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Halliburton Cuts 5,000 Jobs, 8% Of Workforce
Halliburton Cuts 5,000 Jobs, 8% Of Workforce
It turns out oilfield services isn’t a good place to be during epic crude downturns.
Halliburton – which cut thousands upon thousands of jobs in 2015 – is back it, announcing an additional 5,000 layoffs on Thursdsay. The cuts amount to 8% of the company’s remaining workforce. We say “remaining” because as CNN notes, “the latest pink slips bring Halliburton’s job cut tally to between 26,000 to 27,000 since employee headcount peaked in 2014.”
The company will also look to sell assets (because everyone wants the kind of assets Halliburton owns with oil at $30) and is projecting $1.6 billion in capex this year.
“We regret having to make this decision but unfortunately we are faced with the difficult reality that reductions are necessary to work through this challenging market environment,” Emily Mir, a spokeswoman, said Thursday in an e-mailed statement. “We thank all impacted employees for their many contributions to Halliburton.”
Revenue plunged 42% in Q4 the company said last month hit, of course, by the ongoing oil rout. “Let me sum it up,” CEO Dave Lesar said on the call, “2016 is shaping up to be one tough slog through the mud.”
For 5,000 now jobless workers, this year will be a “tough slog through the mud” as well.
On the bright side, the stock is ripping:
Poor Quarter for Canada’s Oilfield Services
Poor Quarter for Canada’s Oilfield Services
It was a jungle out there for the Canadian oilfield services (OFS) industry in the third quarter of the current fiscal year ended September 30, 2015. For a group of 25 diversified, publicly traded Canadian OFS companies, combined revenue declined 38.5 percent from $6.6 billion in 2014 to only $4.0 billion this year.
Just one company, ShawCor, managed to increase revenue on a year-over-year basis. Average gross margin – revenue minus direct expenses for delivering the product or service – fell 6.6 percent from an average 27.0 percent last year to 22.3 percent this year. Only eight of the companies reported a profit for Q3, compared to 2014 when 24 of the 25 companies under review reported a profit in the same three month period. Two companies reported losses close to or exceeding total revenue because of write-downs of balance sheet assets, particularly goodwill.
Gross margin is a key performance indicator of the health of the OFS sector and the companies which operate in it. This is revenue minus direct expenses or cost of goods sold. The main components of direct expenses are cost of goods for products, fuel and labour for services, expendables, repairs and maintenance, field service operations and operations support infrastructure. Changes in the gross margin reflect pricing pressure from clients, as well as input costs such as parts, expendables, fuel and labour.
That revenue should decline this sharply on a year-over-year basis should come as no surprise. With oil prices down by half, drilling is down by half, the rig count is down by half and capital expenditures have fallen accordingly. Exploration and production (E&P) companies have told their shareholders they are enjoying service price reductions in the range of 15 percent to 25 percent across the board. The fact the average gross margin for the 25 companies under review is down on average only 6.6 percent in the face of intense competition and pricing pressure is a testament to the ability of managers to find ways to cut product and service delivery costs to accommodate customer demands for lower prices.
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