Schlumberger slashes 21,000 jobs amid pandemic oil rout

Schlumberger paid out $1 billion in severance benefits. (Shutterstock)
Short Url
Updated 25 July 2020

Schlumberger slashes 21,000 jobs amid pandemic oil rout

  • Global oilfield services giant cuts a quarter of its workforce after bruising second quarter sends revenues plunging

BENGALURE: Oilfield services giant Schlumberger NV on Friday reported its second straight quarterly loss after recording a $3.7 billion charge related to thousands of job cuts and a major pipeline outage in Ecuador.

The company cut about 21,000 jobs amid a steep crash in oil prices that has prompted a pullback in drilling activities. It reported $1.02 billion in severance costs for the second quarter for dismissed workers and recorded a $666 million charge related to asset impairments in Latin America, after a landslide ruptured a pipeline.
The company rounded off second-quarter earnings reports from major US oilfield services providers this week that laid bare the damage wreaked by the coronavirus crisis, particularly in North America.
Although crude prices have recovered from the historic declines in March and April, they are still down around 33 percent for the year, and fears of a COVID-19 resurgence are challenging the company’s outlook about a near-term normalization of oil prices, CEO Olivier Le Peuch said in a statement.

BACKGROUND

Weak oil prices made worse by the reduced demand caused by coronavirus-related lockdowns has had a devastating impact on the major oilfield services companies, especially in the North American shale sector which requires higher oil prices to remain profitable.

Schlumberger, which is restructuring its business to adjust to the price crash, said North America revenue fell to $1.18 billion in the second quarter, less than half of what it was a year earlier, with only slightly better conditions expected in the current quarter.
“The conditions are set in the third quarter for a modest frac completion activity increase in North America, though from a very low base,” Le Peuch said, referring to hydraulic fracturing activities used to complete oil wells.
The world’s largest oilfield services provider reported a net loss of $3.43 billion, or $2.47 per share, for the second quarter, compared with a profit of $492 million, or 35 cents per share, a year earlier.
Excluding charges and credits, the company earned 5 cents per share.


‘Lower for longer’: Fed’s warning on interest rates

Updated 24 September 2020

‘Lower for longer’: Fed’s warning on interest rates

  • The Fed cut rates to near zero in March and took other steps to combat a recession

WASHINGTON: Federal Reserve Vice Chair Richard Clarida said on Wednesday that policymakers “are not even going to begin thinking” about raising interest rates until inflation hits 2 percent, comments aimed at cementing the public’s understanding of the US central bank’s new approach to monetary policy.

“Rates will be at the current level, which is basically zero, until actual observed PCE inflation has reached 2 percent,” Clarida told Bloomberg Television, referring to the Fed’s preferred measure of prices. PCE inflation tends to be somewhat lower than the better-known consumer price index.

“We could actually keep rates at this level beyond that. But we are not even going to begin thinking about lifting off, we expect, until we actually get observed inflation equal to 2 percent. Also we want our labor market indicators to be consistent with maximum employment.”

The Fed cut rates to near zero in March and took other steps to combat a recession that took hold as businesses shut down and consumers stayed home to fight the spread of the coronavirus.

Clarida said that with further government aid from Congress and the steps the Fed has already taken, the US economy could return from the current “deep hole” of joblessness and weak demand in perhaps three years.

To aid that process, the Fed in late August revised its approach to monetary policy to commit to lower rates for longer periods of time, allowing the risk of higher inflation to try to encourage a stronger economic recovery and more job gains for workers. A follow-up policy statement last week gave more specific guidance about future decisions, but questions remain about what the new approach will mean in practice.

Clarida said there should not be any confusion: Rates will not increase until labor markets recover and prices hit the Fed’s target.

“So lower for longer, and we have given some observable metrics,” for judging when a rate hike debate might begin, he said.

Decisions about any possible overshoot of inflation are “academic” at this point, he added, and can be made once the economy rebounds.