Ahead of the Bell: Schlumberger to Cut work Force

By: Ernest Scheyder
By: Ernest Scheyder

NEW YORK (AP) -- Schlumberger Ltd.'s decision to cut about 5 percent of its work force due to sliding oil prices and demand was likely the right move, an analyst said Friday.

The world's biggest oilfield services company said Thursday it will lay off up to 1,000 of its 19,000 North American employees, including up to 100 of its 5,000 workers in the Houston area.

"It's not an unexpected move," Argus Research Co. analyst Phil Weiss said in an interview. "It's probably the right move as they try to manage their costs."

During the fourth quarter, crude fell from around $100 a barrel to less than $40. That was in sharp contrast to the rest of 2008, when oil prices soared and producers posted record profits. Crude prices had flirted with the $150 per barrel mark as recently as July.

But in the wake of oil's plunge, oil and gas companies have since scrapped many exploration and production projects, reducing work for companies like Halliburton Co. and Schlumberger. About 150 to 200 oil rigs have gone offline over the year-ago period, Weiss said.

Halliburton also has confirmed it will begin laying off workers but hasn't said how many or when. Last month, Bernard Duroc-Danner, chief executive of Weatherford International Ltd., the fourth-largest services firm, said job cuts would likely be unavoidable amid a sharp downturn in North American activity.

Among the jobs being cut at Schlumberger are administrative support positions, field operations personnel and contract workers.

The cuts mostly involve workers not directly involved with production, so the company would still be prepared to take advantage of any increase in oil prices, said Weiss, who expects that crude prices could exceed $150 per barrel at some point in the future.

"I hate to see people lose jobs," said Weiss. But, "when you look at those kind of numbers, you've got to think (administrative positions) are the types of jobs that can easily be replaced."

Weiss rates the company's stock as "Buy."

Shares of Houston-based Schlumberger fell 50 cents to $45.33 in premarket trading Friday, having closed Thursday at $45.83. The stock peaked at $111.95 this summer amid oil's heyday, but lost more than half it's value to bottom at $37.07 in December.

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