Aker Solutions suffered a disappointing loss to competitors in Statoil awards that will see the oil services company lose up to US$69 million in revenue, undergo workforce reductions, and an organizational restructure of its maintenance, modifications, and operations (MMO) business in up to five locations.
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Image from Aker. |
Earlier today (15 December), Norwegian giant Statoil handed out awards worth $2.7 billion to five companies for installation work on the Norwegian continental shelf and for the onshore plants at Sture, Kollsnes, Kårstø and Melkøya. Although Aker was awarded a contract, it was not one of the companies chosen as a main supplier. Aker was instead given a competition agreement for modifications work that will put the company in competitive bidding for future work.
“The absence of a new main supplier contract with Statoil will have serious implications for the company's maintenance, modifications and operations business in Norway,” Aker said.
Currently, Aker serves as a main supplier for Statoil in Norway through a framework agreement that expires in the summer of 2016, which provides work for 900 employees, both offshore and onshore.
"We delivered a very strong and commercially sharp bid for the main M&M contract, which takes into account the major cost-efficiency improvements we are undertaking as a company and with our customers. This includes Statoil, which in the last two quarters gave our M&M team in Norway the top score in its customer satisfaction of suppliers," said Luis Araujo, chief executive officer of Aker Solutions. "We're disappointed by the outcome of this bid process, which was on terms similar to those of other MMO contracts that we've secured recently in Norway, the UK and Canada. Now we have to evaluate the consequences of this latest development."
Aker foresees that lower work volumes will represent approximately $58-69 million (NOK 500-600 million) in revenue in 2016, when the current deal with Statoil for maintenance and modifications services expires. The loss of revenue will result in consequences for Aker’s workforce capacity and organizational structure of the MMO business in Norway, which has offices in Stavanger, Bergen, Trondheim, Kristiansund and Tromsø.
Since July 2014, Aker has had to reduce capacity in its Norway MMO business by some 750 permanent positions that the company said is from efforts to adjust to the lower demand, and scale backs from the oil and gas industry.
Out of Aker’s 16,000 global employees, 5000 work in MMO, of which 3700 are located in Norway. The MMO business generated more than 50% of its revenue outside Norway in Q3 2015.
"While Aker Solutions continues to tender for other MMO work in Norway, this latest development will impact how we organize the Norwegian operations," said Per Harald Kongelf, head of Aker Solutions in Norway. "We expect to have to reduce the number of MMO locations in Norway and will provide more information when we have evaluated the overall situation."
In September, Aker Solutions cut 500 permanent positions in its Norwegian subsea sector at the Fornebu, Stokke, Moss and Tranby facilities that the company attributed to the continued slowdown of the market.
In addition, as many as 200 positions in the company’s subsea services business in Ågotnes, Norway, and about 300 positions in its Norwegian MMO were cut in June 2015. Outside of Norway, the company reduced capacity by about 400 permanent positions this year, primarily in the subsea area.
Aker plans to focus on MMO opportunities in Canada and the UK, Araujo said.
Read more:
Statoil inks US$2.7 billion of contracts
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