Schlumberger outlined an aggressive cost-cutting plan for its North American operations as the world’s largest oilfield service firm contends with sharp declines in U.S. shale activity, Reuters reported.
The company reported a slightly better-than-expected fourth quarter profit amid stronger international sales for its services and equipment, offsetting weakness in North America.
Schlumberger Chief Executive Officer Olivier Le Peuch, who took the top job last year, promised to improve North American margins, including through staff cuts, asset sales and by idling equipment.
Schlumberger cut more than 1,400 jobs since the third quarter of 2019, and is exploring selling unprofitable businesses, Le Peuch said on a conference call. His plans calls for an asset-light strategy that emphasizes higher-margin software and technical services.
Wall Street analysts said the report was generally positive, pointing to strong international growth and lower costs in North America.
Shares were up 50 cents at $39.28 in early trading. The stock lost more than 10% last year even as the S&P 500 index of large companies rose 29%.
Le Peuch plans to further pare its OneStim hydraulic fracturing business, which it expanded through a $430-million acquisition just two years ago. It is cutting the number of active fracking fleets, bringing the total reduction to 50%.
The company confirmed a Reuters report that Schlumberger was exploring a sale of a business that helps boost production from aging oil and gas wells. It also plans to halt another North American business that lets producers service live wells onshore.
International markets, which make up 70% of Schlumberger’s business, were a bright spot for the company. Revenue rose 8% to $5.72 billion in the fourth quarter, compared with a 13% decline in North America.
It forecast 2020 spending by oil and gas companies internationally to rise about 5%, with revenue in its international division growing at the same pace or higher excluding asset sales.
Le Peuch, however, warned OPEC-led output cuts would slow investments in Russia and the Middle East in coming months, and its business in Iraq would decline due to U.S.-Iran tensions. North American business will also drop in the first quarter in a low-single digit percentage, he said.
Schlumberger’s net income fell 38% to $333 million, or 24 cents per share, in the three months ended Dec. 31, from $538 million, or 39 cents per share, a year earlier. The year-ago quarter included a gain from an asset sale.
Excluding charges and credits, profit rose to $545 million, or 39 cents per share, from $498 million, or 36 cents per share.
Analysts on average had expected a profit of 37 cents per share, according to Refinitiv IBES.
Reporting by Arathy S Nair and Shariq Khan in Bengaluru; Editing by Sriraj Kalluvila and Nick Zieminski
