Schlumberger boss Paal Kibsgaard has said the global oil and gas industry is showing “clear signs of operating in a full-scale cash crisis”.
The energy service firm’s chairman and chief executive was speaking as it revealed operating profits plunged by 55%, compared with a year earlier, in the first quarter of 2016.
Service giants like Schlumberger are being squeezed hard as the impact of sustained lower oil prices takes its toll on the offshore supply chain.
Tens of thousands of jobs have been shed globally, while consolidation is the order of the day as the service industry’s biggest players adapt to their new trading environment.
Earlier this month, Schlumberger announced the completion of its £10billion-plus cash and shares deal to buy energy service industry rival Cameron International.
It then snapped up Aberdeen oil and gas consultancy Adil from majority shareholder James Paton for an undisclosed sum.
Halliburton is taking over Baker Hughes, in a deal worth £22billion, to unite the world’s second and third biggest service firms behind Schlumberger.
Reporting a torrid start to the year for the industry globally, Mr Kibsgaard said: “During the first quarter of 2016, the decline in global activity and the rate of activity disruption reached unprecedented levels as the industry displayed clear signs of operating in a full-scale cash crisis.
“Budgeted E&P (exploration and production) spend fell again and substantially affected our operating results.
“This environment is expected to continue deteriorating over the coming quarter, given the magnitude and erratic nature of the disruptions in activity.”
A 16% slump in Schlumberger’s revenue between October-December 2015 and the first three months of this year to £4.5billion was one of the steepest quarterly declines suffered by the company since the downturn started, he said.
He added: “This was driven by a continuing drop in activity and persistent pricing pressure throughout our global operations as well as from project delays, job cancellations and activity disruptions.”
A decline in international revenue was most pronounced in the Europe/Commonwealth of Independent States/Africa area, where seasonally lower performance was exacerbated by further weakness of the Russian ruble, while revenues in Latin America and Asia also fell “significantly”.
Mr Kibsgaard said: “E&P spending cuts continue. Recent spending surveys for 2016 now indicate sharper declines than previously forecasted.
“Global spending reductions in 2016 are approaching 25%, corresponding to reductions between 40% to 50% in North America and around 20% internationally.
“In this environment, our overall outlook for the oil markets remains unchanged, with the tightening of the supply-demand balance expected to continue during the rest of the year.
Schlumberger, which has a big presence in the north-east and principal offices in Paris, Houston, London and The Hague, said pre-tax operating profits fell to £626.4million in the latest quarter.
