Financial Issues Continue for Companies in Offshore Sector
The ongoing shakeout in the offshore industry continues with companies across segments of the industry each announcing steps designed to improve liquidity. This comes after similar actions in recent days by other companies involved in segments of the offshore business.
Norwegian company PSG, a provider of seismic and reservoir services, announced further cost-cutting measures including staff reductions, consolidation of offices, a re-organization of functions, and re-negotiation of service agreements. PGS had previously announced the stacking of three out of the eight 3D vessels operated at the start of the year, along with other cost-cutting measures. The company is taking these additional steps, which will result in a total reduction in employment by approximately 40 percent, and lowering annual gross cash operating costs by approximately a third to $400 million.
The annual gross cash cost run rate is based on operating five 3D vessels. The Company is prepared to adjust operated vessel capacity and offshore crew levels further if required.
“The current market situation is very challenging for the seismic industry,” said President & CEO Rune Olav Pedersen. We are addressing the activity reduction and low visibility by adjusting operations and cost. We will scale down our organization significantly while retaining our core capabilities and scalability to be in a position to take advantage of what we believe will be an improving market following the current crisis.
At the same time, Borr Drilling announced that it has completed its financial restructuring conditional on an equity offering. The amendments to facilities from its secured lenders and shipyards the company estimates will provide liquidity improvement of more than $315 million through the first quarter of 2022.
Borr with take several actions, including deferring the delivery of five newbuild jack-ups rigs until mid-2022, deferring certain interest payments until 2022 along with debt amortization, and in turn received amendments to financial covenants. The agreements are conditional on the issuance of 46 million new shares in a $30 million equity offering, which was expected to be completed on June 5, 2020.
“The amended financing package gives a required cash break-even bareboat contribution in 2021 at only around $20,000/day per rig based on just 12 rigs in operation,” said Chairman Paal Kibsgaard. “In addition, the Company has six more rigs activated and available, which it only intends to bring back to work on cash flow accretive contracts. We are also encouraged by the already improving supply-demand outlook for oil, and optimistic that this will lead to a gradual improvement in jack-up drilling activity in the coming year. We furthermore continue to look at additional initiatives to improve liquidity.”