Schlumberger posts steep drop in 3Q profit. No V-shape recovery, CEO said

World’s largest oilfield company Schlumberger has reported a steep drop in its third quarter profit.

Namely, the company’s net income for the quarter was $176 million, an 82 percent drop from the same quarter a year ago, when it posted a net income of $989 million. Revenue fell some 17 percent to $7 billion, down from $8.47 billion in the third quarter of 2015.

Cash flow from operations was $1.4 billion for the third quarter of 2016 and included approximately $170 million of severance payments during the quarter.

Schlumberger Chairman and CEO Paal Kibsgaard said that working capital was negatively affected by lower than expected collections as the company is seeing “widespread delays” in payments from customers in all geographies.

Kibsgaard said that in the global oil market, the supply and demand of crude is now more or less balanced as evidenced by flattening petroleum inventory levels and the start of consistent draws toward the end of the quarter—particularly in North America.

“At the same time, oil demand for 2017 was again revised upward in October and if combined with OPEC’s announced intention to cut production, this suggests further inventory draws in the coming quarters that should lead to upward movement in prices,” he said.

No V shape recovery

The CEO said: “In terms of 2017 E&P investment, visibility remains limited as our customers are still in the planning process. We maintain that a broad-based V-shaped recovery is unlikely given the fragile financial state of the industry, although we do see activity upside in 2017 in North America land, the Middle East and Russia markets. We are therefore ensuring that we are optimally positioned to capture a large share of this upside that we can subsequently turn it into positive earnings contributions.

“With the unparalleled cost and cash discipline we have established, we are confident in our capability to deliver incremental margins north of 65% and a free cash conversion rate above 75%. Going forward, this will give us significant flexibility to both re-invest in our business and steadily return cash to our shareholders. This capability, together with our unmatched scale and our unique ability to drive change throughout our company, clearly sets us apart from other industry players.”