HOUSTON, Texas – Nine thousand workers are set to be laid off by Texas-based oil giant Schlumberger. The oil tool services company said it must fire 9,000 workers because of plummeting crude oil prices and a slow-down in 2015 production and exploration. The employee reduction comprises about 7.5 percent of the company’s 120,000 global labor force.
On Thursday, the company released its fourth-quarter and 2014 earnings results. Profits have fallen by 82 percent in the last quarter of 2014.
Oil prices have dropped 50 percent since this summer because of surges in production and declining growth.
Schlumberger Chief Executive Officer Paal Kibsgaard said “In this uncertain environment, we continue to focus on 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 changes in the fourth quarter.”
The company began its labor force reductions in the final quarter of last year.
Oil prices have failed to stabilize so the job cuts were planned despite good last quarter earnings. Fourth-quarter revenue of $12.6 billion increased 6% year-on-year; however, the income of the last quarter was $302 million as contrasted to $1.664 billion in the same period of 2013.
Schlumberger reported a $296 million charge attributable to the layoff.
Breitbart Texas spoke with Bill Drennen who is the former CEO of PanAtlantic Exploration and a V.P. at Hess Corporation. He has 31 years at ExxonMobil where he last served as a V.P. over exploration in the Americas. Drennen told Breitbart Texas:
“The massive Schlumberger layoffs highlight the downside of falling oil prices. Given the costs to explore, develop, produce, refine and market, at $50/barrel, the margin of profit is gone for most all small and large operators. Consequently, operators cut back on drilling, which immediately impacts rig owners/operators, and if drill well numbers are down, companies such as Schlumberger are not in demand to provide wire line services work to evaluate newly drilled wells, or conduct project management work for independents, or conduct new seismic surveys. Hence, in the economic chain, many organizations, not just Schlumberger, cut jobs and slow down their spending. Consequently, those areas heavily influenced by the Petroleum industry are negatively impacted. And if oil prices remain depressed, you will see more announced staff reductions. It can be a vicious cycle.”
Breitbart Texas’ Bob Price reported in late December that lower gas prices could cast a shadow on Texas’ economic future by causing job loss and lower tax revenue. Just four days ago, he reported cutbacks had already begun and Texas Governor Perry had predicted a “painful period of time.”
The outgoing Texas Governor said he believes the industry downturn will be a “relatively short-lived economic challenge.” Perry believes the impact will not be like the bust in the 1980s because the state now has a more diversified economy.
Breitbart Texas talked to Rick Slemaker, Publisher of Energy Magazine, who had this to say about Texas’ future and the Schlumberger layoffs:
“The merger of Baker Hughes and Halliburton left only two big boys, Halliburton and Schlumberger. Schlumberger had to get leaner to compete and get out of areas where they were not specializing.”
“The Texas result will be good for the state as all the leaders are in Houston. For the record, these layoffs will produce many more entrepreneurs that in the long-run provide efficient companies providing many more jobs than those lost today in Texas and elsewhere. The new jobs created will be in Texas first as frontier oil is too expensive to produce with high profits in short term. Bank on it!”
“Next year’s exploration and production only comes down as highly leveraged companies can’t borrow money they need but the big boys’ debt will still be very manageable. They’ll take over and finish the contracts they have for future years already on the books.”
Lana Shadwick is a contributing writer and legal analyst for Breitbart Texas. Follow her on Twitter @LanaShadwick2.
This article has been updated to include comments from Bill Drennen.