Norwegian offshore support vessel owner Solstad Farstad has increased its cost reduction program target to annualized reductions of NOK 700-800 mill within end of 2018.
The plan to merge Solstad Offshore, Farstad Shipping and Deep Sea Supply into one company was revealed on February 6, 2017. The new company was targeting annual synergy and cost savings of NOK 450 – 600 million compared to the 2016 cost level, regardless of activity level.
The merger was formally in place in June 2017 and based on the experiences from the first six months in operation as one company, Solstad Farstad is now increasing the targeted annualized savings to NOK 700 – 800 million, Solstad Farstad said on Tuesday.
By the end of 2017, the cost reductions relating to measures already implemented represents annualized savings of approximately NOK 400 million.
Three areas for savings
According to the company, the savings mainly relate to three different areas. The first area is global onshore administration. Namely, the new organization structure implemented and the administration expenses have been reduced by combining offices globally and centralization of functions. Different projects to implement common ICT systems are well progressed, and this will further increase efficiency and strengthen operations.
The second area is offshore crew where expenses are being reduced through using best practice to customize crew composition to each specific vessel, flag-state requirements, customer requirements and area of operations.
Finally, in the procurement and economy of scale area combining the three companies have given economies of scale relating to purchasing and logistics, and use of best practice will further reduce costs relating to maintenance and dry-dockings.
The company has also explored revenue synergies related to the merger. While there are several contracts that illustrate the existence of such synergies, the company has at the present moment chosen not to quantify these.
“Solstad Farstad ASA has been and are still working hard to meet the commitments we made to our stakeholders following the merger,” said CEO Lars P. Solstad. He continued: “I am impressed by the strong commitment to reduce costs at the same time as we operate safely and efficiently to the satisfaction of our clients. With the reduced cost base we will be more competitive and with our high quality vessels and operations, we will be in a very good position when the market recovers.”