Schlumberger Ltd., the world’s largest oilfield services company, is laying off 1,000 contractors, operating staff and support personnel across North America because of the deteriorating conditions in the natural gas and oil sector. If market conditions don’t improve, the company warned it could reduce its workforce even more.
Schlumberger employs more than 84,000 people in 80 countries, including around 19,000 full-time North American employees. In Houston, where Schlumberger has its North American headquarters, about 100 of the city’s 5,000-member workforce are expected to be fired. The layoffs began on Wednesday, said spokesman Stephen T. Harris.
Schlumberger had reported strong earnings in 3Q2008, but North American oil and gas spending has slumped in the past few months, and the onshore gas rig count has fallen steadily for weeks (see Daily GPI, Jan. 8). Last month Schlumberger warned investors that 2008 fiscal earnings would fall below Wall Street’s forecasts.
“We have been consistent in our view that our results would be affected in the event of a severe global economic downturn, which we are now facing,” CEO Andrew Gould said last month in a conference call. “However, we still maintain that in the longer term, the fundamentals of our industry are sound.”
Some sources were reporting that Schlumberger actually planned to cut 10% of its North American workforce, or close to 2,000 people. However, the company for now has no intention to increase the job cuts or expand the job reductions outside North America, said Harris.
J.P. Morgan analyst Michael LaMotte, who covers the oil services sector, said in December that Schlumberger’s profit warnings likely would be the first of many in the energy sector because of the deteriorating investment climate. North American exploration and production companies were the first to make deep cuts, and reduced spending will pressure 2009 earnings across the sector, he said. LaMotte also warned that 2010 may be even worse since backlogs will be lower.
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