Oil services giant Petrofac, which has a big North Sea business, has fallen into the red amid the downturn triggered by the coronavirus crisis but noted early signs of improvement in the supply chain.
The company posed a bottom line loss of $78 million (£60m) for the six months to June 30, which it said reflected the deterioration in market conditions triggered by the Covid-19 pandemic and subsequent decline in oil prices.
The losses were swollen by a $14m hit in respect of the Greater Stella project in the North Sea, which the company has faced problems on.
However, Petrofac said it had taken decisive action to reduce costs, strengthen its balance sheet and invest in its core capability. Directors reckon these will best position the firm for the recovery “when it occurs”.
The company noted: “Whilst COVID-19 and low oil prices are continuing to disrupt business activity and delay project awards, there are early signs of improvements in the supply chain and Government related restrictions are easing.”
The Brent crude price rose yesterday amid signs the outlook for the global economy is improving.
Petrofac did not provide details of how its North Sea business has been performing.
The North Sea business is focused on providing engineering and production support (EPS) on existing facilities.
It is thought the EPS business has been less badly impacted than Petrofac divisions that are more reliant on work on new facilities.
However, staffing numbers have been cut in the North Sea under a drive to reduce group running costs by $125m annually.
Total EPS employee numbers in the UK and Middle East fell to 3,950 in the first half, from 4,050.
It is thought that Petrofac employed around 900 people in Aberdeen and 2,000 offshore in the North Sea before launching the cost-cutting drive.
The Rystad Energy consultancy said yesterday that staffing in the global oilfield services sector is set to fall to its lowest level in more than 10 years amid widespread cost-cutting. It reckons total employee numbers will fall to around 610,000 from around 760,000 before the downturn.
Petrofac suffered a $95m hit to profit in 2018 after selling out of Greater Stella. The start of production from the field was held up following delays in the completion of work in Poland on the giant floating production facility supplied by Petrofac for use on the field.
The $14m exceptional costs recorded in the first half in respect of the Greater Stella sale related to the fall in oil prices this year and the production performance of the field.
Petrofac recorded a $64 million charge after cutting the valuation of its investment in Block PM304 off Malaysia.
The company made an underlying first half profit of $21m, against $154m last time.
Source: The Herald
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