Aker Solutions is taking action to mitigate the effects of the slowdown in activity resulting from the coronavirus outbreak and increased uncertainty following declines in oil and gas commodity prices.
Measures implemented in response to the pandemic include temporary closure of locations, where applicable, following national health authorities’ guidelines.
The company said its revenues will decline by a minimum of 20% compared to the outlook it released at end of 2019.
Aker Solutions has already demobilised about 3000 people in Norway, including 700 non-Nordic contractors from Egersund and Sandnessjoen, to comply with new national and customer restrictions.
The company has also submitted notice of potential need for temporary layoffs of up to 6000 employees in Norway and has temporarily laid off 400 employees in Norway and 250 employees in the UK, as of 1 April.
Aker Solutions said its “main financial priority is to protect the company’s balance sheet and financial performance”.
The company also confirmed that it has the “resources, organisation, competence and assets to maintain current and new activity levels initiated by clients”.
Aker Solutions chief executive Luis Araujo said: “The first months of 2020 have been unlike anything we have previously experienced. The COVID-19 pandemic, coupled with the sharp drop in demand for oil and gas, has caused significant disruption to the global economy and left societies around the world grappling with new ways of working and living.
“The global energy sector has been hit particularly hard, and at Aker Solutions we are doing our utmost to mitigate the effects for employees, customers, shareholders and other stakeholders worldwide.”
Araujo said that while it is too early to predict the long-term impact on financial markets and industrial activity level, the current market situation is expected to have an adverse impact on both activity, financial performance and structure of Aker Solutions in 2020.
“A large part of the planned project sanctioning activity in the oil industry will most likely be postponed or cancelled in 2020 unless governments are introducing significant fiscal stimulation to aid in the recovery,” he added.
Before the COVID-19 pandemic, the company had already introduced “cost-saving initiatives” in key segments, including subsea, in order to address the overall cost base. The company is now “accelerating and deepening” these efforts.
The initiatives aim to reduce the company’s fixed cost level by a total, of at least NOK750m (€65m) on an annualised basis by consolidation of the subsea tree production to Brazil and Malaysia.
The Tranby site outside Oslo, in Norway, will no longer produce subsea trees after 2020, removing market capacity of about 60 subsea tree equivalents per year.
At the subsea plants in Port Klang, in Malaysia and Curitiba, in Brazil, manning will be reduced to “strengthen” the plants’ “competitive position” and adapt to the forecasted demand.
Aker Solutions is also reducing overhead personnel and costs across all regions, through early retirement initiatives, and salary freezes for its executives, senior staff and remaining personnel.
The company is currently scheduled to update investors with its first quarter 2020 results and an updated market view on 30 April 2020.