Schlumberger Q4 Earnings Beat; Announces Big Job Cuts

Schlumberger Limited reported better-than-expected earnings for the fourth quarter and announced its restructuring and workforce reduction initiatives amid uncertain market condition.

The shares of Schlumberger climbed almost 5% to $80.31 per share at the time of this writing around 12:50 in the afternoon in New York.

What can past market crashes teach us about the current one?

The markets have largely recovered since the March selloff, but most would agree we're not out of the woods yet. The COVID-19 pandemic isn't close to being over, so it seems that volatility is here to stay, at least until the pandemic becomes less severe. Q2 2020 hedge fund letters, conferences and more At the Read More

Schlumberger financial results

During the fourth quarter, Sclumberger generated $1.50 in earnings per share on $12.6 billion in revenue, an increase of 11% and 6% year-over-year. The company’s earnings were higher than $1.45 per share consensus estimate of Wall Street analysts.

The company said its operating income was $2.8 billion. Schlumberger said it generated record revenue of $4.3 billion in North America and pre-tax operating margin of 19.6%, up by 24 basis points.

Schlumberger benefited in North America due to continued improvements in efficiency, new technology uptake in pressure pumping land and recovery of activity in the US Gulf of Mexico.

The company said its international revenue slightly declined to $8.2 billion and its pretax operating margin dropped 33 basis points to 24.2%. The decline was due to the weakness of the ruble and the seasonal activity drop in Russia amid the falling oil prices, which resulted to the deceleration in customer spending in Europe, CIS, and Africa.

Workforce reduce and restructuring initiatives

Schlumberger recorded several charges during the quarter related to currency devaluation, impairment and restructuring.

“In this uncertain environment, we continue to focus in what we can control. We have already taken a number of actions to restructure and resize our organization that has led us to record a number of charges in the fourth quarter,” according to the company.

Schlumberger recorded $296 million charge related to its workforce reduction of around 9,000 people. It also recorded $590 million impairment charge associated to six vessels, $85 million charge related to seismic intangible asset and $131 million related to lease termination costs. In addition, the company recorded $472 million in currency devaluation charge in Venezuela as well as $199 million impairment charge for its SPM project in the Eagle Ford.

Schlumberger increased dividend

The board of directors of Schlumberger approved the increase of its quarterly dividend by 25% to $0.50 per share payable on April 10, 2015 to shareholders of record on February 11.

The company also repurchased 12.1 million of its common stock during the fourth quarter.

Sternee Agee believed that Schlumberger will continue to generate robust free cash flow and return cash to shareholders despite a more challenging environment. The firm noted that the company’s new technology offerings are strong and it has efficient executions.

The financial research firm also noted that the management of Schlumberger remained confident that the company will outperform its peers despite weaker outlook as it took aggressive steps such reducing its headcount and restructuring certain assets to boost profitability.

Of course the big question is… is this just the start of further job cuts? We hope not – but it looks like the oil sector will be announcing layoffs in the coming weeks/months.