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Image courtesy of Schlumberger.

Schlumberger CEO Paal Kibsgaard warned on Monday that falling upstream spends may cut the company’s first quarter revenues by 15 percent.

During a presentation at the Scotia Howard Weil 2016 Energy Conference Kibsgaard said Schlumberger now expects first quarter 2016 revenues to drop more than 15 percent sequentially to about $6.5 billion.

Kibsgaard added that the current outlook suggests “a further weakening in the second quarter.”

“So far, we have successfully managed the challenging commercial landscape of this downturn….However, the third phase of E&P spending reductions that we are currently experiencing will have a significant impact on our earnings per share in the current and coming quarters given the magnitude and erratic nature of the activity disruptions,” Kibsgaard said.

Crude prices have rallied back from near 13 year lows in recent weeks as OPEC production holds steady and non-OPEC production continues to fall.

The International Energy Agency recently suggested that oil prices may have bottomed out but added that the recent price bump “should not… be taken as a definitive sign that the worst is necessarily over.”

The IEA now expects global demand to grow by about 1.2 million bpd in 2016 while non-OPEC production is expected to fall by 750,000 bpd to 57 million bpd, up from the agency’s estimate of a 600,000 bpd decline in February.

Kibsgaard said that despite the bright spots Schlumberger is maintaining its view “that there will be a noticeable lag between higher oil prices and higher E&P investments given the fragile financial state of our customer base.”

Kibsgaard added that the lag between changes in crude prices and upstream spends “means that there will be no meaningful improvement in our activity until 2017.”

“We firmly believe in a medium-for-longer oil price environment where there is an urgent need for the industry to move to a contracting model with significantly more collaboration and commercial alignment between operators and leading service companies,” Kibsgaard said.

Houston-based Schlumberger said in January that it will cut another 10,000 jobs after reporting a 39 percent year-on-year revenue decline in the fourth quarter.

The company’s fourth quarter revenues fell to $7.74 billion while pre-tax operating income declined 54 percent year-over-year to $1.28 billion.

Income from continuing operations, excluding charges and credits, sank to $819 million in the fourth quarter from $1.941 billion during the same period in 2014.