Esvagt to reduce employee pay over COVID-19, oil price drop
- Business & Finance
Offshore vessel provider Esvagt has decided to streamline its operations and reduce pay to its workers and management to combat the consequences of the decreasing energy prices and COVID-19.
Esvagt said on Tuesday that it launched various initiatives set to secure the shipping company’s continued success during a historical economic downturn and a new situation regarding the COVID-19 pandemic.
Peter Lytzen, CEO of Esvagt, said: “Our oil and gas business is challenged in two essential areas of the current situation
“The fact that oil storage is full and oil and gas prices are low, means that no investments are being made in well drillings. This has an impact on the ERRV spot market, which is a considerable part of our business.
“At the same time, our rates are affected by exchange losses from the Norwegian krone and the British pound; two markets where Esvagt has a substantial presence”.
The company added that the Norwegian shipyard Havyard, which is building Esvagt’s next three service operation vessels for its offshore wind activities, has been in such financial whirlwinds that Esvagt had to contribute to an economic rescue package and an acceptance of delayed delivery.
“All in all, these are elements that put Esvagt’s liquidity under pressure. We have to relate to this”, says Peter Lytzen.
Pay reduction and postponed investments
The board of directors and upper management agreed to a 15 per cent pay reduction, while management took a 10 per cent reduction.
The company’s onshore employees have been offered a volunteer arrangement consisting of a five per cent pay reduction.
“We have to balance our responsibility to keep our employees; to ensure the company’s continued healthy operation and at the same time tend to our obligations. We do not wish to send people home, and we can’t because we have a responsibility as a subcontractor to society’s crucial energy infrastructure.
“For that reason, we have to find alternatives, and I am profoundly thankful for the loyal support and commitment from employees, management, and board of directors”, Lytzen added.
The pay reduction will run for a year, and together with the postponement of investments and few vessels decommissions, it contributes to Esvagt having the necessary liquidity.
Additionally, a renegotiation of contracts with partners and suppliers will ensue.
“We need the backing and support from our subcontractors to ensure that we, from a cost perspective, can regulate our activities with the financial reality we are in.
“It is my impression that the strong public spirit, which has been a solace during the corona pandemic, also applies across the industry. I am witnessing an understanding that we need to stand together in order to get through the current challenges”, Lytzen stated.