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Reeling from a loss of $1.2 billion in profits and half of its revenue for the fourth quarter of 2015, oilfield services company Weatherford International is preparing to cut 6,000 jobs, adding to the surge of oil industry job cuts as oil prices take their toll and the market becomes “brutal”.
Job cuts are a natural response to the oil price crisis, and in Weatherford’s (NYSE:WFT) case, the pending cuts—which will take place in the first half of this year—mean sacrificing 14 percent of its workforce after revenues slid 46 percent to $2 billion at a time when demand for oil equipment and oilfield services slumps.
This is only the latest in a series of cuts for Weatherford, which will have trimmed its workforce by 20,000 members once this new round of cuts are enforced. Twenty Weatherford facilities have also been closed to date, with another nine facilities slated for closure sometime in 2016.
Following the losses that have piled up over two years, we see a desperate pattern: In the fourth quarter of 2014, Weatherford had posted losses of $475 million, followed by losses a year later of $1.2 billion, prompted mainly by a 60 percent drop in North American sales.
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Weatherford’s spending has also been capped for 2016 at $300 million, which is 56 percent lower than last year.
Weatherford is only the fifth-largest oil services company in the world in terms of enterprise value, which sits at about $15 billion, but the four other larger companies aren’t faring too well, either.
The fourth-largest is National Oilwell Varco (NYSE:NOV), with an enterprise value of $16.9 billion, and it hasn’t performed much better. Since late 2014, NOV’s shares have dropped by two-thirds, and it was forced to shed 20 percent of its workforce last year, with additional restructuring in the works for the first half of this year.
Baker Hughes (NYSE:BHI), the No. 3 player, has cut around 16,000 jobs.
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The top dogs in the oilfield services patch—Schlumberger and Halliburton—paint an even more dismal picture.
In late January, Schlumberger (NYSE:SLB) cut 10,000 jobs after reporting losses of $1.02 billion, with a 38 percent contraction in revenue from its peak in the third quarter of 2014 to the fourth quarter of 2015.
As recently as 2014, Schlumberger had posted profits of $302 million, but has since fallen around 44 percent over the past year and a half. In just this past year, Schlumberger reported a 27 percent fall in revenues, and a 39 percent drop in the fourth quarter alone.
January’s job cuts bring Schlumberger’s total job cuts up to 34,000—or 26 percent of its workforce—since the third quarter of 2014. That tops Weatherford’s 14 percent workforce loss.
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The No. 2 player in this patch, Halliburton (NYSE:HAL), has laid off some 22,000 workers, or 25 percent of its global workforce. The most recent cuts came in the last week of January, when the company announced it had cut an additional 4,000 jobs coming off fourth quarter 2015 reports showing a net income loss of $28 million for the quarter, or 79 cents per share for the full year.
"The brutality and length of this down cycle has challenged the entire industry, both our customer base as well as our peers," Weatherford's top executive Bernard J. Duroc-Danner said in a statement.
The first wave of energy industry job cuts came in January 2015, from the producers. This January was the culmination of the snowball effect that has reached the oilfield services segment—and none is immune, with Weatherford’s story par for the course and no better or worse than its peers. This year will be darkest for oil services because the bottom hit its customers first.
By Julianne Geiger for Oilprice.com
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Julianne Geiger is a veteran editor, writer and researcher for US-based Divergente LLC consulting firm, and a member of the Creative Professionals Networking Group.