Schlumberger takes $12 billion charge as CEO charts new course

(Reuters) - Schlumberger NV's SLB.N new chief executive wielded an axe to the company's asset-heavy businesses, taking a $12.7 billion charge in the face of weaker shale drilling and sliding profits.

FILE PHOTO: The exterior of a Schlumberger Corporation building is pictured in West Houston January 16, 2015. REUTERS/Richard Carson/File Photo

The move, by Olivier Le Peuch, writes down his predecessors’ big investments that took the world’s largest oilfield services company deeper into shale and oilfield operations and shows that he intends to shift the company toward more asset-light software and services-driven businesses.

The charge, amounting to nearly 18% of value of the company’s assets, drove an $11.4 billion loss, the largest in the company’s history.

However, shares rose 2% to $32.53 in mid-day trading as investors looked past the writedowns and focused on improved international operations and adjusted profits that topped Wall Street estimates.

Excluding the charges, Schlumberger earned 43 cents a share, above the 40 cents estimated by analysts. While revenue, at $8.5 billion, was flat compared with the same period a year earlier, sales rose in all regions except for North America.

“The large writedown is just affirmation of how weak the end markets are,” said Edward Jones analyst Jennifer Rowland. “Clearly the new CEO seems to be focused on having an asset-light strategy going forward.”

A cut in spending by U.S. oil and gas producers has hit Schlumberger and other oilfield services suppliers hard, forcing it and rivals Halliburton Co HAL.N and ProPetro Holding Corp PUMP.N to shed employees.

Schlumberger’s writedowns included $1.58 billion related to the pressure pumping business in North America, $10 billion for goodwill and other intangible assets, and $114 million for severance, it said. It bulked up the pressure pumping unit two years ago ahead of the shale downturn.

“That’s a sizable writedown from pressure pumping business. That just tells you the state of the North American onshore market being pretty poor,” said Anish Kapadia, founder of London-based oil and gas consultancy firm AKap Energy.

Le Peuch declined to project profit for the current quarter - as company typically has - but pointed to a greater than normal seasonal decline in North America activity. International operations are on track for a high single-digit revenue gain for the year but face hurdles in Latin America, he said.

North America’s rig count was 1,002 as of Oct. 11, or 256 fewer than a year earlier, as producers pulled back activity in the face of trade tensions and weaker oil and gas prices.

Revenue from the company’s international businesses rose a combined 8% in the third quarter, while revenue from North America fell 11%. Sales were strongest in Europe, the Commonwealth of Independent States and Africa, which gained 13% over a year ago.

Reporting by Shariq Khan and Taru Jain in Bengaluru; Editing by Nick Macfie and Steve Orlofsky