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Sunday, April 24, 2016

All-Out Cash Crisis Hits Oil Industry

The second quarter is expected to get worse for Schlumberger, with North American margins dipping as much as 4% into the red, Lemoine said.

Schlumberger CEO sees ‘full-scale cash

 crisis' in oil sector

HOUSTON (Bloomberg) -- Schlumberger cut more jobs in the first quarter as the world’s largest provider of oilfield services sees the industry in an unprecedented downturn.
The global headcount dropped to 93,000 at the end of the first quarter with the reduction, Joao Felix, a spokesman for the company, said by email. The company let go about 8,000 people in the quarter, and reclassified about 5,500 contractors as permanent workers, Chairman and CEO Paal Kibsgaard said Friday in a conference call with analysts. One-third of Schlumberger’s workforce, or roughly 42,000, has now been cleaved off since the worst crude-market crash in a generation began in mid-2014.
“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,” Kibsgaard said in a statement announcing first-quarter earnings Thursday. "This environment is expected to continue deteriorating over the coming quarter given the magnitude and erratic nature of the disruptions in activity."
Oilfield service providers were the first to feel the pain when crude prices began falling in the middle of 2014. Of the more than 250,000 jobs cut globally in the energy industry during the downturn, service providers continue to be the most heavily impacted after customers slashed more than $100 billion in spending last year, with promises of more cuts to come.
Tight Margins
Schlumberger’s profit fell in the first quarter as the company adjusts to shrinking margins in North America as customers scale back work. Customers are slashing spending by as much as 50% in the U.S. and Canada.