Halliburton requests discount from its suppliers in reaction to reduced capital spending

Halliburton requests discount from its suppliers in reaction to reduced capital spending

PRAMOD KULKARNI, Editor

HOUSTON – Oilfield services giant Halliburton has issued a memorandum to its suppliers, asking for a discount effective immediately. The vendors must confirm the discount no later than Dec. 31, 2014.

The memo cites recent decline in commodity prices and how it has created uncertainty for their operator clients and, consequently, for companies like Halliburton in the oilfield services sector. “Given these conditions, we must adjust our costs in order to continue to successfully manage our business through this period,” according to the memo dated Dec. 17, 2014.

"The letter was sent to almost all of Halliburton's global vendors," explained Halliburton spokeswoman Susie McMichael. "The amount of the requested discount varied by vendor and product."

Halliburton ‘s supply chain group is scheduling meetings in January with its suppliers to review market conditions, measure performance to this cost reduction initiative , and assess ongoing relationships.

In another move to adjust to changing market conditions, Halliburton announced its acquisition of its oilfield services rival, Baker Hughes, on Nov. 17, 2014 for $34.5 billion.

It remains to be seen whether Halliburton’s supplier discount initiative will lead to similar moves by other oilfield service companies and equipment manufacturers.