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Schlumberger Believes Oil Market Better in 2016, May Buy Back Iran Subsidiary

ВPaal Kibsgaard the CEO at Schlumberger Ltd (NYSE: SLB), the world’s top oilfield service company, believes that the oil markets will turn positive during this year, but the oilfield activity will not see any significant recovery until 2017.

The company on Thursday reported profit that was better than had been expected and unveiled a new program for share buyback on Thursday helping send the stock up as much as 8% on Friday in midmorning trading.

The glut in oil supply combined with less demand, especially from China sent the oil market spiraling downward. Prices of crude have plunged close to 73% since June of 2014.

The demand for Schlumberger’s services fell as the oil companies slashed their spending by as much as 50 to 70%.

The company is expecting the exploration as well as production investment by oil companies to drop in 2016. While companies in North America scale back their spending, they steered drilling rigs to prolific shale spots and have fracked wells even more intensely that has kept output high.

On Thursday, Kibsgaard announced the company cut over 10,000 jobs during the fourth quarter increasing the total layoff to over 34,000 equal to about 26% of its entire workforce since November of 2014.

The CEO said he was optimistic there are not more workforce cuts needed.

On Friday, Schlumberger said it was in negotiations to buy back its former unit in Iran, known as Well Service of Iran.

There have not been any figures released on how much the company was offering to buy back its former subsidiary or to what extent the talks have reached.

When Schlumberger was preparing to leave Iran back in 2010, along other companies from the West, it sold its subsidiary to Hong Kong based Nima Energy Ltd.

The possible deal would be amongst the first that has emerged since the sanctions by the U.S., European Union and other countries from the West lifted a week ago after an agreement was reached over Iran’s controversial nuclear program.

It is not clear whether Schlumberger along with other companies in the U.S. will be able to return to open operations in Iran.

Several layers of sanctions by the Americans remain against Iran over human rights, weapons issues and terrorism

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