Marine engineer Fugro announced a further 600 job cuts and the sale of one of its business units as it battles to cut costs in response to weak oil and gas prices.
The company, which specialises in prospecting for hard-to-reach subsea deposits that are uneconomic at low oil prices, saw first-half core earnings tumble by 49 percent, though CEO Paul van Riel said he hoped conditions would improve next year.
“The lack of investment is impacting on oil supply while demand is still strong,” he said. “That will result in stabilisation and hopefully thereafter growth.”
The company also stands to benefit from the oil industry’s own cost cutting, which is lowering the energy price at which it becomes worthwhile to drill for hard-to-reach reserves, he said.
Earnings before interest, tax, depreciation and amortization tumbled 49 percent to 98.9 million euros ($110.2 million), compared with the 105 million forecast by analysts. Revenues were down 24.5 percent at 904.9 million euros.
The job cuts bring to 1,000 the total lay-offs announced by Fugro this year, but van Riel said the company was doing well compared with peers, with utilisation rates for its remaining fleet still high.
Some European oil services companies have begun to see a recovery since the oil price bottomed out in January, but some analysts believe companies such as Fugro, with high fixed capital costs, will take longer to recover.
The company announced the sale of its Asia Pacific subsea business for around 14 million euros. In return, Fugro will take a 25 percent stake in buyer Shelf Subsea.
A quarter of Fugro’s shares are owned by larger rival Boskalis, often seen as a potential buyer for the troubled deep-sea specialist. But van Riel said Fugro’s positive cash flow and success in managing its debt were signs its go-it-alone strategy was the right one.
The company promised further cuts to its cost base over the remainder of 2016 and forecast a negative margin on earnings before interest and tax for the year in the low single digits.
($1 = 0.8977 euros)
By Thomas Escritt
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