Why the Slash in 7.3% of its Workforce by Schlumberger (NYSE:SLB)

As oil companies all over the world keep on bearing the hits being received by lowering global oil prices, Schlumberger (NYSE:SLB) just can’t bear the losses any further. The NYSE listed company is now being forced to cut down its labor force, that too by almost 7.3%. Not only this, but the company also will have to reduce its capital expenditure to a great extent this year if it hopes to maintain a survivable cash flow for operations within the company.

The announcement came on the 15^th of this month by the company when it announced that it would be cutting over 9000 jobs from various departments of the company to make up for the losses being incurred due to the sudden and harsh decline in oil prices. Schlumberger (NYSE:SLB) is perhaps one of the largest suppliers of oil services all over the world, employing well over 123,000 employers the world over in various geographical locations.

The announcement by Schlumberger follows the release of its financial statements which the company released to the public on the same day the announcement was made. Stating the financial reports as evidence, representatives of the company highlighted the fact that Schlumberger (NYSE:SLB) incurred charges amounting to $1.77 billion in just the last quarter of 2014. Most of these charges incorporated the devaluation of the Venezuelan currency due to falling oil prices, cuts in jobs (benefits, etc.), and miscellaneous charges incurred due to the seismic activity in business.

World oil prices began to lower in the summer of 2014, have to this day have fallen by well over 50%. At that point in time per barrel price was well over $115 per barrel, however now price for the same has come down to a meager $50 per barrel, and is still lowering with each passing day. In the US, as of today, the Global Benchmark for oil is currently trading at $46.6 per barrel, whereas the Brent crude is trading the same at $48.5 at the same time.

The last decade has been wonderful for Schlumberger (NYSE:SLB), as the company more than doubled the size of its workforce during this time to accommodate to the growing needs of its expanding business structure. The company opened up operations in many parts of the world where it was not operating before. However, of course, the company could not have anticipated the sudden and harsh fall in oil prices that haunts oil companies all over the world today, and now has to lay off the same workers it had hired before, as it no longer can afford to keep them all on board.

It seems the company is being hit by a lowering of supply from the global oil supply chain, but mostly because demand for some of the core services provided by Schlumberger (NYSE:SLB) is being reduced drastically, especially for its fracking as well as drilling services, as its clients (also oil companies), simply cannot afford to invest in these services during the harsh conditions of the market, affecting the business of Schlumberger directly.