Fluid Inclusion Technologies, a US-based oil and gas service company specializing in laboratory analysis of trapped fluids in rock material and advanced borehole gas analysis.
On November 17, 2015, Schlumberger received unconditional approval from the U.S. Department of Justice regarding the proposed merger between a wholly owned subsidiary of Schlumberger Limited and Cameron International Corporation (Cameron). In December 2015, unconditional clearances were also received from anti-trust authorities in Brazil, Canada and Russia. Cameron shareholders overwhelmingly approved the merger agreement at a special meeting on December 17, 2015, and the closing of the proposed merger now remains subject to clearance by the European Commission and certain other jurisdictions, and the satisfaction or waiver of other customary closing conditions.
“In this uncertain environment, we continue to focus on what we can control,” said Kibsgaard. “Throughout the year we took a number of actions to streamline and resize our organization as we continued to navigate the downturn. In continuing to accelerate the benefits of the transformation program across both our Technologies and GeoMarkets in 2016, we believe we will emerge as a stronger company relative to industry peers and competitors once the price of oil and the market conditions in our industry turnaround.”