The bottom of the oil bust?

Fuel Fix:
The CEO of Schlumberger said the world’s largest oilfield services company is slowly switching to offense after calling the “bottom” of the oil bust.

Chairman and CEO Paal Kibsgaard said Friday the “challenging” negotiations have begun to undo the deep discounts offered to oil producers during the downturn for services companies to maintain or grow their market shares. But it isn’t sustainable to keep operating at a loss in the North America shale, he said.

He also cautioned that the recovery will be methodical and slow. The third quarter of the year won’t be much better than the second. After all, Schlumberger terminated 16,000 jobs in the first six months of the year.

“We’re at the bottom, but we’re not expecting an immediate and sharp recovery,” Kibsgaard said. “It’ll be a steady increase in rig count and fracking activity … It’ll be more slow and steady.”

Schlumberger reported a $2.2 billion net loss for the second quarter, compared with a $1.1 billion profit during the same period a year ago. The company’s revenue fell from $9 billion in the second quarter of 2015 to $7.2 billion. However, much of the loss came from impairment charges on little-used equipment and facilities, as well as from restructuring costs because of all the job losses.
A broker friend of mine once told me that trying to predict the top or the bottom of a market was like trying to catch a falling hunting knife without being cut.   However, management of companies has to plan for a turnaround to take advantage of changing market conditions and be ready to execute that plan.  The cost to producers will inevitably rise with the price of oil.


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