(Alliance News) - Petrofac Ltd on Monday suspended its 2019 final dividend payout and announced other cost-cutting measures amid uncertainty arising from the Covid-19 outbreak.
The FTSE 250-listed oil and gas services company said it will reduce capital expenditure by 40% as well as cut overhead and project support costs by at least USD100 million in 2020 and by up to USD200 million in 2021.
Overhead and project support costs will be reduced by cutting salaries for its board, senior management and most of its employees by between 10% to 15%, reducing employee numbers by around 20% and furloughing staff. Additionally, non-staff overhead costs will be reduced by up to 25%.
While engineering and construction activity have continued at most of Perofac's Engineering & Construction project sites and offices, progress is being hurt on supply chain disruptions, travel restrictions and government-enforced lockdowns in India and Iraq. In other regions, operations and maintenance activity in its Engineering & Production Services business have continued but travel and social distancing restrictions are "having a modest impact" on activity levels, the company said.
Looking ahead, Petrofac said order intake of USD2.0 billion in the first quarter has increased its backlog to USD8.2 billion. It said it believes its cost-reduction measures, together with a capital-light business model and a strong competitive position in the Middle East, will protect it against near term pressures.
However, it said it is too early to predict the extent to which Covid-19 and low oil prices will hurt its financial performance or new order intake, and has subsequently suspended its previous revenue and margin guidance.
The stock was trading 1.5% higher at 199.71 pence each on Monday morning in London.
By Ife Taiwo; ifetaiwo@alliancenews.com
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Petrofac (PFC)