The budget cuts are leading to plans by Schlumberger, the largest oilfield service company in the world and with major operations in Oklahoma to coming layoffs.
The company announced it will slash up to 30 percent from its budget as oil activity takes a major hit from the oil price war and the effects of the coronavirus pandemic.
The company also expects to layoff workers and reduce compensation as part of restructuring efforts in North America, CEO Olivier Le Peuch said at the Scotia Howard Weil Energy Conference in New Orleans.
The magnitude of the budget cuts depends on changes to customers’ plans, Le Peuch said. A full 30 percent cut would leave the company with a $1.2 billion capital budget for the year. The company spent $1.7 billion on capital projects in 2019.
Le Peuch said almost all of the company’s remaining capital spending would be in international operations, which accounted for for about 80 percent of its free cash flow.
Schlumberger joins Chevron, Shell, Total and numerous other companies in the energy industry who are cutting billions of dollars in response to rapidly falling oil prices.
A price war between Russia and Saudi Arabia has exacerbated a global supply glut while the coronavirus outbreak has lowered global demand. West Texas Intermediate crude oil is trading around $23 per barrel, a price not seen since February 2002.
Le Peuch said Schlumberger’s international operations have been affected by the coronavirus outbreak but noted that manufacturing operations in China are returning to pre-crisis levels.
In the U.S., the company expects conditions to worsen, perhaps reducing the number of rigs to levels seen during the most recent oil bust. At the low point in May 2016, there were just 404, according the Baker Hughes Rig Count. There are 772 drilling rigs in operation now.
Headquartered in Paris with its principal offices in Houston, Schlumberger has more than 105,000 employees in 120 countries.
Source: Houston Chronicle