Schlumberger NV’s new chief executive wielded an axe to the company’s asset-heavy businesses, taking a $12.7 billion charge in the face of weaker shale drilling and sliding profits.
The move by Olivier Le Peuch writes down his predecessors’ big investments that took the world’s largest oilfield services company deeper into shale and oilfield operations and shows that he intends to shift the company toward more asset-light software and services-driven businesses.
The charge, amounting to nearly 18% of value of the company’s assets, drove an $11.4 billion loss, the largest in the company’s history.
However, shares rose 3% to $32.84 in morning trading as investors looked past the writedowns and focused on improved international operations and adjusted profits that topped Wall Street estimates.
Excluding the charges, it reported a 43-cents-a-share profit above the 40 cents projected by analysts. While revenue at $8.5 billion was flat compared to the same period a year earlier, sales rose in all regions except for North America.
“The large writedown is just affirmation of how weak the end markets are,” said Edward Jones analyst Jennifer Rowland. “Clearly the new CEO seems to be focused on having an asset-light strategy going forward.”
A cut in spending by U.S. oil and gas producers has hit Schlumberger and other oilfield services suppliers hard, forcing it and rivals Halliburton Co and ProPetro Holding Corp to shed employees.
Schlumberger’s writedowns included $1.58 billion related to the pressure pumping business in North America, $10 billion for goodwill and other intangible assets and $114 million for severance, it said. It bulked up the pressure pumping unit two years ago ahead of the shale downturn.
“That’s a sizable writedown from pressure pumping business. That just tells you the state of the North American onshore market being pretty poor,” said Anish Kapadia, founder of London-based oil and gas consultancy firm AKap Energy.
North America’s rig count was 1,002 as of Oct. 11, 256 fewer than a year earlier, as producers pulled back activity in the face of trade tensions and weaker oil and gas prices.
Revenue from the company’s international businesses rose a combined 8% in the third quarter, while revenue from North America fell 11%. Sales were strongest in Europe, the Commonwealth of Independent States and Africa, which gained 13% over a year ago.
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