Write Down of past acquisitions drags down Schlumberger into huge loss for year

Fuel Fix:

Schlumberger, the largest oil-field services company, is responding to the ongoing shale slump by selling underperforming businesses, stacking frac fleets, closing locations and laying off employees.

The company reported a $10.1 billion loss in 2019 compared with a $2.2 billion profit in 2018. It had $32.9 billion in revenue for the year compared with $32.8 billion in the previous year, an increase of 0.3 percent.

Full-year earnings were dragged down by an $11.4 billion loss in the third quarter, when the company wrote down the value of two past acquisitions and experienced nearly a year of weakened demand from its North American hydraulic fracturing business.

During a Friday morning investors call, Schlumberger CEO Olivier Le Peuch reported that the 2020 shale market is expected to decline by high-single or low-double digit percentages. In response, the company's North American arm is selling noncore businesses, stacking nearly one-third of its hydraulic fracturing fleet and closing one-fourth of its locations. Schlumberger also said it laid off 1,400 North American employees in the fourth quarter.

Those cuts and focusing on the three largest U.S. shale basins will save the company $300 million per year, Le Peuch said.

"Our ambition for North America land in 2020 has been clearly set for margin expansion despite the unfavorable activity outlook," Le Peuch said. "While our strategic decision will result in revenue reduction greater than the decline of the market, they will contribute incremental earnings and cash flow compared to 2019."
...
During the third quarter, Schlumberger wrote down the value of business units formed by the 2010 acquisition of Houston oil-field service company Smith International and the 2016 acquisition of Houston offshore service company Cameron International.
...

 In hindsight, those acquisitions look like a mistake.  The company can likely recapture some of the taxes paid on the previous year's profits which may help their cashflow.