Subsea 7’s cost reduction program announced today includes cuts to its workforce by almost 20%, vessels by 28%, and is expected to lead to a corporate restructuring.
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Image from Subsea 7. |
The company said the announcement is in view of the difficult business and economic conditions in the oil and gas market and declining workload.
By early 2016, Subsea 7 expects to cut 2500 from its global workforce, a decrease from the 13,000 the company reported at the end of 2014.
A total of 11 out of 39 vessels will be cut from the global fleet over the next 12 months. The vessels will be from non-renewal of charters, or a disposal or stacking of owned vessels. In addition to the 39 vessels, Subsea 7 also has an additional five vessels under construction.
Deepwater oil and gas production remains a significant market with long-term growth potential, Subsea 7 said.
"These cost reduction plans will allow us not only to adapt to present market challenges but also to maintain our competitiveness and the long-term viability of our business,” Jean Cahuzac, Subsea 7 CEO said. “This will enable us to emerge stronger once the downturn ends. Reducing employment is not a decision we take lightly but one that is necessary in today's difficult oil and gas environment."
In the company’s 1Q results announced at the end of April, Cahuzac said that the continuation of challenging market conditions resulted in subdued order intake and order backlog at Subsea 7, dropping to US$7.6 billion.
New orders and escalations in Subsea 7’s 1Q results were $1 billion, which included the Persephone project for Woodside, offshore Australia, and the extension of two life of field contracts for Shell, offshore UK.
In May, the company was awarded a $300 million pipeline and subsea contract for the Wintershall Norge Maria field development in the Norwegian Sea.
Petrobras awarded Subsea & a two-year $200 million contract for the continued use of its Seven Seas construction vessel for the installation of flexible lines offshore Brazil.
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