Schlumberger, the world’s largest oilfield services provider, reported its lowest first-quarter profit in four years and announced another 11,000 job cuts after customers slashed spending in response to tumbling crude prices.
Net income fell to $975 million, or 76 cents a share, from $1.59 billion, or $1.21, a year earlier, the company based in Houston and Paris said Thursday. That’s the lowest for the period since 2011.
“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 re-fracturing market expands,” Chief Executive Officer Paal Kibsgaard said in the statement. “We also anticipate that a recovery in activity will fall well short of reaching previous levels, hence extending the period of pricing weakness.”
The abrupt drop in North American drilling required more action, Kibsgaard said. The company had announced plans in January to eliminate 9,000 positions, the single largest cut in the industry. With the added 11,000, Schlumberger’s workforce will be about 15 percent smaller than it was during the third quarter of 2014.
Cowen & Co. estimates that energy companies will cut spending on exploration and production services by $114 billion this year after Brent crude prices fell by half from a June high.
Schlumberger sales dropped 8.8 percent to $10.2 billion. The earnings statement was released after the close of regular trading in New York.
“We knew earnings would be down substantially, but when they’re falling this fast, it’s pretty hard to triangulate to the point there,” said Luke Lemoine, an analyst at Capital One Southcoast. “Expectations were pretty low here.”
Schlumberger provides services including drilling wells, hydraulic fracturing and mapping underground oil pockets for energy producers. Its two largest competitors, Halliburton and Baker Hughes, agreed to merge last year. They are scheduled to report earnings next week.
“Schlumberger’s 1Q results will likely shed light on the severity of the drilling activity decline worldwide,” Andrew Cosgrove and William Foiles of Bloomberg Intelligence wrote in an April 15 research note.