BAKU, Azerbaijan, May 15
By Leman Zeynalova – Trend:
UK-based Petrofac company is targeting additional savings to those announced on 6 April, and now expects to reduce overhead and project support costs by at least $125 million in 2020, Trend reports citing the company.
The company said that COVID-19 has caused significant disruption to its Engineering and Construction (E&C) projects due to stringent health protocols, supply chain disruption, travel restrictions and Government-enforced lockdowns.
“Whilst projects are still progressing, this has inevitably resulted in material delays in construction activity, which will not be recovered in 2020,” said Petrofac.
Operations and maintenance activity in our Engineering & Production Services (EPS) business continues in all regions, albeit travel and social distancing restrictions are having a modest impact on activity levels and our training centres have been temporarily closed, according to the company.
In addition, the collapse in oil prices has been the catalyst for clients to review their future investment plans. This is evident in delays to current tenders in E&C, as well as the recent termination of the $1.5 billion Dalma contract.
“Whilst our bidding pipeline remains healthy and we are well positioned on several opportunities this year, we are now prudently anticipating that the majority of 2020 tenders will be delayed until 2021. Contract extensions in EPS, on the other hand, have remained strong with $500 million of new orders secured year to date,” said Petrofac.
In order to mitigate the impact of the COVID-19 pandemic and lower oil prices on financial performance and order intake, Petrofac is taking action to reduce costs, retain its competitiveness and preserve the strength of our balance sheet.
“We are targeting additional savings to those announced on 6 April, and now expect to reduce overhead and project support costs by at least $125 million in 2020 and by up to US$200 million in 2021. In addition, suspension of the final 2019 dividend payment and a 40 percent reduction in capital investment has conserved an incremental $145 million of cash flow,” said the company.
Looking ahead, it remains unclear how long COVID-19 and low oil prices will continue to disrupt business activity and impact business performance.
“Notwithstanding this, we have a healthy order book of secured revenue, a strong balance sheet, liquidity of $1.2 billion and we have taken immediate action to reduce our costs and protect our financial position,” said the UK company.
Petrofac is a leading international service provider to the energy industry. It designs, builds, manages and maintains infrastructure for the energy industries.
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