Subsea 7 says cost cutting is workingCompany News // July 29, 2016
Subsea 7 says the sustained downturn in oil company expenditure continues to result in low industry activity and the timing of new awards to market is still uncertain, but the reduction in its workforce and active vessel capacity will enable it to adapt to the lower levels of activity expected in the foreseeable future.
The company said early discussions with clients are taking place more frequently on solutions to offset the decline rates in production of existing fields through extended tieback and marginal field developments. The company says it remains focused on commercial and long-term strategic priorities, enhanced by its new organisation structure and new ways of working. “The fundamental long-term outlook for subsea field developments remains positive,” said the company.
Subsea 7’s chief executive officer, Jean Cahuzac said: “Subsea 7 delivered a good operational performance in the second quarter, maintaining its track record of safe and reliable project execution. Financial performance continued to be impacted by the industry downturn with diminishing activity levels as planned work was completed and client investment in oil and gas production remained low.”
Second quarter revenue of US$961 million was down 29 per cent on the prior year’s quarter. Adjusted EBITDA of US$280 million and margin of 29 per cent reflected good execution and reduced risk profiles and costs on certain projects as offshore phases progressed. Adjusted EBITDA included a US$53 million restructuring charge related to the group’s global resizing and cost reduction measures. The restructuring charge for the full year is expected to be less than US$100 million.
Active vessel utilisation increased to 82 per cent in the second quarter from 71 per cent in the prior quarter as offshore phases of several projects progressed and seasonal work in the North Sea increased as anticipated. Two vessels, Seven Waves and Seven Antares, which were stacked previously, resumed activities on a temporary basis contributing to an increase in total vessel utilisation to 67 per cent.
In June, Subsea 7 announced a further global resizing and cost reduction programme commensurate with the lower levels of activity and more efficient ways of working. The workforce of 9,200 people as at the end of May will be reduced to approximately 8,000 by early 2017 and up to five vessels will leave the active fleet. The resizing is expected to deliver annualised savings of approximately US$350 million.