Schlumberger Cuts 21,000 Jobs Amid Historic Oil Downturn -- Update

By Collin Eaton 

Schlumberger Ltd., the world's largest oil-field services company, is cutting about 21,000 jobs as oil producers made steep spending reductions in response to a historic drop in prices amid the coronavirus pandemic.

Schlumberger recorded $3.7 billion in impairment charges in the second quarter, including about $1 billion in severance charges related to the job cuts, which represent roughly one-fifth of its workforce, it said Friday.

"This has probably been the most challenging quarter in past decades," Chief Executive Olivier Le Peuch said, noting its revenue fell sharply because of an unprecedented fall in oil-field activity in North America.

Schlumberger's sweeping job cuts are the latest example of how companies are having to sharply tighten their belts and reduce their workforces in the face of a historic drop in demand for their products due to the pandemic.

From United Airlines Holdings Inc. and Boeing Co. to General Electric Co. and Uber Technologies Inc., dozens of major companies have announced they are laying off workers this year as they buckle down in expectation of a prolonged slowdown.

Many companies have chosen to furlough rather than completely sever ties with workers in hopes of bringing them back when conditions improve. But as the effects of the pandemic drag on, more companies may resort to letting workers go.

Energy companies have been particularly hard-hit. U.S. oil prices dropped into negative territory for the first time in April as demand for gasoline and jet fuel fell dramatically this spring as people stopped traveling and governments imposed stay-at-home restrictions.

The oil price crash prompted U.S. oil companies to dramatically cut capital spending on drilling and fracking new wells, the lifeblood of oil-field service companies such as Schlumberger and rivals Halliburton Co. and Baker Hughes Co.

Earlier this week, Halliburton and Baker Hughes both reported losses and declining revenue, with Halliburton estimating spending by North American oil-field services customers will decline 50% this year compared with 2019.

Schlumberger's Mr. Le Peuch said the company accelerated a plan to restructure its North American business, shutting down scores of facilities in a move to position itself "for a market of smaller scale and lower growth outlook, but with higher returns."

He said oil demand is slowly returning to normal and is expected to improve as governments lift restrictions in support of increased consumption, paving the way for a modest increase in fracking activity in North America.

"We expect the global decline to recede into a soft landing in the coming months absent further negative impact from Covid-19 on the economic recovery," Mr. Le Peuch said in a conference call Friday.

As many as 55,000 of the company's employees are working remotely, he said. Schlumberger has corporate offices in Paris, Houston, London and The Hague.

Schlumberger reported a net loss of $3.4 billion, or $2.47 a share, compared with net income of $492 million, or 35 cents a share, in the same period last year. Revenue declined 35% year-over-year to $5.4 billion, with North American sales down 58% to about $1.2 billion.

Its earnings per share, excluding charges and credits, was 5 cents a share, compared with analysts' expectation of a loss of 1 cent per share, according to FactSet.

Schlumberger said it employed approximately 85,000 people as of the end of the second quarter. It had said in the first quarter it employed about 103,000.

Halliburton has also cut thousands of jobs, reporting Monday that it had more than 40,000 employees as of the end of the second quarter, down from about 55,000 at the end of the fourth quarter. It didn't provide specific job-cut numbers.

"This was a difficult decision, but is a necessary action as we work to successfully adapt to challenging market conditions," Halliburton spokeswoman Emily Mir said.

Last month, British oil giant BP PLC said it plans to cut nearly 10,000 jobs, or 14% of its workforce. U.S. oil major Chevron Corp. said it expects to reduce its global workforce by 10% to 15% from about 45,000. Most of the reductions will take place this year, the company said.

Write to Collin Eaton at [e-mail]

(END) Dow Jones Newswires

July 24, 2020 10:14 ET (14:14 GMT)

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