Schlumberger cuts 8,000 jobs in first quarter in ‘toughest environment’ in decades

Schlumberger eliminated 8,000 jobs in the first three months of the year, bringing the workforce of the world’s largest oil field services company down by nearly one-third since cuts began in late 2014.

Schlumberger,  headquartered in Houston, Paris and The Hague, has now cut 40,000 jobs with more expected in a difficult second quarter, Chairman and CEO Paal Kibsgaard said Friday in a conference call. Schlumberger did not disclose where the job cuts occurred.

Schlumberger’s worldwide head count only decreased from 95,000 to about 93,000 — as low as 92,500 now — but the company reclassified 5,500 contractors as permanent employees, so the overall reduction was 8,000 employees, Kibsgaard clarified Friday.

“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,” Kibsgaard said.

North America, in particular, is reaching a “critical mass” stage and the company is even evaluating the costs and benefits in some regions “in the event we have to shut everything down,” he said. “What’s the benefit of taking the losses against shutting down … and starting all over again.”

However, as pessimistic as Kibsgaard is about the current state of the industry, he is equally as confident in the industry beginning to rebound in 2017, if not sooner.

“We expect the current [oil]oversupply to drop to almost zero by the end of the year,” Kibsgaard said, noting that North America is leading the way in production cuts. “We believe the oil market is in the process of balancing.”

Apart from the United States., he cited production cuts in Mexico, Colombia, China and the United Kingdom.

Some new investments by exploration and production companies could even begin in the second half of this year, he said, depending on how the oil price moves.

“The appetite might come up together with the oil price,” he said.

There are lots of opportunities for companies like Schlumberger with lots of scale and capital to survive, invest and grow its market share, he said. He cited the recently completed purchase of Houston-based Cameron International, as well as other small acquisitions.

Still, Kibsgaard has no optimism for the present and upcoming months.

“The industry is now in the deepest financial crisis on record,” he said. “This is the toughest environment we’ve seen in 30 years and it is likely to get even tougher before the market turns.”

Schlumberger’s North American revenue dropped by 55 percent in the first quarter, compared to the same time period in 2015, whereas the company’s international business dipped by 28 percent.

While Schlumberger’s net income declined by 49 percent from last year, the company still saw a $501 million net profit.