EMGS, a Norwegian provider of offshore survey services to the oil and gas industry, has said it will work on further cost reductions citing the challenging market conditions in the oil service industry.
“The company has identified and implemented comprehensive cost reductions on terms and conditions for sub-contractors and in staff levels. The key elements of the program are a reduction of the vessel capacity by one vessel, from three to two vessels, and a corresponding reduction in the global employee expenses,” EMGS said in a statement.
EMGS launched cost reduction efforts in the beginning of the first quarter of 2015 and further measures were announced in June. The company in June said it would lay off 20 percent of its workforce.
In its statement on Tuesday, EMGS said that based on the development in revenues so far in 2015, as well as the outlook for the rest of 2015 and 2016, it has decided to implement further cost reductions.
The announced cuts should reduce the annual operational cost level by around $35 million, or $70 million in total when taking the previously announced measures into account. According to EMGS, this means that its annual operational cost level will be below $100 million. EMGS will take restructuring charges of around $2.8 million.
Also, a provision related to a loss on charter agreements of $4.4 million will be booked in the third quarter 2015. The initiatives will be implemented immediately and yield effects gradually, EMGS said.
The company did not say how many workers would be affected by the new cost reduction initiative. The company has been looking around for a new CEO, after Bjarte Bruheim stepped down in August, after having been in position for a little more than six months. Until a permanent CEO is in place, Stig Eide Sivertsen has been appointed new CEO.
Update: September 29, 2015, 14:13 CET
Responding to a request for more info on the vessel capacity reduction, sent by Offshore Energy Today, Charlotte Knudsen, Head of Investor Relations at EMGS said:
“We will take out vessel capacity according to the charter agreements that we have. Atlantic Guardian will be taken out temporarily in October and November this year, but will be back in from early December.”
“We have two vessels from the BOA Group, the BOA Thalassa and BOA Galatea. The charter agreements for the vessels expire in December 2015 and July 2016 and the vessels will be taken out when the agreements expire. After both BOA vessels are out, the vessel EM Leader, currently laid up, will be taken back in. “
Also, Knudsen said that the company’s preliminary number for the total headcount reduction in this latest round of cuts is 78.
In June, EMGS announced a headcount reduction of 74. Per September 1, the company had a headcount of 273.
Offshore Energy Today Staff; Image source: EMGS