ENERGY services giant Wood Group has slashed about 5,000 jobs since the start of the year, including 1,000 in the UK, as it seeks to rein in costs amid the plunge in oil prices.
The Aberdeen-based group revealed the extent of the cutbacks – equivalent to 13 per cent of its workforce – as it announced a slide in first-half profits.
We have to reflect the fact that a lot of people have lost their jobsBob Keiller
Wood now employs about 11,000 people in the UK, many of whom are focused on the North Sea, and chief executive Bob Keiller told The Scotsman that the firm was facing “tough times” as customers scale back their investments in new projects.
He added: “I joined the industry in 1986 and in the late 1990s it felt as though the world was falling apart as oil fell below $10 a barrel at one point.
“We’ve had a number of shocks to the business, but the last few years have led people into a false sense of security about the stability of the upward boom in the oil and gas industry. Until we see customers begin to release large oil and gas projects, then we have to remain cautious and be right-sized for a business to operate in a lower price environment.”
Keiller was speaking after Wood reported a pre-tax profit from continuing operations of $160.6 million (£102.3m) for the six months to the end of June – a fall of 13 per cent compared with the same period last year.
The group said it had achieved cost savings of $40m since the start of the year, “significantly” ahead of its initial estimates, on the back of the job cuts, which also saw 3,000 roles axed in North America and 1,000 in the Middle East.
Oil prices have slumped by more than half since last year amid a glut of global supply. Oil giants such as BP and Shell have also been slashing spending and cutting their own workforces, but industry leaders have said the outlook could have been even gloomier had Chancellor George Osborne not announced a £1.3 billion package of tax breaks in his Budget in March.
Keiller said: “We continue to work hard to make sure we’re winning contract opportunities as and when they arise, but it’s fair to say there are fewer of them in some areas of the business. In contrast, our pipelines business in North America and our downstream operations are seeing more opportunities than before and some of these projects are every bit as big as ones we’ve done traditionally in upstream and subsea.”
He added: “It’s not all doom and gloom but we have to reflect the fact that a lot of people have lost their jobs and that’s had a huge impact on families in the short term – that’s not something we do lightly.”
Wood Group acknowledged the need for the industry to implement some “self help” measures in areas like the standardisation of equipment and reducing costs.
“We still have a long way to go but the culture is in place for that to happen,” Keiller said.
“The problem we had in 2008 when we saw a sudden collapse in oil prices is that they rebounded very quickly, so there was no real pressure for people to fundamentally change behaviour.”
However, amid the current sustained decline in oil prices, companies such as Wood are under pressure from customers to take more costs out of the equation.
Further reductions in wages and contractors’ rates remain “up for grabs”, Keiller said.
But he added: “At the moment we’re more focused on securing the business we have ahead of us and servicing the new contracts we have won.”