Schlumberger Ltd. cut another 2,000 jobs in the first quarter as the world’s largest provider of oilfield services sees the industry in an unprecedented downturn.
The global headcount dropped to 93,000 at the end of the first quarter with the reduction, Joao Felix, a spokesman for the company, said by e-mail. More than a quarter of Schlumberger’s workforce, or roughly 36,000, has now been cleaved off since the worst crude-market crash in a generation began in late 2014.
“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. "This environment is expected to continue deteriorating over the coming quarter given the magnitude and erratic nature of the disruptions in activity."
The oilfield service providers were the first to feel the pain when crude prices began falling in the middle of 2014. Of the more than 250,000 jobs cut globally in the energy industry during the downturn, the service providers continue to be the most heavily impacted after customers slashed more than $100 billion in spending last year, with promises of more cuts to come.
Schlumberger’s profit fell in the first quarter as the company, which helps explorers find pockets of oil underground and drill for it, adjusts to shrinking margins in North America as customers scale back work. Customers are slashing spending by as much as 50 percent in the U.S. and Canada.
Net income 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.
"It’s a weak beat mainly because they guided estimates down," Rob Desai, an analyst at Edward Jones in St. Louis, who rates the shares a buy and owns none, said in a phone interview. "North America came in weaker than we expected."
Challenges from the collapse in crude prices can be seen in the world’s largest hydraulic fracturing market, North America, where Schlumberger reported a loss of $10 million, before taxes. Elsewhere, 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 company was expected to generate a North America 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 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. The shares, which have 35 buy ratings from analysts, 5 holds and 3 sells, fell 1 percent to $79.50 in after-hours trading as of 6:15 p.m. in New York.
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