Schlumberger sees 40% capital spending cuts in North America

Published on : 2020-04-18

Houston — Industry leading oilfield service firm Schlumberger sees North American producers cutting their capital spending by 40% in 2020 compared to roughly 15% cutbacks internationally as independent shale firms move more quickly to respond to the demand collapse triggered by the coronavirus pandemic.

North American producers have removed drilling rigs and completions crews from oil fields at a record pace in March and early April as NYMEX WTI crude prices fell below $20/b for the first time in 18 years.

"The operating environment that has now emerged is characterized by simultaneous shocks to both supply and demand," said CEO Olivier Le Peuch in an earnings statement. "The spread of COVID-19 has caused more than 50 countries to implement lockdown measures affecting three billion people. Worldwide economic activity is falling sharply, and oil demand destruction is leading to an unprecedented supply-demand imbalance in the range of 20–30 million b/d. This is translating to near-term uncertainties in activity and budget projections."

In its earnings call, Le Peuch said activity started to decline in March in several basins with the most severe impacts in North American land where customers were fast to react with a sharp 17% cut in headcounts.

New project sanctions worldwide are expected to fall back to 2015 levels or lower as investment decisions are pushed back to 2021 and beyond, he said.

In response, Schlumberger is cutting jobs, implementing furloughs, slicing its dividend payments by 75% and reducing its own capital spending budget by about 30% to $1.2 billion, including a 60% capex cut in North America.

Schlumberger cut its North American fracking capacity by 27% by the end of March, Le Peuch said, with reductions of up to 60% expected by mid-year. Schlumberger eliminated more than 1,500 jobs by the end of March.

The company also recorded a big $8.5 billion impairment charge in the first quarter "driven by the significant decline in market valuations during March 2020," it said.

Schlumberger already counted a large impairment charge of about $13 billion last fall.

Schlumberger's stock price is down more than 60% this year to a market capitalization value of less than $21 billion.

As for the first quarter, Schlumberger said its worldwide revenue fell 5% year-on-year, driven by a 17% decline in North America despite a 2% jump internationally.

"Customer spending and drilling activity in North America declined as oil prices slipped early in the quarter before falling abruptly in March," Le Peuch added. "Our international business showed some resilience with year-on-year growth of 2% against the backdrop of an increasingly difficult operating environment."


On Monday, rival Baker Hughes said it will report a $15 billion impairment charge, larger than the company's current market cap, as the decimated oilfield services sector adjusts to the demand collapse.

The embattled Weatherford International, which emerged from bankruptcy in December, said Wednesday it will delist from the New York Stock Exchange and switch to the over-the-counter pink sheets as its finances continue to suffer.

Shale service firms may be suffering the most, but the pain is widespread.

Diamond Offshore Drilling said Thursday it has fallen behind on its debt payments and is in a 30-day grace period as it considers bankruptcy and other alternatives. Diamond's stock is trading well below $1/share after starting the year at more than $7/share.

Only a few oilfield services firms have filed for bankruptcy protection since the beginning of March, including Pioneer Energy Services and Carbo Ceramics. Some of the biggest hits are being absorbed by the smaller- and mid-sized drillers and frackers.

One of the leading drilling firms, Nabors Industries, has seen its stock plunge about 90% this year down to a market cap of just $140 million with its stock trading for about 30 cents per share.

Related Articles

Kuwaiti petroleum firm discovers natural gas, condensate in Indonesia

Kuwait Foreign Petroleum Exploration Company, or Kufpec, has discovered natural gas and a light form of oil in Indonesia

Read More

Gazprom Daily Gas Exports in January Fall to Lowest Since 2015

Gazprom daily gas exports to its main markets shrank in the first 15 days of the new year to the lowest since 2015 while criticism is growing that it’s withholding supplies to Europe.

Read More

Abu Dhabi NMDC bags $21. 5mln dredging contract in Egypt

Abu Dhabi-based National Marine Dredging Company (NMDC) announced on Thursday that it has been awarded 79-million-UAE-dirham ($22 million) contract for dredging works at the entrance to the navigation channel and the trench of the quay wall in Safaga Port in Egypt.

Read More
Wintershall Deaneptune LogoSIEnppipetrojetTransGlobe SCHNEIDER-ELECTRIChempleEgypt gasNorthAlmansooriSKY CTS exxonmobilSchlumberger