North Sea oil producer Taqa said yesterday it was on course for annual savings of more than £260million after shedding 22% of its global workforce.
It also reported higher profits from the UK North Sea after a boost from fiscal changes aimed at reducing the burden of taxation on operators and encouraging investment
Grant Gillon, the Middle East firm’s new chief financial officer, said a transformational programme put in motion against a “challenging” backdrop of lower oil prices was achieving results.
The Scottish engineering graduate also said Taqa’s financial position was strong after a recent refinancing of £2billion of existing credit facilities on improved terms.
United Arab Emirates-based Taqa reported pre-tax losses of £53.4million for the three months to June 30, compared with profits of around £145million a year ago.
Adding the first quarter result, half-year losses totalled around £101million – in stark contrast to profits of £303million a year ago.
First half revenue slumped by 29% to £1.7billion but chief operating officer Edward LaFehr said a continuing tight rein on costs and strong operational performance had offset the impact of a large slump in oil and gas prices.
Mr LaFehr added: “While the current commodity price environment has impacted the whole industry, our results show that we are delivering on our accelerated cost transformation programme.”
Taqa said that despite significantly lower capital expenditure and operating costs falling by 19%, first half oil and gas production decreased by only 5% to 150,000 barrels of oil equivalent per day, against a year ago.
UK oil and gas business delivered first half profits of £67million in 2015, compared with about £49million in the first six months of last year.
Taqa said: “On March 18, 2015, the UK Government announced a number of changes in the UK oil and gas taxation regime which were designed to reduce the burden of taxation and incentivise further investment.
“The principal changes impacting Taqa’s UK business comprised a reduction in the rate of petroleum revenue tax from 50% to 35%, a reduction in the rate of supplementary charge to corporation Tax from 32% to 20% and the introduction of an investment allowance.”
Taqa said its first quarter figures reflected the new tax rules, generating an extra £97million. It also reported flat first half oil and gas production in the UK North Sea.
The company has reduced its global oil and gas headcount by about 22% since July 1 last year.
Just last week, the firm announced plans to axe around 100 jobs in its offshore North Sea workforce as part of cost-cutting which has already delivered savings of about £183million during the first half of 2015.
Taqa said it was on track for its previously announced 40% reduction in annual capital spending this year, a £437million drop on 2014, and a target of annual savings of £262million by the end of 2016.
By Keith Findlay