Norway’s Aker Solutions ASA has become the latest oil and gas services company to announce a fresh round of cuts amid the lower oil price.
Aker revealed late Thursday that it will implement temporary reductions in salaries for Norwegian MMO (maintenance, modifications and operations) employees from March. Senior management will see their pay lowered by 10 percent while the remainder of the staff will see reductions of 5 percent. These adjustments, which will be reviewed after 12 months according to a company statement, are deemed necessary to raise competitiveness and win more work for the company’s Norwegian MMO business. Aker previously announced that it will streamline its MMO segment to one regional unit, from four, in a move that could see the company shed 900 permanent positions.
The latest reductions follow Schlumberger’s announcement in December that it would be axing more staff, in addition to the 20,000 jobs it had already cut in 2015. Weatherford International also revealed that it would cut around 6,000 positions in the first half of 2016, due to the steep drop in oil prices which is hurting drilling and exploration activity. Other streamlining operations have also been implemented in the last six months by Technip and Subsea 7.
In a separate statement, Aker Solutions revealed a lower profit at the EBITDA level in the fourth quarter of this year. The company registered a profit of NOK 182 million ($21 million) in 4Q 2015 compared to a profit of NOK 786 million ($91 million) in 4Q 2014. Sales in the quarter also dropped to NOK 7.9 billion ($922 million), from NOK 9.2 billion ($1.07 billion) in 2014, and the company’s order backlog decreased to NOK 40 billion ($4.66 billion) from NOK 48 billion ($5.60 billion) a year earlier. Aker’s order intake for the quarter did increase by NOK 200 million ($23 million), however, to NOK 6.4 billion ($747 million). These included a maintenance and modifications framework contract with BP in Norway and a framework agreement for offshore engineering and construction services in the UK North Sea.
Aker stated that it had made steady progress in the quarter on a global improvement program to boost cost-efficiency by “at least” 30 percent. The company also warned that it will continue to be “vigilant” on capacity while “protecting key competence”. In its 4Q results, Aker said that the markets are “challenging” and projects are being postponed across the industry. The services company also predicted that activity offshore Norway would remain subdued over the next year, with the exception of the North Sea Johan Sverdrup project, and revealed that its greatest growth potential is outside of Norway, where the company has been expanding.
Outlining a glimmer of hope in the services sector, Aker suggested that there are signs that cost-cutting efforts are having an effect as breakeven costs are coming down. The Norwegian firm stated that this could allow some major developments to be sanctioned in the next 12-to-18 months.
Commenting on its latest results, Aker Solutions CEO Luis Araujo, said in a company statement:
"Our consistently strong execution is the result of a ceaseless focus on improving operations and bringing down costs to the benefit of both customers and shareholders. We have a healthy order backlog, strong financial position and international presence that will benefit us even as our industry continues to face uncertainty amid very challenging market conditions."
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