Oilfield services company Petrofac has announced further cost cuts to mitigate the disruption caused by COVID-19 on project progress and lower oil prices
The company has also warned that the majority of the 2020 tenders will be delayed until 2021.
Petrofac said that while its projects are still progressing, travel restrictions and lockdowns inevitably led to material delays in construction activity that will not be recovered by 2020.
The company added that the collapse in oil prices had been the catalyst for clients to review their future investment plans. This is evident in delays to current tenders in E&C, as well as the recent termination of the US$1.5bn Dalma contract. However, it assured that contract extensions in engineering and production services (EPS) have remained strong, with US$500mn of new orders secured in the past year.
Petrofac aims to make additional savings to those announced in April and now expects to reduce overhead and project support costs by at least US$125mn in 2020 and up to US$200mn in 2021. Furthermore, the suspension of the final dividend payment for 2019 and a 40 per cent reduction in capital investment have retained incremental cash flow of US$145mn.
Rene Medori, the chairman, said, “This is the first year the board will not have the opportunity to meet fellow shareholders in person, a necessary precaution to protect health at the current time. Nevertheless, I want to thank our shareholders, clients, and other stakeholders for their continued support in these challenging times. While the outlook remains unclear, the board is fully supportive of the steps management is taking to preserve shareholder value.”
