Schlumberger and Halliburton announced on Friday that they have had to cut thousands of jobs in the first quarter of 2016. Schlumberger eliminated about 8,000 jobs, including 5,500 contractors that were classified as permanent employees, while Halliburton stated that it cut 6,000 jobs. Halliburton’s accumulated job loss now stands at 33,000. Schlumberger has cut about 40,000 jobs so far.
Such announcements are indicative of the increasingly tough environment in which these companies operate. Even large scale firms such as Halliburton and Schlumberger, with their numerous operations all throughout the world, are feeling the drawbacks of a lowered commodity price. Schlumberger CEO Paal Kibsgaard acknowledged the industry’s difficulties, stating that “This the toughest economic environment we’ve seen in 30 years.”
There is, however, a dim light at the end of the tunnel, as the company believes the market will stabilize towards the beginning of 2017. Kibsgaard stated, “We expect the current oversupply to drop to almost zero by the end of the year,” which should enable the oil price to begin moving to more moderate levels.
Jeff Miller, President of Halliburton, recognizes that the current market is extremely detrimental to all companies involved in the O&G industry. “My definition of an unsustainable market is one where all service companies are losing money in North America, which is where we are now.” Idled rigs and abandoned job sites testify to Miller’s analysis: Bloomberg Intelligence indicates that in the U.S. alone there are 3,870 idled oil and gas rigs. Fifty plus U.S. oil-producing companies have filed for bankruptcy since 2015 according to a review by Reuters. The market is clearly taking a toll on businesses regardless of their size or prestige.
Halliburton was scheduled to report its first-quarter financial results on Monday, April 18, but the company pushed back the earnings release date to May 3. The delay is primarily due to the ongoing antitrust issues regarding the Baker Hughes merger. The deadline for the merger is April 30, but it is increasingly unlikely that the merger is actually going to occur. Multiple countries have issues with the proposed merger, and the DOJ recently declared a lawsuit in order to stop the merger.
Schlumberger reported a $501 million profit, which is a 49 percent decrease from last year.
Article written by HEI contributor Timothy McNally.