(Bloomberg) – Schlumberger Ltd. said it is cutting a fifth of its workforce when the oil services giant warned that new waves of Covid-19 could derail the nascent recovery in global energy demand.
The Houston-based company posted its worst quarterly sales in 14 years on Friday, reflecting the devastating impact of this year’s drop in drilling activity on the contracted hands of the oil patch. Like colleagues Halliburton Co. and Baker Hughes Co., who also reported gains this week, Schlumberger has suffered the brunt of the massive cuts in energy industry spending.
“This has been probably the most challenging quarter in recent decades,” Chief Executive Olivier Le Peuch said in the statement. “The subsequent waves of potential Covid-19 resurgence pose a negative risk for this prospect.”
Schlumberger said he is letting more than 21,000 employees go, reducing staff to a minimum of 11 years. He incurred $ 1 billion in compensation costs in the quarter, plus another $ 2.7 billion from various restructuring and impairment charges.
Despite the disastrous results in some lines of business: North American fracking on the ground and other sales fell 60% from the level of the previous quarter, Le Peuch protected the dividend of 12.5 cents per share from further reductions. Just three months ago, the CEO cut pay for the first time in more than 40 years.
Schlumberger shares fell 1.6% to $ 18.99 at 11:44 am in New York. Adjusted earnings of 5 cents a share compared to the loss of a penny expected by analysts in a Bloomberg survey.
The number of wells drilled worldwide this year is expected to decline by nearly a quarter, with no forecast of full recovery in the coming years, according to industry consultant Rystad Energy.
With that in mind, Schlumberger is reducing its workforce by about a fifth compared to the 105,000 it employed at the end of 2019. Le Peuch told analysts during a conference call that there are more belt tightening: The company has achieved a 40% of its $ 1.5 billion in cost cuts for the year, meaning another $ 900 million in reductions yet to be incurred.
Schlumberger is the last of the big three oil services companies to report second quarter results. Halliburton impressed investors with better-than-expected cost cuts by announcing a new strategy to distribute more technology and seek better revenue growth internationally. Baker Hughes warned investors of a possible second wave of coronavirus cases leading to blockages again.
(Update the share price in the sixth paragraph)
For more items like this, visit us at bloomberg.com
Subscribe now to stay ahead with the most trusted source of business news.
© 2020 Bloomberg LP
