Schlumberger to reduce seismic fleet

Schlumberger Ltd. plans to soon reduce the number of its seismic vessels, according to a Reuters report. This includes retiring older vessels, converting others, and canceling most vessel leases.

At Cowen Group’s Ultimate Energy Conference, held in New York on Dec. 2-3, Schlumberger’s president of operations and integration, Patrick Schorn, discussed the company's response to the decline in oil prices, which includes the restructuring of WesternGeco and significant headcount reductions. The company anticipates $1 billion in related impairment charges and flat sequential revenues and earnings in the fourth quarter.

Commenting on Schom’s statements, Cowen analysts stated, “Schlumberger is accelerating its fleet retirement program in order to lower operating costs. The company is reducing its fleet to nine survey and six source vessels by year-end 2014, from 15 survey and eight source vessels at year-end 2013. As a result of the restructuring, Schlumberger expects to record an $800 million impairment charge in the fourth quarter. The company does not believe the restructuring will significantly impact cash flow from operations or free cash flow.

“Schlumberger is also reducing its headcount in response to the current oil price environment. This will result in a pretax charge of approximately $200 million in the fourth quarter.

“We are reducing our fourth-quarter EPS estimate to $1.50 from $1.56 to reflect lower sales of WesternGeco products, software, and multi-client data, in addition to the decline of the Russian ruble. We are also lowering our 2015 and 2016 EPS estimates for Schlumberger to $5.65 (from $6.30) and $5.90 (from $7.10), respectively driven by our (recently lowered) forecast for an average of $75/bbl WTI and $80/bbl Brent over the next two years. Our price target moves to $98 from $110.”

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