Technip has said that it is anticipating a more challenging environment in the oil and gas sector. Due to this it is launching a restructuring plan and accelerating its cost reduction to reinforce the group through and beyond the downturn. In the first quarter of this year, the sharp fall in oil prices has had a substantial impact on clients’ behaviour, national and international oil companies alike: new projects continue to be deferred as clients assess their investment priorities in a durably changed oil price environment; on occasion there appears to be irrational behaviour in bidding on some of the projects that are being sanctioned; negotiations have been protracted on contract changes and variations, in particular on onshore/offshore projects where some discussions are now even stopped and will find their resolution through the legal process. Technip have therefore concluded that these trends have not improved, and in some cases, have actually worsened over the past two months.
Accordingly, Technip has now decided to go substantially further in reducing its direct and indirect cost base whilst maintaining its strategic decision. The restructuring plan targets savings of 830 million Euros, of which 700 million are to be delivered next year and the balance in 2017. There are one off charges of 650 million Euros to cover all the different aspects of this announcement. The group has also said that it is going to reduce its global workforce by approximately 6000 and will pursue the streamlining of its activities started last year to focus on its core assets and activities. Employees will be informed and employee representatives consulted in due time on a local basis.
Full results for the second quarter of this year will be published on 30 July and will include the majority of the one off costs announced previously, with some of the restructuring costs taken in later periods in accordance with IFRS. For the second quarter and the rest of the year, excluding the one off charges, the group expects:
- Second quarter 2015 onshore/offshore adjusted underlying operating income from recurring activities at approximately 50 million Euros.
- Second quarter 2015 subsea adjusted operating income from recurring activities above 240 million Euros.
- Full year 2015 onshore/offshore adjusted revenue to be unchanged.
- Full year 2015 subsea adjusted revenue to be unchanged.
- Full year 2015 onshore/offshore adjusted underlying income from recurring activities of between 210 and 230 million Euros.
- Full year 2015 subsea adjusted operating income from recurring activities at approximately 840 million Euros.