Fugro will further reduce its workforce by an additional 600 jobs this year, as the company reported a 23% decline in revenue in Q1, and announced plans to stack and retire vessels.
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Image from Fugro. |
The firm saw its revenue drop to US$505 million in Q1, from $680 million during the same period last year. Backlog also decreased 22.3%.
Fugro is also stepping up workforce reductions in 2016 by about 600, which are scheduled to take place in the coming quarters. Compared to year-end 2015, personnel count was reduced by another 363 employees, and compared to Q1 2015, headcount was 1664 lower. Fugro has some 12,000 employees worldwide. The company did not specify which regions or sectors of its business that the cuts will come from.
“The exceptionally deep downturn in oil and gas services has by now entered its third year. We had already guided for a very difficult 2016, and during the past months our clients’ exploration and production budgets again declined significantly. We are therefore anticipating strong revenue decline and severe margin pressure,” Paul van Riel, Fugro CEO said. “In recent months, the oil price has gradually increased from its lowest point early this year but it is uncertain when this will have a positive impact on our business. Overall, the company is well positioned to benefit from the recovery in the market when the supply-demand balance is restored and markets start to recover.”
Subsea
Fugro’s subsea services division reported a 47% drop, from $146 million to $72 million. The decrease was driven by the deterioration of the North Sea market for inspection, repair and maintenance, and of the AsiaPacific market, the company said.
During the period, Fugro’s subsea fleet was reduced by one long term charter as planned, with an additional four other vessel charters ending in 2017. The ROV fleet will continue to be rationalized through 2016 to fit market conditions.
The Fugro Aquarius has been awarded a one-year inspection, repair and maintenance contract in Brazil beginning this month. Other recent awards include one by BHP Billiton Petroleum for the Pyrenees, a five-year inspection contract with Maersk Oil, and an 18-month drill support contract with ONGC in India.
“In the second quarter we plan to retire two older survey vessels and stack another survey vessel. Unless new work is identified, in the second half of the year, two geotechnical vessels will be stacked and additional reductions of the survey fleet will be implemented,” Fugro said.
Geoscience
In its geoscience division, revenue declined by 27.9% from $99 million to $72 million, on a currency comparable basis driven by idleness of the two ocean bottom cable crews.
The company did book a two-month North Sea gig for one of the ocean bottom node crews that is expected to start at the end of Q2.
Geotechnical
The geotechnical division’s revenue fell 19.7% to $166 million from Q1 2015’s $213 million, with the offshore sector decreasing by 27.9% to $54 million.
During Q1 2016, the Fugro Synergy completed a large site characterization project in the Gulf of Mexico while the other vessels were active in the North Sea, East and West Africa, and the Middle East.
A large scientific drilling campaign in Asia-Pacific started at the end of the quarter. The company also gained contracts in Q1 that included the Aberdeen Bay wind farm project in the North Sea.
Surveys
In Fugro’s survey division, revenue dropped by 7.7% to $195 million from $218 million.
New contract awarded in the quarter include the Technip Kaombo subsea project offshore Angola. In Egypt, the survey and subsea contract with Gupco was extended and a service contract for the Pharaonic Petroleum Co. was secured. The division continued to work on the MH370 search and on the large Mexican seep survey for TGS. The innovative Roames asset inspection and modelling solution for power utility networks is gaining further traction, the company said.
“Cost reduction and performance improvement measures are being stepped up to adapt to market circumstances. However, this cannot fully offset the ongoing year-on-year double-digit revenue decline, resulting in severe pressure on margins,” Fugro said. “Our key focus areas are unchanged: cash flow generation and deleveraging of the balance sheet. For 2016, we expect a positive cash flow from operating activities after investments.”
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