NOTE the Date:
BY GILLIAN RICH, INVESTOR'S BUSINESS DAILY
10/16/2015 05:22 PM ET
Schlumberger (NYSE:SLB) said Friday that even more job cuts are on the way, as it continues to see weak spending in the first quarter of 2016 and doesn't expect a recovery in demand until 2017.
The oilfield services giant didn't say how many jobs it would cut, but Schlumberger along with rival Halliburton (NYSE:HAL) already have plans to lay off tens of thousands of workers globally.
"The likely timing gap between the oil price recovery and the subsequent increase in oilfield services activity in combination with a more conservative spending outlook from our customers is causing us to now take further action," Schlumberger CEO Paal Kibsgaard said on a conference call.
The company will take an unspecified Q4 charge, which will cover the job cuts as well as the restructuring of its global manufacturing and distribution network.
The company looks to streamline its engineering, manufacturing and sustaining infrastructure as well as introduce manufacturing automation in line with what's seen in high-tech industries, Kibsgaard said.
Schlumberger shares closed down 2.2% to 74.51 in the stock market today. Halliburton shares plunged 3.7% to 37.81. Shares of Baker Hughes (NYSE:BHI), which is being acquired by Halliburton, tumbled 4.2% to 53.83.
Kibsgaard also warned that Q1 2016 would be weaker than Q4 as exploration and production companies scale back spending, with no meaningful recovery in demand expected until 2017.
On Thursday, he said the oil market in Q4 would be weighed down by worries of reduced growth in demand from China and new supplies from Iran as economic sanctions are lifted.
Drilling activity has resumed its slide after a brief summer uptick, leaving the U.S. oil rig count down by more than 1,000 from a year ago. According to Baker Hughes, U.S. oil rigs fell by 10 this week to 595, a seventh straight weekly decline. Oil-producing firms also have demanded steep price cuts from service providers in what Kibsgaard calls the "most severe downturn in the industry for decades."
On Thursday, Schlumberger reported that Q3 earnings fell 48% to 78 cents per share, its third straight quarter of double-digit declines. Analysts polled by Thomson Reuters were expecting 77 cents per share.
Revenue dropped 33% to $8.47 billion, below views for $8.57 billion. International revenue fell 27% year-over-year, but activity in the Middle East was "robust" especially in Saudi Arabia and the United Arab Emirates. North American revenue sank 47%.
Halliburton is slated to announce results Monday. Analysts see a 76.5% drop in EPS to 28 cents and a 35.1% drop in revenue to $5.65 billion.