Services giant Schlumberger will take a $1 billion writedown this quarter as it slashes the size of its marine seismic fleet and cuts jobs in preparation for a slow down in upstream spending.
The writedown covers the value of six Explorer class vessels and other assets held by WesternGeo, Schlumberger’s UK-based marine seismic unit.
WesternGeo will cut its fleet down from 23 to 15 vessels, getting rid of six vessels Schlumberger acquired from Eastern Echo Holding in 2007.
The cuts will primarily come from retiring older and higher cost ships as well as converting other vessels.
After the reduction, WesternGeo will have nine survey and six source vessels.
Schlumberger will also be cutting an unspecified number of jobs as it braces for explorers and producers to curb new investments.
The vessel writedown will mostly be non-cash and the company will also take a $200 million charge for the job cuts, the Financial Times said.
CEO Patrick Schorn said that although no customers have approached the firm about spending plan changes “it is already clear” that Schlumberger can “expect to see much stronger customer capital discipline and focus on costs.”
As oil prices continue to hover near four year lows Schorn said service firms will have to adjust their plans to accommodate lower prices.
“With oil now at $70 per barrel…it is even clearer than it was nine months ago that we will have to work in a different way to deliver financial out performance for ourselves and for our customers,” Schorn said.