Schlumberger 2Q hit by impairments, restructuring charges

Schlumberger, world’s largest oilfield services company, posted a net loss for the second quarter of 2016, and announced further job cuts.

The company’s net loss was $2.1 billion down from a net income of 1.1 billion. Second quarter revenue fell to $7.1 billion, down from $9 billion in the corresponding quarter of 2015.

Schlumberger’s result was impacted by asset impairment charges of $1.9 billion, which the company said were caused by the persistent unfavorable oil and gas industry market conditions that have continued to deteriorate, and their impact on the activity outlook.

Furthermore, Schlumberger said that as a result of the weakness in the activity that is expected to persist through 2016, it decided to further reduce its headcount. As a result, Schlumberger recorded a $646 million pretax charge during the second quarter associated with these headcount reductions.

Also, following the acquisition of oilfield equipment provider Cameron, the company booked $335 million in merger and integration charges.

Bottom reached?

Schlumberger Chairman and CEO Paal Kibsgaard said that the second quarter market conditions worsened further in most parts of the company’s global operations, but, he said, in spite of the continuing headwinds “we now appear to have reached the bottom of the cycle”.

He also spoke about the restructuring charge stemming from job cuts.

“As a result of the weakness in activity that will persist through 2016 as expected, we have made another significant adjustment to our cost and resource base, including the release of more than 16,000 employees during the first half of 2016 and a further streamlining of our overhead, infrastructure, and asset base. This has led to $646 million in restructuring charges in the second quarter for the reduction in our workforce…”

Explaining the non-cash $1.9 billion impairment charge, Kibsgaard said the charge was for fixed assets, inventory, and multiclient seismic data.

Medium-for-longer

Speaking about the market recovery, he said it was inevitable. However, he said that the service industry needs to increase prices.

“Whatever shape the recovery takes, service pricing must rise while respecting the need for operators to control their costs in what will likely be a medium-for-longer oil price environment. This provides an opportunity to share the additional value that can be mutually created through collaboration and integration.”

Offshore Energy Today Staff