Maersk Drilling in new round of layoffs

Offshore drilling company Maersk Drilling has decided to take another swing with the job axe and lay off even more staff.

Maersk Drilling said on Thursday that the new wave of layoffs, as well as a revision of its financial guidance for 2020, was necessary due to oil and gas companies’ budget cuts, delays, and cancellations in offshore drilling tenders.

The company already stated back in April that it would lay off around 250-300 people in its North Sea crew pool after it decided to stack a number of its rigs to adapt to the changing market environment caused by COVID-19 and low oil prices.

This time around, the Danish company said that the new layoffs would mostly impact onshore workers as the need for onshore support was expected to also be adversely impacted by the reduced offshore activity.

Maersk Drilling added that it would reduce its onshore organization in the Danish headquarters and offices globally and that steps were taken to initiate consultations with employee representatives and trade unions where such consultations are required locally.

This process would most probably lead to Maersk Drilling laying off between 150 and 170 onshore redundancies globally.

Maersk Drilling CEO Jorn Madsen said: “With the outbreak of COVID-19 and the lower oil prices we are facing an unprecedented reality with significant implications for our business.

“Our ambition is to remain a leading company in our industry, and in order to safeguard that position, we need to adapt our cost structure to the current business environment.

“This means that we need to take steps to reduce the workforce, which is unfortunate, not least in the light of the great efforts by our competent and dedicated employees, also over the past critical months”.

This decision by Maersk Drilling comes only a day after Maersk Supply Services Maersk decided to reduce its onshore organization due to the same challenging market situation.

Maersk Supply said on Wednesday that it would reduce its onshore costs by 30 per cent and cut some 55 people globally, with the majority being in the headquarters in Lyngby, Denmark.

Maersk Drilling revised its profitability guidance for 2020 in March for EBITDA before special items to $325-375 million, however, another revision was made on Thursday.

The company emphasised the fact that oil and gas companies announced further reductions in spending budgets and even more new projects sanctions and ongoing tenders have been postponed or cancelled since March. Also, certain existing contracts were renegotiated, suspended, or terminated.

As a result, Maersk Drilling re-assessed and revised its guidance for 2020 for EBITDA before special items to $250-300 million. The 2020 capex guidance is revised to around $150 million from the previous $150-200 million mark.

The company stated that the revised guidance reflected expected adjustments to the existing contracts based on current customer dialogues, no additional contracts with financial impact in 2020, and COVID-19 related costs.

The terminations mentioned by Maersk regard the early termination notice for the Maersk Venturer drillship by Tullow Oil in March as well as Shell and Aker BP’s termination notices for the Mærsk Developer and Maersk Reacher.