Aker Solutions became the latest oil and gas service company to reduce cost, capital spending, and its workforce amid the economic uncertainty. The company said its actions will mitigate the effects of the slowdown in activity triggered by the COVID-19 outbreak, adding revenues are expected to decline a minimum of 20% compared to its outlook at end of 2019.
In addition to already closing some locations temporarily, the company demobilized about 3,000 contractors in Norway and 700 non-Nordic contractors. It has also issued temporary layoffs for 400 employees in Norway and 250 employees in UK and submitted notice of potential need for temporary layoffs to up to 6,000 employees in Norway.
Aker Solutions said it was accelerating its cost-saving initiatives in key segments, including subsea, in order to address the overall cost base. The initiatives aim to reduce the company's fixed cost level by at least NOK 750 million ($72 million) on an annualized basis by
Aker’s investment level will be significantly reduced this year from its original plan of about NOK 750 million to about NOK 500 million.
Aker Solutions’ update comes after oil and gas service companies Sandvik and SNC-Lavlin took similar actions in late March.
Sandvik said it believes the direct impact on its financial performance in Q1 will be limited and it identified a need to mitigate future effects on its business from the spread of COVID-19.
The company’s temporary short-term actions are primarily related to reduced working hours, which it said will generate savings of about $150 million this year. Sandvik’s executive management reduced its salaries by 10%.
Most production units for the company continued operating, but government restrictions put production on hold in Italy, India, and partially in other regions. Its China operations are online and are approaching normal capacity. COVID-19 led to a 1-week closure of operations.
SNC-Lavalin said its 2020 financial outlook was no longer valid given the changing nature of the COVID-19 situation, and the impact on its worldwide operations. SNC-Lavalin president and CEO Ian Edwards said the company was actively managing the emerging impact on its business to minimize disruptions to its service delivery where possible, while taking actions on costs and cashflow to maximize their impact in Q2.
Its engineering services personnel continue servicing clients from non-office-based locations and transitioning work among different jurisdictions as required.
Discretionary expenditure not required to directly support client delivery is being significantly reduced, and capital expenditure frozen. Other actions include reduced hours and employee furloughs. The company’s executive leadership is taking a 20% reduction in salary while board members will take a 20% reduction in cash compensation for Q2.