UK oilfield services provider Petrofac has confirmed it is planning staff reductions and furloughing as part of its action to save cash in response to low oil prices and COVID-19 pandemic.
Reuters last week reported that Petrofac was planning to reduce the workforce by 20%. This was confirmed by Petrofac on Monday.
Ayman Asfari, Petrofac’s Group Chief Executive said:"....we are taking swift, decisive action in response to the COVID-19 pandemic and lower oil prices to reduce costs, retain our competitiveness and preserve the strength of our balance sheet. These best position us to protect our business, stakeholders and the communities we serve.”
Petrofac said that it would reduce overhead and project support costs by at least US$100m in 2020 and by up to US$200 million in 2021, and conserve cash and liquidity by reducing capex by 40% and suspending the 2019 final dividend.
The company said it would reduce personnel by c.20% and furlough staff in anticipation of a reduction in activity levels.
At the end of 2019, Petrofac had 11500 employees. The 20 percent reduction means around 2300 people will be laid off.
The oilfield services company, which has operations in Europe, Africa, Middle East, and Southeast Asia, did not say where and how the workforce cuts and furloughs would be implemented.
Further, it will reduce and structurally rebase salaries and allowances for its Board, senior management and most of our employees by between 10-15%. Further, it plans to reduce non-staff overhead costs by up to 25%.
As at April 2, 2020, the Group had liquidity of US$1.1 billion, following the planned repayment of a US$75 million facility in February 2020. A two-year extension of a US$150 million term loan in March 2020 has reduced debt maturities in the next 12 months to US$275 million, Petrofac said.
Oil prices dropped on Monday after Russia and Saudi Arabia postponed discussions over oil production reduction that could reduce the global oil oversupply and eventually increased the prices hurt by the impact of coronavirus pandemic on global demand.
According to Reuters, Brent crude at 1135 GMT, Brent was down 81 cents, or 2.4%, at $33.30 a barrel. U.S. crude was 65 cents, or 2.3%, lower at $27.69 a barrel, off a session low of $25.28.