Yet another energy company is struggling to save money in the face of unexpectedly low oil prices. Weatherford International, one of the world’s largest oilfield services company, will cut 9 percent of its global workforce in the next two months to save more than $350 million a year.
The vast majority of the layoffs – 85 percent, or 4,250 workers – will be felt in the United States and Western Europe. The company, which has operations in more than 100 countries, now has about 56,000 employees. Weatherford also will offer voluntary buyouts to certain eligible employees to reduce its workforce further.
“We will focus the entire organization on ensuring we are cash-flow positive in 2015,” the Swiss-based company’s CEO Bernard J. Duroc-Danner said in a statement late Wednesday. “This means that for every dollar of revenue we lose due to reduced activity and pricing, we will make up for it in cost, capital expenditure and working capital reductions.”
Because of the drop in oil prices, oil companies and ancillary services like Weatherford are losing business. Nevertheless, Duroc-Danner said Weatherford will keep its eye on ensuring a positive cash flow throughout 2015. Last year it began selling off subsidiaries and cutting costs in other ways, raising about $1.8 billion in cash, most of it to pay down debt.
The problem is simple, according to Alex Brooks, an analyst at Canaccord Genuity Ltd. in London. “Customers aren’t placing new orders,” he told Bloomberg. “Where they can they’re trying to get out of existing contracts, and their credit quality is increasingly under question.”
Similar companies such as Halliburton Co., Schlumberger Ltd. and Baker Hughes Inc., all based in Houston, have been suffering from a lack of business. Schlumberger, the world’s biggest oil-field service company, said in January it would lay off 7 percent of its employees, or 9,000 workers.
Halliburton and Baker Hughes Inc. also plan thousands of job cuts.
Weatherford announced its own layoffs as it was reporting a net loss of $475 million on sales of $3.73 billion during the fourth quarter of 2014. That amounted to a loss of 61 cents per share in the company.
The value of its stock has dropped by about 50 percent in the past six months.
During the fourth quarter, Weatherford said its operations in North America, which make up the majority of its revenue, rose by 13 percent from the same period in 2013. The company said its operations in the Middle East, North Africa and Asia saw an 8.4 percent drop in revenue; Europe dropped by 24 percent; and Latin America had an increase of 3.5 percent.
The company said its plan is to offset any reduction in earnings during 2015 through its cost-cutting, a $550 million reduction in capital expenditure to $900 million, among other actions. They include eliminating the position of chief operating officer, a decision announced in January.
“Due to the quickly changing market conditions, we are aligning and reducing our cost as well as organizational structures to match the new environment,” the company’s statement said.
By Andy Tully of Oilprice.com