Barrons -- Schlumberger Is Scrambling to Cut Costs. Its Earnings Show It’s Still a Work in Progress.
Oct. 16, 2020
10:06 am ET
Schlumberger Is Scrambling to Cut Costs. Its Earnings Show It’s Still a Work in Progress.
By Avi Salzman
Schlumberger stock fell sharply in early trading Friday after the company posted a mixed third-quarter earnings report as it attempts to reduce expenses and become a more focused business.
Excluding one-time items, its 16 cents of earnings per share beat expectations for 13 cents, but its revenue of $5.26 billion slightly missed expectations for $5.40 billion.
While Schlumberger (ticker: SLB) mentioned several positive developments, CEO Olivier Le Peuch also warned that “the near-term recovery remains fragile owing to potential subsequent waves of Covid-19 that could pose a significant risk to this outlook.” The next two quarters should represent the trough for the industry, he said.
Schlumberger, the world’s largest oil services company, is in the middle of a major transition to deal with low oil prices and a slowdown in oil production around the world. Its revenue was down 38% year over year, and Schlumberger is focused on quickly cutting costs to make its business more efficient. It announced a plan in July to cut 21,000 jobs, or about one quarter of the staff.
The company is also pulling back on major business areas, agreeing to sell a majority stake in its North American pressure pumping business to services company Liberty oil-field services (LBRT). That business was once a major growth driver for Schlumberger, which pioneered techniques that led to the U.S. shale revolution.
Schlumberger is increasingly becoming an international business and plans to focus on major projects, like Exxon Mobil’s (XOM) decade-long production plan off the shore of Guyana.
Revenue in North America plunged 59% in the quarter. It now makes up just 22% of the firm’s overall revenue, versus 33% a year ago. CEO Le Peuch was confident that the company is setting itself up for strong earnings in the future.
“The reset of our earnings power is progressing very well,” he said on the company’s conference call.
In morning trading on Friday, shares of Schlumberger were down 5%, to $15.56.
Write to Avi Salzman at avi.salzman@barrons.com
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