Danish offshore vessels owner ESVAGT will cut executive and staff pay, and delay investments in response to the low oil prices and the COVID-19 pandemic.
Peter Lytzen, the CEO of the company that provides emergency response and rescue vessels (ERRV) and service operation vessels (SOV), said, "Our oil and gas business is challenged in two essential areas of the current situation."
"The fact that oil storage is full and oil and gas prices are low means that no investments are being made in well drillings. This has an impact on the ERRV spot market, which is a considerable part of our business. At the same time, our rates are affected by exchange losses from the Norwegian krone and the British pound; two markets where Esvagt has a substantial presence," he said.
ESVAGT also stressed that the Norwegian shipyard Havyard, which is building Esvagt's next three SOVs for its offshore wind activities, has been in such financial whirlwinds that ESVAGT had to contribute to an economic rescue package and an acceptance of a delayed delivery.
"All in all, these are elements that put Esvagt's liquidity under pressure. We have to relate to this," the CEO said.
As part of the company's efforts to reduce the costs, the Board of Directors and upper management have agreed to a 15% pay reduction, and management 10%.
ESVAGT said its onshore employees have been offered a volunteer arrangement consisting of a 5% pay reduction, "and there is a genuine understanding from the shipping company’s over 1,000 offshore employees that in times like these, large pay adjustments aren’t expected."
"We have to balance our responsibility to keep our employees; to ensure the company’s continued healthy operation and at the same time tend to our obligations. We do not wish to send people home, and we can't, because we have a responsibility as a subcontractor to society’s crucial energy infrastructure," Lytzen said.
"For that reason, we have to find alternatives, and I am profoundly thankful for the loyal support and commitment from employees, management and Board of Directors," he said.
ESVAGT said that the pay reduction would rung for a year, and together with the postponement of investments and a few vessel decommissions, it would contribute to the company having the necessary liquidity. Additionally, a renegotiation of contracts with partners and suppliers will ensue, the company said.
"We need the backing and support from our subcontractors to ensure that we, from a cost perspective, can regulate our activities with the financial reality we are in. It is my impression that the strong public spirit, which has been a solace during the corona pandemic, also applies across the industry. I am witnessing an understanding that we need to stand together in order to get through the current challenges," Lytzen said.