Two of the largest oilfield services companies in the world announced a combined workforce reduction of 14,000 in the first quarter of 2016 as crude prices remain soft amid disagreement among international producers to cap production levels. Executives have signaled concern of additional layoffs in the months ahead.
Houston-based Schlumberger Limited (NYSE: SLB), the world’s largest oilfield services company, announced an 8,000 job layoff for the first quarter, according to a conference call reported by the Houston Chronicle. The company has let go of a total 40,000 globally since the 2014 slump began, yet the latest round of job losses remain undisclosed with respect to location. Schlumberger Chairman and CEO Paal Kibsgaard painted an increasingly bleak picture in a quarterly results release, noting that “the first-quarter revenue decrease of 16% was one of the steepest quarterly declines we have posted” since the crude downturn. The executive added that the industry at large has “displayed clear signs of operating in a full-scale cash crisis.”
Neighboring Halliburton Company (NYSE: HAL) piled on the troubling news in a quarterly operation update with a “workforce reduction” of 6,000 thus far for 2016. Recent revenue figures reflected a 17 percent decline at $4.2 billion as the company noted that worldwide drilling rig counts have fallen to levels not seen since 1999. President Jeff Miller echoed the pessimism expressed by Schlumberger executives Friday as well.
“What we are experiencing today is far beyond headwinds; it is unsustainable. My definition of an unsustainable market is one where all service companies are losing money in North America, which is where we are now.”
Domestic and select international oil producing-nations alike were cautiously optimistic leading into the April meeting for the Organisation of the Petroleum Exporting Countries (OPEC) in Qatar as members planned to forge a deal that would cap daily output rates to not exceed record levels seen in January. Direct negotiations failed to produce an agreement after six hours, yet Qatari Energy Minister Mohammed Saleh al-Sada acted to reassure his state news agency Al-Jazeera that the nations will “consult among themselves and with others” until the next meeting in June. The conclave did not have full attendance with Iran as a no-show. Emboldened by the Obama Nuclear Deal, Tehran has refused to accept any production agreements until it has recovered a pre-sanction market share, according to the state outlet.
Closer to home, a western Texas-based collection of domestic producers, the Panhandle Producers & Royalty Owners Association, has embarked on a grassroots push to raise the issue of new import quotas in the 2016 Presidential Election, according to the Associated Press. Though such trade measures have not been seen in roughly four decades, the group is formally advancing a plan that would stair-step quotas until only 10 percent of domestic consumption was sourced outside of the United States. Canadian and Mexican interests would be exempt from the program.
A key indicator for domestic production, Baker Hughes’ Rig Count, further demonstrates the pain felt by domestic explorers and service companies in Texas. New figures released as of April 22 found that only 187 drilling rigs were in use, down seven the week prior. Compared to 2015, the Lone Star State has seen a reduction of more than 200 rigs overall. Active rigs have fallen 80 percent since mid-2014. Members of the coalition of domestic producers told the AP how the stacking of rigs throughout the Permian Basin and New Mexico carries a peripheral economic impact among “Service companies, restaurants, real estate, the people building motels and hotels” throughout the region.
Major domestic oilfield services companies are not the only ones showing job losses in recent weeks. Breitbart Texas reported in early April that Houston-based Chevron Corporation (NYSE: CVX) announced plans to shed roughly 10 percent of its overall workforce.
Logan Churchwell is a founding member of the Breitbart Texas team. You can follow him on Twitter @LCChurchwell.
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