World’s largest oilfield services provider Schlumberger saw its profit nearly halved in the first quarter of 2016.
The company’s CEO Paal Kibsgaard said on Thursday that the quarter had been one of the worst since the downturn started.
“During the first quarter of 2016, the decline in global activity and the rate of activity disruption reached unprecedented levels as the industry displayed clear signs of operating in a full-scale cash crisis. Budgeted E&P spend fell again and substantially affected our operating results,” the CEO said.
This environment is expected to continue deteriorating over the coming quarter given the magnitude and erratic nature of the disruptions in activity, Kibsgaard added.
Schlumberger, which in April completer merger with Cameron, said its first quarter 2016 profit was $501 million, down from $975 million a year ago. Revenue was $6.5 billion, 16% down from the fourth quarter of 2015, when Schlumberger posted revenue of $7.7 billion, and 36 percent down from the first quarter of 2015, when It reported $10.2 billion revenue.
Kibsgaard said that sequentially, the first-quarter revenue decrease of 16% was one of the steepest quarterly declines Schlumberger has reported since the downturn started.
He said the revenue drop was driven by a continuing drop in activity and persistent pricing pressure throughout our global operations as well as from project delays, job cancellations and activity disruptions.
The company last week said it would reduce its activity in Venezuela citing insufficient payments received in recent quarters and a lack of progress in establishing new mechanisms that address past and future accounts receivable.
E&P cuts continue
Meanwhile, Kibsgaard said, E&P spending cuts continue. He said recent spending surveys for 2016 indicated sharper declines than previously forecasted. Global spending reductions in 2016 are approaching 25%, corresponding to reductions between 40% to 50% in North America and around 20% internationally, he added.
“In this environment, our overall outlook for the oil markets remains unchanged with the tightening of the supply-demand balance expected to continue during the rest of the year. Although new exports from Iran and growing global oil inventories drove oil prices lower earlier in the quarter, prices have rebounded to around the $40 level, due to underlying market trends, supply disruptions and talks about a production freeze.
Demand growth forecasts remain steady, while OPEC production levels have been largely flat since mid-2015. Production in North America continues to fall as the effects of decline become more pronounced, while mature non-OPEC production is also declining in a number of regions,” Kibsgaard said.