David Wethe Houston
POLITICAL turmoil from Russia to West Africa helped push 1 000 workers out of their jobs at the world’s largest fracking company.
Halliburton plans to make the job cuts immediately in the eastern hemisphere as it strives to cope with an industry fallout brought on by oil prices at a five-year low, the Houston-based company said yesterday.
The world’s second-largest oilfield-services provider plans to take a $75 million (R868.7m) restructuring charge in the fourth quarter as it cuts headcount and activities globally, Halliburton chief financial officer Mark McCollum told analysts and investors. Economic sanctions in Russia and the weaker rouble are part of the problem.
“Certainly the challenges that are occurring in Russia are meaningful,” Matt Marietta, an analyst at Stephens in Houston, who rates the shares the equivalent of a buy and owns none, said.
“When you combine declining commodities with geopolitical risks and turmoil, that would be a situation for probably a disproportionate amount of change.”
The current job cuts have nothing to do with the company’s $34.6 billion acquisition of Baker Hughes announced last month, Emily Mir, a spokeswoman, said yesterday.
Halliburton, which employs about 80 000 globally, had planned to hire another 21 000 this year and lose an unspecified amount through attrition, Mir said. She declined to say if further cuts were planned elsewhere.
Project delays in North Africa and Algeria along with curtailed deepwater activity in the North Sea and off the coast of West Africa led the company to lower its fourth-quarter guidance for the eastern hemisphere. Sales in the region were expected to be similar to the third quarter, McCollum said.
“Typically, we might see it up, a little bit higher margins, but because of the weakness in Europe, Africa and Community of Independent States, this looks like it’s going to be flat and in the mid-teens,” he said. “It’s interesting that some of the initial impact has been more in the international area than it has been in North America.”
Brent crude prices, the global benchmark, have fallen 46 percent to about $62 a barrel since June 19 on projections for lower demand and higher supplies of the commodity.
The world’s four largest oilfield-service companies may see more than $3 billion in net income cut from analyst projections for next year as they lower their prices for a variety of work, including drilling and hydraulic fracturing, which blasts water, sand and chemicals underground to free trapped hydrocarbons.
Schlumberger, the world’s largest oilfield services provider, said on December 2 it planned to reduce its headcount without offering details.
Halliburton managed to boost its third-quarter profit margin in the eastern hemisphere to 16.3 percent, from 15.5 percent a year earlier.
The company trailed rival Schlumberger, which generated a 25.4 percent operating income margin.
More cuts could come throughout the oil-services industry, Marietta said.
“It’s unavoidable that activity levels are going to have to take a decline for a period of time,” he said. – Bloomberg