Schlumberger to Slash N. American Spending By 50%, CEO Cites ‘Full Scale Crisis’

Naturally, these were ‘good’ numbers for the ‘oil patch’ by SLB. See, by slashing spending by 50% in N. America, jobs will be lost and production will be hurt. After everyone goes bankrupt, they will then emerge out of bankruptcy with skeleton crews and shattered prospects. This, of course, means that oil will finally bottom and forklift up to $200 per barrel.

In other words, buy the ‘oil patch’ now, ahead of apocalyptic 50% capex budget cuts, because after everyone goes out of business oil will head to $200, maybe $300.

Notes that 1Q16 rev declined 16%, the second steepest quarterly decline within the downturn in commodity prices

Net debt increased by $1.1 bln to $6.7 bln in 1Q16

Total cash & equivalents balance of $14.8 bln in 1Q16

Co notes that job cancellations and rig count declines have weighed on revenue

Global spending reductions in 2016 are now approaching 25%, corresponding to the fall of 40%-50% in North America and around 20% in the international markets

FY16 capex budget reduced by $400 mln to $2 bln, when compared to previously announced guidance

Oh, and the CEO didn’t sound to sanguine about the industry, citing a ‘FULL SCALE FUCKING CRISIS’ is underway.

“The decline in global activity and the rate of activity disruption reached unprecedented levels as the industry displayed clear signs of operating in a full-scale cash crisis,” Chairman and Chief Executive Officer Paal.

Notes from call, via Briefing.

Expects market conditions to worsen further in 2Q16 as customers continue to reduce activity

Excluding the additional revenue from Cameron, this market outlook together with the decision to reduce activity in Venezuela could lead to a sequential percentage fall in rev for 2Q16, similar to 1Q16

Discusses that the magnitude of the E&P investment cuts are now so severe it can only accelerate production declines & the consequent upward movement in oil price

Notes that domestic capacity reductions in the service industry will help restore a ‘large’ part of the international pricing concessions made once oil prices & activity levels start to normalize

Cameron rev is expected to be flat sequentially. In this environment co plans to continue to tailor service capacity and overhead costs to activity levels while preserving long-term operational & technical capabilities, which could represent a further burden on operating margins going forward, particularly in North America

Comments that non-OPEC production overall dropped by 930,000 barrels in 1Q16

~60% decline in North America & ~40% internationally
OPEC production expected to be reduced by 1 mln barrels/day in FY16

Believes that the current oversupply is expected to shrink to almost 0 by the end of 2016, and in Q4 this year, OPEC production is now forecasted to be down 1 mlnn barrels per day y/y, notes the oil market is in the process of balancing
Expects a significant drop in rev in 2Q16 compared to 1Q16, making it difficult to retain margins of ~30%

I give up.