Subsea 7 to Shed 13% More Staff On Oil Rout

By Kjetil Malkenes Hovland

OSLO--Norwegian offshore engineer Subsea 7 SA (SUBC.OS) said Wednesday that it would shed another 1,200 jobs by early next year, or 13% of its remaining staff, in a second wave of downsizing.

The company said its workforce would be reduced to 8,000 by early next year, down about 40% from the end of 2014, and that it had started consultations with employee representatives in the U.K. and Norway. The latest reductions will contribute to measures this year expected to save about $350 million annually.

The cuts come at a time when oil-field service companies across the world are slashing costs and downsizing amid weak activity, as lowered oil prices hurt spending among oil companies. Since oil prices plunged in mid-2014, Halliburton and Norway's Aker Solutions ASA have also made substantial job cuts.

Subsea 7 announced in May 2015 that it would cut 2,500 jobs by early this year due to declining workload, but has made deeper cuts than anticipated. The company currently has a workforce of 9,200, down from 9,800 at the end of 2015 and 13,400 a year earlier.

Subsea 7 said Wednesday that up to five vessels would leave its fleet by early next year. By the end of March this year, the company had 38 vessels in its fleet, 27 of which were active, while seven were stacked and four were under construction.

"We adapt to the present low levels of activity," said Subsea 7 Chief Executive Jean Cahuzac. "The reduction in the size of our workforce is a necessary step to maintain our competitiveness and protect our core offering through the oil price cycle."

Subsea 7 said it expected to charge about $100 million in restructuring costs this year.

"Further cost cutting makes perfect sense in our view," said Sparebank1 Markets analyst Christopher Mollerlokken in a note.

Mr. Mollerlokken said he expected global exploration and production spending to decline 29% in 2016, and that Subsea 7's key customers Statoil ASA, Petrobras and Total SA are reducing spending by between 12% and 21%. On average, a third of Subsea 7's fleet had been idle this year, he said.

Sparebank1 has a neutral rating on Subsea 7 and a target price of 74 Norwegian kroner. The shares traded 0.6% higher at 80.55 Norwegian kroner.

Write to Kjetil Malkenes Hovland at [e-mail]

(END) Dow Jones Newswires

June 22, 2016 10:12 ET (14:12 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.