Subsea 7 has released details of its cost reduction program which it alluded to in its first quarter earnings report released April 30.
As previously indicated, these cost reduction measures are expected to deliver approximately $400 million in annualized cash savings from the second quarter 2021. In addition, capital expenditures will be reduced to minimal levels in 2021 and 2022.
The Luxemburg-based subsea engineering firm says its envisages an overall headcount reduction of 3,000 from its current global workforce of 12,000 by the end of the second quarter 2021. It is anticipated that two-thirds of the reduction would affect the non-permanent workforce, while the remaining third will affect permanent employees. Discussions with employee representatives will take place on a local basis and consultation will start soon, the company said.
In terms of vessels, Subsea 7’s active fleet of 32 vessels will be reduced by up to 10 vessels through the non-renewal of chartered tonnage and the stacking of owned assets. “It is intended that the reshaping of the fleet would take place over the next 12 months commensurate with the evolution of the Group’s workload,” the company said.
“Faced with a significant deterioration in the oil and gas market, we are taking swift and decisive action to address the elements under our control. These measures to reduce our cost base will help preserve cash and protect our balance sheet strength, while maintaining our strong competitive position in core markets,” commented John Evans, Subsea 7’s Chief Executive Officer.
On April 30, Subsea 7 reported an adjusted EBITA of $68 million in the first quarter of 2020, compared to $111 million during the same period last year. The company said the lower earnings are reflective of lower activity levels in the North Sea, an absence of conventional activity offshore Africa and Middle East, and increased costs due to the COVID-19 pandemic.