Job cuts are expected at Houston oilfield service company National Oilwell Varco following the implementation of a company restructuring plan created in response to an ongoing industry slump in the U.S. shale basins.
The drilling and oil well completion service company has started trimming its workforce by offering voluntary early retirement to eligible employees, the news agency Reuters reported on Wednesday.
NOV spokesman Loren Singletary declined to comment but said executives will be discusing a restructuring plan regarding the company’s workforce during a second quarter earnings call schedule for Tuesday.
Although exploration and production companies have receovered from a 2014 crude oil price crash, service companies have not fared as well. Citing weaker demand for hydraulic fracturing and drilling services in U.S. shale basins, National Oilwell Varco CEO Clay Williams hinted at restructuring and job cuts during the company’s first quarter earnings in late April.
“NOV underwent significant downsizing between 2015 and 2017, which took out $3 billion in annual costs and helped the organization generate over $2 billion in free cash flow over the same period,” Williams said. “However, given the current market and outlook, the company’s earnings are insufficient and good stewardship dictates that we undertake additional cost reductions.”
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Among the cost-cutting measures Williams proposed was centralizing support functions within the company.
“This is a heavy lift,” Williams said. “It will take a few quarters to accomplish, but it is necessary to drive further profitability. While we are formulating our plans and refining savings estimates currently, we see a preliminary path to capture $120 million a year in savings and would not be surprised for our final plans to meaningfully exceed this.”
With historical roots going back to 1862, NOV is headquartered in Houston and has more than 35,000 employees in 65 nations.
NOV reported a $31 million loss on $8.5 billion of revenue in 2018. The company has not made an annual profit since 2014.
