Oil services giant Schlumberger posted more than a US$1 billion loss in its Q4 and full year 2015 results, in addition to a further 10,000 job cuts, bringing its workforce reduction to some 30,000 for the year.
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Kibsgaard. Image courtesy of Schlumberger. |
In Q4, Schlumberger suffered a $1.02 billion net loss from continuing operations, including charges and credits, compared to a profit of $302 million in Q4 2014. The period also showed a 39% decrease in revenue to $7.74 billion, from Q4 2014’s $8.47 billion.
“Negative market sentiments intensified in the fourth quarter, with oil over-production continuing and extending the bearish trend in global inventories. This led to a further drop in oil prices, which reached a 12-year low in January 2016,” Schlumberger chairman and CEO Paal Kibsgaard said in the report. “The worsening market conditions added further pressure to a deepening financial crisis in the E&P industry, and prompted customers to make further cuts to already significantly lower E&P investment levels. Customer budgets were also exhausted early in the quarter, leading to unscheduled and abrupt activity cancellations.”
Full year 2015 revenue decreased 27% year-on-year to $35.5 billion, in line with upstream capital expenditure spending cuts, which resulted in significantly lower exploration and production investment levels. Full year 2014 revenue came in at nearly $48.6 billion.
Due to customer budget cuts, Schlumberger’s international areas dropped 21%, and offshore North America declined 17%.
In October, Schlumberger first revealed its plans to implement more job cuts. And again in December, the oil services giant reiterated its decision to “right size” the company.
“In anticipation of an extended activity weakness in the first half of 2016, we implemented another significant adjustment to our cost and resource base during the fourth quarter,” Kibsgaard said. “This included a further workforce reduction of 10,000 employees, as well as greater streamlining of our overhead, infrastructure and asset base.”
As a result of Schlumberger’s workforce reduction and expanded incentivized leave of absence program during Q4 2015, the company recorded a $530 million charge during the period, as well as a non-cash $1.6 billion pretax impairment charge for fixed assets, inventory write-downs, facility closures, contract terminations, and other asset impairments.
As for the pending Cameron International merger, Schlumberger expects the deal to close this quarter once all regulatory approvals are received. The deal has already received approvals from regulators in the US, Canada, Brazil and Russia.
“In addition, Cameron shareholders have voted to adopt the merger agreement and we have secured the necessary financing for our US subsidiary that will make the acquisition. The large stock component of the deal, with 78% in stock and 22% in cash, has largely insulated us from market volatility,” Kibsgaard said.
“We remain constructive in our view of the market outlook in the medium term, and continue to believe that the underlying balance of supply and demand will tighten, driven by growth in demand, weakening supply as E&P investment cuts take effect, and by the size of the annual supply replacement challenge,” Kibsgaard said.
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