A gloomy week for the oilfield services sector was rounded off today (24 July) as Schlumberger reported a huge drop in revenue across North America during the second quarter, and confirmed a workforce reduction of more than 21,000 employees.
The Texas firm said revenues across the continent, where the shale patch has been battered by the market effects of coronavirus, fell by 58% year-on-year to $1.2bn. Globally, overall revenue was down 35% compared to the second quarter of 2019 to $5.3bn.
A $3.7bn impairment charge, of which $1bn is attributed to severances, contributed to a net loss of $3.4bn during the three-month period, described by chief executive Olivier Le Peuch as “the most challenging quarter in past decades”.
Schlumberger rivals also report difficult second quarter
Earlier this week, Halliburton and Baker Hughes – Schlumberger’s biggest rivals in the oilfield services sector – each reported similar financial troubles stemming from a huge decline in oil and gas activity, particularly in the US, resulting from the coronavirus demand shock and global efforts to curb production.
“[The results] speak volumes about an industry confronted with historic oil demand and supply imbalances caused by demand destruction from the global Covid-19 containment effort,” said Le Peuch, pointing to the industry-wide spending cuts oil producers have made in response to the challenging economic environment.
He added: “Oil demand is slowly starting to normalise and is expected to improve as government measures support consumption. However, subsequent waves of potential Covid-19 resurgence pose a negative risk to this outlook.”
The oilfield services sector, which supplies labour and technical support to the extractive industry, has been hard hit by the knock-on effects of major production cuts worldwide, as companies seek to preserve capital and tackle the oversupply that put huge pressure on storage capacity and sent prices plummeting during the second quarter of the year.
Research group Rystad Energy recently estimated global demand for oilfield services will fall by 25% this year as a result of the downturn, as producers continue to exercise caution over their spending plans.
The consultancy also put the number of job losses across the US oil and gas industry – prior to Schlumberger’s announcement today – at more than 100,000, the vast majority of which have occurred among labourers servicing the infrastructure that extracts, transports and processes the fuel resources.
Rig count data collected by Baker Hughes, a key indicator of activity within the sector, shows that in the week ending 17 July the number of active drilling rigs in the US was down 73% year-on-year to 253.
