Schlumberger Ltd. (NYSE: SLB) is the king of oilfield services. Despite a transformation that already is underway, more layoffs are headed to Schlumberger’s workforce. This of course also comes with implications in the pending acquisition of Cameron International Corp. (NYSE: CAM).
On December 1, 2015, Schlumberger announced that it will further reduce its workforce. The number of cuts was not specified in the SEC filing, but the company said that the layoffs are in light of expected reduced activity for 2016 and to streamline its support structure.
As a result of these actions, Schlumberger currently expects to record a pretax restructuring charge in the fourth quarter of 2015 that is estimated to be approximately $350 million.
Another issue is that Schlumberger’s presentation at the at Cowen’s 5th Annual Ultimate Energy Conference is taking place the same day. Patrick Schorn, President of Operations at Schlumberger, has a presentation that is dealing with much worse than $70 oil as was seen a year ago. While these are from different portions of the presentation, Schorn talked more specifically about the general conditions, the move with Cameron and the layoffs tied to the transformation:
Last year I described what the fall in the price of oil to near $70 barrel would mean for the oil and gas industry in general, and for the service industry in particular. Today, at nearer $40 per barrel, I’d like to share some further thoughts with you as we face a second consecutive year of falling upstream investment for the first time since the mid-1980s.
However, the latest leg down in activity has led us to again evaluate our staffing levels against expected activity. Following which, we will further right size the organization based on the activity outlook for 2016 and streamline our support structure. This will result in a restructuring charge currently estimated at $350 million in the fourth quarter.
Three main points were outlined. The first was how Schlumberger has outperformed a difficult market that has required a careful balance between maintaining margins and protecting market share. The second issue is Schlumberger’s transformation program to extract faster and more widespread benefits than the company originally expected. Third is the general business, which also includes the planned Cameron transaction.