Schlumberger says another round of layoffs coming

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Schlumberger is preparing for its second round of layoffs this year amid a global downturn in oil and gas activity that also has also pushed rivals to cut jobs. 

The world’s largest oil field services company, which in January announced plans to cut 5 percent of its work force, now expects “a further reduction of a similar amount” in coming months, Chief Executive Andrew Gould was expected to say this morning at the 2009 Howard Weil Energy Conference in New Orleans, according to a prepared text of his speech.

While the first round of cuts — eliminating about 5,000 of the firm’s 84,000 global employees — should be largely completed by the end of March, Gould gave no specific timetable for the next phase of layoffs. 

The move, he said, is part of a broader effort to rein in costs that will also include reducing the firm’s 2009 capital spending budget and negotiating lower prices from suppliers. 

And it comes amid a recent shift in the economics of the oil and gas industry, he said. 

“We are entering a period that will be very different from the last five years when our business was driven by narrow margins of excess supply with resulting effects on oil and natural gas prices,” Gould said. 

“Now we are at a stage where the evolution of demand — governed by the level of economic activity — has become the overriding driver of oil and gas behavior.” 

Oil field services companies like Schlumberger have seen business decline as crude oil prices plummeted from $147 last summer to roughly $50 today. The drop, coupled with the global recession and credit crisis, recently spurred many oil companies to reduce spending on oil and gas exploration. 

Oil field services companies work on a contract basis with oil companies to provide nearly every task involved in taking oil and natural gas prospects from discovery to producing wells, so any drop in oil company spending hurts. 

Schlumberger is one of several major oil field services companies that have recently been forced to pare jobs. 

In January, Halliburton, the second largest services providers, said it cut an unspecified number of jobs, while Baker Hughes said it planned to lay off 1,500 of its 40,000 employees worldwide, including about 200 in the Houston area. This month, Baker Hughes announced another 1,500 job cuts, just over a third of which will be in the United States, including some in Houston. 

Schlumberger, with principal offices in Houston, Paris and The Hague, said its initial round of job cuts in January would cut up to 1,000 of its 19,000 North American employees, including up to 100 of its 5,000 jobs in the Houston area. 

Gould did not say where the second round of job cuts would be focused but gave some clue. He cited three business units that had been most adversely affected by the recent industry downturn — its WesternGeco, Russia and U.S. land drilling units. 

But he noted that in the last five years Schlumberger recruited 11,613 engineers in 140 countries and 8,754 specialists, spent $200 million on two new training centers and saw strong overall profits. 

“The cuts that we have announced therefore come after a period of tremendous growth,” he said, “and are relatively easy to make.”

Copyright (c) 2009, Houston Chronicle

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