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Schlumberger Unveils New Strategy: $1.5B in Cost Cuts, Four Divisions

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At the JP Morgan 2020 Energy, Power & Renewables Conference, Schlumberger Ltd. CEO Olivier Le Peuch detailed plans for major organizational changes for the company in the near-term.

The plan looks to eliminate $1.5 billion in expenses per year. Additionally, the company will be streamlining its 17 product lines, moving them to four divisions.

The company also will be hit with a $1.2-1.4 billion, one-time charge related to this restructuring and workforce consolidation / layoffs (the company reported that it has already cut ~2,000 employees in recent months, but no specifics were provided on further cuts).

Le Peuch said: "To construct the platform from which we will execute our new strategy, major changes to our organizational structure were accelerated. With the ambition of a more agile organization fully aligned with our customer workflows, we are moving to four divisions from 17 product lines and are structuring our geographic organization around five key basins of activity. The impact of this reorganization, and other actions we have taken, will permanently remove over $1.5 billion of structural costs on an annual basis.

"We will incur cash costs of approximately $1.2 to $1.4 billion as a result of both restructuring and reducing our variable headcount. The payback period for these cash costs will be less than one year. Additionally, the rationalization of our asset base is ongoing and will result in additional non-cash charges."

Moving Toward 'Digitalization'

Le Peuch also emphasized that Schlumberger will be moving more of its operations to a digital realm, which will help the company achieve the plan to reduce costs by $1.5B/year.

He stated: "I am convinced that massive adoption of digital technologies will help us reset our operating model and dramatically reduce our operating cost base. Today, we routinely reduce our operational headcount by 25% when operating remotely, and soon we will reach or exceed 50% on certain wellsite operations.

"At the same time, we will increase our performance differentiation, using data science and automation to optimize equipment and operating procedures with greater efficiency and lower costs. Digitalization of our own operations will significantly impact incremental margins when activity rebounds."