Norway’s Electromagnetic Geoservices (EMGS) has announced further cost reductions reflecting the challenging market conditions in the oil service industry.
As communicated in the first quarter report, the company initiated cost reduction measures in the beginning of the first quarter. According to EMGS, these measures have proven successful.
However, due to further delays in contract negotiations and lower than expected demand for EM data, EMGS management has decided to implement an additional cost reduction program.
The key elements of the program include a reduction of EMGS global headcount including consultants by 20% and a reduction of the vessel capacity from four to three ships. In addition, the company said it expects to reduce its capital expenditures by approximately 50% in 2015 compared to the guidance given in the fourth quarter 2014 report.
Furthermore, EMGS informed that the company now expects annual cost savings of a total of approximately USD 35 million compared to 2014 cost level, as a result of the cost programs initiated. Restructuring charges of approximately USD 1.3 million, in addition to a provision related to loss on the EM Leader charter agreement of USD 1.5 million will be booked in the second quarter 2015.
The key elements of the program will be effective from the beginning of the third quarter 2015.