OREANDA-NEWS. Schlumberger expects demand for oil and gas drilling services to remain weak in 2016, with a potential rebound in 2017.

"Any significant recovery in our activity level will be a 2017 event," chief financial officer Simon Ayat said on an earnings call today. "The market outlook for oilfield services in the coming quarters will remain challenging as the pressure on activity and service pricing is set to continue."

The world's biggest oilfield services provider Schlumberger yesterday announced 10,000 additional job cuts and took a $1.6bn impairment charge. North American producers, which drove the drilling boom of the first half of the decade, could cut capital expenditure (capex) by as much as 50pc if oil prices stay at current 12-year lows, according to UK bank Barclays.

US firms expect to cut spending by an average of 27pc this year, based on capex budgets that assume a US benchmark WTI price of $45/bl, Barclays said. The fall in prices leaves spending plans in limbo.

But Schlumberger plans to keep its 2016 capex unchanged at $2.4bn as it seeks to invest in new businesses in anticipation of a rebound in the market. Capex in 2014 was $3.97bn.

"If you look at the base business, it is indeed coming down, but we have certain new activities that we are looking to invest into, in particular the land drilling market for the rig of the future," chief executive Paal Kibsgaard said.

The company generated free cash flow of $5bn last year compared with $6.16bn a year earlier despite the steep plunge in crude prices. "Our ability to generate free cash flow in this part of the cycle is unmatched in the oilfield services industry and gives us a unique ability to capitalize on the significant business opportunity that the current market condition presents," Ayat said.

The company may also look at additional acquisitions this year. Schlumberger in August acquired smaller rival Cameron for $14.8bn. It expects to close the merger in the first quarter.

"With respect to the pending Cameron transaction, the integration plans are largely completed and we are fully ready for day one," Ayat said.

New technology investment is also helping the company grow as producers look to reduce costs, Kibsgaard said. "The new technology sales as a percentage of total revenue in 2015 is 24pc, which is markedly higher than what we saw in the previous downturn in 2008-09," he said.