Halliburton to Trim Workforce, Add $75M Charges in Q4

Oilfield service behemoth Halliburton Co. (HAL) declared at Capital One's annual energy conference that it might book roughly $75 million of restructuring charges in its financial statement during the fourth-quarter of this year. The charges will be related to lay off and streamline operations to suit to the weak crude pricing environment.

The company is expected to cut roughly 1,000 jobs across Europe, Asia, Africa, the Middle East and Australia, effective immediately. The main reason for the head-count cut is the challenging market scenario owing to plummeting oil prices – as reflected in a more than 44% crude price fall since June this year.

Plentiful supply of the commodity in the face of lackluster global demand is primarily responsible for the oil price weakness. Moreover, there are almost no chances of crude prices recovery at least within one year, going by the U.S. investment bank Morgan Stanley’s recent forecast that Brent crude price can be as low as $43 a barrel in 2015.

Halliburton revealed that the layoff is not at all related to its awaited merger with its smaller rival Baker Hughes Inc. Last month, Halliburton entered into a deal with Baker Hughes to buy the latter for a total consideration of $34.6 billion, including cash and stock. The transaction will likely be completed by the second half of 2015.

We believe that with the completion of the merger, Halliburton will be in a better position to weather the weak crude pricing environment.

Halliburton is not the only company that has decided to remove staff redundancy. Schlumberger Ltd. (SLB) − the world’s largest oilfield services provider – might also book $200 million charges owing to headcount cut.

Houston, TX-based Halliburton currently carries a Zacks Rank #3 (Hold), implying that the stock will perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can look at better-ranked players in the energy sector like Seadrill Partners LLC (SDLP) and InterOil Corp. (IOC). Both stocks sport a Zacks Rank #1 (Strong Buy).

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