Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of oil services giant Schlumberger (NYSE:SLB) jumped just more than 12% in the month of April. No, it wasn't from its earnings release; much of it had to do with the fact that oil prices jumped just as much during the month that made investing in oil and gas stocks much more appealing than before.
So What: The big news from Schlumberger this past month was the announcement of a cut of 11,000 people from its workforce. Combined with the company's proposed cuts at the beginning of the year, the total reduction is now at 20,000. These cuts, along with the reduction of Schlumberger's capital spending by $1.5 billion this year, are efforts by the company to remain profitable during the downturn in the oil market.
These efforts have certainly helped. Last quarter's earnings, after the charges associated with layoffs, came in at $1.06 per share. That's down about 12% from the same time last year, but considering the doom and gloom in the oil markets, those numbers are considered respectable.
Now What: As Sclumberger CEO Paal Kibsgaard puts it, Schlumberger is controlling what it can by reducing capital spending and head count. Climbing oil prices will certainly help share prices, but Schlumberger's real business driver is drilling activity. If oil prices can encourage companies to drill for more oil and gas, then it will certainly help the company; but all of these job cuts suggest that it could take a little while longer before that happens.
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