North Energy’s board is in the process of adopting additional, extensive reductions that may lead to a possible merger. The reduction program will see the company close some of its offices; reduce operating costs, and its workforce that is being blamed on the persistent, difficult market conditions.
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Image from North Energy. |
North Energy’s will reduce its annual operating costs to about US$1.2 million (NOK 10 million) after tax, which will take effect beginning next year.
The new cost measures will also further downsize activities in Oslo, which will result in the closing of the Tromsøand Stavanger offices.
"The board of North Energy must respond to the persistently difficult and to some extent deteriorating market conditions affecting our industry," Anders Onarheim, North Energy chair said. “All the signs are that we must expect a tough market to endure for a long time to come and, against that backdrop, feel we must take additional responsible steps."
According to the company, due to the significant reduction in costs, limited future commitments and a reported cash position of about $32 million (NOK 260 million) at 30 June, North Energy is fully funded until further with current activity levels.
"Robust finances are crucial in today's market," says Onarheim. "Our financial position gives us valuable flexibility with regard both to possible future commitments and to possible strategic choices of direction."
In parallel with the program of cost savings, North Energy is continuing its process of assessing different strategic directions for the company, it said.
"Our mandate is to create shareholder value, and we are exploring a number of alternative strategic directions in that connection," Onarheim said. “These include possible mergers and amalgamations. We believe substantial synergies could lie in establishing larger and more robust companies."
Last month, the company entered into an agreement with Det norske oljeselskap, whereby Det norske will acquire North Energy's 10% interest in production license 722. The transaction with Det norske forms part of North Energy's current strategy process, where attention is concentrated on enhancing cost efficiency and optimizing the company's license portfolio.
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