North Energy ASA, a Norwegian oil company, has adopted additional extensive cost cuts that include shutting down two offices and workforce reduction.
Persistent difficult market conditions underlie the decision to make further savings, the company said in a press release issued Wednesday.
Annual operating costs for the company will thereby be reduced to about NOK 10 million ($1.2 million) after tax, with the programme taking virtually full effect from 2016.
“The board of North Energy must respond to the persistently difficult and to some extent deteriorating market conditions affecting our industry,” says chair Anders Onarheim.
“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.”
The company said that, with a significant reduction in costs, limited future commitments and a reported cash position of NOK 260 million ($31.6 million) at June 30, it 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.”
The new cost measures involve further downsizing and the concentration of all activities in Oslo, North Energy said.
This means that the Tromsø and Stavanger offices will be closed, the company explained.
“We can no longer justify today’s arrangement with several offices,” says Onarheim.
“We have therefore decided to concentrate the business in Oslo. That means further redundancies.”
“The approved cost cuts will have consequences for a number of employees,” says acting CEO Knut Sæberg.
“That is naturally regrettable, and we will support those affected to the best of our ability.”
In parallel with the programme of cost savings, North Energy is continuing its process of assessing different strategic directions for the company.
“Our mandate is to create shareholder value, and we are exploring a number of alternative strategic directions in that connection,” says Onarheim.
“These include possible mergers and amalgamations. We believe substantial synergies could lie in establishing larger and more robust companies.”