Schlumberger to lay off 11,000 employees

Due to the effects of low oil prices on the market, Schlumberger (NYSE: SLB) will soon be laying off approximately 11,000 employees. In the first quarter of 2015, Schlumberger’s revenue of $10.2 billion decreased 19% sequentially, and Paal Kibsgaard, chairman and CEO, commented that, because of the abruptness of the fall in industry activity, the company had made “the difficult decision to make a further reduction in our workforce of 11,000 employees, leading to a total reduction of about 15% compared to the peak of the third quarter of 2014.”

In the report, Kibsgaard noted that Schlumberger’s first-quarter revenue decreased 19% sequentially driven by the severe decline in North American land activity and associated pricing pressure. International operations were impacted by reduced customer spend in addition to seasonal effects in the Northern Hemisphere and the fall in value of the Russian ruble and the Venezuelan bolivar. Three-quarters of the overall sequential decline was due to lower activity and pricing, while the remainder was the result of currency effects and non-recurring year-end sales.

“Among the Technologies, Production Group revenue declined 22% sequentially from lower pressure pumping services in North America,” Kibsgaard said, “while Reservoir Characterization and Drilling Group revenues fell by 21% and 15%, respectively, on a sharp decrease in exploration-related services and development drilling activity. Product, software, and multi-client sales also declined as customers further curtailed exploration and discretionary spending.”

He commented that, despite the severity of the sequential revenue decline, Schlumberger has been able to minimize its impact on the company’s margins through prompt and proactive cost management, as well as through the acceleration of Schlumberger’s transformation program across its product lines and geo-markets.

In January, Schlumberger announced its plans to lay off 9,000 employees, joining other major oil and gas firms shedding jobs. In order to continue weathering current industry challenges, the company’s actions will now include further workforce reductions.

Analysts appear positive on the company's agressive cost-cutting strategy. "Despite sequential revenue declines in each region, cost savings initiatives helped support margins better than we expected. Importantly, in North America margins of 12.9% beat our 10.0% forecast with decremental margins of 39% versus our 48% forecast. In the quarter, SLB further cut its workforce by 11,000 employees, leading to a total reduction of about 15% compared to the peak of 3Q14," noted Sterne Agee analyst Stephen Gengaro. 

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