Oil survey group slashes staff

OFFSHORE Hydrocarbon Mapping, an Aberdeen-based oil services company, has announced it is making close to half its staff redundant in a dramatic cost-cutting exercise as it called off takeover talks.

The firm, which provides electromagnetic testing of the sea floor to search for oil and gas reservoirs, has struggled to convince oil companies to invest in its leading-edge technology.

It warned in December that it had to slash costs or seek a sale, and shares slumped as it revealed it was in takeover talks.

Yesterday, OHM said talks had failed to lead to a bid, leading it to end discussions and focus on reducing its costs.

The firm said 40 staff are soon to be made redundant, on top of seven redundancies made last month – out of a total of 113 employees.

Executive chairman Dave Pratt said that, while the redundancies were unfortunate, without "dramatically" cutting its cost base the company would not have the working capital to last through 2009.

He said: "The company should now be able to trade within the capital it has for a reasonable period. But obviously, no company can continue trading forever with little revenue coming in."

The company has also renegotiated the agreements for two vessels it has chartered from Seatrans.

Initially chartering the boats for five years, Pratt said OHM had renegotiated the deals on a "pay as used" model, bringing its cost base more into line with the future revenue.

Pratt estimated that, combined, the measures had cut the company's cash burn by around 500,000 a month.

OHM's specialises in electromagnetic testing, believed by some to be the greatest development in the industry since seismic testing was developed.

Whereas seismic testing, using acoustic waves, can determine ground structure, electromagnetic testing can differentiate between liquids, potentially preventing oil companies drilling into water reservoirs.

While large seismic testing providers have shown interest in the technology – CCG Veritas paid more than 13 million for a 15 per cent stake in OHM in 2007 – take-up by exploration companies has been much slower than expected.

Pratt said that, based on its current forecast of the investment plans of the industry, OHM expected the amount of money invested in electromagnetic testing to increase in 2009, but added that capital investment plans could be cut back.

He said that there was evidence that some exploration projects are being delayed.

He added: "There is some uncertainty over oil companies investment plans, given what's happening with the oil price."

Shares dropped 17 per cent on the news, but recovered to close up 2.4 per cent at 5.25p.