Energy In-depth: Oilfield Giant Schlumberger to Cut 11,000 Jobs, No Word On Arkansas Operations

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SCHLUMBERGER TO CUT 11,000 JOBS, NO WORD ON ARKANSAS OPERATIONS
Schlumberger, the world’s largest oil field equipment firm whose seismic data technology helped to maximize well production in the Fayetteville Shale, announced 11,000 job cuts worldwide as the Houston-based firm’s first quarter revenues and earnings plummeted from a year ago.

Schlumberger Chairman and CEO Paal Kibsgaard gave this dour assessment of the climate in the oil industry in the company’s first quarter financial statements:

“In spite of the detailed preparations we made in the fourth quarter, the abruptness of the fall in activity, particularly in North America, required us to take additional actions during the quarter. These included the difficult decision to make a further reduction in our workforce of 11,000 employees, leading to a total reduction of about 15% compared to the peak of the third quarter of 2014.

“Looking at the macro environment, the global economy continues its steady recovery, and oil demand is still expected to increase by 1 million barrels per day in 2015. However, the significant reductions in exploration and production spend are starting to impact supply in both North America and internationally, and supply is expected to tighten further in the second half of the year.”

Schlumberger’s first-quarter revenue decreased 19% from the previous quarter and 9% year-over-year to $10.2 billion, primarily due to the decline in North American land activity and associated pricing pressure, company officials said. Net income for the company nosedived 38% to $975 million, down from $1.59 billion a year ago. Excluding items, net income was $1.36 billion, or $1.06 per share, down from $1.59 billion, or $1.21 per share, a year ago.

There is no word on what will happen to Schlumberger’s regional office and service facility on a 20-acre site at the Guy Murphy Industrial Park in Conway. The oil service company built the multimillion dollar complex with a 16,000 square foot office and adjacent 15,000 square foot workshop and warehouse in 2005, just ahead of the Fayetteville Shale boon. At one time, there were more than 100 employees at the Conway offices, according to Conway economic development officials.

Earlier this year, Fayetteville Shale leader Southwestern Energy announced it was cutting 40% of its investment in the unconventional Arkansas shale play. Australian mining conglomerate BHP has also slashed its budget in the Arkansas shale play to only $100 million – a fraction of its original spending plans when it bought those assets for $4.75 billion in 2011.

See Schlumberger’s first quarter earnings report here.

NATURAL GAS FIRED GENERATION ON THE UPSWING, COAL POWER FORECASTED TO FALL 7%
The U.S. Energy Information Administration said in its recent short-term energy forecast that power generators are using more natural gas than last year, primarily because of lower natural gas futures compared with coal prices.

The use of natural-gas-fired generation is projected to average 30.4% of total generation in 2015 compared with 27.4% during 2014. U.S. coal production is expected to fall by 7.1% in 2015, as natural gas displaces coal for power generation.

The Henry Hub natural gas spot price averaged $2.83/MMBtu in March, a decline of 4 cents/MMBtu from February. EIA expects monthly average spot prices to remain less than $3/MMBtu through May, and less than $4/MMBtu through the remainder of the forecast. The projected Henry Hub natural gas price averages $3.07/MMBtu in 2015 and $3.45/MMBtu in 2016.

The annual average coal price to the electric power sector fell from $2.39/MMBtu in 2011 to an estimated $2.36/MMBtu in 2014. EIA expects the delivered coal price to average $2.31/MMBtu in 2015 and $2.33/MMBtu in 2016.

To view the EIA’s Short-Term Energy Summer Fuels Outlook, click here.

CORPORATE COMMUNICATIONS VETERAN DAVID AVERY JOINS SOUTHWEST POWER POOL
Southwest Power Pool (SPP) announced Thursday that longtime local media relations executive David Avery has been appointed director of corporate communications for the local grid operator. Avery, most recently with Windstream Holdings, has more than 25 years of experience in public relations and media, and will be responsible for SPP’s internal and external communications. He began work at SPP today (April 16). On a related note, Avery’s replacement at Windstream Holdings is former Mark Pryor top aide Michael Teague.

ENTERGY ARKANSAS TO ADD STATE’S LARGEST SOLAR POWER PLANT TO GRID BY END OF DECADE
Entergy Arkansas announced plans Wednesday to add the state’s largest solar power plant to Arkansas’ growing energy mix by the end of the decade – if approved by the Arkansas Public Service Commission.

The state largest electric utility said that Arkansas County’s Grand Prairie will soon become home to an 81-megawatt photovoltaic solar energy generating facility called Stuttgart Solar, an emissions-free renewable energy facility to be connected to Entergy Arkansas’ transmission grid no later than mid-2019.