Schlumberger Ltd., the world’s biggest oilfield service company, tackled the “uncertain environment” of plummeting crude prices head-on by cutting about 9,000 jobs and reducing costs.
Anticipating lower spending by customers this year, Schlumberger is decreasing its workforce by 7.1 percent and seeking to reduce operating costs at a unit that helps producers find oil and natural gas, the Houston- and Paris-based company said in an earnings report Thursday.
In response to the boost in domestic oil production in the shale oil fields, the company had doubled its workforce in the past 10 years.
“In this uncertain environment, we continue to focus on what we can control,” said Chief Executive Officer Paal Kibsgaard said in a statement. “We have already taken a number of actions to restructure and resize our organization.”
Never miss a local story.
Coping with oil prices near 51/2-year lows, energy producers are expected to cut spending in the U.S. by as much as 35 percent in 2015, according to Cowen & Co. The number of rigs drilling in the U.S. could fall by as many as 750 this year, Wells Fargo & Co. said in a recent report.
The coming year “is looking like it’s gonna be pretty rough,” Rob Desai, an analyst at Edward Jones in St. Louis, said in a phone interview. “With the potential for this to last some time, it’s in the best interest of the company to attack it aggressively.”
Schlumberger took a $1.77 billion one-time charge associated with the job cuts and restructuring of its seismic unit as well as the devaluation of Venezuela’s currency and a lower value for production assets it owns in Texas. Net income for the fourth quarter dropped to $302 million, or 23 cents a share, from $1.66 billion, or $1.26, a year earlier.
Shares in oilfield service companies, which help customers find and produce oil and natural gas, were the first to fall as crude prices declined. Service companies in the Standard & Poor’s Index dropped 20 percent in the fourth quarter, more than the 18 percent decline for producers.
With oil prices failing to stabilize, some producers are waiting to announce plans for 2015, making first-quarter earnings estimates for Schlumberger “still a bit of a guess,” said Stephen Gengaro, an analyst at Sterne Agee & Leach Inc. in New York who rates the company a buy and doesn’t own the shares.
Less than half of the 150 oil and gas companies it monitors have reported spending plans for the year, Norman MacDonald, a portfolio manager for Invesco Ltd., said in an interview. MacDonald, who manages the $990 million Invesco Energy Fund, said he’s never seen this many companies wait so long to announce their budgets.