Oilfield services major, Schlumberger, has announced plans to reduce the WesternGeco marine seismic fleet to lower its operating costs.
The company plans to retire older vessels with lower towing capacity and higher operating costs, convert the remaining lower-end vessels to source boats and cancel most of its third-party charters.
In all, the company will reduce its fleet size to 9 survey and 6 source vessels by the end of this year, from a total of 15 survey and 8 source boats at the end of 2013.
As a result of this restructuring, Schlumberger expects to record a pretax impairment charge of approximately $800 million in the fourth quarter of 2014, primarily relating to the six Explorer-class vessels acquired at a premium in the 2007 purchase of Eastern Echo Holdings, as well as to certain other seismic assets.
“Lower commodity prices have brought a distinct lack of short-term visibility, but one thing that has become immediately apparent, however, is a very strong focus from our customers on short-term cost cutting.
In this respect, exploration has been particularly affected. In terms of exploration success, only three billion barrels of recoverable oil and condensate have been discovered this year—which is the lowest level seen in 25 years and roughly half of that discovered last year. These results are clearly not sustainable from a long-term reserve replacement standpoint, but we do expect lower exploration activity levels to carry forward into 2015,” the company stated.
According to Schlumberger, the restructuring of WesternGeco will have no significant impact on cash flow from operations, nor on free cash flow.
Furthermore, the company also announced job cuts before the end of the quarter.