More job cuts to come

The big four oil services companies released their 3Q 2015 reports this week and the news is a sign that things are not improving in the sector, and in particular in North America. However, globally, thousands more job cuts are expected.

Halliburton announced in its 3Q earnings call on Monday morning that the company has reduced its global headcount by 21% or 18,000.

“In my 22 years in this business, I've never seen a market where we've had less near-term visibility,” said Dave Lesar, Chairman and CEO of Halliburton. “In reality, we are managing this business on a near real-time basis, customer-by-customer, district-by-district, product line-by-product line, and, yes, even crew-by-crew.”

Baker Hughes, which is currently being acquired by Halliburton, announced in its 3Q 2015 results that earlier this year it aimed to cut 16,700 jobs worldwide and as of 30 September it has eliminated some 13,100 positions, leaving another 3600 left to cut by the end of the year.

Weatherford announced that it completed its previously announced 11,000 job cuts during 3Q and plans to eliminate another 3000 by year’s end. The service company said the new cuts will be focused on support positions. Additionally, Weatherford has closed five of seven manufacturing and service facilities, with one more to close by the end of 2015. Weatherford plans to close 90 operating facilities by the end of the year.

"Market conditions will experience further near-term activity reductions in the US, Latin America, and Sub-Sahara Africa,” said Bernard J. Duroc-Danner, Chairman, President and Chief Executive Officer, Weatherford. We believe that Asia Pacific has bottomed out as a market, while we expect the Middle East/North Africa and Russia to remain robust. Over the medium term, we expect commodity prices to recover as the global oil supply and demand forces re-balance, sparking some early activity improvements in 2H 2016. Pricing will continue to remain weak until 2017.”

From the looks of it 4Q 2015 into 1Q 2016 will be a bumpy ride for even the biggest companies.

Schlumberger’s CEO Paal Kibsgaard said in a 16 October earnings call that more job cuts are to be expected in 4Q at his company, although he did not specify how many positions would be eliminated.

“Our forward visibility has again been reduced and we will consequently revert back to managing the company quarter-by-quarter,” Kibsgaard said. “This means a further round of capacity and overhead reductions in 4Q as we adjust resources to a lower activity outlook. At the same time, we will continue to accelerate our transformation program with the next step being a significant restructuring of our global manufacturing and distribution network, which will further modernize the core part of our company.”

Halliburton shared a similar outlook about 4Q, but overall, remains hopeful about 2016. “For 4Q, there's a lot of uncertainty as we approach the holiday season,” Lesar said. “But, we believe that customer budgets will reload in 1Q, and anticipate activity to ramp up in the 2H 2016. Looking ahead, we're not going to try to call the exact shape of recovery. But we do believe that the longer it takes, the sharper it will be."