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The chairman and CEO of Schlumberger said Friday he is “optimistic” the world’s largest oil field services company is done eliminating jobs now that it has cut 34,000 positions — more than 25 percent of its global workforce.
Schlumberger posted a nearly $1 billion net income loss during the fourth quarter and a 60 percent net income decline for all of 2015 from the prior year. Chairman and CEO Paal Kibsgaard warned of a “very challenging” 2016 as exploration and production companies continue to drastically slash their drilling programs, but he also explained that Schlumberger is poised to rebound in 2017.
“A lot of the low-hanging fruit we have already picked,” Kibsgaard said in a conference call. “We are now getting into the deeper part of the transformation.”
He said “letting friends and colleagues go” during the worst downturn in 30 years in the energy sector was difficult — Schlumberger cut about 10,000 jobs during the final three months of 2015. The U.S. benchmark for oil was priced at more than $31 a barrel Friday, up for the day, but well down from the $100 a barrel days as recently as the summer of 2014. North American operations have suffered the most, he said.
While Kibsgaard said he wants the industry to rebound soon, he said the longer the downturn lasts “the stronger we will emerge relative to our competition.”
“We still expect positive movement on oil prices in 2016,” he said, adding that the question is how much oil prices will recover.
The company, which has headquarters in Houston, Paris and The Hague, declined to say how many of its job reductions have been made in Houston area.
Schlumberger is preparing for the “inevitable implosion in E&P” this year, said Bill Herbert, an analyst at energy investment bank Simmons & Company International. But the company also is thinking long term to stay strong and grow its market share, Herbert said.
“I think they legitimately believe they’ve cut their headcount sufficiently,” Herbert said, arguing that more cuts could still come if the downturn extends into 2017 and the recovery takes longer.
Kibsgaard said he expected Schlumberger’s acquisition of Houston-based Cameron International to close soon. Cameron will operate as a fourth business group within Schlumberger and Cameron CEO Scott Rowe will stay on with the company.
“It’s a relatively simple integration,” Kibsgaard said.
Citing its self-confidence, Schlumberger plans to launch a new $10 billion stock buyback program.
Kibsgaard also confirmed Schlumberger has a new partnership with Bermuda-based Golar LNG to develop gas reserves with the help of Golar’s floating liquefied natural gas assets. Golar has its main offices in Norway and the United Kingdom.
Schlumberger also is keeping its planned 2016 capital expenditures in line with its 205 spending. Kibsgaard said the company is continuing to invest in new land-drilling technologies, as well as exploring seismic and growth opportunities in Mexico.
As for its earnings, Schlumberger reported a big quarterly loss primarily because it recorded more than $2 billion in charges for employee severance pay, restructuring costs, contract terminations, facility closures and mothballed equipment.
Schlumberger reported a $989 million loss for the fourth quarter, down from a $317 million net gain for the same period a year ago. Revenue slid nearly 40 percent for the quarter to $7.74 billion.
For the full 2015 year, Schlumberger had net income of $2.1 billion, more than 60 percent less than the $5.5 billion in 2014. Revenue for the year fell 27 percent from $48.6 billion, to $35.5 billion.
Schlumberger plans to consolidate and move much of its Houston headquarters to its existing Sugar Land footprint in a move that analysts have suggested is part of overall cost-cutting efforts.