Machine translation from English source
Oilfield services provider Petrofac joins other service providers in response to unprecedented market conditions. As a result, Petrofac will cut its capital expenditure by 40%, cut salaries across the company and reduce its workforce by approximately 20%.
Petrofac said on Monday the measures include cutting overhead and project support costs by at least $100 million in 2020 and up to $200 million in 2021.
The company's actions also include preserving cash and liquidity by cutting capital expenditures by 40% and suspending its final dividend in 2019.
Ayman Asfari, Petrofac Group Chief Executive Officer, commented: “We have a sustainable business model, a strong competitive position and a differentiated domestic value proposition that is highly valued by our customers. However, we are taking swift and decisive action in response to the COVID-19 pandemic and lower oil prices to reduce costs, maintain our competitiveness and maintain the strength of our balance sheet.
Petrofac said strict health protocols are in place across all of its operations and the company has moved to remote working to minimize business disruption.
Engineering and construction activities continue at most of its engineering and construction (E&C) project sites and offices, although progress is impacted by supply chain disruptions, travel restrictions and government-enforced lockdowns in India and Iraq.
Operations and maintenance activities in the engineering and manufacturing services (EPS) industry continue in all regions, although travel restrictions and social distancing are having a minor impact on activity levels.
Reduce costs
Petrofac's actions to improve its cost competitiveness and protect the long-term health of the business include reducing and restructuring wages and benefits for the board, senior management and most employees by 10-15%.
The company's actions also include staff reductions of approximately 20% and furloughs in anticipation of lower activity levels and a reduction in non-personnel overhead costs by up to 25%.
Preservation of cash and liquidity (refrigeration crewing)
As of April 2, 2020, the group had liquidity of $1.1 billion following the scheduled repayment of a $75 million loan in February 2020. A two-year extension of a $150 million term loan in March 2020 reduced debt maturities over the next 12 months to $275 million. S&P recently affirmed the group's investment grade credit rating.
During this period of extreme economic uncertainty, Petrofac management believes it is prudent to take steps to preserve cash and liquidity, including reducing capital expenditure by 40% ($60 million) in 2020 and working capital management.
In addition, the board of directors is withdrawing its recommendation to pay a final dividend of 25.3 US cents ($85 million), declared on February 25, 2020. The board will consider resuming and paying dividends once the full impact of COVID-19 and low oil prices is known, the company added.
$2 billion in orders in the first quarter also increased the company's backlog to $8.2 billion.
“We believe these factors, along with a readily available capital business model and a strong competitive position in the Middle East where production costs are low, will protect us from near-term headwinds.
“However, it is too early to establish and quantify the impact of both COVID-19 and low oil prices on financial performance or new order intake, and as a result we are suspending our previous guidance on revenue and margins,” Petrofac concluded.
Source: worldmaritimenews
