Schlumberger Limited. (NYSE:SLB) announced that it plans to cut an additional 11,000 jobs, after it announced job cuts of 9,000 back in January. The two job cuts sums the total number of job cuts to 20,000. The management said that in spite of the necessary preparations in 4Q, the company witnessed a fall in drilling activity, specifically in North America. It forced to opt for additional job cuts in this quarter. The latest decision leads to a total reduction of approximately 15% compared to the peak levels recorded in 3Q2014.
Apart from the additional job cuts, Schlumberger reported 1Q revenue of $10.25 billion, falling below analysts’ expectations of $10.46 billion. The revenue and adjusted profit declined 9% and 12%, respectively year-over-year. However, the adjusted profit of $1.09 per share topped expectations of 89 cents a share.
The pricing pressure
Paal Kibsgaard, the CEO of Schlumberger Limited. (NYSE:SLB), said that 1Q revenue declined 19% sequentially led by the severe drop in North American land activity and related pricing pressure. The reduced customer spending, seasonal influence in the Northern Hemisphere and the depreciation of the Venezuelan Bolivar and Russian Ruble adversely affected the performance of international operations. In fact the lower activity and pricing resulted in the sequential decline for the last three-quarters. The production group revenue also dropped 22% sequentially due to lower pressure pumping services.
The silver lining
Kibsgaard further added that despite the problem of the sequential revenue decline, Schlumberger have succeeded to reduce its impact on the margins through proactive and prompt cost management. It opted for the acceleration of the transformation plans across product lines and GeoMarkets. The decisions were taken at right time and helped the company to enhance its financial performance compared to prior industry cycles. The overall sequential decremental operating margin came at 33% as the International Areas and North America reported 25% and 39%, respectively.