Energy

Liam Denning is a Bloomberg Gadfly columnist covering energy, mining and commodities. He previously was the editor of the Wall Street Journal's "Heard on the Street" column. Before that, he wrote for the Financial Times' Lex column. He has also worked as an investment banker and consultant.

Some kick off the holiday season by decorating a tree. Schlumberger files with regulators to announce that it will be cutting more jobs.

Wednesday's filing followed a presentation given on Tuesday by the oilfield services giant's head of operations, Patrick Schorn. In keeping with the gloomy message delivered with third-quarter results in October, Schorn reiterated that 2016 looks grim for the industry as it digs its way out of an oil-price crash. So more pink slips are on the way as the year draws to a close. 

Schlump

With investment by the oil industry set to contract for two years in a row for the first time since the 1980s, Schlumberger is focused on squeezing more out of every asset and worker. One crude measure of productivity -- but relevant in the current context -- is revenue per employee. This topped $400,000 at Schlumberger for the first time in 2014, according to numbers compiled by Bloomberg.

Since then, it has been sliding badly. Based on rough employee numbers given in the company's quarterly earnings releases, revenue per worker slipped by 16.5 percent in the first nine months of the year to about $338,000, annualized. Based on the current consensus revenue estimate, if Schlumberger left its employee count stable at about 105,000, then the total for the year would be a shade under $330,000 -- the lowest since 2011. Next year, it would drop to $313,000, the lowest since 2010, in the immediate aftermath of the financial crisis.

Schlumberger isn't alone, of course. Rivals Halliburton and, especially, Baker Hughes face the prospect of a precipitate drop in revenue per employee this year and next. Take a look:

Working it Out
The big three oilfield services companies face big declines in revenue per employee
Source: Bloomberg, company announcements
Note: 2015 and 2016 are projections based on current revenue estimates and holding headcount flat at 3Q 2015 levels

Collectively, the three firms had already slashed headcount by 46,000, or 18 percent, in the first nine months of 2015. Further cuts could be just as brutal. Schlumberger doesn't cite revenue per employee as a basis for sizing its workforce. But say it wanted to hold the line at about $338,000 a head. Based on estimates for next year's revenue, that would imply cutting roughly another 8,000 jobs, which would take headcount back below 100,000 for the first time since 2010. In Wednesday's filing, Schlumberger said it would take a fourth-quarter pretax charge of about $350 million related to cuts, which is just a bit below the $390 million taken in the first quarter in connection with 11,000 job losses.

In considering any plans of their own to cut headcount further, Halliburton and Baker Hughes must factor in their planned merger. With Baker Hughes's stock trading at a wide discount of 15 percent to the offer, investors are clearly anxious that it may not go through. Schlumberger's painful adjustment continues, but it at least isn't relying on the goodwill of regulators. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Liam Denning in San Francisco at ldenning1@bloomberg.net

To contact the editor responsible for this story:
Mark Gongloff at mgongloff1@bloomberg.net