Sembcorp Marine posted a 26% loss in its group revenue that resulted in the rig builder to cut about 8000 jobs amid the tough operating environment, the company revealed in its Q3 2016 and nine month results.
Image of the Safe Zephyrus, from Prosafe.
The global jobs losses, which have spanned over the timeframe from 2015 to present is comprised of both employees and subcontractors, however, Sembcorp Marine told OE that most of the reductions consist largely of subcontracted workers.
“We have reallocated excess manpower from drilling to non-drilling work without compromising on safety and quality of execution. We have also terminated less efficient sub-contractors and allow for natural attrition of our employees,” Wong Weng Sun, Sembcorp Marine president and CEO said. “In addition to manpower optimization, we have taken measures to reduce our operating costs by implementing salary freeze and adjustments to the variable remuneration components for management staff since 2015.”
Sembcorp Marine’s total group revenue for the first nine months of the year came in at nearly US$2 billion (S$2.71 billion), representing a 26% drop from 2015’s $2.6 billion (S$3.64 billion).
In the company’s rigs and floaters segment, Sembcorp Marine saw 44% decline at nearly $1 trillion (S$1.39 billion), when compared to 2015’s $1.8 trillion (S$2.46 billion).
“The decline was led by lower revenue recognition for the rig building projects resulting from customer deferment requests and customer restructuring. Floaters revenue was higher,” Sembcorp Marine said.
The company’s offshore platforms segment posted a revenue increase of 27% year-on-year from $519 million (S$722.4 million) in the first nine months of 2015 to $658 million (S$915.7 million) during the same period this year on sales recognition of its order book base from offshore platform contracts.
Sembcorp Marine said that its key deliveries for its rigs and floaters, and offshore platforms segments included the Safe Zephyrus harsh environment accommodation semisubmersible vessel to Prosafe; the Ivar Aasen process platform; drilling and living quarters topsides to Det Noske Oljeselskap, the Maersk Highlander F&G JU2000E jackup rig to Maersk Oil; and the world’s largest ultra high-specification harsh environment jackup, the Noble Lloyd Noble, to Noble Corp.
The group gross profit for the first months of the year also posted a 44% year-on-year decline to $185 million (S$258 million) from $330 million (S$459 million).
“With OPEC’s announcement late last month of an agreement for modest oil output cuts, oil prices have rebounded from multi-year lows of below $30 per barrel earlier this year, to above the $50 per barrel range presently. However, with reduction of offshore exploration and production capex projected to continue into 2017, the demand outlook for offshore exploration and production activities is likely to remain weak in the foreseeable future, especially given the existing excess supply of drilling rigs, and many yet-to-be delivered new-build rigs awaiting customer charters,” Sun said. “This has contributed to the increasing financial stress on companies across the entire upstream exploration and production value chain.”