Schlumberger Rips Off Band-Aid With $12.7 Billion Writedown
Schlumberger Rips Off ‘Band-Aid’ With $12.7 Billion Writedown
(Bloomberg) -- Wall Street guessed that writedowns from Schlumberger Ltd. were coming, but some analysts were taken aback by the sheer size of the $12.7 billion in pretax charges reported by the oil services company on Friday.
The company’s earnings report was its first since Chief Executive Officer Olivier Le Peuch took the reins in August. The writedowns led the company to post its largest net quarterly loss in at least a decade. Schlumberger said on its earnings conference call that the writedowns were part of the new CEO’s strategy.
The size of the charges was “eyebrow-raising,” analysts at Tudor, Pickering, Holt & Co. said in a note after the report was released. “Better to rip Band-Aid off sooner vs. later.”
Nonetheless, net income excluding one-time items was 43 cents a share, exceeding all 27 estimates from analysts in a Bloomberg survey. Schlumberger’s stock climbed as much as 4.1% in New York trading and was up 2.3% to $32.62 at 11:39 a.m. Eastern time.
Most of the charges -- $8.8 billion -- comprised writedowns on goodwill, the intangible asset on a corporate balance sheet that typically arises after the acquisition of another company. Schlumberger cited its 2010 purchase of Smith International Inc. and its takeover of Cameron International Corp. in 2016, and the subsequent deterioration in market conditions.
Schlumberger Sees Foreign Revival as U.S. Oil Drilling Slows
Schlumberger also reported a $1.58 billion charge related to its pressure-pumping business in North America, where the fracking industry is slowing. Citing “ongoing economic challenges in Argentina,” it recorded $127 million of charges due to its activities in the country. It also had $62 million of severance costs in the quarter.
To contact the reporters on this story: Simon Casey in New York at scasey4@bloomberg.net;David Wethe in Houston at dwethe@bloomberg.net
To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Joe Carroll, Christine Buurma
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