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Schlumberger sees Ecuador's unpaid bills hurting quarterly results
March 28, 2017 / 6:32 PM / 5 months ago

Schlumberger sees Ecuador's unpaid bills hurting quarterly results

The exterior of the Schlumberger Corporation headquarters building is pictured in the Galleria area of Houston January 16, 2015.Richard Carson

HOUSTON/QUITO (Reuters) - OPEC production cuts and economic woes are complicating Schlumberger NV's (SLB.N) efforts to collect $1.1 billion from Ecuador's state-owned Petroamazonas, casting a cloud over the oil services company's first-quarter results.

"Continuing payment issues" in Ecuador are hurting earnings, Chief Executive Officer Paal Kibsgaard said in a text of a speech delivered at the Scotia Howard Weil energy conference in New Orleans on Monday.

Earlier this month, Kibsgaard wrote to Ecuadorean President Rafael Correa seeking to resolve an impasse over unpaid bills that he said was causing Schlumberger "considerable financial stress."

Kibsgaard wrote that talks between top Schlumberger executives and Ecuadorean ministry officials since October "have made no real progress," according to a copy of the letter seen by Reuters.

"The situation is obviously not sustainable in the long run," he wrote, adding that Schlumberger was forced to expand debt to finance operations in the country.

Schlumberger did not respond to requests for comment.

Ecuador's Ministry of Hydrocarbons declined to confirm the talks. The government has acknowledged some problems with payments to oil companies, without specifying which ones.

Ecuador's economy has been hurt by the global oil-price downturn and two major earthquakes that killed more than 660, injured 6,300 and caused damages estimated at up to $3 billion.

Ecuador is holding a presidential election on Sunday. A leftist Correa ally is slightly ahead in the polls.

Analysts tracked by Thomson Reuters estimate Schlumberger's first-quarter earnings at 27 cents a share, compared with 40 cents a share a year earlier. The company is expected to report results on April 21.

The company has invested $3 billion to date in Ecuador under contracts signed earlier this decade to expand production at two oilfields, out of total investment that was to reach $4.9 billion over 20 years.

Schlumberger earlier this year reported accounts receivable as of Dec. 31 rose 7 percent over a year earlier, to $9.39 billion, while 2016 revenue slid 40 percent, to $27.92 billion.

Schlumberger earlier stumbled in its efforts to be paid for work in financially hard-hit Venezuela, another member of the Organization of the Petroleum Exporting Countries. Last April, it cut local workers and pulled out of projects with Petroleos de Venezuela due to a lack of payments by the state-owned oil company.

Payment under one deal in Ecuador was to come from a tariff on incremental oil production in the Auca oil field, one of the largest in the country. That has been hampered after Ecuador cut output there by about 10,000 barrels a day to meet its quota under a November agreement by OPEC.

Since 2014, Halliburton Co (HAL.N), another oilfield services provider, also has a contract with Petroamazonas that calls for it to invest $1 billion over five years. A Halliburton spokeswoman on Tuesday declined to comment on its operations in the country.

Reporting by Gary McWilliams in Houston and Alexandra Valencia in Quito; Editing by Leslie Adler

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