Schlumberger Ltd. (SLB), the world’s biggest oilfield-services company, took a $1.77 billion charge in the fourth quarter as it prepares for an “uncertain environment” after the collapse in oil prices.
Net income dropped to $302 million, or 23 cents a share, from $1.66 billion, or $1.26, a year earlier, Houston- and Paris-based Schlumberger said in a statement.
The company will cut about 9,000 jobs, 7.1% of its workforce, as it anticipates lower spending by customers in 2015.
It is understood the oil company said it expected to cut more than 100 jobs in the North-East and offshore.
A Schlumberger spokeswoman said: “The dramatic fall in oil price over the past quarter has led our customers to decrease exploration and production activity worldwide.
“As a result, Schlumberger is reducing headcount in line with lower activity levels and this is unfortunately impacting our North Sea operations and people.”
Energy companies, coping with a 42% decline in oil prices during the last three months of 2014, are expected to cut spending in the US by as much as 35% this year, according to Cowen & Co. The number of onshore US rigs could fall by as much as 750 this year, Wells Fargo & Co. said in a note yesterday.
“Clearly we’re seeing a drop-off in activity,” Stephen Gengaro, an analyst at Sterne Agee & Leach Inc. in New York, said in a phone interview before the release.
“The first and second quarter is where you start to see the deterioration in the year-over-year comparisons.”
Schlumberger said the one-time costs for the quarter were the result of the job cuts, the devaluation of Venezuela’s currency, a lower value for production assets it owns in Texas and a determination that some of its seismic vessels were worth less than previously estimated.
Shares in oilfield-services companies, which help customers find and produce oil and natural gas, were the first to fall as crude prices declined.
Service companies in the Standard & Poor’s Index dropped 20 percent in the quarter, more than the 18 percent decline for producers.
Exploration and production spending globally is expected to drop 17 percent to $571 billion, Jim Crandell, an analyst at Cowen, wrote in a January 7 research note.
Schlumberger has the smallest exposure to North America compared with peers, generating a dollar of sales in the region for every $3 globally.
With oil prices failing to stabilize, some producers are waiting to announce plans for 2015, making first-quarter earnings estimates for Schlumberger “still a bit of a guess,” said Gengaro, who rates the company a buy and doesn’t own the shares.
Less than half of the 150 oil and gas companies it monitors have reported spending plans for the year, Norman MacDonald, a portfolio manager for Invesco Ltd., said in an interview.
MacDonald, who manages the $990 million Invesco Energy Fund, said he’s never seen this many companies wait so long to announce their budgets.
Excluding one-time items, Schlumberger earned $1.50 a share in the fourth quarter, beating the average of 34 analysts’ estimates compiled by Bloomberg. Sales of $12.6 billion fell short of estimates.
Schlumberger, which has 34 buy and 10 hold recommendations from analysts, gained 0.8 percent to $77.25 at 4:50 p.m. in New York. The company increased its quarterly dividend 25%.
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