(Reuters) - U.S. oilfield services firm Halliburton Co. on Tuesday disclosed a $2.2 billion charge to earnings as weakening North American shale activity continued to hit the industry.

FILE PHOTO: Oil production equipment is seen in a Halliburton yard in Williston, North Dakota April 30, 2016. REUTERS/Andrew Cullen/File Photo

The charge for asset impairments was centered on hydraulic fracturing and legacy drilling equipment units, and employee severance costs, the company said. Halliburton dismissed 8% of its North American staff at mid-year, and later cut staff across several western U.S. states.

U.S. producers are pulling back on drilling and completing wells, pressured by investor demands to focus on debt reduction and returns.

Rival Schlumberger NV on Friday said it cut more than 1,400 workers, and would idle 50% of its hydraulic fracturing equipment due to weak demand. Fracking applies high pressure to release trapped oil and gas in shale wells.

Schlumberger last year recorded a $12-billion charge to earnings and U.S. oil major Chevron Corp took an at least $10 billion charge on projects that were no longer economic to tap.

“The U.S. shale industry is facing its biggest test since the 2015 downturn, with both capital discipline and slowing leading edge efficiency gains weighing down activity and production,” Halliburton Chief Executive Jeff Miller said on call with analysts.

Halliburton will reduce capital spending by 20% this year, to $1.2 billion, executives said on the call, as North American customers further slash spending. It will recognize $50 million of the charges in the current quarter.

The U.S. rig count has fallen by roughly 24% to 796 in the past year, according to rival Baker Hughes. Halliburton exited 2019 with 22% less working frack equipment than it began the year.

Profit margins in units that drill, evaluate and put oil and gas wells into production will fall this quarter, it forecast.

Excluding the charge, Halliburton topped analysts’ estimates for quarterly profit, boosted by higher drilling activity outside North America, a recent bright spot for oilfield service providers.

The company swung to a $1.7 billion loss in the fourth quarter on the charge. On an adjusted basis, the company earned 32 cents per share, compared with analysts’ average estimate of 29 cents, according to Refinitiv.

Shares were up 1.6% in early trading at $24.48.

Halliburton said revenue from North America fell over 30% to $2.33 billion, while international markets rose over 10% to $2.86 billion in the fourth quarter ended Dec. 31.

Halliburton’s total revenue fell 12.6% to $5.19 billion, but beat estimate of $5.10 billion.