Norway’s Electromagnetic Geoservices (EMGS) said it will implement additional cost reduction measures reflecting the challenging market conditions in the oil service industry.
The company has now implemented cost reductions on terms and conditions for sub-contractors and in staff levels.
The key elements of the program are a reduction of the vessel capacity by one vessel, from three to two vessels, and a corresponding reduction in the global employee expenses.
EMGS initiated cost reduction measures in the beginning of the first quarter this year and further measures were announced in June. Based on the development in revenues so far in 2015, as well as the outlook for the rest of 2015 and 2016, the company has decided to implement further cost reductions.
The company expects that the additional cost reductions will reduce the annual operational cost level by approximately USD 35 million. Hence, the results from the total reductions implemented in 2015 are expected to amount to USD 70 million, reducing the annual operational cost level to below USD 100 million. The company will have restructuring charges of approximately USD 2.8 million, whereas USD 1.5 million will be booked in the third quarter and USD 1.3 million will be booked in the fourth quarter 2015.
In addition, a provision related to loss on charter agreements of USD 4.4 million will be booked in the third quarter 2015. The initiatives will be implemented immediately and yield effects gradually.
“Although the market conditions currently are challenging, EMGS believes that the company’s technology and flexible business model leaves the company well positioned for an upturn in the market,” said the press release.